VEREIT Inc. (NYSE: VER), the publicly-traded real estate investment trust formerly known as American Realty Capital Properties Inc., is selling its retail distribution subsidiary Cole Capital to an affiliate of investment manager CIM Group.
The purchase price is up to $200 million, comprised of $120 million cash paid at closing under the purchase agreement and up to $80 million in fees to be paid under a six-year services agreement based on Cole’s future revenues. VEREIT noted that the transaction simplifies its business model enabling the firm to focus on its real estate operating business.
Currently, Cole has more than $7.6 billion in assets under management and manages five public non-listed real estate investment trusts: Cole Credit Property Trust IV Inc., Cole Credit Property Trust V Inc., Cole Real Estate Income Strategy (Daily NAV) Inc., Cole Office & Industrial REIT (CCIT II) Inc., and Cole Office & Industrial REIT (CCIT III) Inc.
The six-year services agreement will require VEREIT to provide operational real estate support to Cole for approximately one year. The transaction is expected to close at the end of the fourth quarter of 2017 or during the first quarter of 2018, subject to regulatory approvals and customary closing condition.
“CIM is acquiring expertise and what we believe are best-in-class performing funds in the net/finance lease sector,” said Richard Ressler, CIM co-founder and principal. “We believe that adding net/finance lease offerings to CIM’s product capabilities is complementary to CIM’s real asset platforms and will benefit all of our stakeholders.”
“The transaction allows us to simplify our core business model and focus on our large, diversified single-tenant real estate portfolio,” said Glenn Rufrano, chief executive officer of VEREIT. “Cole Capital will have a sponsor in CIM with an institutional foundation and established distribution relationships with wirehouses.”
According to a filing with the Securities and Exchange Commission, once the transaction closes, Cole CEO Bill Miller, who also serves as VEREIT’s executive vice president of investment management, will no longer be employed by VEREIT but will be employed by the CIM Group purchaser or one of its affiliates.
Citigroup Global Markets Inc. acted as the exclusive financial advisor to VEREIT.