American Realty Capital Trust, Inc. (“ARCT” or the “Company”)
(NASDAQ: ARCT) announced today, based on 2012 earnings guidance,
that it estimates its annualized FFO and AFFO for the 12-month
period commencing April 1, 2012 to total between $0.79 and $0.82
per share. This compares with annualized FFO and AFFO per share of
$0.70, prior to the effect of the tender offer, prepayment of
certain mortgages and assumed acquisitions, as discussed below. In
addition, the Company indicated it plans to prepay approximately
$161.3 million of mortgage notes in the beginning of the second
quarter of 2012. Furthermore, the Company made public a commitment
from Wells Fargo Bank, National Association to enter into a senior
secured interim term loan facility in the amount of up to $200
million and engagement of Wells Fargo Bank, National Association to
arrange a senior secured five-year term loan facility. The Company
also confirmed the successful completion of its $220 million tender
offer.
“We have undertaken a number of important initiatives in an
effort to build shareholder value, improve earnings and reduce our
cost of capital. Our 2012 earnings guidance is a demonstration of
our confidence that these substantive actions will create value for
our stockholders,” said William M. Kahane, the Company’s CEO.
2012 FFO and AFFO
Estimates
The Company estimates that both FFO and AFFO on an annualized
basis for the 12-month period commencing April 1, 2012 should range
from $0.79 to $0.82 per share. These per share estimates are based
on the completion of the following activities:
- Purchasing $220 million of common
shares (or approximately 20.95 million shares) under its tender
offer at a price of $10.50 per share. Such tendered shares will be
redeemed with proceeds received from the Company’s current
revolving credit facility with RBS Citizens Bank, N.A.
- Prepaying approximately $161.3 million
of fixed rate mortgage indebtedness. The weighted average effective
interest rate of this debt is 5.43%, with a current remaining term
of 4.2 years. These mortgage notes will be paid off with proceeds
received from a senior secured interim term loan committed by Wells
Fargo Bank, National Association. The Company expects the $200
million interim term loan to bear interest at LIBOR plus 1.95% (or
2.20%) for the initial six months, and then be replaced by a
fixed-rate facility at an interest rate based on the then current
five-year Treasury swap rate plus 1.95% (or 3.20% currently), after
giving effect to expected swap arrangements, for the balance of the
five-year term.
- Acquiring approximately $100 million
(at an initial yield of 7.80%) of high-quality, freestanding,
single tenant investment properties net leased to credit worthy or
investment grade credit tenants on a long-term basis funded with
available working capital and availability under its existing
revolving credit facility.
- ARCT’s current annual dividend is $0.70
per common share, or $0.05833 payable monthly. Management and the
board of directors will evaluate increasing the dividend at the end
of the second quarter and on a quarterly basis thereafter.
Senior Secured Term Loan
The Company also announced today it has received a commitment
from Wells Fargo Bank, National Association to enter into a senior
secured interim term loan in the amount of up to $200 million (the
“Interim Loan”). The Company has also engaged Wells Fargo Bank,
National Association to enter into a senior secured five-year term
loan facility (the “Term Loan”) (collectively, with the Interim
Loan, the “Credit Facility”). The Interim Loan will have a term of
six months. The Company expects that the Interim Loan will bear
interest at LIBOR plus 1.95% (or approximately 2.20%). The Term
Loan will have a term of five years. The Company expects that the
Term Loan will bear interest at a fixed rate based on the
then-current five-year Treasury swap rate plus 1.95% (or
approximately 3.20% currently), after giving effect to expected
swap arrangements, for the full loan term. Pursuant to the terms of
the commitment letter and engagement letter, the lender’s
obligation to enter into the Credit Facility is subject to
customary approvals and conditions to closing (including consent of
required lenders under the Company’s revolving credit facility).
Although the Company believes that the entry into the Credit
Facility is probable, there can be no assurance that the
transaction will be consummated.
The Credit Facility will provide for monthly interest payments,
with all principal outstanding being due on the maturity date. The
Credit Facility may be prepaid from time to time and at any time,
in whole or in part, without premium or penalty, subject to
reimbursement of certain costs and expenses. The Company and
certain of the Operating Partnership's subsidiaries guarantee the
obligations under the Credit Facility and have pledged certain
equity interests in the property owning entities as collateral for
the obligations thereunder. In the event of a default, the lender
has the right to terminate its obligations under the Credit
Facility, and to accelerate the payment on any unpaid principal
amount of all outstanding loans.
Proceeds from the Credit Facility are anticipated to be used to
prepay approximately $161.3 million of the Company’s outstanding
fixed rate mortgage indebtedness. The expected annual interest
savings to the Company from the prepayment of mortgage debt is
approximately $4.3 million. The Credit Facility will increase the
Company’s unencumbered asset pool to approximately $1.24
billion.
Tender Offer
The Company also confirmed today the successful completion of
its modified “Dutch auction” tender offer for the purchase of up to
$220 million of shares of its common stock. Approximately 20.95
million shares were accepted under the tender offer at a price of
$10.50 per share.
