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ARCP One Step Closer to CapLease Merger

Schorsch Confident In Ability to Close Both CapLease and ARCT IV Mergers In Third Quarter
July 10, 2013
The winning streak keeps getting longer for Nicholas S. Schorsch, chairman and CEO of American Realty Capital Properties ( ARCP). The dealmaker who has vowed to reshape the net-lease property industry through a series of large mergers and portfolio transactions, is doing his part with plans to grow ARCP to an enterprise value of $10 billion by the end of 2013.

This week, ARCP said it now plans to buy CapLease, Inc. (NYSE:LSE) sooner than expected after a 40-day "go shop" period expired without an offer for the rival company from another suitor.

ARCP announced May 28 that it intends to buy CapLease for $2.2 billion, including $580 million in assumed debt, in a deal that would make it the third-largest net-lease REIT in the U.S. based on market capitalization. American Realty expects to close the transaction in the current quarter, pending the outcome of a vote whether to approve the merger at a special meeting of CapLease stockholders.

During the go shop period, CapLease contacted 44 potential alternative buyers, but none submitted a proposal to acquire the company.

Following its merger agreement with American Realty Capital Trust IV, Inc., ARCP announced July 1, 2013 that it would raise its dividend for the seventh consecutive quarter, effective when the CapLease and ARCT IV mergers close.

"With the recent success demonstrated by our $774 million acquisition of a high-quality portfolio from GE Capital, we have closed over $1.14 billion of portfolio acquisitions year to date," noted Schorsch.

"We are confident that we can efficiently close both the ARCT IV and CapLease transactions before the end of the third quarter."

The only hitch in ARCP's recent growth trajectory occurred in March, when Cole Credit Property Trust III rejected Schorsch's $9.7 billion offer to purchase Cole Holdings. CCPT III announced the closing of its acquisition of Cole Holdings April and launched as a public company earlier this month.

Wall Street has been largely favorable to ARCP's growth, despite the volatility of share prices in the overall REIT sector this year.

"We believe the spread between net-lease [capitalization] rates and Treasurys continues to offer a compelling opportunity to deliver attractive, risk-adjusted returns," said Mitch Germain of JMP Securities in an investor note last week.

Since the Monday announcement on CapLease, ARCP's shares have risen by just under 3% as of the close of the market Wednesday.

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