Home News ARCP Makes Changes in Accounting Policies and Personnel

ARCP Makes Changes in Accounting Policies and Personnel

American Realty Capital Properties (ARCP) AR Capital’s publicly traded REIT, announced today that previously issued, unaudited financial statements and other financial information is no longer reliable. Specifically, information contained in its 10-Q Quarterly Reports for the fiscal periods ended March 31, 2014 and June 30, 2014, as well as its earnings releases and other financial communications are under scrutiny.

The issues came to light during an investigation of accounting practices by the Audit Committee on September 7, 2014. Further investigation did not uncover any errors in the consolidated financial statements for the three months ended March 31, 2014.

However, the Audit Committee believes that the company incorrectly included certain amounts related to its non-controlling interests in the calculation of adjusted funds from operations (AFFO) for the three months ended March 31, 2014. Furthermore, the Audit Committee believes the error was identified but intentionally left uncorrected.

The committee also believes other AFFO and financial statement errors were intentionally made, causing an overstatement of AFFO and an understatement of the company’s net loss for the three and six months ended June 30, 2014.

“The accounting issues are unacceptable and we are taking the personnel and other actions necessary to ensure that this does not happen again.” said David S. Kay, Chief Executive Officer of ARCP. “As disappointed as I am, I do not believe that this impairs, in any meaningful way, what is important about our Company – the high quality and diversification of our real estate assets, the depth and strength of our management team, the strong and predictable cash flows from our leases, the strength of our balance sheet and the size of our market opportunity,”

The mistakes have resulted in the resignation of Brian Block and Lisa McAlister

The company announced that effective immediately, Michael Sodo has replaced Mr. Block as Chief Financial Officer of the company and will report directly to David Kay and the Audit Committee. Previously, Mr. Sodo served as Senior Vice President, Director of Financial Reporting and Treasury. Before joining ARCP, he worked for Capital Automotive, serving most recently as SVP, Director of Financial Reporting and Treasurer.

Replacing Ms. McAlister and reporting to Mr. Sodo, Gavin Brandon will now serve as Chief Accounting Officer. Prior to this Mr. Brandon was a Senior Vice President of Accounting, overseeing acquisition accounting and property on-boarding, lease accounting, accounts payable, accounts receivable and process treasury services.

Moving forward, ARCP is re-evaluating its financial reporting controls and procedures. It plans on making necessary changes to its controls and procedures to fix any control deficiencies that may be identified during the investigation. The company will also work with the Audit Committee and its independent advisors to make adjustments to the previously issued financial statements as soon as possible.