PHOENIX-Cole Credit Property Trust III has executed a definitive merger agreement to acquire Cole Holdings Corp., a commercial real estate investment management company managing more than $12 billion assets for more than 160,000 individual investors represented by more than 13,000 financial advisors. Upon completion of the transaction, scheduled for a Q2 2013 closing, CCPT III will change its name to Cole Real Estate Investments Inc. and will pursue a listing on the New York Stock Exchange.

CCPT III is one of the largest REITs focused on the net-lease commercial real estate sector. Following the NYSE listing, Cole Real Estate Investments would be the second-largest publicly-traded REIT in the net-lease sector. The acquisition of Cole Holdings provides CCPT III with a proven management team and a full-scale real estate investment management platform with more than 350 employees, as well as a portfolio of more than 2,000 properties with more than 76 million square feet of corporate real estate under management.    

In addition, the acquisition better positions CCPT III to pursue a listing on the NYSE. Upon a listing on the NYSE, Cole Real Estate Investments will be well positioned to achieve inclusion in a variety of indices over time, such as the Russell 1000, Russell Midcap and MSCI US REIT Indices.

As consideration for the acquisition of a premier real estate investment manager, CCPT III will make upfront payments of $20 million in cash, subject to adjustment, and approximately 10.2 million shares of CCPT III common stock.

Also in play will be the following contingent amounts:

• Approximately 2.1 million shares of CCPT III common stock after a listing on the NYSE
• Additional shares of CCPT III common stock potentially payable in 2017 as an "earn-out" contingent upon the acquired business' demonstrated financial success based on two criteria, the acquired business generating EBITDA above a minimum threshold and CCPT III's stock performance relative to its peer group.
• The upfront stock consideration and the stock consideration upon listing are subject to a three-year lockup with approximately one-third of the shares paid at closing released each year.  The stock consideration payable in 2017 is subject to a lock-up until December 31, 2017. 

"For over a decade, a primary strategy in the asset management industry has been the creation of large, full-service firms with the scale and resources necessary to compete effectively in a changing environment," says Christopher Cole, founder and executive chairman of Cole Holdings in a press release. "The real estate industry has been lagging behind in terms of the creation of full-service asset managers that can provide a comprehensive suite of products and services to distribution partners."

Cole notes that the acquisition is the result of more than 30 years of effort. "I am thrilled about the substantial growth potential and income generation that this combination will offer to all Cole Real Estate Investments stockholders," he adds. "I look forward to continuing to work with Cole Holdings' talented team to capitalize on the significant opportunities that this exciting transaction will deliver to investors for generations to come."

Goldman Sachs & Co. and Lazard served as financial advisors, and Wachtell, Lipton, Rosen & Katz and Venable LLP served as legal advisors to the special committee of the board of directors of CCPT III.  Morris, Manning & Martin LLP served as legal advisor to CCPT III. Moelis & Co. served as exclusive financial advisor and Sullivan & Cromwell LLP served as legal advisor to Cole Holdings.