American Realty Capital Properties Inc. (ARCP:US) agreed to buy American Realty Capital Trust IV, a nonlisted real estate investment trust under the same management company, in a deal valued at about $3.1 billion as it expands its holdings of U.S. single-tenant buildings.
American Realty Capital Properties offered 2.05 of its shares or $30 in cash for each share of the other REIT, the New York-based companies said in a statement today. The stock offer is worth about $31 per share, based on the average share price for the five trading (ARCP:US) days through yesterday, they said.
Nicholas Schorsch, the chairman and chief executive officer of both companies, has been on a buying spree as he seeks to build American Realty Capital Properties into one of the country’s largest single-tenant landlords. The REIT in May agreed to acquire CapLease Inc. (LSE:US) for $2.2 billion, including debt, and last week completed the purchase of 447 properties from General Electric Co.’s GE Capital. American Realty Capital Trust also agreed to buy a portfolio of GE buildings last month.
“We’ve been very busy since January,” Schorsch said on a conference call today with investors and analysts. “We’re building a portfolio for the years to come.”
Both companies are managed by American Realty Capital, a sponsor of nontraded REITs also led by Schorsch. That company has raised $3.5 billion from investors this year through May and accumulated the most money in the industry in 2012 and 2011, according to data from Robert A. Stanger & Co., a Shrewsbury, New Jersey-based investment bank.
Nonlisted REITs aren’t traded on exchanges and are primarily marketed by brokers to individual investors. American Realty Capital Trust IV started selling stock in June 2012, according to a regulatory filing. The company closed the offering in April after raising $1.7 billion.
American Realty Capital Properties is a former nontraded REIT that was listed on the New York Stock Exchange in 2011. With its recently announced deals, the company’s enterprise value -- a measure of market value, cash, preferred equity and debt -- will have grown from $250 million in September 2011 to about $10 billion, according to today’s statement.
American Realty Capital Properties last month sold almost $900 million of common stock and convertible preferred stock in a private placement to help pay for the CapLease and GE Capital deals. The company expects the purchase of American Realty Capital Trust to be completed mainly through issuance of shares, Chief Financial Officer Brian Block said in the statement.
The REIT’s shares (ARCP:US) rose 0.7 percent today to $14.90.
The acquisition will increase American Realty Capital Properties’s assets to 2,579 single-tenant properties in 48 states with annual rental income of more than $527 million. The deal was approved by the independent directors of both companies and is expected to be completed by the end of this quarter.
After the completion of the recently announced deals, American Realty Capital Properties would be the second-largest single-tenant REIT, after Realty Income Corp. (O:US) of Escondido, California. Realty Income had 3,525 properties at the end of March, according to a regulatory filing. In January, it purchased American Realty Capital Trust Inc., a REIT that had Schorsch as its chairman.
American Realty Capital Properties today raised its forecast (ARCP:US) for 2014 adjusted funds from operations, a cash flow metric used by REITs, to $1.19 to $1.25 a share. In May it estimated $1.17 to $1.21 a share. The company also said its annualized dividend (ARCP:US) will increase to 94 cents a share.
American Realty Capital Properties said it may also begin evaluating removing its external management structure, which would reduce expenses and potentially improve its share price, according to the statement.
Net-lease landlords rent buildings to one tenant, with occupants paying such expenses as maintenance costs and property taxes. The Bloomberg index of single-tenant REITs gained 8.9 percent this year, compared with an increase of about 13 percent for American Realty Capital Properties.
Stocks in the industry have fallen since May amid the prospect of rising interest rates. Single-tenant landlords’ long-term leases make the companies comparable to bond investments.
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