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Divide and Monetize: ARCP to Split Retail Portfolio Into Separate REITs

Move Would Create New $2.2 Billion Publicly Traded Company
March 13, 2014
The largest U.S. net lease REIT, American Realty Capital Properties Inc. (NASDAQ: ARCP), announced plans to split its single-tenant and multi-tenant shopping center portfolios by spinning off the majority if its multi-tenant shopping center business into a separate publicly traded REIT valued at $2.2 billion.

The new REIT, which will be called American Realty Capital Centers Inc. (ARCenters), will own 69 of the firm's multi-tenant retail properties in 26 states totaling 11.8 million square feet. ARCP, which will focus on single-tenant, free-standing retail properties, will retain a 25% stake in the new ARCenters.

Nicholas Schorsch, CEO and chairman of ARCP, will also serve as chairman of ARCenters.

ARCP will give stockholders one share of ARCenters stock for every 10 shares of ARCP stock. The company projects the first-year annualized dividend for ARCenters at 73 cents per share, while the annualized dividend for ARCP remains at $1 per share, according to a release.

"By separating the two high-quality portfolios, we intend to create more clarity, more efficiency and more opportunity for our stockholders," said Schorsch.

Schorsch noted that ARCP had promised investors it would unlock the value of its multi-tenant holdings and focus ARCP’s pure-play portfolio exclusively on net lease assets.

"We recognized that the market was not giving us full and fair value for our multi-tenant assets," he said.

Nearly half, 47%, of ARCenters' portfolio is located in the top 20 metropolitan areas nationwide. The portfolio was 96.3% leased as of Jan. 31.

The announcement is the latest in a series of proposed or discussed spinoffs involving shopping center property.

In December, the world's largest mall owner, Simon Property Group (NYSE:SPG), announced a plan to spin off all of its strip center business and smaller enclosed malls into an independent, publicly traded REIT called SpinCo. This week, the Wall Street Journal reported that Vornado Realty Trust (NYSE: VNO) is exploring spinning off its suburban strip centers into a separate company.

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