American Realty Capital Trust Inc
American Realty Capital Trust — Merger or Acquisition (December 2012)
35 slides from American Realty Capital Trust's merger presentation, Dec 21, 2012
Slide 1: Creating the Top Net Lease REIT: Acquisition of The Monthly Dividend Company
DECEMBER 2012 Creating the Top Net Lease REIT Acquisition of The Monthly Dividend Company ® NYSE: O
Slide 2: Additional Information and Where to Find It
2 Additional Information and Where to Find It In connection with the proposed merger, the Company and Realty have filed a definitive proxy statement with the SEC on December 6 , 2012 and commenced mailing the definitive proxy statement and a form of proxy to the stockholders of the Company . BEFORE
Slide 3: Forward-Looking Statements
3 Forward - Looking Statements Information set forth herein (including information included or incorporated by reference herein) contains “forward - looking statements” (as defined in Section 21 E of the Securities Exchange Act of 1934 , as amended), which reflect the Company’s and Realty’s expectat
Slide 4: A Compelling Transaction for ARCT's Stockholders
4 A Compelling Transaction for ARCT’s Stockholders x Premium Valuation: Realty Income is valuing ARCT’s assets at a significantly higher price and lower cap rate than ARCT’s cost basis, which represents the lowest cap rate of similar net lease REIT transactions 1 – 5.9% cash cap rate / 6.1% GAAP cap
Slide 5: A Compelling Transaction for ARCT's Stockholders (Continued)
5 A Compelling Transaction for ARCT’s Stockholders (Continued) x Alignment of Interests: Pro forma for the transaction, ARCT management will own ~$45 million of equity in Realty Income, including over $25 million of existing equity in ARCT – As part of the merger agreement, ARCT management agreed to
Slide 6: Transaction Summary
Transaction Summary REALTY (INCOME
Slide 7: Transaction Summary
7 Transaction Summary • Transaction Value: Realty Income will acquire ARCT for approximately $2.95 billion in a 100% stock transaction at a fixed exchange ratio of 0.2874 shares of Realty Income for each share of ARCT • Implied Price Per Share: As of September 5, 2012, the day prior to the announcem
Slide 8: Ownership of Realty Income, the Best Performing Net Lease REIT Over the Past 40 Years
8 Ownership of Realty Income, the Best Performing Net Lease REIT Over the Past 40 Years • Merger will result in ARCT stockholders owning Realty Income, the best performing publicly traded net lease REIT • Realty Income has paid 508 consecutive monthly dividends since 1970 and has increased its month
Slide 9: Compelling Growth Potential to Drive Future Stockholder Value
9 Compelling Growth Potential to Drive Future Stockholder Value • The combined company will be significantly larger and financially stronger than its competitors and will have one of the lowest cost of capital in a sector where low cost capital creates competitive advantage • The combined company’s
Slide 10: Transaction Value Represents a Significant Premium to ARCT's Asset Cost
10 Transaction Value Represents a Significant Premium to ARCT’s Asset Cost • On September 5, 2012, the offer value implied a weighted average capitalization rate for ARCT’s assets of 6.1%, or 5.9% based on current cash rents, significantly below the weighted average capitalization rate of 8.2% paid
Slide 11: Cap Rate is the Lowest of Similar Public Net Lease REIT Transactions
11 Cap Rate is the Lowest of Similar Public Net Lease REIT Transactions Implied Cap Rate Source: Company filings, Wall Street Research and Investor Presentations (1) Represents a 5.9% cash cap rate or 6.1% GAAP cap rate. 5.9% 7.10 - 8.25% 7.6% 7.5% 7.5% 7.4% 7.2% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7
Slide 12: EBITDA Multiple at High End of Similar Public Net Lease REIT Transactions
12 EBITDA Multiple at High End of Similar Public Net Lease REIT Transactions Implied Forward EBITDA Multipl e 1 (1) Based on announced transaction value and forward consensus median EBITDA estimates. (2) EBITDA estimate of $251.9 million as at 15 - Mar - 2007. As of the announcement date, the EBITDA
Slide 13: Transaction Value Represents a Significant Premium to ARCT's Historical Trading Levels
13 Transaction Value Represents a Significant Premium to ARCT’s Historical Trading Levels • Implied offer value of $12.21 per share of ARCT common stock represents a premium of: • 23.5% to ARCT’s volume - weighted average price on first day of trading of $9.89 • 12.3% to the average closing price pe
Slide 14: Comprehensive Strategic Review Process Led ARCT Board to Conclude Offer Was in Stockholders' Best Interests
14 After a Comprehensive Strategic Review Process the ARCT Board Concluded That the Realty Income Offer Was in the Best Interests of Stockholders Timeline Process Details May 2011 • ARCT filed 8 - K to announce it was evaluating strategic alternatives — Board hired Goldman, Sachs & Co. as financial
Slide 15: Transaction Results From Comprehensive Strategic Review Process (Continued)
15 Transaction Results From Comprehensive Strategic Review Process (Continued) Timeline Process Details Early August 2012 • In August 2012, Realty Income contacted ARCT to indicate interest in revisiting a possible strategic transaction with ARCT August 16, 2012 • Realty Income proposed an exchange
Slide 16: Transaction Has Been Reviewed Favorably By the Research Analyst Community
16 Transaction Has Been Reviewed Favorably By the Research Analyst Community • “In our view, O’s deal for ARCT is an attractive one as it has the lowest capital costs in the public markets and we don’t se e better offers being out there for the enterprise.” - J.P. Morgan research report, “3Q a Penny
Slide 17: Overview of Realty Income
Overview of Realty Income REALTY (INCOME i
Slide 18: Overview of Realty Income
18 Overview of Realty Income • Realty Income (NYSE: O) is an $8.7 billion commercial real estate company with a Baa1/BBB/BBB+ (Moody’s/S&P/Fitch) credit rating • Founded in 1969 to provide monthly dividends to stockholders through the ownership of net lease real estate • 508 consecutive monthly divi
Slide 19: Realty Income's Long-Term Goals
19 Realty Income’s Long - Term Goals • Moderate FFO growth • Moderate dividend growth • Maintain a conservative business strategy that does not take excessive risk in the pursuit of objectives • Maintain a conservative financial position for stockholders — Debt : Maximum 20 - 35% — Preferred: Maximu
Slide 20: Proven Track Record of Consistent Dividend Growth
20 Proven Track Record of Consistent Dividend Growth • Realty Income has a consistent track record of generating dividend growth over its 18 years as a public company • Realty Income has increased its dividend 68 times since its 1994 NYSE listing and has had 508 consecutive monthly dividends • The d
Slide 21: Realty Income Has Achieved Outsized Returns Relative to Major Indices
21 Realty Income Has Achieved Outsized Returns Relative to Major Indices Including the S&P 500 (1) Calculated as the difference between closing stock price as of period end, less the closing stock price as of previous perio d. (2) Per NAREIT website and Factset . Includes reinvestment of dividends.
