Overview
SEC Filings
Prospectus
FAQs
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FAQ's
Q: What is a REIT?
A: In general, a
real estate investment trust (REIT) is a company that:
- pays distributions to investors of at least 90% of its taxable income;
- avoids the "double taxation" treatment of income that generally results
from investments in a corporation because a REIT is not subject to
federal corporate income taxes on its net income, provided certain income tax
requirements are satisfied; and
- combines the capital of many investors to acquire a large-scale,
diversified real estate portfolio under professional management.
Q: How are you different from your competitors who offer
unlisted, finite-life public REIT shares or real estate limited partnership
units?
A: We focus our investments primarily on the
acquisition of freestanding, single-tenant commercial properties net leased to
investment grade and other creditworthy tenants. Unlike funds that invest solely
in multi-tenant properties, we plan to acquire a diversified portfolio comprised
primarily of a large number of single-tenant properties and a smaller number of
multi-tenant properties that compliment our overall investment objectives. By
acquiring a large number of single-tenant properties, we believe that lower than
expected results of operations from one or a few investments will not
necessarily preclude our ability to realize our investment objectives of current
income to our investors and preservation of capital from our overall portfolio.
In addition, we believe that single-tenant commercial properties, as compared to
retail centers, office buildings, industrial properties and apartments, offer a distinct investment advantage since these properties generally require less management and operating capital and have less recurring
tenant turnover. In addition, since we intend to acquire properties that are
geographically diverse, we expect to minimize the potential adverse impact of
economic downturns in local markets. We seek to acquire properties with long
term leases to investment grade or other creditworthy tenants. We will acquire
or invest in properties located only in the United States and the Commonwealth
of Puerto Rico.
Q: What is the experience of your officers and directors?
A: Nicholas S. Schorsch, our Chairman and Chief Executive
Officer, founded and formerly served as President, CEO and Vice-Chairman of
American Financial Realty Trust since its inception as a REIT in September 2002
until August 2006. American Financial Realty Trust is a publicly traded REIT
listed on the NYSE that invests exclusively in office, bank branches and other
operationally critical real estate assets that are net leased to tenants in the
financial service industry such as banks and insurance companies. Through
American Financial Resource Group and its successor corporation, now American
Financial Realty Trust, Mr. Schorsch has executed in excess of 1,000
acquisitions, both in acquiring businesses and real estate properties with
transactional value of approximately $5 billion. In 2003, Mr. Schorsch received
an Entrepreneur of the Year award from Ernst & Young.
William M. Kahane, our President, Chief Operating Officer and Treasurer,
began his career as a real estate lawyer practicing in the public and private
sectors from 1974-1979. From 1981-1992 Mr. Kahane worked at Morgan Stanley &
Co., specializing in real estate, becoming a Managing Director in 1989. In 1992,
Mr. Kahane left Morgan Stanley to establish a real estate advisory and asset
sales business known as Milestone Partners which continues to operate today. Mr.
Kahane is currently a Managing Director of GF Capital Management & Advisors
LLC, a New York based merchant banking firm, where he directs the firm's real
estate investments. GF Capital offers comprehensive wealth management services
through its subsidiary TAG Associates LLC, a leading multi-client family office
and portfolio management services company with approximately $5 billion of
assets under management.
Peter M. Budko, our Executive Vice President and Chief Investment Officer,
founded and formerly served as Managing Director and Group Head of the
Structured Asset Finance Group, a division of Wachovia Capital Markets, LLC from
1997-2006. The Structured Asset Finance Group structures and invests in real
estate that is net leased to corporate tenants. While at Wachovia, Mr. Budko
acquired over $5 billion of net leased real estate assets. From 1987-1997, Mr.
Budko worked in the Corporate Real Estate Finance Group at NationsBank Capital
Market (predecessor to Bank of America Securities) becoming head of the group in
1990.
Brian S. Block, our Senior Vice President and Chief Financial Officer, began
his career in public accounting at Ernst & Young and Arthur Andersen from
1994 to 2000. Subsequently, Mr. Block was the Chief Financial Officer of a
venture capital-backed technology company for several years prior to joining
American Financial Realty Trust in 2002. While at American Financial Realty
Trust, Mr. Block served as Senior Vice President and Chief Accounting Officer
from 2003 to 2007 and oversaw the financial, administrative and reporting
functions of the organization. He is a certified public accountant and is a
member of the AICPA and PICPA.
