{"id":1004046208,"date":"2012-09-06T13:47:03","date_gmt":"2012-09-06T21:47:03","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004046208"},"modified":"2022-12-08T20:13:40","modified_gmt":"2022-12-09T04:13:40","slug":"realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/","title":{"rendered":"Realty Income to Acquire American Realty Capital Trust in $3B Transaction"},"content":{"rendered":"
\"\"<\/a>

Tom A. Lewis, Realty Income CEO<\/p><\/div>\n

By Gail Kalinoski, Contributing Editor<\/p>\n

Six months after American Realty Capital Trust went public in an effort to \u201cunlock the value of the company\u201d for shareholders, the REIT has been acquired by Realty Income Corp. for nearly $3 billion.<\/p>\n

Under the deal, Realty Income would acquire all of the outstanding shares of ARCT for approximately $2.95 billion. The purchase would be financed by Realty Income issuing $1.9 billion of its common stock to ARCT shareholders, the assumption of about $526 million in debt and the immediate repayment of approximately $574 million of outstanding debt and transaction expenses. The ARCT shareholders are expected to receive $12.21 per share. Once the deal closes either late in the fourth quarter or early 2013, ARCT shareholders should own about 25.6 percent of Realty Income\u2019s shares.<\/p>\n

The deal is expected to immediately add to Realty Income\u2019s funds from operations and also add 20 to 22 cents per share to FFO.<\/p>\n

The acquisition gives Escondido, Calif.-based Realty Income 501 new assets, expanding its national portfolio to more than 3,250 single-tenant properties owned under long-term leases. It also boosts the credit quality of Realty Income\u2019s mostly retail portfolio by adding more diverse and investment-grade tenants like FedEx, Walgreen\u2019s, CVS, the Government Services Administration, Dollar General, Express Scripts, PNC Bank and Whirlpool. The REIT said these new tenants increase the company\u2019s revenue generated by investment-grade tenants from 19 percent to 34 percent of pro forma total revenue.<\/p>\n

\u201cThis acquisition comprehensively advances Realty Income\u2019s strategic objectives of increasing its revenues generated by investment grade tenants and further diversifying its portfolio outside of the retail industry,\u201d said Tom A. Lewis, Realty Income CEO.<\/p>\n

John P. Case, executive vice president and CIO of Realty Income, said, \u201cBy completing this transaction, while maintaining the integrity of Realty Income\u2019s capital structure through issuing $1.9 billion in new equity, Realty Income continues to be well positioned to use its size and liquidity to acquire additional properties.\u201d<\/p>\n

The company’s reprsentatives said that upon closing, Realty Income is expected to be the largest publicly traded net lease REIT by more than two times its nearest competitor, with a value of about $11.4 billion and total equity market capitalization of $7.6 billion. It will also become the 18th<\/sup> largest publicly-traded REIT.<\/p>\n

Realty Income does not expect problems integrating the ARTC portfolio, which consists of all net lease properties, to its existing portfolio. None of the ARTC employees will remain with Realty Income and the firm expects to hire only about four to six more employees.<\/p>\n

ARCT executives said the deal will give its shareholders an \u201cattractive return\u201d and allow them to \u201ccapitalize on the recent upward price movement of the shares of ARCT, and to achieve a premium valuation for their shares.\u201d\u00a0 Both Chairman Nicholas S. Schorsch and CEO William M. Kahane noted Realty Income\u2019s long track record of paying monthly dividends and said the ARCT shareholders will benefit from those reliable returns.<\/p>\n

\u201cThis transaction will institutionalize the notion of durable, defensive dividends for our shareholders by allowing them to become owners on a very favorable basis of the largest, and I believe, now the best, publicly-traded net lease real estate company, period,\u201d said Schorsch. \u201cSize, low-cost capital, and management skill are the competitive advantages in the net lease sector.\u201d<\/p>\n

Kahane also commented on the size of the Realty Income portfolio.<\/p>\n

\u201cRealty Income has now managed to construct an enterprise that is bigger by an order of magnitude and financially stronger than any its competitive set,\u201d he said.<\/p>\n

For ARCT, the sale completes a long period of exploring strategic alternatives for the REIT, which parent company American Realty Capital launched four years ago as a non-traded publicly listed security. Schorsch told Commercial Property Executive <\/em>in March that the board of directors had decided to publicly trade on the NASDAQ Global Select Market after considering an outright sale or merging with a third party that was already listed in a national exchange. On March 1, ARCT became the first investment grade triple-net lease REIT to trade publicly.<\/p>\n

Schorsch said at the time that the board felt it was the \u201cright time in the market for our investors to unlock the value of the company as a publicly traded company.\u201d He added then that investors were looking for durable and sustainable yield that was relatively tax efficient and that REITs, particularly one like ARCT that had single-tenant, net lease properties with best in class tenants, provided those yields.<\/p>\n

David Sobelman, executive vice president of Calkain Cos., a brokerage that specializes in net lease properties, said, \u201cIt\u2019s just very telling as to the desires of not only private investors, but institutional investors to purchase, hold and own net lease properties in this market.\u201d<\/p>\n

Sobelman said the deal looked like a win for both REITS.<\/p>\n

\u201cRealty Income gets the diversification, gets increased income, they\u2019re able to probably pay their shareholders the predetermined dividend that they typically pay and they get an increase in credit worthiness in the types of tenants,\u201d Sobelman told Commercial Property Executive.<\/em> \u201cARCT monetized all their hard work that they\u2019ve done for the last several years.\u201d<\/p>\n

BofA Merrill Lynch and Wells Fargo Securities served as financial advisors to Realty Income and Latham & Watkins L.L.P. acted as legal counsel. Goldman, Sachs & Co. provided financial advice to American Realty Capital Trust and Proskauer Rose L.L.P. was its legal counsel.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Realty Corp has bought American Realty Income REIT. Under the terms of the deal, the seller would acquire all of the outstanding shares of ARCT for about $3 billion.<\/p>\n","protected":false},"author":952,"featured_media":1004046211,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37774,37775,21783,21742,37776,37777,21749,37778],"tags":[],"class_list":["post-1004046208","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-rc-dividend-yield","category-rc-forward-affo-payout-ratios","category-investment","category-latest","category-rc-premium-discount-to-nav","category-rc-price-ltm-ffo","category-retail","category-rc-total-return"],"acf":[],"yoast_head":"\nRealty Income to Acquire American Realty Capital Trust in $3B Transaction - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Realty Income to Acquire American Realty Capital Trust in $3B Transaction\" \/>\n<meta property=\"og:description\" content=\"Realty Corp has bought American Realty Income REIT. Under the terms of the deal, the seller would acquire all of the outstanding shares of ARCT for about $3 billion.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2012-09-06T21:47:03+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T04:13:40+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/Toms_photos_crpd.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"473\" \/>\n\t<meta property=\"og:image:height\" content=\"260\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Anna Spiewak\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/\",\"name\":\"Realty Income to Acquire American Realty Capital Trust in $3B Transaction - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/Toms_photos_crpd.jpg\",\"datePublished\":\"2012-09-06T21:47:03+00:00\",\"dateModified\":\"2022-12-09T04:13:40+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/1bbb99675c2609ea2e6792f8b25d7b76\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/realty-income-to-acquire-american-realty-capital-trust-in-3b-transaction\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/Toms_photos_crpd.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/09\/Toms_photos_crpd.jpg\",\"width\":\"473\",\"height\":\"260\",\"caption\":\"Tom A. 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