ARCP American Realty Capital upgrade details -- to Buy at Ladenburg Thalmann; tgt $16...makes COLE worth more too....buy both
23-Oct-13 12:12 ET
American Realty Capital upgrade details -- to Buy at Ladenburg Thalmann; tgt $16
Ladenburg Thalmann upgraded ARCP to Buy from Neutral and set tgt at $16 based upon strategic benefits of its recently announced merger with COLE. Benefits include: 1) reduced leverage; 2) more reliable AFFO stream vs. the prior forecast; 3) higher quality AFFO stream 4) the addition of the well-respected and highly connected real estate professionals from COLE; 5) .) better AFFO/sh growth potential now that ARCP will own Cole's private capital business.
"This is taking the number two and number three net-lease REITs and creating kind of a game-over, category-killer in the sector," says Cole Real Estate (COLE +8.7%) CEO Marc Nemer of the deal to sell itself to American Realty Capital Properties (ARCP -1.5%) for $11.2B in cash and stock. The combined company will push into first place in size in the popular triple-net-lease sector, surpassing Realty Income (O +0.7%).
ARCP's acquisition-happy chief Nicholas Schorsch in the past has typically raised private money for non-traded REITs and then sold the portfolios to ARCP in order to cash out his investors, but this is a massive public deal. "How many REITs have the ability to raise both public and private capital," he says. "The ability for us to acquire non-traded REITs, either whole or in part, is only increased" by this Cole deal.
S&P 500 inclusion next? The investor presentation (slide 8) notes the combined company's market cap will be larger than index constituents Kimco Realty and Macerich.