Item 1.01. Entry into a Material Definitive Agreement.
Closing of $2.55 Billion Senior Note Offering
On February 6, 2014, ARC Properties Operating Partnership, L.P. ("ARCP OP"), the
operating partnership of American Realty Capital Properties, Inc. (the
"Company"), and Clark Acquisition, LLC, a wholly owned subsidiary of the Company
("Merger Sub" and, together with ARCP OP, the "Issuers"), issued an aggregate of
$2.55 billion senior unsecured notes including $1.3 billion aggregate principal
amount of 2.000% senior notes due 2017 (the "2017 Notes"), $750 million
aggregate principal amount of 3.000% senior notes due 2019 (the "2019 Notes")
and $500 million aggregate principal amount of 4.600% senior notes due 2024 (the
"2024 Notes" and, together with the 2017 Notes and the 2019 Notes, the "Notes").
The Notes were issued pursuant to an indenture, dated as of February 6, 2014
(the "Base Indenture"), as supplemented by an officer's certificate, dated
February 6, 2014 (the "Officer's Certificate" and, together with the Base
Indenture, the "Indenture"), among the Issuers, the Company, certain of the
Company's subsidiaries (together with the Company, the "Guarantors") and U.S.
Bank National Association, as trustee. The net proceeds from the offering of the
Notes were primarily used to fund the cash consideration, fees and expenses
relating to the Merger (defined below) and to repay amounts outstanding under
ARCP OP's senior credit facility. The description of the Indenture contained in
this Current Report on Form 8-K is qualified in its entirety by reference to the
complete text of the Base Indenture and the Officer's Certificate, which are
filed herewith as Exhibit 4.1 and Exhibit 4.2, respectively, and are
incorporated herein by reference.
The 2017 Notes were issued at an initial offering price of 99.971% of the
principal amount plus accrued interest from February 6, 2014, the 2019 Notes
were issued at an initial offering price of 99.591% of the principal amount plus
accrued interest from February 6, 2014 and the 2024 Notes were issued at an
initial offering price of 99.841% of the principal amount plus accrued interest
from February 6, 2014. The 2017 Notes mature on February 6, 2017 and bear
interest at a rate of 2.000% per annum. The 2019 Notes mature on February 6,
2019 and bear interest at a rate of 3.000% per annum. The 2024 Notes mature on
February 6, 2024 and bear interest at a rate of 4.600% per annum. Interest on
the Notes is computed on the basis of a 360-day period composed of twelve 30-day
months and is payable semi-annually in arrears on February 6th and August 6th of
each year, beginning on August 6, 2014.
The Issuers may redeem all or a part of any series of the Notes at any time at
their option at the redemption prices set forth in the Indenture, plus accrued
and unpaid interest on the principal amount of the Notes of such series being
redeemed to, but excluding, the applicable redemption date. With respect to the
2019 Notes and the 2024 Notes, if such Notes are redeemed on or after January 6,
2019, with respect to the 2019 Notes, or November 6, 2023, with respect to the
2024 Notes, the redemption price will equal 100% of the principal amount of the
Notes of the applicable series to be redeemed, plus accrued and unpaid interest
on the amount being redeemed to, but excluding, the applicable redemption date.
The Indenture contains certain covenants that restrict the ability of each of
the Issuers and each of the Guarantors to, among other things, consummate a
merger, consolidation or sale of all or substantially all of their assets and
incur or guarantee additional secured and unsecured indebtedness. The covenants
also require subsidiaries of the Company that (i) own equity interests of an
Issuer or (ii) guarantee other indebtedness of an Issuer or any guarantor in the
future to guarantee the Notes on an equal and ratable basis.
The Issuers' obligations under the Notes are fully and unconditionally
guaranteed, jointly and severally, by the Guarantors. The Notes and the related
guarantees rank equally with all of the Issuers' and the Guarantors' existing
and future unsecured indebtedness.
