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American Realty Capital—Retail Centers of America Files Presentation Regarding Proposed Merger with American Finance Trust

January 26, 2017

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American Realty Capital – Retail Centers of America Files Presentation Regarding Proposed Merger with American Finance Trust

January 26, 2017 | James Sprow | Blue Vault

Money transfer

In a Form 425 filing with the SEC on January 24, American Realty Capital—Retail Centers of America (RCA) gave a presentation for stockholders who will be voting on the proposed merger with American Finance Trust (AFIN) at a special meeting currently scheduled for February 13, 2017. In the presentation, RCA offers “Frequently Asked Questions” and answers for stockholders to consider. (In an article that appeared on the Blue Vault website on January 11, 2017 entitled “Stanger Report Slams Proposed ARC—Retail Centers of America/American Finance Trust Merger” the merger is examined in detail.)

Here are the highlights from the FAQ’s in the presentation:

If the merger is approved, each RCA share will be converted into 0.385 AFIN shares plus $0.95 per RCA share in cash. (Blue Vault note: AFIN shares are not listed and there is no guarantee that AFIN will be listing its shares in the near future.)

After the merger is complete, each RCA share will convert into 0.385 AFIN shares and no further action is required of stockholders, financial advisors, broker dealer home office representatives or custodians.

No changes in RCA account information (such as names and addresses) will be processed after February 9, 2017, in order to help facilitate a smooth and orderly share transfer process.

Like RCA, AFIN has a share repurchase plan (“SRP”) permitting AFIN shareholders to sell their shares back to AFIN subject to certain conditions. (Note:  According to Blue Vault’s Q3 2016 report on AFIN, no shares were redeemed in Q2 or Q3 of 2016.) AFIN’s SRP is subject to modification, suspension or termination should the AFIN board determine necessary.

The RCA DRIP plan was suspended in contemplation of the merger with AFIN.  All distributions have been paid in cash starting with the distribution payable on September 1, 2016.

If approved, the cash portion of the merger consideration will be paid at closing.

Based on AFIN’s current distribution rate, the amount of monthly cash distributions will remain the same for RCA shareholders once the merger is complete. The presentation gives the example:  “If you currently receive your distributions via direct deposit and usually receive approximately $100.00 per month, after the merger you will continue to see a monthly distribution direct deposited in your account for approximately $100.00.”

The presentation also answers a question regarding the tax consequences of the merger, stating that RCA shareholders generally will recognize a gain (but not a loss) for U.S. federal income tax purposes upon the receipt of a combination of AFIN common stock and cash in exchange for RCA common stock in connection with the merger. There is a discussion of tax consequences on page 139 of the proxy.

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Ramón A. Rivera-Ramos
Blue Vault Nontraded REIT and Nontraded BDC Reviews
September 1, 2016

Blue Vault helps me to stay well informed on the financial status of both open and closed nontraded REITs and BDCs, so that I can help my clients better understand the product, before they make the decision to invest and after.