American Realty Capital Properties hit by lawsuit from institutional investors

New York City Retirement Systems and TIAA-CREF have joined a group of investors that allege American Realty Capital Properties, a real estate investment trust, and others violated federal securities laws.

The $158.7 billion pension fund and TIAA-CREF filed complaints in the U.S. District Court in New York last week, claiming that ARCP “made false and misleading statements by misrepresenting the company’s business and prospects and engaged in a scheme to deceive the market and a course of conduct that artificially inflated prices of American Realty securities.”

Specifically, ARCP misstated its adjusted funds from operations, a measure of REIT performance, by about $23 million total in the first and second quarters of 2014, according to the New York City pension fund’s filing.
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At the end of October, the company acknowledged the errors and that senior executives “had been aware of that falsity, but did not correct it,” according to the filing.

“The purpose and effect of said scheme, plan and unlawful course of conduct was, among other things, to induce (the New York City pension fund) and other members of the class to purchase American Realty Securities during the class period at artificially inflated prices,” the filing states.

The complaints also name several of ARCP’s issuers, underwriters and its auditor as defendants in the case.

Both the pension fund and TIAA-CREF filed for lead plaintiff status.
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The $90 billion Ohio Public Employees Retirement System, Columbus, and $74.8 billion Ohio State Teachers’ Retirement System, Columbus, also filed for lead plaintiff status at the end of December after losing $7.5 million as a result of the alleged fraud, said news release from the office of Ohio Attorney General Mike DeWine.

The news release also said the revelation of the alleged fraud in October “resulted in losses in the company’s stock value of approximately $3 billion.”

A spokesman for American Realty said the company does not comment on pending litigation.
Meaghan Kilroy is a reporter at sister publication Pensions & Investments