Sunday, April 10, 2011

ARC Snark
This press release from American Realty Capital Trust (ARCT) popped up on my Google News feed over the weekend.  Here is the important part of the press release:

With the pending July 25, 2011, close of ARCT’s initial public offering, the Company’s advisor, American Realty Capital Advisors, LLC, intends to initiate the process of interviewing investment banking firms and other advisory firms to provide its board of directors with recommendations in exploring various strategic actions to maximize shareholder value, including the assessment of various liquidity alternatives.
ARCT commenced its initial public offering on January 25, 2008, and as of the date of this press release has raised total gross proceeds of $885.2 million. As of the date of this press release, the Company has acquired 320 properties for a total purchase price of $1.27 billion, consistent with the Company’s investment strategy, i.e., acquiring free standing, single tenant properties net leased long-term to investment grade and credit worthy tenants.”
Let me guess what's going to happen.  ARCT will hire JP Morgan as its advisor, ARCT will announce a plan to list its shares sometime before the middle of 2014, once ARCT's a listed company, investor shares will convert to liquid shares on a deferred basis, probably over eighteen months, and for the next three months wild rumors about near-term liquidity and high per share valuations will spread.   This is the playbook from Healthcare Trust of America.   Like Healthcare Trust of America, it is important to watch the liquidity and vesting of the shares paid to management, to make sure management is not cashing out first.   Buying a non-traded REIT is a long-term investment, never an arbitrage play.

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