The pending sale to Blackstone creates shareholder value, says ARCP president Kay.

NEW YORK CITY—American Realty Capital Properties said Wednesday it plans to sell substantially all of its multi-tenant shopping center portfolio to a Blackstone Group fund for $1.98 billion in cash. Proceeds from the sale would then be recycled to fund the net lease REIT’s $1.5-billion Red Lobster portfolio acquisition, which it announced this past Friday.

The pending sale to Blackstone Real Estate Partners VII follows up ARCP’s announcement in March that it planned to spin off the multi-tenant retail into a separate REIT, to be known as American Realty Capital Centers Inc. Instead, most of the 11.7-million-square-foot portfolio that would have comprised ARCC’s holdings will trade to Blackstone, although ARCP would continue to own 18 shopping centers totaling 1.7 million square feet. The portfolio came into ARCP’s fold as a result of its $11-billion merger with Cole Real Estate Investments earlier this year.

“We continued to look at options to create stockholder value through a disposition of our multi-tenant assets, and we believe that through the sale to Blackstone of the multi-tenant shopping center portfolio, we have accomplished this,” says David S. Kay, ARCP’s president. “This sale will allow us to acquire what in our view are the 500 best Red Lobster stores profitably by selling our multi-tenant portfolio at a cap rate that is more than 100 basis points lower than the 7.9% cash cap rate for the Red Lobster portfolio.”

In an SEC filing, ARCP says the portfolio that it intends to sell to Blackstone runs to 78 properties, including 35 power centers, 12 grocery centers, 21 anchored centers and 10 single-tenant properties. The single-tenant properties are being included in the multi-tenant portfolio in order to minimize release prices, make-whole payments and defeasance amounts that would be payable if these 10 single-tenant retail properties were not included in the portfolio, according to the SEC filing.

ARCP also said Wednesday that in view of the Red Lobster deal meeting its full-year acquisitions target of $3 billion, it would raise the bar to $4.5 billion in acquisitions for calendar 2014. Separately, the REIT said Wednesday that it had commenced a public offering of 100 million shares of common stock, with the underwriters having a 30-day option to purchase up to 15 million additional shares.