Why Cole Real Estate Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cole Real Estate Investments (NYSE: COLE  ) popped 10% today after rival REIT American Realty Capital Partners (NASDAQ: ARCP  ) agreed to acquire it for about $6.85 billion.

So what: The cash-or-stock deal -- either $13.82 in cash, or 1.0929 of American Realty shares -- values Cole at $14.59 per share, and represents a premium of about 14% to its Tuesday closing price. American Realty is making the move to increase scale and become the largest single-tenant REIT in the U.S., but judging from its own stock's small loss today, Mr. Market isn't overly thrilled with the price that management is paying to do it.

Now what: The combined company will have 3,732 properties in 49 states and Puerto Rico, and will boast a dividend yield of about 7.5%. "By leveraging our successful track records, our complementary businesses and highly skilled professionals, we are confident that we will be well-positioned to achieve continued growth," ARCP Chairman and CEO Nicholas Schorsch said. "Far more can be accomplished by these two great companies working together than either one could have hoped to achieve independently." So while Cole's upside is limited at this point, ARCP's newly bolstered portfolio and dividend might be worth checking out. 

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  • Report this Comment On October 24, 2013, at 9:43 AM, mruffin3 wrote:

    I took the money and ran yesterday. I bought most of mine in the mid $10s 3 months ago after the IPO when the non-traded REIT investors were cashing out on the liquidity event and sold at $13.98 yesterday. I had planned to buy and hold as I liked the dividend yield and the value in their RE portfolio, but it's hard not to take a 35% 3 month return when you can get it since I have no interest in any ARCP stock.

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