American Realty Capital Properties Announces Third Quarter 2013 Operating Results and $0.21 AFFO per Share

NEW YORK, Nov. 7, 2013 /PRNewswire/ -- American Realty Capital Properties, Inc. (NASDAQ: ARCP) ("ARCP" or the "Company") announced today its operating results for the three and nine months ended September 30, 2013. Operating highlights are provided below. All per share results are reported on a fully diluted basis.

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For the quarter ended September 30, 2013, revenues of $60.9 million were reported, a record amount for the Company, compared to $45.0 million in the second quarter of 2013, or a quarter-to-quarter increase of over 35%. Adjusted funds from operations totaled $46.7 million for the third quarter of 2013, compared to $32.8 million generated in the second quarter, respectively, or a quarter to quarter increase of over 42%.

Third Quarter Operating Highlights (three months ended September 30, 2013)

• Revenues: $60.9 million.
• Property level net operating income (includes total revenues less property operating expenses): $56.8 million.
• Funds from operations: $(19.7) million, or $(0.09) per share.
• Core funds from operations (excluding one-time merger and acquisition related costs as well as the mark-to-market adjustment resulting from the completed private placement): $23.9 million, or $0.10 per share
• Adjusted funds from operations: $46.7 million, or $0.21 per share.
• Fully diluted weighted-average shares outstanding: 227.3 million.

Third Quarter Operating Highlights (nine months ended September 30, 2013)

• Revenues: $145.9 million.
• Property level net operating income (includes total revenues less property operating expenses): $136.9 million.
• Funds from operations: $(156.5) million, or $(0.85) per share.
• Core funds from operations (excluding one-time merger and acquisition related costs as well as the mark-to-market adjustment resulting from the completed private placement): $81.4 million, or $0.44 per share
• Adjusted funds from operations: $110.3 million, or $0.60 per share.

Portfolio Highlights

Third Quarter 2013

• Portfolio composition as of September 30, 2013: 1,219 properties, 100% occupied (excluding one vacant property classified as held-for-sale), freestanding single-tenant properties comprised of 20.4 million square feet, occupied by 59.4% investment grade corporate tenants (attributing the rating of each parent company to its wholly owned subsidiary, as applicable) with a weighted average remaining lease term of 9.5 years. These properties are located in 48 states plus Puerto Rico and include 183 tenants, operating in 32 distinct industries.
• Third quarter acquisitions: $95 million of properties purchased at an average capitalization rate of 9.0% (including expected contingent rental income).

Subsequent Events to Third Quarter 2013

• Portfolio composition as of November 6, 2013: 1,328 properties, 99% occupied (excluding one vacant property classified as held-for-sale), comprised of 34.0 million square feet, occupied by 67.7% investment grade corporate tenants (attributing the rating of each parent company to its wholly owned subsidiary, as applicable) with a weighted average remaining lease term of 9 years. These properties include 231 tenants and operate in 41 distinct industries. 
• Closed acquisition of CapLease: On November 5, closed on the previously announced acquisition of CapLease, adding a portfolio of 68 assets that is 97% occupied.

Pending

• Organic acquisitions: $1.1 billion of pending organic acquisitions at an average capitalization rate of 7.8%, anticipated to close during the fourth quarter of 2013.
• American Realty Capital Trust IV ("ARCT IV") merger: Announced $3.0 billion acquisition of ARCT IV, expected to close by mid-December, 2013, subject to receipt of ARCT IV stockholder approval.  Terms of the merger agreement modified to pay a per-share consideration of $9.00 in cash; 0.5190 shares of ARCP common stock; and 0.5937 shares of ARCP perpetual preferred securities (6.7% annual coupon).
• Cole Real Estate Investments ("Cole") merger: On October 23, announced $11.2 billion acquisition of Cole.  The transaction is expected to close in first half of 2014, subject to receipt of ARCP and Cole stockholder approvals.  A preliminary proxy/prospectus was filed on November 5, 2013.

Balance Sheet and Capital Markets Highlights

Third Quarter 2013

• Convertible note offering: Closed its underwritten public offering of $300.0 million Convertible Senior Notes due 2018 ("Notes") during the quarter. Additionally, the representatives for the underwriters delivered notice to ARCP electing to partially exercise their over-allotment option to purchase $10.0 million of additional Notes, which closed on August 1, 2013. The Notes will pay interest semi-annually at a rate of 3.0% per annum and will mature on August 1, 2018. The holders may elect to convert the Notes into cash, ARCP's common stock or a combination thereof. 
• Senior corporate credit facility: Upsized senior corporate credit facility total financing capacity of up to $1.7 billion; currently in process of increasing the facility to $2.5 billion.
• Common and preferred equity offering: Private placement of common stock and Series D cumulative convertible preferred stock ("Series D Preferred") to institutional holders reinvesting the proceeds from the conversions and redemptions of Series C convertible preferred stock ("Series C Preferred").

