American Realty Capital in another big deal, this time with GE

After raising almost $1.6 billion in equity in the first four months of the year, American Realty Capital Trust IV Inc., one of Nicholas Schorsch’s net-lease real estate investment trusts, is spending it.
The REIT has agreed to buy from GE Capital a $1.45 billion collection of retail properties with tenants including restaurant brands Taco Bell, KFC and Burger King. The portfolio is part of the formerly publicly traded Truststreet Properties Inc.
“Give (ARC IV) credit for getting the capital deployed,” said Keith Alliare, managing director, Robert A. Stanger & Co. Inc., who added that he could not comment on the specific economics of the transaction because he had not yet looked at them. “The challenge with raising this kind of money is putting it to work.”
Mr. Allaire said that, the longer investors’ capital remains on the sidelines in such REITs, the potential cost to investors increases. Current record low interest rates are far below the 6.5% to 7% yield on commercial real estate, he said.
“You lose money the longer you hang onto it” when managing such illiquid REITs, he said.
The acquisition comes after American Realty Capital Trust IV’s, or ARC IV, sales skyrocketed this year. According to Securities and Exchange Commission filings, the REIT started the year with $135 million in equity.
Registered representatives and advisers raised almost $1 billion in ARC IV equity during the first three months of this year, according to filings with the SEC. In total, the REIT raised $1.7 billion in equity before closing its offering this spring.
The REIT will have a portfolio of $2.3 billion after the completion of the GE Capital purchase, as well as $318 million of acquisitions already completed. The deal “enables us to efficiently deploy all of the remaining equity capital raised for [ARC IV] within the next 60 days, well ahead of schedule,” Mr. Schorsch, the REIT’s chief executive, said in a statement. The REIT expects to close the major portion of the GE Capital acquisition in the next 30 days.
It is the second time in the last week that one of Mr. Schorsch’s REITs have struck a deal with GE Capital. Last Friday, American Realty Capital Properties Inc., a listed REIT, said it agreed to purchase the $807 million GE Capital Portfolio, which also owns net-lease properties.