(Mark Your Calendars: RealShare New York takes place Oct. 12 at the Marriott Marquis.)
NEW YORK CITY-After evaluating various “strategic alternatives,” non-traded REIT American Realty Capital Trust entered into an agreement with lender RBS Citizens Bank to establish a $115 million line of credit for new property acquisitions, but also to lower the interest rate and frictional cost the company is paying for existing credit facilities, an ARCT spokesman tells GlobeSt.com in an e-mail. RBS has committed to hold $50 million of the $115 million credit facility on its balance sheet, while its financial advisor Goldman Sachs & Co. will hold the remaining $65 million.
The credit facility will bear interest at a floating rate based on the company’s corporate leverage ratio, which is currently below 40%, and will bear interest at approximately 2.25%, according to ARCT. It has 36-month term and may be increased to $250 million.
In a prepared statement, Nicholas S. Schorsch, CEO of ARCT, attributed the agreement to the company’s continued relationship with RBS, and its expanded role with Goldman Sachs, who reviewed a possible sale of all or a portion of the company during spring 2011. “We believe that the credit facility with RBS Citizens Bank will provide us greater flexibility in making acquisitions and decrease the interest rate and frictional costs associated with our existing credit facilities which we intend to terminate,” he says.
Schorsch added that based upon ARCT’s corporate leverage ratio, the REIT will reduce its interest rate by 1.20%, resulting in an annual interest cost savings of $720,000, given if ARCT has $60 million outstanding. The frictional cost savings to ARCT will be approximately $15,000 per property or greater, he says, since the lender is not recording mortgages or conducting property level due diligence.
In terms of acquisitions, a spokesman for ARCT could not disclose specific locations, but says “consistent with its business plan, it will continue to acquire single tenant triple net properties throughout the United States until the capital raise is fully deployed.” ARCT, which focuses on net-leasing pharmacies, banks, restaurants and convenience stores in high-traffic locations, currently owns 379 assets in total across the country and the REIT intends to complete the acquisitions by end of the third quarter 2011, as GlobeSt.com previously reported in July.
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