RCS Capital Corporation (RCAP) announced today that it will buy Cole Capital Partners and Cole Capital Advisors (together, Cole Capital) from American Realty Capital Properties (ARCP) for $700 million.
Cole Capital is the private capital management business of ARCP, which includes a broker-dealer, wholesale distribution and a non-traded real estate investment trust (REIT) sponsor and advisory businesses.
The purchase price of $700 million consists of $200 million cash, $300 million of seller debt and $200 million of RCAP Class A common stock.
As part of the agreement, American Realty will act as an advisor to Cole Capital’s non-traded real estate investment trust, sharing fees with RCS Capital. “This transaction significantly simplifies our business model and provides us a long-term economic stake in the growth and success of Cole Capital’s investment programs,” American Realty Chief Executive Officer David Kay said in the statement. The move will eliminate “considerable overhead and volatility.”
American Realty, headed by Chairman Nicholas Schorsch, has been buying and selling assets to concentrate on single-tenant buildings leased to businesses, such as drugstores and fast-food restaurants. Schorsch also is executive chairman of RCAP.
The acquisition of Cole Capital will add seven investment programs to RCAP’s suite of investment products. And ARCP will act as sub-advisor to certain REITs advised by Cole Capital.
In January 2014, RCAP punctuated a string of broker-dealer acquisitions by paying $1.1 billion to acquire giant Cetera Financial. Several months later, RCAP replaced Cetera's CEO Valerie Brown with Roth.
Including its recently announced acquisitions of VSR Group and Girard Securities, RCAP now has 9,700 advisors with $236 billion under administration.
With revenues of $417 million, RCAP’s retail advice business accounted for nearly half of its total revenue of $918 million through the first six months of the year. RCS had revenues of $390 million.
“Adding Cole Capital to our wholesale platform offers many exciting benefits to RCS,” said Bill Dwyer, chief executive officer of Realty Capital Securities, RCAP's wholesale distributor of non-traded REITS, business development companies and mutual funds. “We are gaining an experienced team of professionals with complementary skills and relationships while adding seven additional investment solution offerings that represent significant equity capital raising potential, all the more so due to the sub-advisory arrangement with net lease leader, American Realty Capital Properties.”