Realty Income Corporation · NYSE:O
Realty Income — Merger or Acquisition (December 2012)
36 slides from Realty Income's merger presentation, Dec 12, 2012
Slide 1: Filed by Realty Income Corporation Pursuant to Rule 425
Filed by Realty Income Corporation Pursuant to Rule 425 Under the Securities Act of 1933 And Deemed Filed Pursuant to Rule 14a-12 Under the Securities Exchange Act of 1934 Subject Company: American Realty Capital Trust, Inc. Registration Statement No. 333-184201
Slide 2: Creating the Top Net Lease REIT
Creating the Top Net Lease REIT The Monthly Dividend Company® NYSE: O Acquisition of DECEMBER 2012
Slide 3: Introductory Notes
Introductory Notes The data and other information described in these slides speaks as of the date of the slides or an earlier date indicated. Future performance may not be consistent with past performance, and is subject to change and inherent risks and uncertainties. This presentation contains cert
Slide 4: A Compelling Transaction for ARCT's Stockholders
A Compelling Transaction for ARCT’s Stockholders 1 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 1 similar net lease REIT transactions – 5.9% cash cap rate / 6.1% GAAP cap r
Slide 5: A Compelling Transaction for ARCT's Stockholders (Continued)
A Compelling Transaction for ARCT’s Stockholders (Continued) 4 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 r
Slide 6: Transaction Summary
Transaction Summary REALTY (INCOME The Monthly Dividend Company*
Slide 7: Transaction Summary
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 announcemen
Slide 8: Ownership of Realty Income, the Best Performing Net Lease REIT Over the Past 40 Years
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 monthly
Slide 9: Compelling Growth Potential to Drive Future Stockholder Value
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 co
Slide 10: Transaction Value Represents a Significant Premium to ARCT's Asset Cost
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 by
Slide 11: Cap Rate is the Lowest of Similar Public Net Lease REIT Transactions
Cap Rate is the Lowest of Similar Public Net Lease REIT Transactions Implied Cap Rate 9.0% 7.10-8.25% 8.0% 7.6% 7.5% 7.5% 7.4% 7.2% 7.0% 5.9% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% American Realty American Financial Newkirk Realty Trust / Government Properties Trustreet Properties / Spirit Finance Capit
Slide 12: EBITDA Multiple at High End of Similar Public Net Lease REIT Transactions
EBITDA Multiple at High End of Similar Public Net Lease REIT Transactions 1 Implied Forward EBITDA Multiple 20.0 x 18.4 x 18.0 x 15.7 x 16.0 x 14.1 x 13.9 x 13.8 x 14.0 x 13.2 x 12.0 x 10.0 x 8.0 x 8.0 x 6.0 x 4.0 x 2.0 x 0.0 x American Realty American Financial Government Properties Spirit Finance
Slide 13: Transaction Value Represents a Significant Premium to ARCT's Historical Trading Levels
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 per sha
Slide 14: After a Comprehensive Strategic Review Process the ARCT Board Concluded the Offer Was in Stockholders' Best Interests
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 • ARCT filed 8-K to announce it was evaluating strategic alternatives May 2011 — Board hired Goldman, Sachs & Co. as financial advis
Slide 15: Transaction Results From Comprehensive Strategic Review Process (Continued)
Transaction Results From Comprehensive Strategic Review Process (Continued) Timeline Process Details • In August 2012, Realty Income contacted ARCT to indicate interest in revisiting a possible strategic transaction Early August 2012 with ARCT • Realty Income proposed an exchange ratio of 0.2841 for
Slide 16: Transaction Has Been Reviewed Favorably By the Research Analyst Community
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 see better offers being out there for the enterprise.” - J.P. Morgan research report, “3Q a Penny Shy
Slide 17: Overview of Realty Income
Overview of Realty Income REALTY (INCOME The Monthly Dividend Company*
Slide 18: Overview of Realty Income
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 dividen
Slide 19: Realty Income's Long-Term Goals
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: Maximum 10 - 15% Interes
Slide 20: Proven Track Record of Consistent Dividend Growth
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 1 • The di
