VEREIT, Inc.

[Technical Difficulty] American Realty Capital Properties’ third quarter 2014 earnings report and business update. Joining me today are Bill Stanley, Interim Chief Executive Officer and Chairman and Mike Sodo, Chief Financial Officer.

Today’s call is being webcast on our website at arcpreit.com in the investor relations section. You can also find today’s presentation posted on our website.

There will be a replay of the call beginning at approximately 10AM Eastern Standard Time today. Dial in for the replay is 18-77-344-7529 with a confirmation code of 10061586.

Before I turn the call over to Bill, I would like to remind everyone that certain statements in this earnings call which are not historical facts will be forward looking. ARCP’s actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC report.

In addition, as stated more fully in our SEC reports ARCP disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Let me quickly review the format of today’s call.

First, Bill will provide a business update and review the audit committee’s key findings, followed by Mike presenting certain impacts of the restatement and our third quarter financial results. Bill will then conclude with a portfolio overview and a recap of the Board of Directors’ actions to date.

Now I would like to turn the call over to Bill Stanley. Bill?

Thank you, Bonne. Good morning.

Thank you for joining today’s business update. I am pleased to report the completion of the restatement and filing of our financial statements.

This event not only represents an important milestone but moves us forward from a difficult period for the company. Included in the restated financial statements are year-end 2013 and the quarters ended March 31 and June 30, 2014.

In addition to the restatements, we have filed Form 10-Q for the quarter of 2014. These filings have brought the company into compliance with agreements that were reached with our lenders under the company's credit facility and other senior noteholders in recent months.

And while a great deal of work remains, we are confident that many key issues have been addressed and plans have been put in place for dealing with those that remain. These actions allow us to focus on running the business and moving ARCP to a position of market leadership and prominence.

As a symbol of our new era, today's call is being hosted from our new headquarters in Phoenix, further exemplifying the separation and changes that have occurred from the previous New York based ARCP. Going forward we intend to provide transparency and visibility to our investors and stakeholders, along with the commitment to provide regular business updates as to our strategic progress.

If you would turn to Slide 5, you will find a schedule of items we expect to release in the near future, including our 2014 10-K by March 31. We anticipate announcing a CEO and independent non-executive chairman in the near-term and intend to host an investor day later in the year to formally introduce our new CEO so that they may offer their strategic vision for the future.

Turning to Slide 6, provides an outline of the board’s activities since last September. A summary of these activities is as follows: The Audit Committee retained Weil, Gotshal and Ernst & Young to conduct a thorough and independent investigation of issues that were identified in September 2014, as well as additional issues identified through their work and by management.

Both firms were given unfettered access to personnel and information to allow a thorough investigation. Next, the Board’s committee chairmanships, compositions and roles were realigned, including my appointment as interim Chairman and CEO.

All direct relationships with former executive chairman were ended and significant steps were taken and remained in process to unwind relationships with the entities where he is either an executive director or a significant stockholder. We retained the executive search firm of Korn Ferry to conduct a search for a new Chief Executive Officer and an independent Chairman of the Board.

Morgan Stanley was retained to provide strategic advice on our capital, debt structure, real estate assets, strategy and capital allocation. We obtained extensions from lenders and reached an agreement with certain senior noteholders related to the delivery of required financial statements and related certificates.

Finally, we are taking steps to materially enhance our corporate governance and financial controls. Today's announcements represent a major step forward and put ARCP on a path toward being a best-of-class company.

A summary of the findings of the investigation should begin with the understanding that the Audit Committee did not identify any material changes related to ARCP’s real estate ownership, rental revenues or fundamental business operations nor any of the financial statements or operations of the Cole Capital sponsored non-traded REITs. As such the core of our business is unaffected by the accounting and financial issues that were discovered through the investigation.

Slide 8 and 9 summarize key findings, the first of which relates to financial statement and AFFO errors, including amounts recorded in the wrong periods. Accounting for non-controlling interest, mischaracterization of expenses for merger-related activities which were more appropriately recharacterized as G&A expenses, along with other misapplications of GAAP.

