I was alerted in a comment to this blog that American Realty Capital Trust has awarded its executives shares of restricted stock. Here is the wording from the post-effective amendment that American Realty Capital Trust filed on March 11, 2011:
On June 2, 2010, American Realty Capital Trust announced that it was waiving any internalization fees in the event that it internalizes its external advisor as part of of a sale or listing American Realty Capital Trust's shares on an exchange. The awards above came about three months after the announced waiver of any internalization fees. The pool of stock available to award is up to 7.5 million shares, which at $10 per share is $75 million. In the quote above, at $10 per share, the awards last September are worth nearly $10 million to Nicholas Schorsch and over $2 million to William Kahane. The bulk of the shares that American Realty Capital Trust can allocate to its executives is still available for allocation.On September 13, 2010, our advisor granted 934,159 restricted shares of common stock to Nicholas S. Schorsch, chief executive officer of our advisor, 212,370 restricted shares of common stock to William M. Kahane, president and chief operations officer of our advisor, 160,604 restricted shares of common stock to Peter M. Budko, executive vice president chief investment officer of our advisor, 55,270 restricted shares of common stock to Edward M. Weil, Jr., executive vice president and secretary of our advisor and 37,597 restricted shares of common stock to Brian S. Block, executive vice president and chief financial officer of our advisor. Fifty percent of the restricted shares vest over a four year period commencing with the one year anniversary of the September 13, 2010 grant date and 50% vest only to the extent our net asset value plus the distributions paid to stockholders equals 106% of the original selling price of our common stock.
Internalization fees can be lucrative to the external advisor, and some non-traded REITs have paid more than $100 million for their advisors. American Realty Capital Trust's decision to waive internalization fees was positive for investors.
The company that distributes American Realty Capital Trust is Realty Capital, which also distributed Healthcare Trust of America (HTA). HTA waived its internalization fees in 2009, but recently expanded its pool for executive and board member stock awards by $80 million. It looks like American Realty Capital is following HTA's path.
Half of the American Realty Capital executive stock awards are deferred over four years and half vest only "to the extent our (American Realty Capital Trust) net asset value plus distributions paid to stockholders equals 106% of the original selling price of our common stock."
To me, American Realty Capital's granting of large amounts of stock to its executives is another form of an internalization fee. The large amount of stock was issued by American Realty Capital Trust after the announcement that there would be no big pay day when it purchased (internalized) its advisor, plus American Realty Capital has plenty more stock it can grant its executives. Like HTA, American Realty Trust appears to have figured a way around its waived internalization payday.