NEW YORK (TheStreet) -- American Realty Capital Properties (ARCP) fell Monday after Friday's announcement of a sale-leaseback deal with private equity firm Golden Gate Capital for the Red Lobster (DRI) restaurant chain.
Darden Restaurants announced it would sell Red Lobster to the San Francisco-based Golden Gate for $2.1 billion. Golden Gate then announced a sale-leaseback deal with ARCP to decrease its exposure to Red Lobster's real estate. The $1.5 billion deal is for more than 500 Red Lobster restaurants. Golden Gate will sell the land and buildings to ARCP and then lease them back.
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Robert W. Baird downgraded the stock to "neutral" and reduced its price target to $15 from $17 in the wake of the deal. The firm cited higher credit risk following the transaction.
The stock was down 1.15% to $12.95 at 12:18 p.m.
Separately, TheStreet Ratings team rates AMERICAN RLTY CAP PPTY INC as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICAN RLTY CAP PPTY INC (ARCP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ARCP's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 647.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AMERICAN RLTY CAP PPTY INC has improved earnings per share by 27.4% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AMERICAN RLTY CAP PPTY INC reported poor results of -$2.30 versus -$0.47 in the prior year.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN RLTY CAP PPTY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$106.13 million or 1466.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 118.7% when compared to the same quarter one year ago, falling from -$141.16 million to -$308.68 million.
- You can view the full analysis from the report here: ARCP Ratings Report