American Realty Capital REIT buys Cole REIT for $11.2 billion

Publish Date: October 24, 2013

Topics: american realty capital properties, cole, landlord, net lease, owner, reit, single tenant, transaction

New York City–based American Realty Capital Properties (ARCP) has agreed to acquire its chief rival, Phoenix–based Cole Real Estate Investments, for $11.2 billion, including $7.2 billion in cash. ARCP, whose portfolio is mostly made up of multi-tenant properties, has been an active consolidator in the net-leased sector this year, acquiring both CapLease Inc. and the American Realty Capital Trust IV Inc. portfolio.  Phoenix-based Cole has been making waves of its own in the single-tenant sector, snapping up properties at a fast clip. The merger of the two companies will create the largest U.S. net-leased REIT with an estimated value of $21.5 billion.

Under the agreement, Cole stockholders can opt for American Capital Realty to either convey 1.0929 shares of common stock, or $13.82 cash, for each Cole share. ARCP's offer is valued at $14.59 per share based on its Oct. 22 closing price — a premium of 13.8 percent based on Cole's closing price.

The combined companies expect to save $70 million during their first year together through expense synergies. Together they own 3,732 properties leased to more than 600 tenants occupying over 100 million square feet in 49 states and Puerto Rico. More than 47 percent of the combined companies’ annualized rents will be from investment grade tenants such as CVS, Dollar General and PetSmart. The portfolio will be 99 percent occupied with an average remaining lease term of 11 years.

“This merger represents a new beginning for former competitors,” said ARCP chairman and CEO Nicholas Schorsch, in a press release. “Far more can be accomplished by these two great companies working together than either one could have hoped to achieve independently.”

The Cole management team, including founder and executive chairman Christopher H. Cole, will leave the company. “The decision of our board to merge the companies under Nick’s leadership is entirely forward-thinking, namely, our two companies are far better and more powerful together than apart. Our union provides benefits of size, scale and diversification,” Cole said in a press release. “As I step away from the company which I built and bears my name, I am very proud of and will miss the outstanding people who have helped me construct our world-class enterprise.” 

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