NEW YORK CITY-Having sought unsuccessfully to acquire Cole Credit Property Trust III this past spring, American Realty Capital Properties Inc. will now be taking over Cole Real Estate Investments Inc., the REIT formed from the subsequent merger of Cole Credit III and Cole Holdings. Valued at $11.2 billion, the merger announced Wednesday morning—along with the pending acquisitions of CapLease of American Capital Trust IV—will create a net lease REIT with an enterprise value of $21.5 billion, the largest such company in the space.
The merger has been approved by the boards of both companies and is expected to close in the first half of 2014. It will create a net lease portfolio of about 102 million square feet, with 3,732 properties leased to over 600 tenants across 49 states and Puerto Rico.
Calling the combination “a new beginning for former competitors,” Nicholas Schorsch, chairman and CEO of ARCP, says his company and Cole “both have histories of driving tremendous growth. By leveraging our successful track records, our complementary businesses and highly skilled professionals, we are confident that we will be well positioned to achieve continued growth.”
At Pheonix-based Cole, founder and executive chairman Christopher Cole says the decision to merge “is entirely forward-thinking” on his part and the Cole board’s. “Namely, our two companies are far better and more powerful together than apart; our union provides immediate and obvious benefits of size, scale and diversification,” he says. “This transaction represents a major step in achieving our goal of creating the premier real estate company that delivers best-in-class long-term results to our clients.” He adds that he will “step away from the company which I built and bears my name.”
ARCP says its pending mergers with CapLease and ARCT IV both are on track to close. These two mergers, along with the Cole deal and pending property acquisitions, will result in a net lease REIT that’s 64% larger than its next nearest competitor and the 14th largest publicly traded REIT.
On the ARCP-Cole merger, Barclays and RCS Capital, the investment banking division of Realty Capital Securities LLC, are acting as financial advisors to ARCP and Proskauer Rose LLP is acting as legal counsel to ARCP. Goldman Sachs & Co. is acting as exclusive financial advisor to Cole and is receving legal counsel from Fried Frank Harris Shriver & Jacobson, while Wachtell, Lipton, Rosen & Katz, Venable LLP and Morris, Manning and Martin LLP are acting as legal counsel to Cole. Sullivan & Cromwell LLP is acting as special counsel to Christopher Cole and certain other executives in connection with the transaction.