In the second quarter of 2014, the erroneous calculation of Q1 2014 AFFO was intentionally not corrected and other AFFO and financial statement errors were intentionally made. This resulted in an overstatement of AFFO and an understatement of net loss for the second quarter of 2014.

Today's filings correct these errors. A more thorough discussion of these points can be found in the financial adjustment summary on Slide 10.

The second key finding involves related party transactions. The Audit Committee's investigation identified certain payments made by the company to ARC Properties Advisors, LLC and certain of its affiliates that were not sufficiently documented or otherwise warrant scrutiny.

The company has recovered consideration valued at approximately $8.5 million in respect to certain such payments that the company concluded were inappropriate. The company is considering whether it has a right to seek recovery for any other such payments and if so, its alternatives for seeking recovery.

Additionally, the investigation found that equity awards made to two former executives in connection with the transition to self-management of the company contained provisions that, as drafted, were more favorable than those approved by the Compensation Committee of the company's Board of Directors. One of the former executives relinquished all of his equity awards, while the other agreed that his awards should have been subject to terms consistent with those approved by the Compensation Committee and relinquished all awards with the exception of 1 million restricted shares which were subject to accelerated vesting.

Furthermore, these shares are subject to clawback by the company if in any proceedings, after all appeals, he is found to have breached his fiduciary duty of loyalty or is found to have committed or admits fraud or misconduct in connection with his responsibilities as an officer or director. Finally, the investigation found certain material weaknesses in the company's internal controls over financial reporting and its disclosure controls and procedures.

The company continues to work actively to address and remediate these material weaknesses under the oversight of the Audit Committee. As part of the Audit Committee work, we have evaluated our corporate governance and compliance policies and instituted a number of changes to help us work towards achieving best-in-class standards.

This includes a disciplined culture of high standards for ethics, integrity and personal responsibility, as well as a policy -- as well as policies and protocols that govern how business is conducted along with systems of checks and balances to deter inappropriate behavior. Finally, an update on the search of our new Chief Executive Officer and independent nonexecutive chairman and dividend policy are as follows: Korn Ferry was retained and Tom Andruskevich, our interim Lead Independent Director has worked closely with the Korn Ferry team and he is in advanced discussions with multiple highly respected candidates all of whom we believe will create significant value for our shareholders.

We have been encouraged by the response and caliber of candidates that are interested in ARCP and believe that this is a validation of the strength of our underlying business, real estate portfolio and the people. It is our belief that an announcement of a new CEO will be forthcoming in the near term.

An issue of particular concern has been the timetable and plan for reinstatement of the dividend. To this end, the board plans to announce a new dividend policy later in 2015 given that the company will have more latitude and freedom from the restrictions that accompanied the waivers and consents from the company's lenders which prohibited payment of dividends on the company's common stock until the delivery of its required financial statements and related certificates.

As such, the board intends to establish the common stock dividend at a payout rate that is in line with net lease peers, and when the dividend is reinstated, I expect it will be paid on a quarterly basis. We would be remiss if we do not comment on the legal landscape surrounding the company.

I can assure you that we are actively managing and evaluating the legal environment and this is an important priority for the company. With that, I will turn it over to Mike Sodo, our Chief Financial Officer to discuss certain aspects of the restatement and our third quarter results.

Thank you, Bill and thank you all for joining us today. I would like to summarize the impact of the restatements we are making in our financial statements which are presented on Slide 10 in the presentation.

As detailed within the slide, there were no changes to total assets and total liabilities in excess of 0.5% for the periods presented. With respect to our earnings, cash flows and AFFO per share, I will provide a breakdown for 2013, the first quarter of 2014 and the second quarter of 2014.

For the year ended December 31, 2013, we’ve restated total revenues by a reduction of $555,000 to $329.3 million. We have restated our total net loss, increasing it by $16.8 million to $491.5 million.

There was no change to cash flows for 2013. AFFO has been restated by a $0.20 per share reduction to $0.87 per share.

