Appaloosa’s new position in American Realty Capital Properties
Highlights of Appaloosa Management's 4Q14 13F (Part 9 of 9)
Appaloosa and American Realty Capital Properties
Appaloosa Management started a position in American Realty Capital Properties (ARCP) during the fourth quarter of 2014. The position accounted for 0.65% of the fund’s total 4Q14 portfolio.
About American Realty Capital Properties
American Realty Capital Properties is a self-managed commercial REIT. As per the REIT structure, the company collects rent and distributes 90% of the taxable income to shareholders in the form of dividends. ARCP invests in single-tenant, freestanding commercial properties. The company operates under two segments:
REI (real estate investment)
Cole Capital
You can gain exposure to ARCP by investing in the Vanguard REIT Index ETF (VNQ). ARCP accounts for 1.21% of VNQ.
The entire management team at ARCP had to depart after last year’s accounting scandal.
Corvex Management pushes ARCP for board changes
Activist investment firm Corvex Management is ARCP’s second-largest shareholder. Corvex is actively seeking board representation at the company.
Corvex’s stake came to light after ARCP’s revelation of accounting regularities. To learn more, read Market Realist’s article Corvex Management discloses activist stake in ARCP.
CCIT merger with SIR
On January 29, ARCP segment Cole Capital announced the completion of a merger between CCIT (or Cole Corporate Income Trust) and SIR (Select Income REIT). CCIT was the first office- and industrial-focused, non-listed REIT managed by Cole Capital.
In connection with the merger, “CCIT stockholders were given the opportunity to elect to receive either $10.50 in cash or 0.36 of a SIR common share in exchange for each share of CCIT held, subject to the limitation that no more than 60% of the CCIT shares be exchanged either for cash or SIR shares.”
After the CCIT acquisition, SIR increased its annual dividend by 4.2% to $2 per share. Each CCIT stockholder who received SIR shares could receive $0.72 annually on each 0.36 of an SIR share. This would be a 10.8% increase from CCIT’s annualized distribution of $0.65 per share.
Agreement with senior noteholder group
After the discovery of ARCP’s “intentionally” hidden accounting errors, the company received an extension for reporting its third-quarter and full year 2014 financial statements. ARCP has promised to deliver its 3Q14 financial statements by March 2. An ad hoc group of senior noteholders agreed not to issue notice of default against ARCP before March 3.
Appaloosa’s other 4Q14 positions
David Tepper’s Appaloosa Management initiated new positions and sold some existing positions during the fourth quarter of 2014. Besides adding the position in American Realty Capital Properties, the fund sold positions in some of its largest companies, including Citigroup (C), Halliburton (HAL), Facebook (FB), and CBS Corporation (CBS). Appaloosa also reduced its holdings in Delta Air Lines (DAL), Google (GOOG), and the Priceline Group (PCLN).
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