Updated 11:30 a.m.
American Realty Capital Properties Inc., the biggest U.S. owner of single-tenant properties, plunged as much as 22 percent after saying it replaced two executives following errors in its financial statements.
Brian Block left as chief financial officer and has been replaced by Michael Sodo, while Gavin Brandon was named chief accounting officer in place of Lisa McAlister, the New York- based real estate investment trust said in a statement today. The company said that some amounts related to non-controlling interests likely were incorrectly included in adjusted funds from operations, an error the audit committee believes was identified but intentionally not corrected.
Investors “may throw in the towel on today’s news, as accounting missteps take a while to sort out,” Paul Adornato, an analyst with BMO Capital Markets, said in a note to clients today before the market opened. “Confidence takes longer to return, if ever.”
American Realty shares slid 21 percent to $9.73 at 10 a.m. New York time. They had lost 3.7 percent this year before today, compared with a 20 percent gain in the Bloomberg REIT index.
American Realty Capital Properties is the biggest owner of single-tenant properties such as pharmacies and restaurants, growing through an acquisition spree since it began trading three years ago. Founder Nicholas Schorsch stepped down as chief executive officer at the end of last month under a plan announced in June. He remains chairman.
The audit committee believes other financial statement errors were intentionally made, the company said today. American Realty will reduce its adjusted funds from operations by $12 million for the first quarter of this year 2014 and $10.9 million for the three months ended in June, according to the statement.
“The accounting issues are unacceptable and we are taking the personnel and other actions necessary to ensure that this does not happen again,” CEO David S. Kay said in the statement.