Diving Deep Into ARCP, Other REITs With A Wall Street Analyst

On March 11, JMP Securities released a research note updating:

• American Realty Capital Properties, Inc. ARCP
• Apollo Commercial Real Estate Finance ARI
• Columbia Property Trust CXP

Tale Of The Tape

Notably, ARCP shares are down ~34 percent during the past year due to accounting woes, management shake-ups and ongoing SEC and FBI investigations.

JMP - American Realty (ARCP): Maintains Market Perform

• The big news was that ARCP has named Glenn Rufrano as its new CEO. JMP noted the Rufrano had a reputation as a "straightforward executive… with a history of shareholder value creation."
• JMP expects ARCP shares to trade positively on the news.
• However, JMP also noted that the "Non-Executive Chairman seat remains unoccupied" still represents uncertainty regarding direction.
• JMP noted that ARCP's balance sheet needs repair and that "Rufrano has shown previous acumen on the deleveraging front from his previous REIT management tenure."
• The announcement that two of the five ARCP board members "with deep ties to the previous management regime" are stepping down will help shareholders to gain a voice.
• JMP "remains on the sidelines…awaiting clarity on Rufrano's strategic plan," and maintains AFFO estimates for 2014/2015 of $0.92/$0.91, respectively."

JMP - Apollo CRE (ARI): reiterates Market Outperform

• JMP reiterated its "Market Outperform rating on shares of Apollo Commercial Real Estate Finance with an $18.50 price target based on a required 9.5% dividend yield."
• "On March 5, Apollo CRE priced a follow-on equity offering of 10.0M shares at $17.00, raising estimated net proceeds of $168.0M;" a 24.5% increase, which temporarily lowered leverage.
• JMP reduced its "2015 core EPS estimate to $1.85 from $1.90 and [JMP maintains its] 2016 estimate at $1.95."
• JMP believes "ARI shares represent an exceptional value, trading at 1.02x book value with a dividend yield of 10.5% (compared to a peer median yield of 8.1%), and… potential for a next 12-month total return opportunity of ~21%."

JMP - Columbia Property Trust (CXP): maintains Market Outperform, $27 PT

• JMP adjusted its "estimates on shares of Columbia Property Trust following yesterday's announcement that the company had priced $350M of 10-year senior notes."
• JMP pointed out that CXP "stock is cheap at 13.5x 2015 FFO (compared to the sector average of ~18x)."
• JMP's $27 PT is "derived from a blend of [its] NAV estimate ($25.50) and a 15x multiple ($28.80)."
• "The new debt is slightly dilutive to 2015 FFO/share… [JMP's] estimate declines from $1.92 to $1.89, due mostly to the timing of capital deployment, while [JMP's] 2016 FFO/share estimate decreases by a penny to $1.83."
• Columbia's "portfolio quality and location should improve materially following the next tranche of planned asset sales, which concludes the portfolio repositioning strategy."

Image credit: MarshalM20, Wikimedia