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AR Global’s Retail Centers of America and American Finance Trust Inch Closer to Merger

American Realty Capital – Retail Centers of America and American Finance Trust, two publicly registered non-traded REITs sponsored by AR Global, announced that the “go shop” period relating to last month’s merger announcement has expired. The merger agreement between the two companies provided RCA with a go-shop period where it could actively solicit alternative proposals from third parties for 45 days.

BMO Capital Markets, the financial advisor to RCA’s special committee, did not receive an alternative acquisition proposal from the third parties it contacted.

As reported by The DI Wire last month, the two REITs are merging to create a single retail focused REIT with an enterprise value of approximately $3.9 billion. If approved by shareholders, the combined retail-focused portfolio will total 494 properties, comprising 20.8 million rentable square feet of single-tenant net lease, power center, and lifestyle center assets.

American Finance Trust plans to acquire all of the outstanding common stock of Retail Centers of America for approximately $1.4 billion, payable in a combination of AFT common shares and cash plus the assumption of certain debt.

Under the terms of the agreement, RCA shareholders will receive 0.385 shares of AFIN common stock and $0.95 in cash for each share of RCA common stock they own. Upon closing, RCA shareholders will own approximately 37 percent of the combined company. The approximately 90 percent stock component of the transaction is expected to be tax-free to shareholders.

American Finance Trust will add two independent directors to be appointed by RCA’s board of directors, bringing to six the total number of directors for the combined company, five of which are independent.

Shareholders of both REITs will vote on the proposed merger at a special meeting of common stockholders, which is not yet scheduled. Joint preliminary proxy materials were filed with the Securities and Exchange Commission on Friday. The transaction is expected to close in the first quarter of 2017.

American Finance Trust’s portfolio consists of 459 office, retail, and distribution properties totaling 13.1 million square feet with a total purchase price of $2.2 billion. The portfolio is 100 percent leased with a weighted-average remaining lease term of 9.6 years. The company commenced its initial public offering in April 2013, which closed six months later after raising $1.6 billion.

American Realty Capital—Retail Centers of America went effective in March 2011 and closed in September 2014 after raising $973 million in investor equity. The REIT’s portfolio includes 35 properties totaling 7.5 million square feet with an investment cost of $1.2 billion.

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