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Net Lease Portfolio Shake-Up Triggers $2.3 Billion American Realty Capital Buy

ARC REITs Splitting Up 273 Inland American Net Lease Properties
August 14, 2013
American Realty Capital (ARC) sponsored REITs capped an especially busy week by announcing more than $2.5 billion in commercial real estate acquisitions and a pipeline of another $1.1 billion in deals expected to close this year.

The source for the bulk of properties involved in the deals is a major portfolio restructuring underway by Chicago-based REIT, Inland American Real Estate Trust, which is the seller of $2.3 billion of the properties ARC is buying. The large volume of deals involve four of ARC's portfolio of publicly registered non-traded REITs:

  • American Realty Capital Trust V buying a $1.45 billion portfolio of net lease properties;

  • American Realty Capital Properties Inc. buying a $416.5 million portfolio of primarily net leased properties;

  • American Realty Capital New York Recovery REIT buying a 10-story New York City office building for $220.3 million; and

  • American Realty Capital Healthcare Trust buying 12 senior living facilities, one medical office building and a parcel of land, with a total purchase price of $176.9 million as well as the regional headquarters for UnitedHealthcare Services for $123 million.



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American Realty Capital Trust V
American Realty Capital Trust V Inc. is acquiring a $1.45 billion portfolio of 247 net lease properties from Inland American Real Estate Trust. The purchase price includes the assumption of $488 million of debt. The company intends to fund the remaining purchase price using cash from its ongoing initial public offering. The company said it may seek financing on the portfolio a from a lender yet to be identified.

The portfolio contains 10 million rentable square feet and is 100% leased to nine tenants, including Suntrust Bank, Sanofi SA, C&S Wholesale Grocers, Ahold, American Express Travel and Home Depot with a weighted average remaining lease term of 11.7 years.

As part of this pending acquisition, ARCT V has assembled a separate $2.11 billion portfolio to be purchased at an average capitalization rate exceeding 7.5%. The portfolio includes $1.96 billion of properties under contract and $121.9 million of properties under signed letters of intent.

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

American Realty Capital Properties
American Realty Capital Properties Inc. announced that it had lined up a second half 2013 pipeline of $1.1 billion of acquisitions expected to be purchased at an average capitalization rate of 8%.

The pending purchases include a $416.5 million portfolio of 40 properties containing 5.9 million rentable square feet and are net leased to 26 tenants, diversified across 21 industries and 20 states. The seller again is Inland American Real Estate Trust Inc. and the purchase price includes the assumption of $194.9 million of debt.

According to seller Inland American Real Estate Trust, the deals represent the results of a “robust evaluation process.”

"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," said Thomas McGuinness, president of Inland American. "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.”

Separately, Inland American Real Estate Trust also has its entire conventional multifamily portfolio under contract for sale. The REIT owns 17 apartment complexes with 5,311 units. Occupancy in the portfolio is approximately 90% with an average rental rate of $992/unit.

American Realty Capital New York Recovery REIT
Also this week American Realty Capital New York Recovery REIT acquired a 10-story office building at 333 W.t 34th St. in Midtown Manhattan from SL Green for $220.3 million. The 347,000-square-foot building is fully leased to four tenants: The Segal Co. (Eastern States), The Metropolitan Transportation Authority, Godiva Chocolatier Inc. and Sam Ash New York Megastores.

American Realty Capital Healthcare Trust
American Realty Capital Healthcare Trust expects to acquire four UnitedHealth regional headquarters facilities located in Cypress, CA; Indianapolis; and two in Wisconsin, for a total price of $123 million, not including closing costs.

The four properties comprise 610,700 rentable square feet and are part of $1.4 billion portfolio ARC Healthcare has assembled that includes $1.05 billion of already-purchased properties, $238.4 million of properties under contract and and $111.5 million of properties under signed letters of intent.

During the period July 1, 2013 to Aug. 12, the REIT acquired 12 senior living facilities, one medical office building and a parcel of land, representing an aggregate purchase price of $176.9 million. As of August 12, 2013, the company's aggregate portfolio consists of 83 properties with a base purchase price of $1 billion.

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