Inland American Real Estate Trust Inc. has entered into an equity interest purchase agreement to sell 294 net lease assets to AR Capital LLC.
ARC will acquire on behalf of certain of its affiliates, certain equity interests in direct and indirect subsidiaries of Inland American, which collectively own Inland American’s core net lease assets in an all-cash transaction valued at approximately $2.3 billion. This includes the assumption of approximately $795.3 million in debt and the repayment by the company of approximately $360.9 million in debt. The portfolio of net lease assets consists of 294 retail, office and industrial assets.
“We are very pleased to have reached this agreement, which represents the culmination of a robust evaluation process to achieve maximum value for this portfolio of core net lease assets,” said Thomas McGuinness, president of Inland American. “Our board of directors, with the assistance of legal and financial advisors, thoroughly evaluated the strategic alternatives for this portfolio with a goal of maximizing our return on these assets and supporting Inland American in the execution of our long-term strategic plan. We are excited about this transaction and the opportunities it will present the company.
“The sale of our core net lease portfolio is a major step in executing our long-term strategy of focusing our energies and investment capital in the multi-tenant retail, lodging and student housing asset classes,” he added. “We believe these asset classes will generate consistent cash flows, which will allow us to continue providing our stockholders with sustainable distributions while allowing us the opportunity to benefit from current real estate trends.”
Inland American expects to realize up to approximately $1 billion of net proceeds, which could be received over the next nine months, from the sale. The company intends to use the net proceeds for, among other things, investing in high quality assets within its targeted asset classes and reducing debt.
Inland American is also currently evaluating alternatives for using a portion of the net proceeds to provide liquidity to its stockholders, such as exploring options for a share repurchase. Due to the fact the company is nearing the time of a new estimated share value calculation, in advance of concluding a strategy or strategies for providing liquidity, Inland American intends to engage an independent, third-party valuation firm to separately value Inland American’s remaining portfolio of real estate assets. These asset values will be used in updating Inland American’s estimated per share value, which is expected to be completed in the fourth quarter of 2013.
As previously outlined, Inland American’s strategy includes:
- Maintaining a stable income stream to provide a sustainable monthly distribution to stockholders;
- Focusing the company’s diversified assets in three specific real estate classes – multi-tenant retail, lodging and student housing – by tailoring, expanding and refining these portfolios;
- Capitalizing on current market trends in commercial real estate and realizing income growth in each of the three targeted real estate classes;
- Enhancing the overall quality of their portfolio for long-term growth through disciplined asset acquisitions; and
- Positioning the portfolio for multiple liquidity events.
“This transaction provides us with additional capital to support our strategic growth initiatives, while enhancing our overall capital structure,” said Jack Potts, principal financial officer of Inland American. “We are committed to investing the net proceeds in a manner consistent with our long-term growth strategy.”
Goldman, Sachs & Co. is acting as financial advisor to Inland American and Latham & Watkins LLP is acting as legal counsel to Inland American. Skadden Arps Slate Meagher & Flom LLP acted as special counsel to the independent members of the Inland American Board of Directors.