ARCP’s business segments
We noted earlier that American Realty Capital Properties (ARCP) is a self-managed commercial REIT that Corvex Management has taken an activist stake in. This article will provide an overview of ARCP’s businesses.
ARCP owns many of the buildings that well-known brands like Walgreens, FedEx, General Electric, Goodyear, and Proctor & Gamble use. ARCP collects rent from these tenants and passes a minimum of 90% of the taxable income received onto its shareholders. The company operates under two segments, REI (Real Estate Investment) and Cole Capital.
ARCP sees stable income from its REI (Real Estate Investment) segment
As of June 30, 2014, ARCP had leased 98.8% of the rentable space at these properties with a weighted average remaining lease term of 9.95 years. The company also owned 25 commercial mortgage-backed securities (or CMBS) and 14 loans held for investment. It also had, through unconsolidated joint ventures, interests in six properties comprising 1.6 million rentable square feet of commercial and retail space.
ARCP’s revenue sources and strategy
REITs have posted higher gains in 2014
Although shares of ARCP have been down since October due to accounting irregularities, its other triple net REIT peers, National Retail Properties (NNN), Realty Income (O), and W.P. Carey (WPC), have performed well.
A recent news report in The Wall Street Journal by Robbie Whelan noted that REITs have posted their largest returns in 2014 due to lower interest rates and a strengthening economy. The article cited data from the FTSE NAREIT Equity REITs Index, which follows the performance of 148 property companies.