“We couldn’t be more pleased with the results of the Tender
Offer,” said Nicholas S. Schorsch, chairman of ARCT. “Results
exceeded our expectations and we are excited for the opportunity to
buy back shares at a discounted value which we believe will have a
positive impact on the Company’s earnings, and in turn be accretive
to ARCT’s shareholders.”
As previously disclosed, the Company processed the full amount
of the Tender Offer as initially contemplated and met the validly
tendered requests submitted by tendering shareholders. The
preliminary results of the Tender Offer were released yesterday,
March 29, 2012.
Investor Conference Call
The Company will host a conference call on Thursday,
April 5, 2012 at 9:30am EDT to discuss the results of the
Company’s Tender Offer and 2012 estimates. The number to dial is
(855) 212-0212 with an access code of 175-378-153.
FFO & AFFO
The Company considers funds from operations (“FFO”) and adjusted
FFO, as adjusted to exclude acquisition-related fees and expenses
(“AFFO”), useful indicators of the performance of a real estate
investment trust (“REIT”). Because FFO calculations exclude such
factors as depreciation and amortization of real estate assets and
gains or losses from sales of operating real estate assets (which
can vary among owners of identical assets in similar conditions
based on historical cost accounting and useful-life estimates),
they facilitate comparisons of operating performance between
periods and between other REITs in our peer group. Accounting for
real estate assets in accordance with generally accepted accounting
principles (“GAAP”) implicitly assumes that the value of real
estate assets diminishes predictably over time. Since real estate
values have historically risen or fallen with market conditions,
many industry investors and analysts have considered the
presentation of operating results for real estate companies that
use historical cost accounting to be insufficient by
themselves.
Additionally, the Company believes that AFFO, by excluding
acquisition-related fees and expenses, provides information
consistent with management's analysis of the operating performance
of the properties. By providing AFFO, the Company believes it is
presenting useful information that assists investors and analysts
to better assess the sustainability of its operating performance.
Further, the Company believes AFFO is useful in comparing the
sustainability of its operating performance with the sustainability
of the operating performance of other real estate companies,
including exchange-traded and non-traded REITs.
As a result, the Company believes that the use of FFO and AFFO,
together with the required GAAP presentations, provide a more
complete understanding of its performance relative to its peers and
a more informed and appropriate basis on which to make decisions
involving operating, financing, and investing activities.
FFO and AFFO are non-GAAP financial measures and do not
represent net income as defined by GAAP. FFO and AFFO do not
represent cash flows from operations as defined by GAAP, are not
indicative of cash available to fund all cash flow needs and
liquidity, including the Company’s ability to pay distributions and
should not be considered as alternatives to net income, as
determined in accordance with GAAP, for purposes of evaluating its
operating performance. Other REITs may not define FFO in accordance
with the current National Association of Real Estate Investment
Trusts, or NAREIT, definition (as the Company does) or may
interpret the current NAREIT definition differently than the
Company does and/or calculate AFFO differently than it does.
Consequently, the Company’s presentation of FFO and AFFO may not be
comparable to other similarly titled measures presented by other
REITs.
The following is a reconciliation of net income per share,
computed in accordance with GAAP, to FFO and AFFO for the 12-month
period commencing April 1, 2012 (consistent with how the Company
has historically presented this non-GAAP financial measure):
Guidance Range Low High Net
income $0.144 $0.174 Add: Depreciation and
amortization 0.646 0.646
FFO (rounded) $0.790
$0.820 Straight line rent -0.049 -0.049 Amortization of
deferred compensation 0.022 0.022 Amortization of deferred
financing costs 0.018 0.018 Acquisition and transaction costs 0.005
0.005
AFFO (rounded) $0.790 $0.820
Important Notice
The preliminary information contained in this press release is
subject to confirmation by the paying agent and the depositary and
is based on the assumption that all shares tendered through notice
of guaranteed delivery will be delivered within three business days
of the expiration of the Tender Offer. The final number of shares
to be purchased, the final purchase price and the final proration
information will be announced following completion of the
confirmation process. Payment for the shares accepted for purchase
under the Tender Offer, and return of all other shares tendered and
not purchased, will occur promptly thereafter. Investor questions
concerning the Tender Offer may be directed to the depositary for
the Tender Offer, ARC Advisory Services, LLC at (877) 373-2522.
This press release is for informational purposes only and is not
an offer to buy or the solicitation of an offer to sell any shares
of the Company.
American Realty Capital Trust, Inc., a publicly traded Maryland
corporation listed on The NASDAQ Global Select Market, is a leading
self-administered real estate company that owns and acquires single
tenant free standing commercial real estate properties that are
primarily net leased on a long-term basis to investment grade
credit rated and other creditworthy tenants.
The statements in this press release that are not historical
facts may be forward-looking statements. These forward looking
statements involve risks and uncertainties that could cause the
outcome to be materially different.
Additional information about the Company can be found on the
Company’s website at www.arctreit.com.
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