The Notes and the related guarantees have not been registered under the
Securities Act of 1933, as amended, or any state securities laws, and may not be
offered or sold in the United States without registration or any applicable
exemption from registration requirements. This Current Report on Form 8-K shall
not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of, the Notes or the related guarantees in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
In connection with the issuance of the Notes, the Issuers and the Guarantors
. . .
Item 2.01. Completion of Acquisition or Disposition of Assets.
Closing of Acquisition of Cole Real Estate Investments, Inc.
On February 7, 2014, the Company completed its acquisition (the "Merger") of
Cole Real Estate Investments, Inc. ("Cole"), pursuant to that certain Agreement
and Plan of Merger, dated as of October 22, 2013 (the "Merger Agreement"), by
and among the Company, Merger Sub and Cole, pursuant to which Cole merged with
and into Merger Sub with Merger Sub surviving the Merger as a wholly owned
subsidiary of the Company.
The Merger became effective (the "Effective Time") upon the filing of the
Articles of Merger with the State Department of Assessments and Taxation of
Maryland and the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware with an effective date of February 7, 2014.
In connection with the consummation of the Merger, each share of common stock,
par value $0.01 per share, of Cole ("Cole Common Stock") issued and outstanding
immediately prior to the Effective Time, other than shares owned by the Company,
any subsidiary of the Company or any wholly owned subsidiary of Cole, was
converted into the right to receive either (i) 1.0929 shares of common stock,
par value $0.01 per share, of the Company (the "Stock Consideration") for those
stockholders of Cole who made a valid stock election or who did not make a valid
stock or cash election on or prior to the election deadline in accordance with
the terms of the Merger Agreement or (ii) $13.82 in cash (the "Cash
Consideration" and together with the Stock Consideration, the "Merger
Consideration") for those stockholders of Cole who made a valid cash election
pursuant to the Merger Agreement.
In addition, as provided in the Merger Agreement, immediately prior to the
Effective Time, (i) the vesting of outstanding Cole restricted share units
("RSUs") was accelerated and the shares of Cole Common Stock deemed to be issued
in settlement thereof were deemed to be entitled to receive the Merger
Consideration and (ii) outstanding Cole performance share units ("PSUs") vested
based on the average of the target and maximum payout percentages set forth
under the terms of the applicable award agreements, and the shares of Cole
Common Stock deemed to be issued in settlement thereof were deemed to be
entitled to receive the Merger Consideration, in each case, in accordance with
the cash or stock elections made by the holders thereof pursuant to the Merger
Approximately 509.2 million shares of Company common stock were issued to those
holders of Cole shares (including holders of RSUs and PSUs) who made a valid
stock election pursuant to the Merger Agreement, did not make a valid election
or did not deliver a valid election form prior to the election deadline, and the
aggregate amount of Cash Consideration payable to those holders of Cole shares
(including holders of RSUs and PSUs) who made a valid cash election pursuant to
the Merger Agreement was approximately $147.8 million.
In connection with the consummation of the Merger, the Company will issue
approximately 15.9 million shares of Company common stock, in the aggregate, and
pay approximately $33.9 million in cash, in the aggregate, to Christopher H.
Cole, Marc T. Nemer, Stephan Keller, Jeffrey Holland and Kirk McAllaster
pursuant to the letter agreements entered into between the Company and such
individuals concurrently with the execution of the Merger Agreement, pursuant to
which each of them has agreed, among other things, to certain arrangements in
connection with the closing of the Merger and the payment of amounts to which
they are entitled under the Agreement and Plan of Merger dated as of March 5,
2013, by and among Cole, CREInvestments, LLC, Cole Holdings Corporation ("Cole
Holdings") and Christopher H. Cole, pursuant to which Cole acquired Cole
Holdings on April 5, 2013 (collectively, the "Letter Agreements").
