Positive Signs in Retail Sector

With the economy in an upswing, American Realty Capital Properties Inc.'s (NASDAQ: ARCP) retail tenants are seeing "great growth in their underlying earnings," according to Nicholas Schorsch, the company's chairman and CEO.

In a video interview with REIT.com in New York at REITWeek 2012: NAREIT's Investor Forum, Schorsch discussed the state of the retail real estate sector. He said he sees "encouraging" signs in the current market.

"Sales are stable, and earnings are strong. Balance sheets are getting stronger," Schorsch said in reference to American Realty Capital's retail tenants. "And the United States is clearly the shining star on a global basis."

American Realty Capital launched its initial public offering (IPO) on the NASDAQ exchange in July 2011, raising net proceeds of nearly $70 million. A follow-on equity offering in June raised more than $30 million. Schorsch said the capital that the company has raised has put it in position to take advantage of opportunities in a business, "mid-duration" net-leasing, in which it lacks a "natural competitor."

"Because of that, we can be highly selective about the assets that we're buying," Schorsch said. "For us, to have extra capital right now is kind of a perfect storm. We are deploying the capital very rapidly and we're able to buy very accretively. Our cost of debt because of our newly configured lines of credit is really strong. So, our cost of capital is very robust and it allows us to be very selective and fill our portfolio rapidly with new acquisitions."

Schorsch pointed to major metropolitan areas such as New York, Los Angeles, San Francisco and Boston as strong retail markets in the current environment. However, he noted that American Realty Capital aims for a diverse strategy focused on properties located "at the corner of Main and Main"—those at major intersections within towns and cities.

"We're looking to be in all 50 states," Schorsch said. "We want to be in core markets. We're finding robust markets across the country, secondary and tertiary markets."