Slide 21: Realty Income Has Achieved Outsized Returns Relative to Major Indices Including the S&P 500
Realty Income Has Achieved Outsized Returns Relative to Major Indices Including the S&P 500 Compounded Annual Return Source: Bloomberg. Note: All of these compounded average annual total return rates are calculated in the same manner: from Realty Income’s NYSE listing on October 18, 1994 through Sep
Slide 22: Combined Company Highlights
Combined Company Highlights 21
Slide 23: Superior Asset Portfolio
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 the net
Slide 24: Consolidation Opportunity
Consolidation Opportunity Fragmented Net Lease Market Provides Ample Opportunity for Realty Income to Continue to Grow • Estimated $1.5 to $2.0 trillion of U.S. real Estimated Ownership Profile estate is held by corporate owners / users Publicly Owned (<5%) (1) • Highly fragmented market without a d
Slide 25: Size is a Competitive Advantage and Drives Value
Size is a Competitive Advantage and Drives Value The Largest REITs Consistently Outperform The Broader REIT Market • Average annual outperformance of 4.5% Total Return 42.8% 39.8% 36.7% 36.8% 35.9% 31.5% 31.6% 28.6% 29.6%28.5% 15.7% 16.9% 14.9% 12.1% 10.8% 5.7% 8.7% 3.6% 2007 2008 2002 2003 2004 200
Slide 26: Combined Company Increased Size and Scale
Combined Company Increased Size and Scale • Largest public triple net lease company by Total Market Capitalization over two times $11,556 Equity Value Total Debt + Preferred th • 18 largest public U.S. REIT 4,352 $8,665 • Cost of capital, operational and economies 3,305 of scale advantages $5,304 1,
Slide 27: Improved Credit Profile and Access to Capital
Improved Credit Profile and Access to Capital • Lower cost of debt capital resulting from larger size, access to multipleforms of capital,and Realty Income’s investmentgrade credit rating • Well positioned to benefit from external acquisition growth strategy compared to substantially all competitors
Slide 28: Investment Grade Debt Profile
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 ARCT to 17
Slide 29: Conclusion
Conclusion REALTY (INCOME The Monthly Dividend Company*
Slide 30: A Compelling Transaction for ARCT's Stockholders
A Compelling Transaction for ARCT’s Stockholders 1 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 1 similar net lease REIT transactions – 5.9% cash cap rate / 6.1% GAAP cap r
Slide 31: A Compelling Transaction for ARCT's Stockholders (Continued)
A Compelling Transaction for ARCT’s Stockholders (Continued) 4 Alignment of Interests: Pro forma for the transaction, ARCT management will own ~$45 million of equity in Realty Income, including over $25 million of existing equity in ARCT – As part of the merger agreement, ARCT management agreed to r
Slide 32: Appendix
Appendix REALTY (INCOME The Monthly Dividend Company*
Slide 33: Break Fee Represents One of the Lowest Break Fees in Similar REIT Transactions
Break Fee Represents One of the Lowest Break Fees in Similar REIT Transactions Break Fee Represents ~1.7% of Transaction Value Reported Reported Breakup Reported Reported Breakup Date Breakup Fee Deal Value Fees As % of Date Breakup Fee Deal Value Fees As % of Buyer Seller Announced ($ 000) ($ mm) D
Slide 34: You May Contact Us At
You May Contact Us At Brian Jones Tere H. Miller Chief Financial Officer Vice President Corporate Communications OFFICE (646) 937-6903 EMAIL IR@realtyincome.com EMAIL bjones@arctreit.com Heather Gentry Vice President of Investor Relations OFFICE (646) 937-6904 EMAIL hgentry@arctreit.com American Rea
Slide 35: Additional Information and Where to Find It
Additional Information and Where to Find It These materials are not a substitute for the Registration Statement on Form S-4 (File No. 333-184201) that Realty Income filed with the SEC in connection with the proposed transaction with ARCT, or the definitive joint proxy statement/prospectus sent to se
Slide 36: Forward-Looking Statements
Forward-Looking Statements Information set forth herein (including information included or incorporated by reference herein) contains “forward-looking statements” (as defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect Realty Income’s and ARCT’s expectations reg
Realty Income — Merger or Acquisition (December 2012) on 6ix