ARCP to Become Self-Managed Following Closing of ARCT IV Merger

By Gail Kalinoski, Contributing Editor

Nicholas Schorsch, of ARCP

Just days after its $3.1 billion merger with American Realty Capital Trust IV, Inc. is finalized and weeks before its $11.2 billion acquisition of Cole Real Estate Investments, Inc. is completed, American Realty Capital Properties, Inc. will become self-managed on Jan. 8.

The New York-based net-lease REIT led by Nicholas Schorsch announced several months ago that it had determined self-management was in the best interests of the company and its stockholders. Investors and analysts had been calling for the firm, which had been on an aggressive acquisition spree throughout 2013, to self-manage because of perceived conflicts of interest. Schorsch said in August that self-management would occur after the acquisitions of ARCT IV and CapLease, Inc., a $2.2 billion merger that closed on Nov. 5, were completed.

Daniel Donlan, a research analyst & vice president at Ladenburg Thalmann & Co., had said in an investors note that ARCP needed those mergers finalized so it would have the scale to internalize.  He said self-management would likely result in cost savings and possibly more investors who had been concerned about the external management.

“We believe the move to self-management creates stockholder value by establishing a structure that allows us to operate more effectively and efficiently,” Lisa Beeson, the new ARCP chief operating officer, said in a prepared statement this week. “We view this as the optimal timing to implement this improved structure as we look forward to successfully integrating ARCT IV and Cole with ARCP.”

The ARCT IV merger, announced in July, is expected to close Jan. 5. The public, non-traded REIT has approximately 1,326 properties with 15.2 million square feet. ARCP and ARCT IV share the same sponsor, American Realty Capital. Last February, ARCP closed on the $2.2 billion acquisition of American Realty Capital Trust III, Inc., another non-traded net lease REIT also sponsored by American Realty Capital. The ARCT III acquisition was just one of several high-profile deals undertaken by Schorsch and his team throughout 2013.

Once the self-management is complete, ARCP will continue to be led by Schorsch, who will serve as executive chairman, and Brian Block, also a founder of ARCP, who will be chief financial officer. Joining Schorsch, Block and Beeson as key executives are David Kay as president, Lisa Pavelka McAlister as chief accounting officer, Glenn Kindred as executive vice president of the Restaurants Division and Paul McDowell as president of the Office & Industrial Division. McDowell had been CEO of CapLease before the merger with ARCP.

“We could not be more pleased with the timing of ARCP’s transition to becoming a completely self-managed enterprise,” Schorsch said in the release. “As we take our place as the most significant net lease REIT in the industry, we will be guided by the strongest most experienced management team ever assembled to run such a company.”

Schorsch said ARCP will terminate its management agreement with its external manager, ARC Properties Advisors, L.L.C. as of Jan. 8. However, it will use some ARC Properties Advisors services to complete the Cole acquisition, which is expected to close this month.

ARCP will then become the world’s largest net-lease REIT worth about $21.5 billion with more than 3,700 properties in 49 states and Puerto Rico. The October announcement that ARCP was acquiring Cole came as a shock to many because the net lease rivals had been embroiled in a public feud earlier in 2013 as ARCP tried unsuccessfully to acquire Cole Credit Property Trust III, a non-listed REIT, for $10 billion. CCPT III chose to be acquired by its sponsor and asset manager Cole Holdings Corp. and created the new entity, Cole Real Estate Investments, Inc.