Subsequent to Third Quarter 2013

• 'Baa3' Moody's Investment Grade Corporate Credit Rating: On October 14, 2013, ARCP was assigned a 'Baa3' investment grade corporate credit rating by Moody's Investor Services.

Management Commentary

"We have continued to build enterprise value during this third quarter, and for now are intently focused on execution," commented ARCP Chairman and CEO Nicholas S. Schorsch.  "In this regard, we have identified several near-term key objectives: completing the announced ARCT IV and Cole transactions; becoming self-managed and significantly broadening our intellectual capital by continuing to attract the best and brightest managers in the industry; deleveraging and terming out our balance sheet utilizing long-term, fixed rate debt; and effectively and seamlessly integrating Cole organization."

"We have filed the merger proxies for ARCT IV and Cole and have tentative stockholder vote dates of December 11, 2013 and January 14, 2014, respectively," noted Mr. Schorsch.  "Our team worked  tirelessly and collaboratively with the Cole team to have these documents filed with the SEC in under two weeks."

"We are fully committed to becoming self-managed, as promised," added Mr. Schorsch. "In fact, it is a closing condition for our merger with Cole.  We will announce the President of ARCP before year-end.  We have already moved to bolster our team with several key hires.   Brian Block, our CFO, will now be focused exclusively on ARCP.  Lisa Beeson joins us as COO after 25 years as an investment banker with tremendous M&A and capital markets expertise.  Lisa Pavelka McAlister is our new CAO with 25 years' experience in senior financial roles versed in all aspects of financial and accounting operations.  In addition, we continue to be impressed with the depth of talent at Cole.  One of the key attributes of the merger is our ability to tap the tremendous human capital resident at the Cole organization, and we expect these senior executives will play a meaningful role in the management of ARCP."

"Finally, the ARCP and Cole teams are committed to a rapid closing and smooth integration," continued Mr. Schorsch   That process is well underway, and we are working cooperatively to leverage the best of three great organizations - ARCP, Cole and CapLease."

"Our 3^rd quarter operating results are in-line with projections," added Brian S. Block, EVP & Chief Financial Officer.  "We are well positioned to close our pending acquisitions and execute our capital plan.  Our team is focused on taking advantage of our investment grade rating and securing long-term financing at attractive rates.  We have commitments in place for $755 million of long-term, fixed rate debt, and expect to issue senior unsecured in the private and public markets.  Looking beyond 2013, we will raise equity only in connection with acquiring accretive real estate investments as we continue to deleverage our balance sheet.  We do not intend to issue equity simply to pay down debt." 

"I am thrilled to join ARCP," added Lisa E. Beeson, EVP and Chief Operating Officer.  "My near-term mandate is to integrate three great platforms; this plan is well underway.   We have established teams that have been working together smoothly to get us to an early first quarter of 2014 closing.  Our ability to get the proxy for the Cole merger filed in in a matter of weeks is testimony to these efforts.   We are now working to determine the best shared systems in real estate, accounting and financial reporting." 

Financial Results

Revenues
Total revenues were $60.9 million for the three months ended September 30, 2013, compared to revenues for the three months ended June 30, 2013 of $45.0 million, representing a 35% increase. Total revenues were $145.9 million for the nine months ended September 30, 2013.

Funds from Operations and Adjusted Funds from Operations
Funds from operations ("FFO") for the three months ended September 30, 2013, totaled $(19.7) million, or $(0.09) per share. FFO for this period includes one-time merger and other transaction related expenses of $3.8 million. FFO for the nine months ended September 30, 2013 totaled $(156.5) million, or $(0.85) per share. FFO for this period includes one-time merger and other transaction related expenses of $146.2 million Excluding such one-time costs, FFO is $(10.2) million, or $(0.06) per share.

Adjusted funds from operations ("AFFO") for the three months ended September 30, 2013, totaled $46.7 million, or $0.21 per share. AFFO for the nine months ended September 30, 2013 totaled $110.3 million, or $0.60 per share.

Property Level Net Operating Income
Property Level net operating income ("NOI") was $56.8 million for the three months ended September 30, 2013, compared to NOI for the three months ended June 30, 2013 of $42.5 million, representing a 34% increase. NOI was $136.9 million for the nine months ended September 30, 2013.

