* Deal to create REIT with 3,732 properties
* Properties cover 100 mln sf in 49 states, Puerto Rico
* Deal comes 6 months after failed bid to buy Cole
* Cole stock up 8 pct, American Realty stock down 1.9 pct
(Adds CEO comment, net-lease details, company background,
updates stock prices)
By Ilaina Jonas and Mridhula Raghavan
Oct 23 American Realty Capital Properties Inc
has reached a deal to buy Cole Real Estate Investments
Inc for about $7.2 billion in cash and stock to create
the largest U.S. net-leased real estate investment trust (REIT),
the companies said on Wednesday.
American Realty said the acquisition of Phoenix-based Cole
would increase the size of its portfolio to 3,732 properties
which are mostly retail stores. It will also create the 14th
largest publicly traded U.S. REIT and positions American Realty
as a contender to join the S&P 500, attracting more
The deal comes about six months after a failed attempt by
American Realty to buy Cole.
"We're both better companies today," said American Realty
Capital Chairman and Chief Executive Nicholas Schorsch, who will
lead the combined company.
Net-lease REITs over the past few years have enjoyed soaring
popularity because their high dividends have captured the
attention of investors in the current low-interest environment.
This type of investment trust can provide large dividends
because tenants assume long-term leases and pay most of the
costs associated with the property. The arrangement creates a
type of bond-like investment, making scale and diversity more
important for this type of property company, Schorsch told
Reuters in an interview.
Cole shares rose as much as 14.3 percent on the New York
Stock Exchange on Wednesday, while American Realty shares were
lower in afternoon trading on the Nasdaq.
Both companies had been nontraded REITs, with American
Realty going public before Cole. Earlier this year, Cole
rejected a raised offer of $6.7 billion from American Realty and
instead brought its external management team into the company
and listed itself on the New York Stock Exchange in June.
American Realty then turned to other acquisitions, buying
American Realty Capital Trust IV, an affiliated nontraded REIT,
for $3.1 billion. It bought CapLease for
about $2.2 billion and a large portfolio of 447 properties from
an affiliate of GE Capital for $774 million.
The Cole deal will add many more properties leased by
corporate tenants, such as Walgreen Co and CVS Caremark
Corp pharmacies, to American Realty's current portfolio
which includes Dollar General, Citizens Bank and FedEx.
The combined company will have more than 600 different
tenants, with about 47 percent of tenants investment-grade, the
The dividend of the combined company would be about 7.5
percent compared with the average REIT dividend of 3.3 percent,
Schorsch said. American Realty said that when the deal closes,
its annualized dividend will increase to $1.00 from 94 cents and
expenses will be cut by $70 million, without significantly
reductions in the workforce.
Properties of the combined company cover 100 million square
feet in 49 states and Puerto Rico
American Realty said it would offer either 1.0929 of its
shares or $13.82 in cash for each Cole share. The cash portion
would be prorated after it reached 20 percent of the deal.
The stock offer is valued at $14.59 per Cole share based on
American Realty's Tuesday close, representing a premium of 14
percent to Cole's closing price.
The deal, valued at about $11 billion including debt, is
expected to close in the first half of 2014.
American Realty said it expects adjusted funds from
operations for 2014 to be between $1.13 and $1.19 per share, up
from its 2013 AFFO outlook in the range of 91 to 95 cents per
Barclays and RCS Capital, the investment banking division of
Realty Capital Securities LLC, were financial advisers to
American Realty. Goldman Sachs was the exclusive financial
adviser to Cole.
Cole shares were up 8.1 percent at $13.86 on Wednesday
afternoon, off an earlier high at $14.65. American Realty shares
were down 1.9 percent at $13.09.
(Reporting by Ilaina Jonas in New York and Mridhula Raghavan
and Sagarika Jaisinghani in Bangalore; editing by Matthew Lewis)