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ARCP Opts to Sell Shopping Centers to Blackstone for $1.98 Billion

Net-Lease Company Cancels Plans to Spin Off Strip Centers into REIT, Saying Sale Offers Better Deal for Shareholders
May 21, 2014
Fast-growing American Realty Capital Properties, Inc. (NASDAQ: ARCP), pivoting from an earlier decision to spin off 69 shopping centers into a separate REIT, announced Wednesday it instead plans to sell the portfolio to Blackstone Group for $1.975 billion and use the proceeds to help pay for the announced purchase last week of Red Lobster's real estate properties.

ARC Properties expects to finalize the sale with affiliates of Blackstone Real Estate Partners VII within 30 days of today's announced signing of a letter of intent, and cycle the proceeds into the $1.5 billion Red Lobster sale-leaseback transaction with Golden Gate Capital, which plans to acquire the seafood chain for $2.1 billion from Darden Restaurants.

Led by Executive Chairman and CEO Nicholas Schorsch, ARCP said last week it expects to reach its investment goal of $3 billion for the entire year with the Red Lobster purchase. As a result, the company is raising its acquisitions target for 2014 to $4.5 billion.

The shopping center properties are the same assets ARCP slated in March to be spun off into a new REIT called American Realty Capital Centers, Inc.

However, Schorsch said the plan to spin-off the retail portfolio prompted inquiries from investors and new options -- along with an opportunity to simplify ARCP, which over the last year has grown into the largest U.S. owner of single-tenant real estate.

"We now believe the sale of the multi-tenant portfolio will deliver the best value creation option to our shareholders and serve to enhance the clarity of our single-tenant, net lease investment strategy," Schorsch said in a statement.

ARCP President David S. Kay said the Blackstone sale will allow the company to fund the Red Lobster purchase by selling the shopping center portfolio at a capitalization rate more than 100 basis points below the 7.9% cash cap rate to be paid for the Red Lobster portfolio.

ARCP's shares fell nearly 5% to a one-year low of $12.26 at the close of trading Wednesday after the company issued a separate announcement that it will issue 100 million common shares. The stock has fallen more than 15.5% since the mid-March announcement of the planned spin-off of its multi-tenant portfolio.

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