American Realty Capital Properties, Inc. will acquire all of the outstanding shares of American Realty Capital Trust IV, Inc. for cash and stock in a merger agreement valued at $3.1 billion. The deal is a notable continuation of the trend of consolidation among real estate investment trusts.
The merger is also significant because both REITs are net lease, meaning that the 470 tenants in ARCP’s 2,579 single-tenant properties pay their own operating costs.
“Today’s announced merger solidifies our leadership position in the net lease real estate sector,” Nicholas Schorsch,the chairman and CEO of ARCP said in a prepared statement. “Less than two years after listing ARCP on NASDAQ, subject to completing this acquisition and the CapLease merger, together with the recently announced portfolio purchase from GE Capital and other organic acquisitions, we will have increased our enterprise value from $250 million in September 2011 to $10 billion, becoming the second largest net lease REIT.”
“Along with our other announced transactions, the addition of ARCT IV’s assets to ARCP’s portfolio results in an exceptionally well diversified real estate pool, with 2,579 properties in 48 states plus Puerto Rico aggregating more than 45 million square feet,” Michael Weil, president of ARCP, said in a prepared statement. “On a pro forma basis, our 470 tenants representing 29 distinct industries will generate $527 million of annualized rents, of which 57% will derive from investment grade tenants.
“The weighted average remaining lease term remains strong at 10 years, near-term lease rollover continues to be modest with 6.6% of our leases maturing through the beginning of 2016, and occupancy remains at 100%. We welcome the ARCT IV shareholders who elect to become ARCP shareholders, and note that their opportunity to participate in durable income-based, growing distributions continues.”
The transaction creates the second biggest publicly traded REIT. Since going public in 2011, ARCPS enterprise value has surged to $10 billion from $250 million.