ARCT: SELL REIT, RINSE, REPEAT
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|ARCT chairman Nick Schorsch tends to duplicate business models that work, so when we heard on Thursday that Realty Income has agreed to buy American Realty Capital Trust for $2.9B, we wondered if more deals to come between the two. (Rinse and repeat: because nobody likes a REIT with dry split ends.)|
|We sat down with ARCT chairman Nick Schorsch in his 405 Park Ave office Friday afternoon. But first some context on ARCT's kin: ARCT III (last reported at 235 properties and 6.7M SF, plus $357M of properties under contract, according to an Aug. 20 SEC filing) is on pace to close this week at $1.7B. That would make the 13 months it took to raise its target equity amount the shortest ever for a non-traded REIT. ARCT III's success owes in part to the strength of the original ARCT (501 properties, 15.7M SF). And ARCT IV is getting under way. American Realty Capital's net-lease REITs also go after similar properties (the second, ARC Daily NAV, is a little different): properties with low leverage, no vacancy (the beauty of sale-leasebacks), long lease terms, and investment-grade tenants.|
|Here's ARCT's Walgreens in Sealy, Texas. Nick tells us Realty Income is the only net-lease company with the size and low cost of capital that could offer such solid benefits to ARCT investors. ARCT stock is now tied to Realty Income's, which trades higher; indeed, as we sat down with him, the NASDAQ closed on ARCT's third consecutive day of all-time-high trading. Realty Income, he says, gains a portfolio with higher occupancy, longer lease terms, and more diversity among higher-grade tenants. The deal will close by Q1 '13.|