1 + 3 Equals $2.3B Deal for Inland, ARC

Three REITs sponsored by AR Capital are the prospective buyers, for a total of nearly $2 billion, of a 16.5 million-square-foot portfolio of 294 largely net-leased retail, office and industrial properties to be sold by Inland American Real Estate Trust.
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Nicholas Schorsch, of ARC

Three REITs sponsored by AR Capital, New York, are the prospective buyers, for a total of nearly $2 billion, of a 16.5 million-square-foot portfolio of 294 largely net-leased retail, office and industrial properties to be sold by Inland American Real Estate Trust Inc., of Oak Brook, Ill., the parties announced Friday.

Inland American values the deal at $2.3 billion, which includes the price for the properties and the assumption of nearly $800 million in debt and adds the repayment by the seller of about $360.9 million in debt. Inland American reported that it expects to realize up to about $1 billion in net proceeds from the sale over the next nine months.

The primary buyer is American Realty Capital Trust V Inc., which will take about three-quarters of the transaction’s total dollar amount, or $1.45 billion. (See table.) The 247 properties are 100 percent leased to just nine tenants: Suntrust Bank, C&S Wholesale Grocers, Americold, Home Depot, Sanofi SA, Koninklijke Ahold, American Express Travel, New Breed Logistics and LA Fitness, according to an SEC filing. The expected annualized NOI is $108.5 million, according to the buyer.

Counting this transaction and all other properties currently owned or in an acquisition pipeline, ARCT V has assembled a $2.11 billion portfolio with an average cap rate exceeding 7.5 percent and about 70 percent net leased to investment-grade tenants.

“This purchase will enable us to substantially complete our acquisition stage,” Nicholas Schorsch, chairman & CEO of ARCT V, said in a release. “At the same time, we will surpass our stated goal of constructing a portfolio of properties that is at least 50 percent investment grade, leased on a long-term basis and well-diversified by industry, geography and tenancy.”

American Realty Capital Properties Inc. will buy a portfolio of about 5.9 million rentable square feet and leased to 26 tenants.

Finally, American Realty Capital Healthcare Trust will purchase a four-building portfolio 100 percent net-leased to UnitedHealth, which uses the four buildings as its regional headquarters in Cypress, Calif.; Indianapolis; and Onalaska and Wauwatosa, Wis.

“The sale of our core net lease portfolio is a major step in executing our long-term strategy of focusing our energies and investment capital in the multi-tenant retail, lodging and student housing asset classes,” Thomas McGuinness, president of Inland American, said in a release. “We believe these asset classes will generate consistent cash flows, which will allow us to continue providing our stockholders with sustainable distributions while allowing us the opportunity to benefit from current real estate trends.”

 

ARCT V ARCP ARCHT TOTAL
Purchase price $1.448 billion $416.5 million $123.0 million $1.987 billion
Included debt $488 million $194.9 million $793.5 million
Properties 247 n/a 4 294
Rentable SF 9.96 million 5.9 million 610,700 16.5 million