The descriptions of the Merger Agreement and the Letter Agreements with Mr. Cole
and Mr. Nemer contained in this Current Report on Form 8-K (including the
description of the Merger Consideration) are qualified in their entirety by
reference to the Merger Agreement and such Letter Agreements, copies of which
were attached as Exhibit 2.1, Exhibit 99.2 and Exhibit 99.3, respectively, to
the Current Report on Form 8-K filed by the Company on October 23, 2013. The
descriptions of the Letter Agreements with Mr. Keller, Mr. Holland and Mr.
McAllaster contained in this Current Report on Form 8-K are qualified in their
entirety by reference to such Letter Agreements, copies of which were attached
as Exhibit 99.4, Exhibit 99.5 and Exhibit 99.6, respectively, to the Amended
Current Report on Form 8-K/A filed by the Company on October 25, 2013.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Thomas A. Andruskevich and Scott P. Sealy, Sr. to the Company's
Board of Directors
Pursuant to the terms of the Merger Agreement, effective as of February 7, 2014,
the board of directors of the Company (the "Board") appointed Thomas A.
Andruskevich, 62, and Scott P. Sealy, Sr., 66, to each serve as a director of
the Company, for a term expiring upon the earlier of (i) the next annual meeting
of the Company's stockholders and until his successor is duly elected and
qualified or (ii) his death, removal or resignation. There are no related party
transactions involving Messrs. Andruskevich or Sealy that are reportable under
Item 404(a) of Regulation S-K. Each of Messrs. Andruskevich and Sealy, together
with Leslie D. Michelson and William G. Stanley (each of whom is an existing
independent director of the Company), will serve on the Company's
newly-constituted conflicts committee, established by the Board (the "Conflicts
Committee"), as described in Item 5.03 below. A description of Messrs.
Andruskevich's and Sealy's respective backgrounds is set forth below.
Thomas A. Andruskevichpreviously served as an independent director of Cole from
October 2008 until the closing of the Merger, as a member of its audit committee
from May 2012 until the closing of the Merger and as chairman of its
compensation committee and as a member of its corporate governance and
nominating committee from June 2013 until the closing of the Merger. Currently,
he is the chairman and chief executive officer of TAA Consulting, LLC and an
operating partner for jeweler and timepieces at Marvin Traub Associates. Until
July 2013, Mr. Andruskevich served as non-executive vice-chairman of Birks &
Mayors, Inc., formerly Henry Birks & Sons, and chairman of Mayors Jewelers,
Inc., a wholly owned subsidiary of Birks & Mayors, Inc.Mr. Andruskevich served
as the president and chief executive officer of Birks & Mayors, Inc. from
November 1996 until March 2012, when he retired. During that time, he
orchestrated a merger of Mayors Jewelers, Inc. and Henry Birks & Sons in 2002
and a successful IPO of Birks & Mayors, Inc. in 2007. From 1994 to 1996,
Mr. Andruskevich was president and chief executive officer of the clothing
retailer Mondi of America, following a distinguished career at Tiffany & Co.
from 1989 to 1994, which culminated in his appointment as executive vice
president of international & trade of Tiffany & Co. in 1992. Mr. Andruskevich
serves on the board of directors of Robbins Bros. Jewelry Acquisition Holdings,
LLC. He has served as a member of the boards of directors of Birks & Mayors,
Inc., Mayors Jewelers, Inc. and Jewelers of America from 2009 to 2012.
Scott P. Sealy, Sr.previously served as an independent director of Cole from
October 2008 until the closing of the Merger and as chairman of its corporate
governance and nominating committee and as a member of its compensation and
audit committees from June 2013 until the closing of the Merger. From January
2012 until April 2013, Mr. Sealy served as a member of the board of directors of
Cole Credit Property Trust IV, Inc., a non-traded real estate investment trust
advised by an affiliate of Cole, and as a member of its audit committee.
