Nicholas Schorsch, ARCP chairman and CEONew York – American Realty Capital Properties Inc. (NASDAQ: ARCP), the nation's largest net lease REIT, will spin off its $2.2 billion multi-tenant shopping center business into a separate publicly traded REIT known as American Realty Capital Centers Inc. (ARCenters). The new entity will own 69 properties in 26 states totaling 11.8 million square feet.
ARCP, which will retain a 25 percent operating partnership in the spin-off REIT, will issue 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.
"As we promised our investors, we have strategically unlocked the value of our multi-tenant retail portfolio by announcing the creation of ARCenters and focusing ARCP's portfolio exclusively on net lease assets," says Nicholas Schorsch, CEO and chairman of ARCP who will also serve as chairman of ARCenters. "By separating the two high-quality portfolios, we intend to create more clarity, more efficiency and more opportunity for our stockholders.
"Not only have we taken a step to enhance ARCP's growth profile, but we have created another vehicle with the intention of facilitating even more growth," Schorsch adds.
The ARCenters portfolio, 47 percent of which is located in the top 20 metropolitan statistical areas nationwide, was 96.3 percent leased as of Jan. 31. The average 3-mile radius demographics for the properties includes a population of 69,000 and an income of $71,000 per year.
ARCP estimates that the new REIT's net operating income will be more than $139 million in its first year. The spinoff is also expected to increase adjusted funds from operations (AFFO) per share from 86 cents per share in 2013 to $1.20 per share this year, according to ARCP president David Kay.
"We recognized that the market was not giving us full value for our high-quality shopping centers," says Kay. "In addition to unlocking that value for our stockholders, we believe this transaction enhances our financial profile while focusing our pure-play strategy."
ARCenters will be advised by, and will outsource certain duties to, ARCP Advisors LLC, a subsidiary of ARCP. The new REIT will also have right of first offer on ARCP's remaining 15 multi-tenant shopping center assets, which are being held for the time being due to mortgage obligations.
American Realty Capital Partners Inc., based in New York City, owns a portfolio of 3,732 properties totaling approximately 102 million square feet valued at $21.5 billion. The REIT made headlines in early February with the acquisition of another large REIT, Cole Real Estate Investments Inc., for $11.2 billion.
ARCP's stock price closed at $14.52 per share on March 12, up from $14.24 per share a year ago.
The spinoff is expected to be completed in the second quarter. ARCenters will be traded on the NASDAQ exchange under the symbol ARCM.
— John McCurdy