General Electric Co. (NYSE:GE) is selling off properties it rents to restaurant chains in the company’s latest move to shrink its financial arm and shift its focus towards industry.
American Realty Capital Properties Inc. (NASDAQ:ARCP) will purchase 471 properties from GE for $807 million. Most of the buildings are being rented by tenants who operate national restaurant chains including IHOP, Burger King (NYSE:BKW), and Taco Bell. American Realty has been looking to diversify its holdings, and with this deal the company has accomplished its goal to gain $1.1 billion in acquisitions 5 months earlier than it had originally planned. American Realty also announced earlier in the week that it agreed to buy CapLease Inc. (NYSE:LSE), which owns diverse real estate holdings across the U.S., for $2.2 billion.
The properties American Realty bought from GE are net-lease properties, on which the tenant is responsible for both rent and any other costs related to the property. Occupancy for the properties is almost at 100 percent, according to American Realty. The realty company seems to have bounced back completely after being turned down on an attempt to buy out Cole Holdings Corp. American Realty increased its offer for Cole Holdings to $9.7 billion, including the assumption of debt, back in March, but the offer was rejected.
The assets were purchased from GE’s finance arm GE Capital, a branch of the company that Chief Executive Officer Jeffrey Immelt has been looking to downsize. Immelt’s goal is for GE Capital’s assets to shrink to less than half of what they were before the 2008 financial crisis by 2014. In line with Immelt’s goals, GE also recently sold GE Capital’s Canadian vehicle-fleet to Element Financial Corp. (NYSE:ELEEF) for $552 million. Immelt has also said the company is considering an initial public offering of some parts of GE Capital.
The financial branch of GE brings in half of GE’s earnings from continuing operations, but its huge size also cost the company its prized triple-A credit rating during the financial crisis in 2008. Since then, Immelt has dedicated himself to decreasing the company’s reliance on its financial arm.
GE Capital Chief Michael Neal is expected to step down as soon as this summer, and the company has been evaluating potential successors. Neal has held the position for 8 years, growing GE Capital to its peak size in 2007 and guiding it through the financial crisis. Analysts believe the change in leadership is a sign that the financial sector of GE is finally on stable ground.
In addition to possible IPOs, the company will continue selling off real estate businesses, insurance operations, and overseas banking stakes. Immelt would like for the company to continue to grow its industrial profits. Industry accounted for 54 percent of GE’s profits last year, and Immelt wants to see that number expand to 70 percent.
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