Mr. Sealy has been a principal of Sealy & Company, Incorporated ("Sealy"), a
real estate and investment company, since 1968 and has served as chairman of its
board of directors since February 2000. Mr. Sealy provides strategic planning
and business development for Sealy, which is in the business of acquisitions,
repositioning and ground-up development of regional distribution and industrial
facilities. During his tenure, Sealy and its affiliates have acquired or
developed and sold over $1 billion of industrial real estate totaling
approximately 31 million square feet. In 2008, Sealy entered into a $200 million
joint venture with California State Teachers' Retirement System. The joint
venture, named SeaCal, pursues the acquisition and development of value-added
industrial and office properties. Mr. Sealy is a member of the Society of
Industrial and Office Realtors and has served as a chapter president, a member
of its national board of directors and a member of its strategic planning
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Amendment to Bylaws and Establishment of Conflicts Committee
Pursuant to the terms of the Merger Agreement, effective as of February 7, 2014,
the Board adopted an amendment to the bylaws of the Company (the "Bylaw
Amendment") relating to the creation of the Conflicts Committee. The Conflicts
Committee will consist of four independent directors, two of whom are selected
by the Board pursuant to the Merger Agreement as described in Item 5.02 above
(or their successors). The other members of the Conflicts Committee are also
named in Item 5.02 above. Under the Bylaw Amendment, a majority of the Conflicts
Committee must approve any material contracts and transactions between the
Company and AR Capital, LLC and its affiliates (subject to certain exceptions)
and the Conflicts Committee has the power to monitor compliance with certain
self-management requirements specified by the Merger Agreement. The Bylaw
Amendment satisfies certain aspects of one of the closing conditions under the
This summary of the material provisions of the Bylaw Amendment is qualified in
its entirety by the Bylaw Amendment which is attached as Exhibit 3.1 to this
Current Report on Form 8-K and incorporated herein by reference.
Item 8.01. Other Events.
Dividend Increase and "Stub Period" Dividend
As previously disclosed, the Board authorized an increase to its annualized
dividend from $0.94
per share to $1.00
per share, contingent upon and effective
with the closing of the Merger (the "Dividend Increase"). Accordingly, on
February 14, 2014
, the Company will pay a distribution of $0.08333
per share to
stockholders of record at the close of business on February 7, 2014
former Cole stockholders who received the Stock Consideration. Further, pursuant
to the Merger Agreement, the Company and Cole each paid a "stub period" dividend
to their respective stockholders who were record holders on February 6, 2014
the period since their most recent record date through the last business day
prior to the closing of the Merger. The amount of such "stub period" dividend
paid by the Company was $0.08113
Press Release Relating to Merger Close Following $2.55 Billion
On February 7, 2014
, the Company issued a press release announcing the
consummation of the Merger following its successful $2.55 billion
unsecured note offering and the Dividend Increase. A copy of such press release
is attached to this Current Report on Form 8-K as Exhibit 99.1 and is
incorporated herein by reference.
Multi-Year Outperformance Plan
The Multi-Year Outperformance Plan (the "OPP") approved by the Company on
October 21, 2013
, as disclosed in the Company's Current Report on Form 8-K filed
on October 25, 2013
, became effective in accordance with its terms on January 8,
at the Company's successful transition to self-management (the "Effective
Date"). Based on the Company's equity market capitalization on the Effective
Date (the "Initial Market Cap"), the maximum award opportunity under the OPP
will be $222,088,949
, which is equal to 5% of the Initial Market Cap.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
3.1 Bylaw Amendment, effective as of February 7, 2014.
4.1 Indenture, dated as of February 6, 2014, among ARC PropertiesOperating Partnership, L.P., Clark Acquisition, LLC, the
guarantors named therein and U.S. Bank National Association,
4.2 Officers' Certificate, dated as of February 6, 2014.
4.3 Registration Rights Agreement, dated as of February 6, 2014,
among ARC Properties Operating Partnership, L.P., Clark
Acquisition, LLC, the guarantors named therein, Barclays
Capital Inc. and Citigroup Global Markets Inc.
99.1 Press Release dated February 7, 2014.