Dividend Increase
Total dividends paid to common stockholders by the Company were $42.1 million for the three months ended September 30, 2013, or $0.91 per share on an annualized basis.

On May 28, 2013, an increase in the annual dividend rate from $0.91 per share to $0.94 per share was declared, contingent upon and effective with the earlier of the close of the ARCT IV merger or the CapLease merger. Additionally, on October 23, 2013, an increase in annual dividend rate from $0.94 per share to $1.00 per share was declared, contingent upon, and effective with, the close of the Cole merger. As a result of the CapLease closing, ARCP will raise its dividend to $0.94 effective December 2013.

2014 Guidance
In connection with the announcement of the Cole merger transaction, ARCP updated 2014 AFFO guidance from $1.13 to $1.19 per share.

Corporate Mergers and Strategic Opportunities Update

CapLease Merger

• This transaction closed on November 5, 2013

In addition to adding the portfolio of 68 assets, Paul McDowell, CEO of CapLease joined ARC Advisory Services, LLC, a subsidiary of AR Capital, LLC, as President of the office, industrial and build-to-suit activities.  Several other senior CapLease executives will also join AR Capital, LLC.   

ARCT IV Merger

• ARCT IV Stockholder vote tentatively scheduled for December 11, 2013

On July 2, 2013, ARCP signed a definitive merger agreement under which it will acquire all of the outstanding shares of ARCT IV. On October 7, 2013 ARCP and ARCT IV amended the terms of the merger agreement. Under the terms of the new amended agreement, ARCP will now acquire all of the outstanding shares of ARCT IV, in a transaction valued at $3.0 billion for consideration including cash, common stock and perpetual preferred securities. The transaction is expected to close during the fourth quarter of 2013, subject to receipt of required ARCT IV stockholder approval.

Cole Merger

• S-4/Proxy filed November 5, 2013
• ARCP and Cole Stockholder votes tentatively schedule for January 14, 2014

ARCP and Cole signed a definitive merger agreement to merge the two companies in a transaction valued at $11.2 billion. This combination will create the largest net lease REIT with an enterprise value of $21.5 billion. ARCP has secured $2.75 billion of fully committed financing from Barclays in connection with this transaction. Cole stockholders are expected to receive a fixed exchange ratio of 1.0929 shares of ARCP common stock or $13.82 cash per share (subject to a 20% proration). A joint proxy statement/prospectus was filed on November 5.  Following its effectiveness, both ARCP and Cole stockholders will be entitled to vote on this transaction.  The transaction is expected to close in the first quarter of 2014, subject to receipt of required ARCP and Cole stockholder approvals.

• AFFO Growth: Updated AFFO pro forma 2014 guidance of $1.13 to $1.19 per share; target payout ratio of 85% to 90%.
• Dividend Increase: ARCP dividend per share on closing increases to $1.00.
• Significant Deleveraging: ARCP net debt to EBITDA ratio declines from 9.1x to 7.7x by year end 2014.
• Expense Synergies: $70 million of year one expense synergies expected.
• Scale and Competiveness: 64% larger than the closest comparable net lease REIT. Size and scale create operating and revenue efficiencies, including lower cost of capital, superior growth opportunities and higher investor returns.
• Portfolio Quality: Superior diversification by asset type, tenancy, industry and geography; 47% investment grade tenancy; 99% occupied; 11 years remaining average lease term.
• Optimization of Core Capabilities: In addition to the durability provided by the single tenant net lease portfolio, the multi-tenant retail properties coupled with the "vintage" (mid-term) net leased properties should generate significant rent growth potential.
• Cost of Capital Advantages: ARCP's investment grade rating allows for significantly lower cost of financing, which is highly accretive to its overall corporate earnings.
• Increased Institutional Coverage: Transaction positions ARCP for potential inclusion in the S&P 500.

Self-Management
ARCP is fully committed to become self-managed following the pending closings of the ARCT IV and Cole mergers.  The self-management plan will be substantially completed by year-end 2013 and will be fully implemented upon the close of the Cole merger.  ARCP executive officers will include: Nick Schorsch, Executive Chairman and CEO, Brian S. Block as EVP and CFO; hires Lisa Beeson as EVP and COO; and Lisa Pavelka McAlister as SVP and CAO.  In addition, two of Cole's independent directors will join the Board of ARCP upon closing of the merger.