For the first quarter of 2014, we have restated total revenues by an increase of $540,000 to $321.2 million. We have restated our total net loss, reducing it by $17.2 million to $291.4 million.

There was a $149,000 increase to our first quarter cash flows. AFFO has been restated by a $0.07 per share reduction and $0.19 per share.

For the second quarter of 2014, we have restated total revenues by an increase of $197,000 to $382.2 million. We have restated our total net loss, increasing it by $14.4 million to $54.7 million.

There was a $1.7 million increase to our second quarter cash flows. AFFO has been restated by a $0.03 per share reduction to $0.21 per share.

Moving on to our third quarter earnings on Slide 15. We reported third quarter 2014 consolidated revenue of $457.1 as compared to $95.3 million as restated in the same period in the prior year.

We also reported a net loss of $280.4 million which includes a $256.9 million loss primarily related to the multitenant portfolio which was held for sale as of September 30, 2014, compared to a restated net loss of $80.2 million in the same period in the prior year. Consolidated FFO using the gross method $0.21 per diluted share as compared to a restated negative FFO of $0.07 a year ago and AFFO in the quarter was $0.26 per diluted share as compared to a restated $0.28 in the third quarter of 2013.

In the third quarter, ARCP acquired $2.3 billion of net lease real estate, including the $1.7 billion Red Lobster sale-leaseback transaction. Further, we invested $1.1 billion in properties on behalf of the managed REITs.

This completes the high level overview of our third quarter results. Subsequent to the third quarter, we completed the sale of ARCP’s multi-tenant portfolio for $1.9 billion, simplifying our operating model.

Approximately $1.2 billion of net proceeds from this transaction were used to pay down our line of credit. Additionally, December 4, 2014, ARCP issued a press release announcing that it’s entered into a settlement agreement with RCS Capital Corporation that resolved the dispute over the sale of Cole Capital to RCS Capital.

The company received $60 million in the combination of cash and unsecured note from RCS and the release from a payment obligation of ARCP to terminate the equity purchase agreement and all related agreements and documents. At the end of 2014, we had approximately $3.2 billion outstanding under our credit facility.

As the company works to complete the preparation of its financial statements for the year ended December 31, 2014 which we expect to file no later than March 31, 2015, we will not provide FFO guidance for the full year 2014. However we have provided information on Slide 18 and 19, including certain key financial items to help you assess our 2014 level of earnings.

Going forward, our new CEO and the board will evaluate all aspects of the company including AFFO and FFO and establishing 2015 guidance, appropriate leverage and liquidity levels, our acquisition and disposition strategy, a prudent dividend policy and establishing the dividend rate, portfolio allocation and a review of our general and administrative expenses and other operating expenses. Once decisions have been made on these, we will establish our 2015 operating plans and be in a position to provide guidance on 2015 as soon as practical.

With that, I will turn the call back over to Bill.

Thanks, Mike. Given the issues that the company contended with over the last several months, we believe that it is important to understand that ARCP continues to be an exceptional business.

To this end, I would like to spend a few minutes on the fundamentals of our business and strategy. Slide 21 provides some key facts regarding the company.

Beginning with an overall enterprise of $20.1 billion, diversification of income through our Cole Capital platform, strong predictable cash flows, an experienced veteran team of real estate professionals led by Tom Roberts and Paul McDowell. Broad portfolio diversification across a large number of properties locations and high quality tenants with long term leases.

Finally, a healthy balance sheet with a manageable debt maturity schedule. The slides that follow number 21 provide additional details as to the company’s portfolio and holdings.

Cole Capital, despite being a separate entity, has been negatively impacted by ARCP’s recent issues. Many of Cole’s broker-dealers have suspended selling Cole’s non-traded REITs.

We are confident that our relationships with these important partners will normalize with the filing of our financial statements. As noted by Robert Stanger, Cole is consistently at the top of its industry peers in terms of raising capital and has a strong share of the market.

With a consistent level of capital raise, while we recognize that the current performance of Cole is substantially below its historic levels, the business remains structurally and fundamentally sound. In fact, we believe firmly that Cole provides a tremendous opportunity to build shareholder value.

