It is a difficult task to regain the trust of shareholders who have been misled in the past.
On Thursday, new CEO Glenn Rufrano hosted the inaugural Vereit Inc VER earnings call for the quarter ended June 30, 2015.
Shareholders and investors who follow publicly traded REITs are familiar with the rise and fall of the fortunes of the former NASDAQ listed American Realty Capital Properties and its previous management led by founder and former chairman Nicholas Schorsch.
The name "Vereit" is a blend of "REIT" and "veritas," the Latin word for truth, signaling a fresh start.
Tale Of The Tape: Past Year
Vereit officially began trading on the NYSE under the ticker VER on July 31, 2015; however, some information is still available for American Realty Capital Properties.
Vereit shares were essentially flat on the 2Q15 results and conference call, down 1.15 percent (10 cents) at $8.62 at 4:00 p.m. EST Friday.
American Realty Capital Properties shares fell off of a cliff back in October 2014, after accounting irregularities and a cover-up were announced, which triggered an ongoing SEC investigation and a slew of civil litigation cases.
During the Q2 call, Rufrano estimated that Vereit will spend $50 to $55 million in legal fees during FY 2015.
During the past 52 weeks, American Realty Capital Properties/Vereit common shares have traded in a range of $7.38 to $13.44 per share.
The New Vereit Dividend
REITs are required by law to distribute at least 90 percent of taxable income to shareholders in the form of a dividend. This is a major reason why many investors own REIT shares.
The Realty Capital Properties regular dividend of $1.00 per share was suspended, and no dividend has been paid to shareholders during the first half of 2015. This allowed for Rufrano and his team to undertake a strategic review of the real estate portfolio, operations and the company balance sheet.
The company announced that Vereit will pay a quarterly dividend of $0.1375 per share for 3Q15 and 4Q15. The Vereit annualized dividend of $0.55 per year represents a 6.3 percent yield based upon the August 6 $8.73 closing price.
Vereit's Business Plan Foundation
"The four key pillars of the business plan focus on enhancing the portfolio, supporting Cole Capital, achieving balance sheet investment-grade metrics and establishing a sustainable dividend," according to the company Q2 earnings release.
Vereit Conference Call: Q2 Progress
- Joint Ventures: Sale of interests where Vereit has limited operational control and upside.
- Flat Leases: Twenty (20) percent of NOI is currently generated from leases that are flat for five, 10 or even 25 years. In a rising rate environment, these properties will be a drag on both NAV and AFFO growth. Notably, these are high quality properties that are being sold at low cap rates.
- Restaurants: The portfolio is currently overweight with 19 percent casual dining (including Red Lobster concentration) and 9 percent quick service.
- Non-Core: This relates to location, physical characteristics, tenant credit profile and potential to re-lease at market rents.
Investor Takeaway
Clearly with the major changes implemented by Rufrano in just a short few months, the name change from American Realty Capital Properties to Vereit is far more than just a new logo and ticker symbol.
However, even with the dividend reinstated, Vereit is still very much a work in progress.
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