American Realty to buy Cole Real Estate Investments for $7 bn

US real estate company, American Realty Capital Properties (ARCP) yesterday said that it would buy Cole Real Estate Investments for about $7 billion and create one of the largest commercial real estate investment trusts (REIT) in the US.

The deal was valued at $11.2 billion, including debt.

Commenting on the transaction, ARCP's chairman and CEO, Nicholas Schorsch said, "ARCP will become the largest net lease REIT and the new industry leader. We benefit by uniting not only two exceptional real estate portfolios, but also by joining forces with Cole's world-class management team."

Cole's CEO, Marc Nemer said, "This transaction brings together two high quality property portfolios managed by talented professionals serving investors, broker dealers and financial advisors. Moreover, it underscores our commitment to creating diversified capital sources and income streams and the importance of net lease real estate.''

New York-based ARCP will pay 1.0929 of its common shares valued at $14.59 for each Cole share or $13.82 in cash, a 14-per cent premium to Cole's closing price of $12.82 on 22 October.

Under the deal that has been approved by the boards of both companies, the merged company will have a portfolio of more than 3,700 properties with over 100 million square feet in 49 states and Puerto Rico.

The combination of ARCP and Cole creates the world's largest net lease REIT and the 14th largest publicly traded REIT, with a pro forma enterprise value of approximately $21.5 billion, approximately 64 per cent larger than its closest net lease REIT comparable.

ARCP said that it had lined up $2.75 billion of financing from Barclays and the deal is expected to be completed early next year.

The deal comes after Cole, a privately held company, had rejected a revised $6.7 billion offer in March from ARCP and listed itself on the New York Stock Exchange in June.

Post merger, two of Cole's existing independent directors will become directors of ARCP.