NEW YORK CITY-In anticipation of its impending merger with American Realty Capital Properties Inc., American Realty Capital Trust III Inc. (ARCT III) has obtained an $875-million credit facility with a group of five lenders.
The credit facility can be increased through an additional commitment to up to $1 billion, according ARCT III officials. Wells Fargo, RBS Citizens, Regions Bank, Capital One and JP Morgan Chase have made commitments to the credit facility financing. Wells Fargo Bank, N.A. will act as administrative agent, RBS Citizens, N.A. and Regions Bank will act as syndication agents, and Capital One, N.A. and JP Morgan Chase Bank, N.A. will participate as documentation agents.
ARCT III and American Realty Capital Trust, both engaged in single-tenant net lease real estate transactions, announced Thursday that their proposed merger would close earlier than expected during the first week of March and that ARCT III stockholders would receive an increase to their annualized dividend upon the close of the merger deal. At the time of the initial merger announcement in December, the companies said the deal would create a merged company with $3 billion of enterprise value with a portfolio of more than 800 properties that are net leased to investment grade and other credit tenants, totaling approximately 18.9 million square feet located in 44 states. The merger deal was initially expected to close during the second quarter of this year.
The $875-million credit facility includes a $525-million term loan facility and a $350-million revolving credit facility. Loans under the credit facility will be priced at their applicable rate plus 160 to 220 basis points, based upon ARCT III’s or American Realty Capital Properties’ current leverage, company officials report. To the extent that ARCT III or–upon the successful consummation of the proposed merger–ARCP receives an investment grade credit rating from a major credit rating agency, borrowings under the facility will be priced at the applicable rate plus 115 to 200 basis points. ARCT III or American Realty Capital Properties will have the ability to make fixed rate borrowings under this facility as well, they add.
ARCT III is a publicly registered, non-traded REIT. It focuses on acquiring primarily free-standing single-tenant retail properties net leased to investment grade and other creditworthy tenants with long-term lease durations that contain non-cancelable lease terms of 10 or more years. American Realty Capital Partners is a publicly traded Maryland corporation listed on the NASDAQ stock market that qualified as a REIT for the year ended Dec. 31, 2011. It is focused on acquiring and owning single tenant freestanding commercial properties subject to net leases with high credit quality tenants.
Nicholas Schorsch, chairman and CEO of American Realty Capital Properties, states, “Upon the anticipated close of the proposed merger the combined company will have improved access to low-cost financing, using this credit facility and the facility already put in place by ARCP. This financing will enable us to use low-cost, fixed rate borrowings, helping us continue to grow our business and to enhance our already attractive balance sheet.”
Michael Weil, president and COO of ARCT III, adds, “As we get closer to the potential close of our merger with ARCP, we are pleased that a number of major banks, including Wells Fargo, RBS Citizens, Regions Bank, Capital One and JP Morgan Chase, have provided us this very substantial financial support. Upon the merger completion, financing arranged for ARCP will further enhance the combined company’s borrowing capabilities up to $1.2 billion. This is especially important in our real estate sector, where both size and low cost capital combine to create competitive advantage.”
In terms of further details of the proposed merger agreement, the two companies report that following a vote by stockholders at the special meeting scheduled for Feb. 26th on the proposed merger, ARCT III stockholders who elect to receive common stock in American Realty Capital Properties will receive an increase of $0.20 per share to their current annualized distribution. This will reflect an annualized rate of $0.86 per share, beginning with the March 2013 distribution. It would represent a 30% distribution increase for ARCT III stockholders, who will become American Realty Capital Properties stockholders upon the closing of the merger–assuming they elect to receive shares.
ARCT III is a publicly registered, non-traded REIT. It focuses on acquiring primarily free-standing single-tenant retail properties net leased to investment grade and other creditworthy tenants with long-term lease durations that contain non-cancelable lease terms of 10 or more years.
Pursuant to the terms of the merger agreement, each outstanding share of common stock of the company will be converted into the right to receive either 0.95 of a share of common stock of American Realty Capital Properties or $12.00 in cash. However, in no event will the aggregate consideration paid in cash be paid on more than 30% of the shares of ARCT III’s common stock issued and outstanding immediately prior to the closing of the merger, company officials report. All ARCT III stockholders who elect to receive shares in American Realty Capital Properties will have a tax-free exchange.