Activist investor Marcato Capital Management LP asked American Realty Capital Properties Inc. to curb its acquisition spree and complained that a recent stock sale hurt existing shareholders.
“The company is engaging in too many transformative transactions too quickly,” Mick McGuire, managing partner at Marcato, wrote in a letter to Leslie Michelson, American Realty’s lead independent director, that was included in a statement today. “ARCP should pause on large-scale transaction activity and give investors a chance to see multiple quarters of clean financial results.”
Marcato, based in San Francisco, owns 21.8 million shares of American Realty, according to the statement. The New York- based real estate investment trust, whose chairman and chief executive officer is Nicholas Schorsch, has expanded through acquisitions since it first sold shares to the public in September 2011. The company is now the largest owner of U.S. single-tenant buildings, which are leased to businesses such as drugstores and fast-food restaurants.
American Realty raised its acquisition target for the year to $4.5 billion from its initial plan of $3 billion, according to an investor presentation filed with regulators today.
“Our board of directors and management team regularly review the company’s strategic priorities and opportunities, including deleveraging, capital allocation, and assess a variety of strategic options,” American Realty said in a response to Marcato’s letter. “We are committed to driving value for all ARCP stockholders and will continue to take actions to achieve this important objective.”
The REIT didn’t need to offer shares to raise money because it agreed to sell most of its multitenant shopping centers to Blackstone Group LP for about $2 billion, Marcato said in the letter. American Realty on May 28 closed on a sale of 138 million shares at $12 each.
“Such willingness to destroy shareholder value, by issuing shares at an acknowledged discount to fair value, illustrates a disregard for existing shareholders that we find very problematic,” Marcato said.
American Realty rose 0.6 percent to $12.44 at 10:14 a.m. in New York. The shares are down 19 percent in the 12 months through yesterday.
McGuire founded Marcato in 2010 with startup capital from Blackstone Group LP after he worked for Bill Ackman at Pershing Square Capital Management LP. Marcato recently targeted Sotheby’s in a campaign alongside fellow activist Third Point LLC.
Check out Schorsch Strikes Again: ARCP to Buy Red Lobster Properties on ThinkAdvisor.