American Realty Capital Properties Inc. (NASDAQ:ARCP) announced it has restated earnings for the fiscal 2013 year along with the first and second quarters of 2014. The company refiled its 10-K and 10-Q’s for those periods in response to implications it had misstated the numbers in its official release. ARCP’s Board of Directors had assigned an Audit Committee that worked alongside independent auditor, Weil, Gotshal & Manges LLP along with Ernst &Young LLP. The group performed a complete independent investigation that addressed accounting concerns brought to the attention of the Audit Committee back in September of 2014.
No Material Changes
The Audit Committee did not discover or identify any material changes to the previously released filings. The questions raised were in relation to the company’s real estate ownership, rental revenue and core business operations. These findings also included the company’s Cole-Capital-sponsored non-traded REIT’s or any matters in relation to the company’s operation of the REIT’s.
It was discovered however that the net loss for 2013 was understated along with the second quarter of fiscal 2014. There were payments that the committee identified related to the company’s dealings with ARC Property Advisors LLC along with some of its affiliates that were not properly documented and warranted further scrutiny. The payments in question added up to about $8.5 million that were deemed inappropriate. There was also the discovery that payments made to certain executives were structured as to be more beneficial to the executives than the board had agreed to. There were also material weaknesses in the internal controls for financial reporting including disclosure and procedures. The company is hoping this puts the fiasco behind them and they can move forward from here. ARCP is a REIT, or commercial properties real estate investment trust that is incorporated in Maryland and focuses on free-standing tenants and commercial property leases.
The news of the audit and refiling of numbers helped move the stock off its current base but it still has a long way to go to recover fully from the selloff created last October. The next resistance level is at $11.50.