NEW YORK CITY—In a deal that will enable American Realty Capital Properties to focus solely on net lease, ARCP is selling Cole Capital to another company with common ancestry. RCS Capital will acquire Cole Capital for at least $700 million in cash, stock and assumed debt, the two companies announced Wednesday.

A private capital management business, Cole Capital came into the ARCP fold as part of the $11.2-billion merger with Cole Real Estate Investments, which closed this past February. For ARCP, the sale means a simpler business model, while for RCAP, it means an increase in assets under management and the addition of seven Cole Capital investment programs that will bolster its presence in net lease.

As part of the transaction, ARCP will be entitled to an earn-out of up to an additional $130 million based upon Cole Capital's 2015 EBITDA. Additionally, ARCP will act as sub-advisor to Cole Capital's non-traded REITs and acquire and property manage net lease real estate assets for them.  In addition, ARCP has agreed to source, underwrite and acquire US net lease properties for American Realty Capital Global Trust II Inc., a net lease REIT formed this past spring.

“As the leading wholesale distribution platform in the industry, RCAP is uniquely suited to increase the velocity and volume of Cole Capital's overall equity raising capabilities,” says David S. Kay, who assumed the CEO chair at ARCP on Wednesday with Lisa Beeson becoming president, both as previously announced. “With their expertise in the industry, we will be able to focus on acquiring and managing the real estate activities for the managed funds and our balance sheet.”

At Realty Capital Securities, RCAP's wholly owned wholesale broker-dealer, CEO Bill Dwyer says the addition of Cole Capital to the wholesale platform offers “many exciting benefits.” Among them, Dwyer says, are “an experienced team of professionals with complementary skills and relationships,” along with the addition of seven additional investment solution offerings “that represent significant equity capital raising potential, all the more so due to the sub-advisory arrangement” with ARCP. “Both RCS and Cole bring substantial history and expertise in net lease direct investments, so we believe the fit is ideal.”

Kay adds that in view of the “transformative transaction,” ARCP has revised its guidance for this year to reflect the terms of the strategic relationships. “Our guidance range includes the reduction of acquisition and asset management fees as well as certain expenses that will not be reimbursed due to the sale,” he says. “We have also introduced 2015 guidance which reflects significantly reduced variability due to the sale of the securities business.”

In connection with the transaction, Moelis & Co. is acting as financial advisor and Weil, Gotshal & Manges LLP is acting as board counsel to ARCP. Barclays Capital Inc., RCS Capital and Citi are acting as financial advisors and Duane Morris LLP is acting as board counsel to RCAP in connection with the transaction. Proskauer Rose LLP is acting as transaction counsel to ARCP and RCAP.