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Corvex Management discloses activist stake in ARCP

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Corvex discloses activist position in ARCP

Activist investment firm Corvex Management LP recently disclosed a 7.1% stake in New York-based real estate investment trust (or REIT) American Realty Capital Properties Inc. (ARCP). A 13D the fund filed said it owned 64,703,029 shares, including shares underlying call options. The fund said the total purchase price for the shares was $71,063,853, and for the call options was $158,072,416.

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ARCP shares fall over revelation of accounting irregularities

ARCP is a self-managed commercial REIT focused on investing in single tenant freestanding commercial properties subject to net leases with high credit quality tenants. It is the largest triple net lease REIT, under which a tenant is required to pay all costs associated with a property, including real estate taxes, insurance, utilities, and routine maintenance in addition to the base rent.

Other triple net REITs include National Retail Properties (NNN), Realty Income (O), and W.P. Carey (WPC). ARCP and its peers are also part of the iShares Dow Jones US Real Estate ETF (IYR) and Vanguard REIT Index ETF (VNQ).

Shares fell 19% in late October following reports of accounting errors that were “intentionally” hidden. Management shakeups followed and ARCP also saw a criminal probe over its accounting practices by the Federal Bureau of Investigation and the Securities and Exchange Commission.

The REIT recently said it has suspended its dividend, and received an extension for reporting its third quarter 2014 and full year 2014 financial statements.

Another activist hedge fund shareholder Marcato Capital has also recently criticized ARCP for its acquisition strategy and equity issuance.

Corvex management overview

Corvex Management, which has over $5 billion in assets under management, focuses on “investing in high quality, US businesses under-going change in industries with positive secular tailwinds.”

Keith Meister leads Corvex as the managing partner and chief investment officer. Prior to founding Corvex, Meister worked under various positions, including CEO and vice chairman of Icahn Enterprises LP. He earlier served as a director of numerous companies, including Icahn Enterprises, Motorola Mobility, Motorola Inc., XO Holdings, Federal Mogul, American Railcar, ADT, and Ralcorp.

Corvex is supportive of ARCP board’s decisions

Corvex said in its 13D filing that it will continue to have discussions with ARCP’s board, management, and advisors with respect to its business and strategies. It further said it commends the “board’s decision to retain qualified advisors in seeking to promptly resolve past issues and position the company to look to the future rather than focusing on the past.” Corvex further said “that this is a time of transition and a unique opportunity for a ‘new start’ for the company and its shareholders.”

The next part of the series will further highlight Corvex’s plans with respect to ARCP.

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