SAN FRANCISCO—Is American Realty CapitalProperties growing too rapidly? Marcato CapitalManagement, one of the REIT's largest shareholders,appears to think so. Marcato on Monday sent a letter toLeslie Michelson, ARCP's lead independentdirector, citing concerns over what San Francisco-based Marcatosees as “value destroying activity.”

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Marcato's letter, which was made public Tuesday over thesignature of Marcato founder and managing partner RichardMcGuire, expresses frustration at ARCP's recent equityissuance at $12 per share. “We found it disturbing that thecompany would issue equity after repeatedly stating publicly thatit had no intention to do so, and at a price that it has repeatedlyacknowledged undervalues the shares,” McGuire writes. “Managementcould not have been clearer about this point on recent conferencecalls.”

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McGuire's letter says the net lease REIT's equity offering onthe heels of selling its multi-tenant retail portfolio to theBlackstone Group shows “a disregard for existing shareholders thatwe find very problematic.” The decision to then upsize thatoffering, from 100 million shares to 120 million, represented “anadditional slap in the face,” McGuire asserted.

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Further, McGuire writes, ARCP has amassed “too manytransformative transactions too quickly.” The letter cites theREIT's back-to-back acquisitions of CapLease, American RealtyCapital Trust IV and Cole, its $1.5 billion-purchase of more than500 Red Lobster locations, the multi-tenant retail sale toBlackstone and $120-million stock issue.

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All of these deals in a row, in Marcato's view, have made ARCP'sfinancials “complicated and difficult to understand.” He recommendsthat instead, the company hit the pause button on large-scaletransaction activity “and give investors a chance to see multiplequarters of clean financial results.”

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A statement in response to McGuire's letter notes that ARCP“welcomes open communications with its stockholders and valuestheir input toward the shared goal of enhancing value. Our board ofdirectors and management team regularly review the company'sstrategic priorities and opportunities, including deleveraging,capital allocation, and assess a variety of strategic options. Weare committed to driving value for all ARCP stockholders and willcontinue to take actions to achieve this important objective.”

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With approximately 21.8 million shares, Marcato owns 2.4% ofARCP's common stock. Last week, Marcato urgedIntercontinental Hotels Group, which reportedlyhad rejected an unsolicited takeover offer, to consider mergingwith another large hotel operator. Marcato owns 3.8% of IHG'sstock.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.