Home Alts News ARCP Restates Financials for all of 2013 and Q1/Q2 2014

ARCP Restates Financials for all of 2013 and Q1/Q2 2014

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American Realty Capital Properties (ARCP) announced today that it has filed amended, restated financials for 2013 and the first half of 2014. ARCP’s audit committee, with the help of independent advisors Weil, Gotshal & Manges LLP plus Ernst & Young LLP, thoroughly investigated the company’s financials as a result of the accounting irregularities brought to light in late September 2014.

The investigation uncovered that net loss was understated each quarter of 2013 and Q2 2014. AFFO was overstated in 2011, 2012, 2013, and the first two quarters of 2014. There were payments made by ARCP to ARC Properties Advisors, LLC that were deserving of scrutiny and as a result, the company has recovered considerations of about $8.5 million.

Additionally, two former executives earned equity awards in connection with ARCP’s move to self-management that were more favorable than what its Board’s compensation committee approved.

“The restatement of our financial statements is an important milestone for ARCP and enables the Company to put this matter behind us,” commented William Stanley, interim Chairman and Chief Executive Officer of ARCP.

Meanwhile, ARCP owns Cole Capital, sponsor of non-traded REITs, which has been punished by its parent’s reporting fiasco. Broker-dealers began suspending selling agreements with Cole and other entities controlled by Nicholas Schorsch shortly thereafter learning of the investigation.

“At Cole Capital, the team is turning its attention to normalizing relationships with its broker-dealer partners and clearing firms, as well as re-engaging its financial advisor network. We are optimistic that we can quickly build momentum and resume the normal course of business operations soon,” added Stanley.

ARCP also announced its Q3 2014 results which includes Cole Capital highlights. During the quarter, Cole revenue was $59.8 million and net income was $1.1 million. The sponsor raised $260.8 million of capital on behalf of its non-traded REITs, which puts its total at $1.3 billion through the end of September 2014.

ARCP had agreed to sell Cole to RCS Capital Corporation for $700 million and as a result of the uncovered accounting irregularities, that deal fell apart.

Fourth quarter results are expected to be filed by the end of this month.