Two commercial property companies merge in massive deal

Two of the major players in commercial real estate are combining in a massive deal.

In one of the biggest commercial real estate transactions of the year, two of the nation's top commercial property owners have agreed to a $7.2 billion deal.

American Realty Capital Properties and Cole Real Estate Investments have agreed to the multi-billion dollar deal in which American Realty will buy Cole with a combination of cash and stocks.

"These two companies were meant to be together," Nicholas Schorsch, American Realty's chief executive, told The New York Times. "This is a one plus one equals four or five scenario."
According to The Observer, the transaction will create a mix of real estate properties totaling 102 million square feet across 3,732 buildings.

The combined company will be one of the largest landlords in the U.S., with 600 tenants in 49 states and Puerto Rico. The tenants include known entities such as CVS, Walgreens, Home Depot, FedEx and AT&T.

"This was a once in a life time moment when you actually have a perfect storm for these two companies to come together," Schorsch said. "You can say put Ford and General Motors together, but it doesn't always work. This really is a phenomenal union in a moment in time that may never come again."

The deal is expected to close in the first half of 2014 and will create the world's largest net-lease real estate investment trust (REIT). The value of the combined enterprise is $21.5 billion, according to The Observer.

American Realty will compensate Cole shareholders with nearly 1.1 shares of ARCP stock or $13.82 cash per share. The deal is worth roughly $7 billion based on the value of ARCP shares.

Deal almost never happened
American Realty first made an unsolicited offer for Cole in March in a move that would have curbed Cole's move to go public, according to The New York Times. Cole rejected the offer, got itself listed on the New York Stock Exchange in June and saw shares climb more than 17 percent.

American Realty still hoped to acquire Cole, but it had to pay up to do so. The purchasing company will pay 14 percent above Cole's closing stock price and bear significant new debt in taking over the company.

"This transaction brings together two high quality property portfolios managed by talented professionals serving investors, broker dealers and financial advisors," said Marc Nemer, chief executive of Cole.

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