Road to recovery New leadership and business model guide local REIT’s comeback
etting a multi-billion company back on the right track can be a long and complex process, but having the right leadership and strategies in place can make all the difference. Case in point, Phoenix-based VEREIT where new leadership’s emphasis on four key pillars is producing positive indications that the real estate investment trust is again headed in the right direction after recouping from an accounting irregularity in 2014. VEREIT ranks among the five most valuable Arizona-based companies in terms of stock-market capitalization with shares worth $8.5 billion. Formerly doing business as American Realty Capital Partners, it faced numerous lawsuits after the 2014 accounting problem, which led to the departure of top-level executives and steep drops in the company’s stock prices. After it restated financial reports for fiscal year 2013 and the first two quarters of 2014, Glenn Rufrano was hired as the new chief executive officer in April 2015 and promised a fresh start. After immersing himself to understand the company’s needs and strengths, Rufrano took steps immediately to develop a business model aimed at addressing the company’s debt and portfolio, which included a name change and rebranding to VEREIT in July 2015. Five-plus year employee, Kristy Lubeck, vice president of human resources for Vereit, attributes the company’s comeback to a renewed commitment by Rufrano and the management team to work together in redefining VEREIT’s culture, behavior and business approach. “With these areas clearly defined,” she says, “it became a road map of
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how we could achieve our goals on a day to day basis, which in turn has helped foster a results driven and collaborative atmosphere.” In August 2015, Rufrano announced VEREIT’s new business plan consisting of four key pillars that focus on enhancing the portfolio, supporting Cole Capital, achieving balance sheet investment-grade metrics and establishing a sustainable dividend. Since the announcement, Rufrano, says the company has delivered on all four pillars and even exceeded original projections. A company update on VEREIT released by Goldman Sachs’ Global Investment Research Division in August 2016 states, “VEREIT has already made dramatic improvements towards being an investable company.” “VEREIT has already made great strides in terms of leverage, debt duration, tenant concentration and Cole Capital,” the report explains. “We believe 2017 will be a watershed year where VEREIT will complete the final steps needed in order to regain appeal to institutional REIT investors; we also believe that investors who invest ahead of this could be rewarded.” In August, Goldman Sachs reiterated its “Buy rating” for VEREIT stock and raised its 12-month price target to $11.90 with 20-percent total return potential. “As VEREIT prepares for growth,” Rufrano says, “the company is evolving into a capital provider for corporate America where we have the ability to monetize the real estate that houses their respective businesses, allowing them to reinvest back into their operations.” DIVERSIFYING THE PORTFOLIO As a full-service real estate operating company with the infrastructure to
buy, sell, finance, property manage, asset manage and lease net lease properties, VEREIT owns and manages a 4,142-property real estate portfolio of retail, restaurants, office and industrial assets worth $15.6 billion, including 74 properties in Arizona and 41 on behalf of Cole Capital. While Rufrano admits the company’s biggest strength is the diversification of its portfolio, he wanted to diversify it more and ensure its long-term stability as part of the new business plan.