New REIT Formed to Pursue Sale Leaseback Deals in US & Europe

GlobeSt.com - October 20, 2010

Former W.P. Carey CEO Gordon DuGan and US investment head Benjamin Harris have teamed up with American Realty Capital’s Nicholas Schorsch and William Kahane to compete on W.P. Carey’s turf. They’ve formed Corporate Income Properties ARC Inc. a joint venture that will focus on corporate sale-leasebacks in the US and Europe.

A W.P. Carey spokesman referred GlobeSt.com to a comment from CEO Trevor Bond appearing in the Wall Street Journal. “Our success is based on the strength of a whole organization and not just one or two people,” Bond told the WSJ. “We have a process based on 37 years of accumulated institutional expertise. No one has replicated our success in the net-lease sector.” DuGan left W.P. Carey in July over disagreements with chairman William P. Carey about long-term investment direction.

According to an SEC filing by Northcliffe Asset Management, which DuGan and Harris formed in September, the JV intends to raise a minimum of $200 million and a maximum of $500 million to acquire single-tenant commercial properties and lease them back to the sellers. The IPO is being handled by Realty Capital Securities, an affiliate of American Realty Capital.

Corporate Income Properties will invest, directly or indirectly, at least 85% of the net proceeds in single tenant net-leased commercial properties and will limit aggregate borrowings to between 50% and 60% of the aggregate cost of investments, according to a spokesman. While the primary geographic target will be US markets, up to 25% of the portfolio may include properties purchased internationally.

The issuers expect unlevered cap rates of 8% to 9%. Leases will run at least 10 years, the spokesman says.

Last week, Schorsch announced the launch of American Realty Capital Healthcare Trust, a non-traded healthcare REIT that will target medical office properties. The JV with DuGan and Harris, which is also expected to qualify as a REIT, fits in with the Schorsch strategy of sector-specific, publicly registered, non-traded REITS.

Currently, Realty Capital Securities is raising more than $10 billion for seven non-traded REITs, according to the American Realty Capital spokesman. The company has raised more than $1 billion in the past 20 months and is currently raising about $140 million a month. Last month, RCS fundraising accounted for 18% of the total equity raised in the non-traded REIT market for September, the spokesman says. Sphere: Related Content