American Realty To Sell Cole Capital To RCS For $700 Mln

(RTTNews) - American Realty Capital Properties, Inc. (ARCP) Wednesday said it has signed a definitive agreement to sell its private capital management business, Cole Capital to RCS Capital Corp. (RCAP) for at least $700 million.

In the light of the transaction, ARCP revised its full-year 2014 adjusted funds from operations, or AFFO guidance, and issued outlook for 2015.

Through this acquisition, ARCP expects to significantly reduce its general and administrative costs while maintaining a long-term steady stream of fee income from its role as sub-advisor to the managed funds.

As per the agreement, ARCP will receive $200 million in cash, 8.39 million shares of RCAP's Class A common stock for $0.001 per share and $300 million of unsecured debt with a laddered interest rate increasing from 7.5 percent to 10.5 percent at certain time intervals until maturity in December 2021.

Also ARCP will be entitled to an earn-out of up to an additional $130 million based upon Cole Capital's 2015 EBITDA. The transaction is expected to be completed in the fourth quarter of 2014.

The company expects to use the sale proceeds to repay certain outstanding indebtedness.

American Realty Capital Properties owns and acquires single tenant, freestanding commercial real estate that is net leased on a medium-term basis. RCS Capital is engaged in the wholesale broker-dealer, and investment banking and capital markets business activities.

David Kay, chief executive of ARCP stated, "This transaction significantly simplifies our business model, provides us a long-term economic stake in the growth and success of Cole Capital's investment programs..."

ARCP and RCS Capital will share the acquisition and asset management fees 50:50 and, in addition, ARCP will receive a portion of the disposition and incentive fees due to RCS for advising the Managed Funds.

For full year 2014, ARCP now expects AFFO to be in the range of $1.06 to $1.08 per share. Further, for 2015, the company expects AFFO in a range of $1.11 to $1.14 per share.

ARCP closed Tuesday's trading at $12.06, down 2.51 percent.

RCAP ended at $22.52, down 3.43 percent. In the pre-market activity on Wednesday, the shares rose 1.73 percent.