Slide 22: Combined Company Highlights
22 Combined Company Highlights
Slide 23: Superior Asset Portfolio
23 Superior Asset Portfolio • Achieves greater economies of scale than standalone ARCT and Realty Income by leveraging Realty Income’s operating platform over a larger portfolio • Creates the largest public triple net lease company by over two times; well - positioned as a premier consolidator in th
Slide 24: Consolidation Opportunity
24 Consolidation Opportunity • Estimated $1.5 to $2.0 trillion of U.S. real estate is held by corporate owners / users • Highly fragmented market without a dominant type of investor • Sector is underpenetrated by public companies • Limited competition from investors due to constricted bank lending m
Slide 25: Size is a Competitive Advantage and Drives Value
25 Size is a Competitive Advantage and Drives Value Source: Bloomberg (1) Average total return of the top 20 largest REITs by equity market capitalization at the end of each year, per NAREIT. Total Return The Largest REITs Consistently Outperform The Broader REIT Market • Average annual outperforman
Slide 26: Increased Size and Scale
26 $681 $505 $335 $332 $256 $176 O (PF) O NNN LXP EPR ARCT Combined Company Increased Size and Scale • Largest public triple net lease company by over two times • 18 th largest public U.S. REIT • Cost of capital, operational and economies of scale advantages • Increased float and liquidity • Pro for
Slide 27: Improved Credit Profile and Access to Capital
27 Improved Credit Profile and Access to Capital • Lower cost of debt capital resulting from larger size, access to multiple forms of capital, and Realty Income’s investment gr ade credit rating • Well positioned to benefit from external acquisition growth strategy compared to substantially all comp
Slide 28: ARCT's Long Term Balance Sheet Goals Met Immediately
28 ARCT’s Long Term Balance Sheet Goals Met Immediately • ARCT Balance Sheet Goal: ARCT’s long term balance sheet goal is to reduce levels of secured and floating rate debt and increase weighted average debt maturity in pursuit of an investment grade corporate credit rating • ARCT Balance Sheet Risk
Slide 29: Investment Grade Debt Profile
29 Investment Grade Debt Profile • The combined company will have few near - term debt maturities and well - laddered maturities after 2017 • Weighted average debt duration increases from 4.1 years for ARCT to 7.8 years combined • Secured debt as a percentage of total debt decreases from 54% for ARC
Slide 30: Conclusion
REALTY (INCOME Conclusion 30
Slide 31: A Compelling Transaction for ARCT's Stockholders
31 A Compelling Transaction for ARCT’s Stockholders x Premium Valuation: Realty Income is valuing ARCT’s assets at a significantly higher price and lower cap rate than ARCT’s cost basis, which represents the lowest cap rate of similar net lease REIT transactions 1 – 5.9% cash cap rate / 6.1% GAAP ca
Slide 32: A Compelling Transaction for ARCT's Stockholders (Continued)
32 A Compelling Transaction for ARCT’s Stockholders (Continued) x Alignment of Interests: Pro forma for the transaction, ARCT management will own ~$45 million of equity in Realty Income, including over $25 million of existing equity in ARCT – As part of the merger agreement, ARCT management agreed t
Slide 33: Appendix
REALTY (INCOME Appendix
Slide 34: Break Fee Represents One of the Lowest Break Fees in Similar REIT Transactions
34 Break Fee Represents One of the Lowest Break Fees in Similar REIT Transactions Break Fee Represents ~1.7% of Transaction Value Source: SNL Financial Buyer Seller Date Announced Reported Breakup Fee ($ 000) Reported Deal Value ($ mm) Breakup Fees As % of Deal Value Buyer Seller Date Announced Repo
Slide 35: You May Contact Us At
35 You May Contact Us At Brian Jones Chief Financial Officer O FFICE (646) 937 - 6903 E MAIL bjones@arctreit.com Heather Gentry Vice President of Investor Relations O FFICE (646) 937 - 6904 E MAIL hgentry@arctreit.com Tere H. Miller Vice President Corporate Communications E MAIL IR @realtyincome.com
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