Scottsdale, AZ—A consortium of investors led by Australia's Macquarie Bank Ltd. and Kaupthing Bank hf of Iceland has agreed to buy single-tenant property REIT Spirit Finance Corp. in a $3.5-billion deal. The consortium includes four other equity participants, which a Macquarie spokesman describes as large institutions or investment funds, predominantly from the US.

The consortium's offer is for $14.50 cash per share, which represents an 11% premium over the REIT's closing price on March 12, and the transaction's $3.5-billion value includes $1.9-billion of assumed debt.

The agreement allows locally based Spirit Finance to solicit better offers from other parties through April 9, and the REIT's announcement of the deal states that its "board of directors, with the assistance of its financial advisors, intends to solicit superior proposals during this period." Spirit Finance is being advised by Citigroup Corporate & Investment Banking and Wachovia Securities. The consortium is being advised by Macquarie Securities (USA) Inc. and Kaupthing Securities Inc., while Credit Suisse has committed to providing its debt financing.

Spirit Finance's management declined through a spokesperson to comment until the transaction closes. A March 13 research note from Banc of America Securities LLC analyst Ross Nussbaum states that "the deal appears to have been privately negotiated and Spirit now has 28 days to run a full auction process in the hopes of soliciting a superior proposal." Should the consortium lose the deal to a better offer, it could get a $31-million break-up fee.

The Macquarie spokesman says the consortium's intent is to continue to operate the single-tenant property investor as Spirit Finance, with its senior management remaining in place, and continued growth of its portfolio. Just what structure it would be operated under is currently being evaluated, NET LEASE forum is told.

While Macquarie through its various funds has been a significant acquirer of US commercial property--it was the largest foreign investor in the market in 2005--it has more typically sought multi-tenant office, grocery-anchored retail and industrial properties through joint ventures. "This is basically the entrance into another subsector of the real estate market," the spokesman notes.

Should the deal go through, it will take Spirit Finance out of the public market realm. "The access to capital through a different market, i.e., not the public market, may be an attractive alternative for them," the Macquarie spokesman says.

"Macquarie has a proven track record of investing for the long term and has earned a reputation for securing efficient capital access around the world. We look forward to working with the consortium to build upon our leadership position as a real estate net lease capital provider," states Spirit Finance president and CEO Christopher H. Volk. "We are also pleased that the consortium has committed to making an equity investment in Spirit at this time by purchasing newly issued shares in the company. This investment will fund our continued growth and is a significant vote of confidence in our strategic plan." Per the acquisition agreement, the consortium committed to buy 6.15 million shares at $12.99 a share. The proceeds "will be used to fund real estate-related activities in the ordinary course of its business," Spirit Finance's announcement states.

Volk and chairman Morton H. Fleischer are no strangers to building up a public company that ultimately is taken private. They were the forces behind the former Franchise Finance Corp. of America, which was founded by Fleischer in 1979, eventually taken public on the New York Stock Exchange, and then ultimately sold in 2001 to GE Capital.