NEW YORK CITY—Days after RCS Capital Corp. terminated its $700-million acquisition of Cole Capital from American Realty Capital Properties, ARCP has filed suit against RCAP. ARCP said Wednesday it had filed litigation Tuesday in Delaware Chancery Court; RCAP did not respond to GlobeSt.com's requests for comment, nor did ARCP provide additional information on the lawsuit beyond a news release issued Wednesday morning.
“We continue to believe that RCS's attempt to terminate the purchase agreement constitutes a breach” of that agreement to buy Cole Capital, according to a statement the net lease REIT issued Wednesday. “Under the circumstances, the independent members of the ARCP board of directors and ARCP had no choice but to file this litigation in order to preserve and protect the interests of ARCP's shareholders under the purchase agreement.”
Both companies are chaired by Nicholas Schorsch. However, as RCAP reiterated in a statement issued last week, they're separate companies, each with its own independent directors, separate accounting functions and no overlapping management.
In an SEC filing this past Friday, RCAP spelled out the reason for terminating the purchase agreement, alluding to ARCP's disclosure late last month of accounting irregularities that led to the replacement of its CFO and chief accounting officer. “In light of recent disclosures” by ARCP as well as the “the matters arising with respect to such disclosures,” RCAP's board determined that “it was appropriate for the company to terminate the purchase agreement.” RCAP's SEC filing also noted that the agreement “does not provide for any early termination penalties.”
For its part, ARCP said last week that it had received a letter from RCAP “in the middle of the night” terminating the agreement to acquire Cole Capital. ARCP said that RCAP's attempt to terminate the deal “constitutes a breach of the agreement. In addition, we believe that RCS's unilateral public announcement is a violation of its agreement with ARCP.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
