Schorsch: ARCP Aims to 'Streamline and Focus' Strategy

NEW YORK CITY-“It's about streamlining and focusing our strategy to make it better,” Nicholas Schorsch tells GlobeSt.com about recent actions taken at American Realty Capital Properties. Even as the net lease REIT continues its dizzying pace of acquisitions—including mergers with American Realty Capital Trust IV and CapLease—ARCP aims at creating a structure that makes it “not as only as competitive, but more competitive than our peer set,” says its chairman and CEO.

Most recently, as GlobeSt.com reported earlier this week, ARCP announced it would go to internal management once the ARCT IV and CapLease integration is finalized. The company cited the advantages that a self-administration format offers for publicly traded entities of its scale.

ARCP is now “the largest aggregator of net leased assets, particularly the corporate, high credit-quality,” Schorsch says. “That's who we are.” More than 60% of ARCP's rank comes from investment grade credits, and 75% of its rents come from rated credits.

Within the REIT's peer set, “that quality of income is very important,” says Schorsch. “So we believe that we need to have a dedicated management team, and clearly that will create a better trading multiple. We also believe it eliminates any potential conflicts, for people worried about our management team being distracted.” That's especially true when, in the case of ARCP, “we've gone from less than $1 billion of assets at the beginning of the year to nearly $11 billion of assets at the end of the year.”

Earlier this month, Schorsch told Bloomberg that AR Capital LLC, of which he's also chairman and CEO, was moving away from non-traded net lease REITs, although it has other non-traded vehicles such as New York Recovery REIT, which specializes in Manhattan office properties. At an investor day presentation last month, he had said American Realty Capital Trust V would be the will be the last net-lease program in the non-traded space “for a number of years to come.” The effect, he tells GlobeSt.com, will be to “eliminate conflict between our two platforms.” ARCP, he adds, “will be our only net lease platform by year end.”

Schorsch also clarifies ARCP's announcement that its board would be keeping an eye toward the impact of the “recent challenging conditions” in the capital markets on its pending transactions, including the ARCT IV deal. “It's specifically about keeping in tune with macroeconomic conditions: interest rates, how the REIT market is trading, all those other important aspects that matter to our investors,” he says. “We look at it holistically, and we wanted to make sure the investors knew that we were on the job and paying attention.”