Oak Brook, Ill. — Inland American Real Estate Trust Inc. has agreed to sell its core net lease portfolio consisting of 294 retail, office and industrial assets to New York-based AR Capital LLC (ARC) in an all-cash transaction valued at approximately $2.3 billion. The deal includes the assumption of approximately $795.3 million in debt.
"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," says Thomas McGuinness, president of Oak Brook-based Inland American Real Estate Trust, a non-traded REIT.
"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."
The deal represents "the culmination of a robust evaluation process to achieve maximum value for this portfolio of core net lease assets," adds McGuinness.
From the disposition, Inland American expects to realize up to approximately $1 billion of net proceeds, which could be received during the next nine months. The company intends to use these net proceeds for, among other things, investing in high-quality assets within its targeted asset classes and reducing debt.
The non-traded REIT is also evaluating alternatives for using a portion of the net proceeds to provide liquidity to its stockholders, such as exploring options for a share repurchase.
Inland American's strategy includes, among other things, enhancing the overall quality of its portfolio for long-term growth through disciplined asset acquisitions and positioning the portfolio for multiple liquidity events.
"This transaction provides us with additional capital to support our strategic growth initiatives, while enhancing our overall capital structure," says Jack Potts, principal financial officer of Inland American. "We are committed to investing the net proceeds in a manner consistent with our long-term growth strategy."
Inland American intends to continue payment of monthly distributions at an annualized rate of 50 cents per share. This equates to a 7.2 percent annualized yield based on the company's current estimated per share value. The company also maintains its FFO guidance for 2013 of 50 cents to 51 cents per share.
The transaction will be completed through multiple closings, with the initial closing expected to occur in the third quarter of 2013, the second closing expected to occur at the end of the fourth quarter of 2013 and the final closing expected to occur in the first half of 2014.
The multiple closings reflect the need to obtain certain required third-party consents, and each closing is subject to customary approvals and closing conditions, including certain property due diligence conditions.
Goldman, Sachs & Co. is acting as financial advisor to Inland American and Latham & Watkins LLP is acting as legal counsel to Inland American in the transaction.
As of March 31, Inland American owned 759 properties, representing approximately 45 million square feet of retail, industrial and office properties, 4,919 conventional multifamily units, 5,332 student housing beds and 16,407 hotel rooms. Inland American is one of six REITs that are, or have been, sponsored by affiliates of The Inland Real Estate Group of Cos.
— Matt Valley