$61M in Stock, Debt Buys National Properties Corp.

DES MOINES-Locally based National Properties Corp. is being merged into a subsidiary of Orlando-based Commercial Net Lease Realty in a stock, debt and dividend transaction valued at $61 million. The merger is expected to be completed in the second quarter of 2005. National Properties owns 43 properties located in 12 states (Midwest and South) that are leased to 17 corporations, including QuikTrip convenience stores (17 properties), Perkins restaurants (five properties), Academy sporting goods stores (two properties) and a Walgreens drug store (one property). Commercial Net Lease Realty owns 362 investment properties (8.5 million sf) in 38 states that are leased to 152 corporations including Barnes & Noble, Best Buy, CVS and OfficeMax.The deal calls for Commercial Net Lease Realty to issue approximately 1.6 million shares of common stock, which was worth $31.2 million based on the Jan. 14 closing price. Common stockholders of National Properties will receive four shares of Commercial Net Lease Realty common stock for each share of National Properties stock they own. In addition, as a condition to Commercial Net Lease Realty’s obligation to close the merger, National Properties must pay a dividend to its shareholders of $20.8 million, or approximately $50.84 per share. Although the merger itself is tax-free, this amount will be taxable to National Properties’ shareholders as an ordinary dividend. The remaining $9 million of the transaction price was in the form of assumed debt.Completion of the merger is subject the approval of the holders of a majority of the outstanding shares of National Properties’ common stock. Commercial Net Lease Realty has entered into a shareholders’ agreement with the holders of approximately 53% of the outstanding Natoinal Properties’ common stock whereby these holders have agreed to vote in favor of the merger. However, Commercial Net Lease Realty may terminate the merger agreement if a majority of the National Properties’ shareholders not bound by the shareholders’ agreement do not approve the merger. The merger does not require Commercial Net Lease Realty’s shareholders’ approval.