Michael Weil, our Executive Vice President and Secretary, was formerly the
Senior Vice President of Sales and Leasing for American Financial Realty Trust
(AFR), where he was responsible for the disposition and leasing activity for a
33 million square foot portfolio. Under the direction of Mr. Weil, his
department was the sole contributor in the increase of occupancy and portfolio
revenue through the sales of over 200 properties and the leasing of over 2.2
million square feet, averaging 325,000 square feet of newly executed leases per
quarter.
Q: Will you acquire properties in joint ventures?
A: Possibly. We may want to acquire properties through one
or more joint ventures in order to diversify our portfolio of properties in
terms of geographic region, property type and tenant industry group. Increased
portfolio diversification reduces the risk to investors as compared to a program
with less diversified investments. We also believe that joint ventures may offer
us attractive investment opportunities that would otherwise not be available
to us. Our joint ventures may be with our affiliates or with third parties. Generally, we
will only enter into a joint venture in which we control the decisions of
the joint venture. If we do enter into joint ventures, we may assume liabilities
related to the joint venture that exceed the percentage of our investment in the
joint venture.
Q: What steps do you take to make sure you invest in
environmentally compliant property?
A: Generally, we will
obtain a Phase I environmental assessment of each property we purchase. These
assessments, however, may not reveal all environmental hazards. In certain
instances we will rely upon the experience of our advisor and we expect that in
most cases we will request, but will not always obtain, a representation from
the seller that, to its knowledge, the property is not contaminated with
hazardous materials. Additionally, many of our leases contain clauses that
require a tenant to reimburse and indemnify us for any environmental
contamination occurring at the property.
Q: Generally, what are the terms of your leases?
A: We will seek to secure leases from investment grade and
other creditworthy tenants before or at the time we acquire a property. We
expect that our leases generally will be net leases, which means that the tenant
is responsible for all costs and expenses related to the use and operation of
the property, including the cost of repairs, maintenance, property taxes,
utilities, insurance and other operating costs. In certain of these leases, we
may be responsible for the repair of specific structural components of a
property, such as the roof or structure of the building. We expect that our
leases generally will have terms of ten or more years, some of which have renewal
options. We may, however, enter into leases that have a shorter term.
Q: How do you determine whether tenants have the appropriate
creditworthiness for each building lease?
A: We will
determine creditworthiness pursuant to various methods, including reviewing
financial data and other information about the tenant. In addition, we may use
an industry credit rating service to determine the creditworthiness of potential
tenants and any personal guarantor or corporate guarantor of each potential
tenant. We will compare the reports produced by these services to the relevant
financial and other data collected from these parties before consummating a
lease transaction. Such relevant data from potential tenants and guarantors
include income and cash flow statements and balance sheets for current and prior
periods, net worth or cash flow of guarantors, and business plans and other data
we deem relevant.
Q: What is an "UPREIT"?
A: UPREIT
stands for "Umbrella Partnership Real Estate Investment Trust." We use an UPREIT
structure because a sale of property directly to a REIT generally is a taxable
transaction to the selling property owner. In an UPREIT structure, a seller of a
property that desires to defer taxable gain on the sale of its property may
transfer the property to the UPREIT in exchange for limited partnership units in
the UPREIT, and thus defer taxation of gain until the seller later exchanges its
UPREIT units on a one-for-one basis for REIT shares. If the REIT shares are
publicly traded, at the time of the exchange of units for shares, the former
property owner will achieve liquidity for its investment. Using an UPREIT
structure may give us an advantage in acquiring desired properties from persons
who may not otherwise sell their properties because of unfavorable tax results.
Q: Will the distributions I receive be taxable as ordinary
income?
A: Yes and No. Generally, distributions that you
receive, including distributions that are reinvested pursuant to our
distribution reinvestment plan, will be taxed as ordinary income to the extent
they are from current or accumulated earnings and profits. We expect that some
portion of your distributions may not be subject to tax in the year received
because depreciation expense reduces taxable income but does not reduce cash
available for distribution. The portion of your distribution that is not subject
to tax immediately is considered a return of capital for tax purposes and will
reduce the tax basis of your investment. This, in effect, defers a portion of
your tax until your investment is sold or we are liquidated, at which time you
will be taxed at capital gains rates. However, because each investor's tax
considerations are different, we recommend that you consult with your tax
advisor. You also should review the section of this prospectus entitled "Federal
Income Tax Considerations."
