Nontraded REIT to consider higher American Realty Capital offer

Nontraded real estate investment trust Cole Credit Property Trust III Inc. said Thursday its special committee of outside board members will review American Realty Capital Properties Inc.’s revised offer, but also said it was committed to its own buyout plan.
On Wednesday, American Realty Capital upped the stakes in the battle between two of the biggest players in the REIT space by offering no less than $13.59 a share in stock or $12.50 a share in cash for Cole Credit Property Trust III, which is known as Cole III. A week ago, American Realty Capital offered $12 in cash and stock for Cole III but that bid was quickly rejected.
The offer works out to a total value of more than $9.7 billion including debt, up from last week’s offer, which had a value of just more than $9 billion.
The special board committee “will carefully review the revised [ARC] proposal in consultation with its advisors, and pursue the course of action that it believes is in the best interests of CCPT III and its stockholders,” according to a statement from Cole III.
The special committee “reiterated that it remains committed to its previously announced course of action to acquire Cole Holdings,” the statement added.
Still, the nontraded REIT said its investment bankers “were contacted by ARCP and agreed to have a meeting with ARCP. Prior to meeting, ARCP elected to make its revised proposal public.” Cole officials were not available for comment.
“I’m thrilled they’re open to our offer,” American Realty Capital chief Nicholas Schorsch said in an interview. In a letter to Cole III directors on Wednesday, he said Cole officials had not responded to his offer to meet.
No date has yet been set for the two sides to get together.
Earlier this month, Cole III, whose client roster includes Home Depot Inc., Wal-Mart Stores Inc. and Lowe’s, offered to buy Cole Holdings and take the combined entity public. The controversial proposal included hefty “internalization” fees paid to Cole Holdings executives.
In its latest offer, ARCP said it would buy Cole’s management company, Cole Holdings Corp., as part of the merger.
In a filing with the Securities and Exchange Commission on Monday, Cole III said its acquisition of its management company would benefit shareholders of the newly combined entity. Cole also said that the initial proposal from ARCP would result in 12% to 25% less for shareholders and result in a new entity with too much leverage.
Those claims “are just crazy,” Mr. Schorsch said Wednesday. He added that his new offer “allows a smooth and seamless transition” because founder “Chris Cole and his management team [are] getting paid.”
He said the revised bid is based on more-detailed operating data Cole released Monday in its SEC filing, as well as in response to Cole’s claims that its own proposal to merge Cole Holdings with the Cole REIT could not be averted.
“This offer is a floor of $13.59, and in [Cole’s] filing, they already pegged [their proposal] at $13 to $15 … in a best-case scenario” after going public, Mr. Schorsch said.