Third Quarter 2013 Conference Call Details

ARCP will be hosting its third quarter 2013 conference call and Webcast on Thursday, November 7, 2013 at 11:00 AM ET. Nicholas S. Schorsch, Chairman and Chief Executive Officer, and Brian S. Block, Executive Vice President and Chief Financial Officer, will conduct the call. Conference call details are as follows:

Live Conference Call and Webcast Details*
Domestic Dial-In Number: 1-888-317-6003
International Dial-In Number: 1-412-317-6061
Canada Dial-In Number: 1-866-284-3684
Conference ID: 7852498
Webcast: http://arcpreit.com/Q32013EarningsCall/ 
*Participants should dial in 10-15 minutes early.

Conference Call Replay Details
Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-0088
Conference ID: 10034661
Date Available: November 7, 2013 (one hour after the end of the conference call) to January 31, 2014 at 9:00 AM ET

Supplemental Information

Supplemental information on the Company's third quarter 2013 operations can be found in the Company's Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) on November 7, 2013. The supplemental information report is titled "Quarterly Supplemental Information: Third Quarter 2013. Information in this report includes, in addition to other data: (1) Consolidated Balance Sheet and Income Statement Details; (2) Funds from Operations and Adjusted Funds from Operations details; (3) Dividend Summary; and (4) Portfolio Details. 

Company Pro Forma Presentation

ARCP filed a company presentation in its Current Report on Form 8-K filed with the SEC on November 5, 2013, containing additional pro forma information describing the combined company (assuming the acquisitions of CapLease, ARCT IV and Cole).  A copy of the company presentation can be found in Annex A attached hereto.

Funds From Operations and Adjusted Funds From Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), an industry trade group, has promulgated a measure known as funds from operations ("FFO"), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from sales of property but including asset impairment writedowns, plus depreciation and amortization, after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT's policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of U.S. GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in U.S. GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and adjusted funds from operations ("AFFO"), as described below, should not be construed to be more relevant or accurate than the current U.S. GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under U.S. GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and AFFO measures and the adjustments to U.S. GAAP in calculating FFO and AFFO.

We consider FFO and AFFO useful indicators of the performance of a REIT. Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs in our peer group. Accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT's definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. While certain companies may experience significant acquisition activity, other companies may not have significant acquisition activity and management believes that excluding costs such as merger and transaction costs and acquisition related costs from property operating results provides useful information to investors and provides information that improves the comparability of operating results with other companies who do not have significant merger or acquisition activities. AFFO is not equivalent to our net income or loss as determined under GAAP, and AFFO may not be a useful measure of the impact of long-term operating performance if we continue to have such activities in the future.

We exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments, gains or losses on contingent valuation rights, gains and losses on investments and early extinguishment of debt. In addition, by excluding non-cash income and expense items such as amortization of above and below market leases, amortization of deferred financing costs, straight-line rent and non-cash equity compensation from AFFO we believe we provide useful information regarding income and expense items which have no cash impact and do not provide liquidity to the company or require capital resources of the company. By providing AFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that are not as involved activities which are excluded from our calculation. Investors are cautioned that AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as it excludes certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.

In addition, we exclude certain interest expenses related to securities that are convertible to common stock as the shares are assumed to have converted to common stock in our calculation of weighted average common shares-fully diluted.

In calculating AFFO, we exclude expenses, which under GAAP are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued merger and acquisition fees and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property and certain other expenses. Therefore, AFFO may not be an accurate indicator of our operating performance, especially during periods in which mergers are being consummated or properties are being acquired or certain other expense are being incurred. AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments as items which are unrealized and may not ultimately be realized. We view both gains and losses from fair value adjustments as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management's analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information.

As a result, we believe that the use of FFO and AFFO, together with the required U.S. GAAP presentations, provide a more complete understanding of our performance relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

FFO and AFFO are non-GAAP financial measures and do not represent net income as defined by U.S. GAAP. FFO and AFFO do not represent cash flows from operations as defined by U.S. GAAP, are not indicative of cash available to fund all cash flow needs and liquidity, including our ability to pay distributions and should not be considered as alternatives to net income, as determined in accordance with U.S. GAAP, for purposes of evaluating our operating performance. Other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do and/or calculate AFFO differently than we do. Consequently, our presentation of FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs.

About the Company

ARCP is a publicly traded Maryland corporation listed on The NASDAQ Global Select Market that qualified as a real estate investment trust for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2011, focused on acquiring and owning single-tenant freestanding commercial properties subject to net leases with high credit quality tenants. Additional information about the ARCP can be found on its website at www.arcpreit.com. ARCP may disseminate important information regarding the Company and its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.