Q: What will you do with the money raised in this offering
before you invest the proceeds in real estate?
A: Until we
invest the proceeds of this offering in real estate, we may invest in
short-term, highly liquid or other authorized investments, such as money market
mutual funds, certificates of deposit, commercial paper, interest-bearing
government securities and other short-term investments. We may be not be able to
invest the proceeds in real estate promptly and such short-term investments will
not earn as high of a return as we expect to earn on our real estate
investments.
Q: How does a best efforts offering work?
A: When shares are offered to the public on a "best
efforts" basis, the brokers participating in the offering are only required to
use their best efforts to sell the shares and have no firm commitment or
obligation to purchase any of the shares. Therefore, we may not sell all of the
shares that we are offering.
Q: Who can buy shares?
A: Generally,
you may buy shares pursuant to this prospectus provided that you have either (1)
a net worth of at least $70,000 and a gross annual income of at least $70,000,
or (2) a net worth of at least $250,000. For this purpose, net worth does not
include your home, home furnishings and automobiles. Residents of certain states
may have a different standard. You should carefully read the more detailed
description under "Suitability Standards" immediately following the cover page
of this prospectus.
Q: For whom is an investment in our shares recommended?
A: An investment in our shares may be appropriate for you
if you meet the minimum suitability standards mentioned above, seek to diversify
your personal portfolio with a finite-life, real estate-based investment, seek
to receive current income, seek to preserve capital, wish to obtain the benefits
of potential long-term capital appreciation, and are able to hold your
investment for a time period consistent with our liquidity plans. On the other
hand, we caution persons who require immediate liquidity or guaranteed income,
or who seek a short-term investment, that an investment in our shares will not
meet those needs.
Q: May I make an investment through my IRA, SEP or other
tax-deferred account?
A: Yes. You may make an investment
through your individual retirement account (IRA), a simplified employee pension
(SEP) plan or other tax-deferred account. In making these investment decisions,
you should consider, at a minimum, (1) whether the investment is in accordance
with the documents and instruments governing your IRA, plan or other account,
(2) whether the investment satisfies the fiduciary requirements associated with
your IRA, plan or other account, (3) whether the investment will generate
unrelated business taxable income (UBTI) to your IRA, plan or other account, (4)
whether there is sufficient liquidity for such investment under your IRA, plan
or other account, (5) the need to value the assets of your IRA, plan or other
account annually or more frequently, and (6) whether the investment would
constitute a prohibited transaction under applicable law.
Q: Is there any minimum investment required?
A: Yes. Generally, you must invest at least $1,000.
Investors who already own our shares can make additional purchases for less than
the minimum investment. You should carefully read the more detailed description
of the minimum investment requirements appearing under "Suitability Standards"
immediately following the cover page of the prospectus.
Q: How do I subscribe for shares?
A: If
you choose to purchase shares in this offering and you are not already a
stockholder, you will need to complete and sign a subscription agreement, like
the one contained in this prospectus as Appendix A, for a specific number of
shares and pay for the shares at the time you subscribe.
Q: Who is the transfer agent?
A: The
name, address and telephone number of our transfer agent is as follows:
American Realty Capital Trust, Inc.
c/o ACS Securities Services, Inc.
3988 N. Central Expressway
Building 5, 6th floor
Dallas, TX 75204
To ensure that
any account changes are made promptly and accurately, all changes including your
address, ownership type and distribution mailing address should be directed to
the transfer agent.
Q: Will I be notified of how my investment is doing?
A: Yes. We will provide you with periodic updates on the
performance of your investment with us, including:
- following our commencement of distributions to stockholders, four
quarterly or 12 monthly distribution reports;
- three quarterly financial reports;
- an annual report;
- an annual Form 1099; and
- supplements to the prospectus during the offering period.
We will provide this information to you via one or more of the following
methods, in our discretion and with your consent, if necessary:
- U.S. mail or other courier;
- facsimile;
- electronic delivery; or
- posting, or providing a link, on our affiliated website, which is
[www.americanrealtycap.com].
Q: When will I get my detailed tax information?
A: Your Form 1099 tax information will be placed in the
mail by January 31 of each year.
Q: Who can help answer my questions?
A:
If you have more questions about the offering or if you would like additional
copies of this prospectus, you should contact your registered representative or
contact:
Realty Capital Securities, LLC
Three Copley Place
Suite 3300
Boston, MA 02116
877-373-2522
Attn: Investor Services
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