American Realty Properties (NASDAQ:ARCP) inked a deal to buy American Realty Trust (NASDAQ:ARCT) in a deal valued at roughly $3.1 billion on Tuesday to widen its footprint in the net-lease market where tenants are responsible for a majority of operating costs.
With this purchase and a string of other recent acquisitions, ARCP now owns 2,579 single tenant properties net leased to 470 tenants across 29 industries in 48 states, giving it an enterprise value of about $10 billion and making it the second-largest net-lease real estate investment trust in the country.
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Shares of the properties group climbed more than 3% in early trade to $15.25.
The acquisition has been approved by the independent directors of both companies and remains subject to customary closing conditions and shareholder approval. If all goes as scheduled, it is expected to close in the third quarter.
In light of the transaction, ARCP increased its 2014 adjusted funds from operations guidance to $1.19 to $1.25 a share, which would be equivalent to year-over-year growth of 31%. ARCP also said it would ramp up the payment of debt to “maintain financial flexibility” and increase its annualized dividend to 94 cents.
“Today's announced merger solidifies our leadership position in the net lease real estate sector,” ARCP chief executive Nicholas Schorsch said in a statement. “More important than sheer growth in size, ARCP over the trailing twelve months has been among the best performing REITs on the exchanges, with total shareholder return of 58% and an increased annualized rental income from less than $25 million to more than $527 million.”
With this buy and other recent purchases from GE Capital, ARCP increased its enterprise value from just $250 million at the time of its September 2011 IPO.