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ARCP Update; Business Priorities, Portfolio Review, Extensions, and More

American Realty Capital Properties (ARCP) recently provided updates on its current status, which include a portfolio review, an extension for reporting third quarter and full year financial statements for 2014, and a review of its dividend policy. 

The company’s board of directors has developed a list of priorities which includes;

  • Evaluate capital structure and allocation of capital to drive stockholder returns; 
  • Actively manage real estate assets in ARCP’s portfolio; 
  • Stabilize and grow Cole Capital’s non-traded REIT business; 
  • Enhance financial and operating information systems to be best-in-class; 
  • Review and optimize organizational structure and G&A expenses; and 
  • Manage liabilities and cash flow during the review.

The actions are intended to put ARCP and Cole Capital in a better position for future growth. Additionally, ARCP’s Compensation Committee has retained the services of Korn Ferry to help ARCP quickly find a Chief Executive Officer and an independent, non-executive Chairman of the Board.

William Stanley, interim Chairman and Chief Executive Officer, commented, “The Board of Directors is focused on strengthening ARCP and generating cash flows to protect and grow investor capital. We are also evaluating the best strategies to stabilize and grow Cole Capital, an important business with strong prospects. The priorities we have outlined today will serve as the framework around which we seek to accomplish these objectives. We will continue to evaluate the best path forward for ARCP, building on our strategic priorities to enhance stockholder value.”

After conducting a review of its portfolio, ARCP was able to confirm its portfolio’s composition including its existing leases and the validity of tenant-generated cash flows. The review also validated the quality and diversity of ARCP’s net-lease portfolio, which is made up of credit quality tenants across the United States. The review determined that these assets provide strong, predictable cash flows that bolster ARCP’s balance sheet.

ARCP also received another consent waiver on December 23, 2014 from the lenders under its unsecured credit facility. The waiver grants ARCP an extension on the delivery of its third quarter financial statements for 2014 as well as certifications on its previously delivered first and second quarter financial statements for 2014 and other financial deliverables. The company also received an extension to deliver its full year audited financial statements for 2014. 

The extensions come with the caveat that ARCP must permanently reduce the maximum amount of indebtedness under its credit facility to $3.6 billion, eliminating the $25 million swingline facility. At the moment, ARCP has $3.2 billion outstanding under its credit facility and over $250 million cash on hand. The company has also agreed not to request anymore loans or letters of credit under the facility and it must maintain a $10.5 billion unencumbered asset pool.

As far as dividends are concerned, ARCP and its subsidiary ARC Properties Operating Partnership, L.P. will not be paying any dividends on its common equity until it has delivered its financial statements and related compliance certificates. ARCP will pay a dividend to holders of its 6.70% Series F Cumulative Redeemable Preferred Stock on January 15, 2015.

Lastly, ARCP reported that the Audit Committee of its Board of Directors is continuing to work with external advisors to complete its investigation as soon as possible and to make any corrections to the company’s financial statements.