We estimate that we will receive net proceeds from this offering of
approximately $69,787,000 (or approximately $83,750,000 if the underwriters’
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions, and estimated expenses of the offering, assuming a
public offering price of $ per share. We will contribute the net proceeds
of this offering to our operating partnership in exchange for OP units, and
following such contribution will own 99.99% of the OP units (or 99.99% of the
OP units if the underwriters’ over-allotment option is exercised in full). The
operating partnership intends to use such net proceeds to repay indebtedness
under our revolving credit facility and for general working capital purposes.
Our facility bears interest at the rate of (i) LIBOR with respect to Eurodollar
rate loans plus a margin 205 to 285 basis points, depending on our leverage
ratio; and (ii) the greater of the federal funds rate plus 1.0% and the
interest rate publicly announced by RBS Citizens as its “prime rate” or “base
rate” at such time with respect to base rate loans plus a margin of 125 to 175
basis points depending on our leverage ratio.
Pending the use of the net proceeds, we intend to invest the net proceeds in
interest-bearing, short-term investment-grade securities, money-market accounts
or other investments which are consistent with our intention to maintain our
qualification as a REIT.
We are subject to competition in the acquisition of properties and intense
competition in the leasing of our properties. We compete with a number of
developers, owners and operators of commercial real estate, including ARC and
its affiliates and other REITs and funds sponsored and/or advised by ARC and/or
its affiliates, many of which own properties similar to ours in the same
markets in which our properties are located, in the leasing of our properties.
We also may face new competitors and, due to our focus on single tenant
properties located throughout the United States, and because many of our
competitors are locally and/or regionally focused, we will not encounter the
same competitors in each region of the United States.
Many of our competitors have greater financial and other resources and may have
other advantages over our company. Our competitors may be willing to accept
lower returns on their investments and may succeed in buying the properties
that we have targeted for acquisition. We may also incur costs on unsuccessful
acquisitions that we will not be able to recover.
derived from
tenants that have an investment grade credit rating as determined by a major
credit agency, and 100.0% of our average annual rent is derived from tenants
who we believe are credit tenants, including FedEx Corporation, or FedEx,
Walgreen Co., or Walgreens, CVS Caremark Corporation, or CVS, and the General
Service Administration, or GSA. Our portfolio is diversified by tenant,
property type and geography, and our properties are generally subject to long-
term leases that have an average duration to expiration of 13.5 years. The
majority of our leases have tenant extension options. Our targeted retail
properties are well-located on “the corner of Main Street and Main Street,
USA,” and our office and distribution warehouse properties are typically
situated along high traffic transit corridors at locations carefully selected
by our tenants to support operationally essential activities. As of January 31,
2012, our portfolio is 100% occupied and consists of 485 properties located in
43 states and Puerto Rico, with over 15.6 million square feet, leased to 61
different commercial enterprises doing business in 20 separate industries.
We expect to maintain our current balance of properties by type and tenant
credit quality and to continue to diversify our portfolio geographically.
We have virtually no lease expirations over the next six years, with only 0.9%
of our average annual rent expiring through December 31, 2017, and well-
staggered lease maturities thereafter. Our average remaining lease term is 13.5
years as of January 31, 2012. We believe our high-quality properties and long-
term leases to credit tenants result in strong predictability of cash flows.
Our properties generally have been recently constructed or renovated and have
a weighted average age, as of January 31, 2012, of 5.3 years. We believe that
the low average age and modern amenities of our properties make them attractive
to tenants, and result in higher current rents, lower vacancies and a higher
number of alternative uses.
Our executive management team and our Chairman of the Board possess substantial
expertise in all aspects of net leased property acquisition, leasing,
management and finance. Nicholas S. Schorsch, one of our company’s co-founders
and our Chairman of the Board, and William M. Kahane, one of our company’s co-
founders and our President and Chief Executive Officer, have been actively
involved, since the formation of our company and through January 31, 2012, in
the acquisition of all our 485 net leased properties, with more than 61 credit
tenants. Messrs. Schorsch and Kahane also have substantial public REIT
operating experience, Mr. Schorsch as the former Chief Executive Officer and
Vice Chairman of American Financial Realty Trust, Inc., or AFRT, a New York
Stock Exchange, or NYSE, listed REIT, and the current Chairman and Chief
Executive Officer of American Realty Capital Properties, Inc., or ARCP, a
NASDAQ Stock Market listed REIT, and Mr. Kahane as a former trustee of AFRT,
the former Non-Executive Chairman of the Board of Catellus Development Corp.,
or Catellus, a NYSE-listed growth-oriented real estate development company, and
President and Chief Operating Officer of ARCP (a position he will resign
concurrently with the consummation of the offering). As of the closing of this
offering, we expect to employ approximately ten individuals, including
accounting, reporting, asset and property management, human resources, investor
relations and capital markets and acquisitions professionals.
Our principal executive office is located at 106 York Road, Jenkintown, PA
19046; our telephone number is (215) 887-2189. Our website address is
www.arctreit.com.
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