American Realty Capital Properties Inc. (ARCP) Chief Executive Officer Nicholas Schorsch will step down as CEO in October and be replaced by President David Kay as part of governance changes at the largest single-tenant landlord.
The change was planned and Mr. Schorsch will remain on the board, he said in a letter to shareholders. Also, board members William Kahane and Edward Weil are resigning, leaving the company with five independent directors. Mr. Kay “will dedicate a substantial portion of his time as CEO to investor communications,” Mr. Schorsch said in the letter, filed last Friday with the Securities and Exchange Commission.
(Read how Mr. Schorsch responded to shareholder criticism over his dealmaking pace.)
American Realty Capital Properties has become the biggest U.S. owner of single-tenant properties in less than three years, overtaking Realty Income Corp. (O) American Realty Capital focuses on buildings with only one tenant, such as pharmacies and restaurants. The company's shares are little changed from their 2011 initial public offering price of $12.50.
“We believe Mr. Kay will be more proactive in talking to investors and improve the company's financial transparency as he builds out his executive team,” Simon Yarmak, an analyst at Stifel Nicolaus & Co., wrote in a report. He has a hold rating on American Realty Capital.
The company's shares rose 3.5% to close at $12.59 Friday and were off 0.60% Monday in afternoon trading in New York. American Realty Capital raised about $70 million in the IPO, and now has a market value of $11.4 billion.
The New York-based company said on its first-quarter earnings call that it planned to accelerate the CEO succession from its original plan, which was set to begin in early 2015, Mr. Yarmak said.
ACQUISITION SPREE
Activist investor Marcato Capital Management earlier this month asked American Realty Capital to curb its merger and acquisition spree, and complained that a recent stock sale hurt existing shareholders.
“Management has pledged no more M&A activity this year,” Mr. Yarmak said in his note. “Additionally, management has pledged no more equity will be raised this year.”
As chairman and CEO of American Realty Capital Properties, Mr. Schorsch has completed at least 20 company, portfolio and building acquisitions since the shares began trading in September 2011, according to data compiled by Bloomberg.
“Rather than focus on corporate mergers, we will concentrate on the deliberate execution of our organic acquisition strategy,” Mr. Schorsch said in the letter. “This approach includes individual transactions, small portfolios and build-to-suits.”
(Bloomberg News)