Additional Information about the Cole Merger and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed Cole merger, the Company and Cole expect to prepare and file with the U.S. Securities and Exchange Commission ("SEC") a registration statement on Form S-4 containing a joint proxy statement/prospectus and other documents with respect to the Company's proposed acquisition of Cole. The joint proxy/prospectus will contain important information about the proposed transaction and related matters. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED BY THE COMPANY OR COLE WITH THE SEC CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, COLE AND THE PROPOSED COLE MERGER.

Investors and stockholders of the Company and Cole may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by the Company and Cole with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by the Company with the SEC are also available free of charge on the Company's website at www.arcpreit.com and copies of the documents filed by Cole with the SEC are available free of charge on Cole's website at www.ColeREIT.com.

Participants in Solicitation relating to the Cole Merger

The Company, Cole, AR Capital, LLC and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company's and Cole's stockholders in respect of the proposed Cole merger. Information regarding the Company's directors and executive officers can be found in the Company's definitive proxy statement filed with the SEC on April 30, 2013. Information regarding Cole's directors and executive officers can be found in Cole's definitive proxy statement filed with the SEC on April 11, 2013. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed Cole merger if and when they become available. These documents are available free of charge on the SEC's website and from the Company or Cole, as applicable, using the sources indicated above.

Additional Information about the ARCT IV Merger and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed ARCT IV merger, the Company and ARCT IV expect to prepare and file with the SEC an amendment to their proxy statement/prospectus and the Company expects to prepare and file with the SEC an amendment to its registration statement on Form S-4 and other documents with respect to the Company's proposed acquisition of ARCT IV. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND REGISTRATION STATEMENT (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ARCT IV MERGER.

Investors may obtain free copies of the registration statement, the proxy statement/prospectus and other relevant documents filed by the Company and ARCT IV with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by the Company with the SEC are also available free of charge on the Company's website at www.arcpreit.com and copies of the documents filed by ARCT IV with the SEC are available free of charge on ARCT IV's website at www.arct-4.com.

Participants in Solicitation relating to the ARCT IV Merger

The Company, ARCT IV, AR Capital, LLC and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from ARCT IV's stockholders in respect of the proposed ARCT IV merger. Information regarding the Company's directors and executive officers can be found in the Company's definitive proxy statement filed with the SEC on April 30, 2013. Information regarding ARCT IV's directors and executive officers can be found in ARCT IV's definitive proxy statement filed with the SEC on April 30, 2013. Additional information regarding the interests of such potential participants will be included in the proxy statement/prospectus, the registration statement and other relevant documents filed with the SEC in connection with the proposed ARCT IV merger if and when they become available. These documents are available free of charge on the SEC's website and from the Company or ARCT IV, as applicable, using the sources indicated above.

Forward-Looking Statements

Information set forth herein (including information included or incorporated by reference herein) contains "forward-looking statements" (as defined in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect the Company's, CapLease's, ARCT IV's and Cole's expectations regarding future events. The forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements include, but are not limited to, whether and when the transactions contemplated by any of the merger agreements will be consummated, the combined company's plans, market and other expectations, objectives, intentions, as well as any expectations or projections with respect to the combined company, including regarding future dividends and market valuations, and estimates of growth, including funds from operations and adjusted funds from operations and other statements that are not historical facts.

The following additional factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of any of the merger agreements; (2) the inability to complete the ARCT IV merger due to the failure to obtain ARCT IV stockholder approval of the ARCT IV merger or the failure to satisfy other conditions to completion of the ARCT IV merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the ARCT IV merger; (3) the inability to obtain regulatory approvals for the Cole merger transaction and the approval by the Company's stockholders of the issuance of Company common stock in connection with the Cole merger and the approval by Cole's stockholders of the Cole merger; (4) risks related to disruption of management's attention from the ongoing business operations due to the proposed mergers; (5) the effect of the announcement of the proposed mergers on the Company's, ARCT IV's or Cole's relationships with their respective customers, tenants, lenders, operating results and businesses generally; (6) the outcome of any legal proceedings relating to any of the mergers or the merger agreements; and (7) risks to consummation of the mergers, including the risk that the mergers will not be consummated within the expected time period or at all. Additional factors that may affect future results are contained in the Company's, ARCT IV's and Cole's filings with the SEC, which are available at the SEC's website at www.sec.gov. The Company, ARCT IV and Cole disclaim any obligation to update and revise statements contained in these materials based on new information or otherwise.

ANNEX A:  http://origin-qps.onstreammedia.com/origin/multivu_archive/ENR/FX-NY12606-20131107.pdf

SOURCE American Realty Capital Properties, Inc.