VEREIT Grows FFO, Moves Forward on Changes

PHOENIX—In its first quarterly report under a new name, VEREIT reported year-over-year gains in funds from operations, revenue and normalized EBITDA, while also moving forward on its business plan. To that end, the net lease REIT, which has begun trading on the New York Stock Exchange under the VER symbol, said it planned to enhance its portfolio by selling up to $2.2 billion of assets by the end of 2016, and also sought to reduce its net debt to EBITDA ratio to a range of 6.0x to 7.0x.

Both goals are in line with CEO Glenn Rufrano's program to re-establish trust in the company, which underwent rapid growth as American Realty Capital Properties and was beset last fall by revelations of accounting irregularities and the resignations of its senior management team. Even before the accounting scandal came to light, some activist investors questioned whether the REIT's growth rate was sustainable.

VER's plan to cull assets has already meant about $960 million in sales either completed or under contract as of Wednesday. That included the sale last month of a portfolio of 68 CVS properties for approximately $318.2 million.

Subsequent to the second quarter, VER amended the terms of its credit facility, reducing the minimum unencumbered asset pool requirement from $10.5 billion to $8 billion, a move intended to provide greater flexibility in executing the company's property disposition initiatives. It also lowered the capacity of its revolving line of credit by $300 million to $2.3 billion.

The company also adopted changes in its governance, including restrictions on its use of Maryland anti-takeover provisions and a time limit on the effectiveness of any poison-pill plan that hasn't been approved by stockholders. Other priorities include re-establishing the value of Cole Capital, its investment management business, and establishing a sustainable dividend.

“There was a solid base in place when I joined the company in April with a talented team, good assets and a strong operational infrastructure,” Rufrano says. “Now, we have the opportunity for a fresh start, represented by a new name, culture and business approach. Continuing our momentum, the changes adopted by our board represent major steps towards establishing 'best-in-class' corporate governance. With the introduction of our business plan, we now have a strategy in place and are rapidly executing.”