National Planning latest to cut sales of an American Realty Capital REIT

Another leading independent broker-dealer, National Planning Corp., said this week that, as a result of continuing due diligence, it has suspended sales of American Realty Capital Trust V Inc., a remarkably fast-selling product that in June averaged sales of $10.8 million per day. On Monday, NPC said that its concerns over ARC V were related to another American Realty Capital REIT, American Realty Capital Trust IV Inc. That REIT in June said it was purchasing 986 properties from an affiliate of General Electric Capital Corp. for $1.45 billion. The vast majority of those properties are fast-food and casual-dining restaurants. “Due to concerns with style drift, deviations from the prospectus and growing pains, which all have implications for [ARC V], NPC decided to suspend sales” of the REIT, according to an e-mail to NPC reps from the firm's products group. In the same e-mail, NPC said it was adding to its selling list another American Realty Capital REIT, the Phillips Edison–ARC Shopping Center REIT II Inc. “Based upon the GE transaction, the portfolio for [ARC IV] does not match the [REIT's] stated strategy in terms of the average credit rating of the portfolio,” according to the e-mail. “Additionally, [ARC IV] appears to deviate from the marketed strategy in terms of the types of tenants and adding value through aggregation.” The e-mail also cited concern over American Realty Capital's “fast growth into multiple areas.” A spokeswoman for the broker-dealer, Melissa Hernandez, declined to comment. “We have a great relationship with NPC,” said Nicholas Schorsch, chief executive of American Realty Capital. “It's a rotation issue. They have a heavy concentration of ARC IV in their system and they want to see that play out.” Other broker-dealers have not expressed such due-diligence concerns stemming from the ARC IV purchase of the GE Capital portfolio, Mr. Schorsch said. Last Friday, Securities America Inc. told its registered reps it was no longer offering ARC V, citing a risk of overconcentration.