To highlight, I offer the following by noting that second progress has been made during the past several months, including a thorough and independent investigation conducted by the Audit Committee. Financial statements for 2013 and quarters one and two 2014 have been restated and our 10-Q for Q3 2014 has been filed.

Swift action changing the senior leadership following the resignations of former members of management and substantial progress in identifying a new CEO and independent non-executive chairman for the next phase of positive shareholder growth. Steps to materially enhance our corporate governance and financial controls and a commitment to implement best-in-class corporate practices.

Confirmation that core business was fundamentally unaffected by the issues related to the audit committee’s investigation. Affirmation that the company remains strong, well capitalized and positioned to be a leader in the net lease industry into the future.

In closing, we have provided as much detail as we are currently able to deliver relative to the investigation, ongoing litigation and other actions. Materials filed with the SEC today will provide you with more detail regarding these matters.

As such, we will not be able to respond to questions on these topics on today’s calls. With that, we will take your questions on third quarter 2014 results and the company’s business update.

Hi good morning. Thanks for the time.

Bill, I was just hoping you could talk a little bit about the how the process for the CEO and the new independent chairman is going? Are you guys setting sort of an agenda ahead of time about what you would like the company to look like strategically or is that fully going to be open to the decision of the new management and new board members?

And is your plan to stay on longer term with the company?

Yes. We expect -- the board is actively engaging in discussions with new candidates.

It is our view that the current board, future board members, and CEO will work collaboratively with setting a new agenda along with inputs that we’ll receive from our advisor Morgan Stanley.

And your plans?

The board is under review right now as to the future composition and we expect announcements as to any restructuring in the near future.

Okay. So it's a collaborative process between the current board and is the way you envision it and any new hires?

It’s not necessarily the new people are going to set the stage for what the company is going to be like? It's a collaboration between who's there now and who you’re bringing on board, is the way you frame it?

Yes. We believe that it will be a collaborative process with new board members, new management and our outside external advisors.

Thanks for taking my question. Just with regard to your thoughts on corporate governance.

I guess Bill, you touched on some of the things you are committed to but maybe with specific to MUTA, I know you guys had announced opting out – I’d love to know where that stands and maybe any other changes that you expect to intercede over the coming months?

The board plans to further review our position on MUTA in conjunction with the new CEO, the new board and our management team. In terms of the second part of your question, in terms of external controls, I could refer you please to Slide 11 for details but in brief you can expect a different tone from the top a commitment to establishing a culture of compliance, integrity and transparency, improved internal controls and practices and procedures.

We are adopting a related party transaction policy to be administered by the nominating and corporate governance committee, we’ve established or are in the process of establishing a chartered disclosure committee. We are implementing new processes for equity-based compensation.

We're documenting and standardizing all critical accounting policies. We've completed preliminary design of an accounting closed process and we are enhancing IT controls.

Thanks and good morning. Bill, can you maybe spend a minute and give us a sense as to what ARCP looks like today as an organization in terms of the major functions like is there still an acquisition staff?

What are they doing? Asset management?

And what all this costs -- both as relates to the balance sheet as well as for Cole to run day to day -- I'm guessing that the third quarter may not be reflective of exactly what those costs are.

Yes. The management team as a company including both Cole and ARCP remains deep and robust.

We have outstanding veteran teams in all silos of the portfolio and our office and industrial, in restaurant, in our single tenant retail, in our multitenant, in our build to suit, in addition our Cole capital team has a deep and experienced bench. We feel that the company is well staffed and we believe that the new CEO and any new members to management will step into a very -- well supported by a very strong experienced robust and veteran team.

Any sense as to what that cost or if there's anything we should take away from the third quarter G&A and overhead to adjust or anything like that?

The company has put a tremendous amount of focus on G&A synergies and opportunities recognizing that this company came from multiple mergers and acquisitions and stated a goal of reducing G&A through a series of synergies. Many of those synergies have been identified and implemented as part of the audit process.

We expect that to continue and we expect with the 2014 statement you will see the impact in evidence of further synergies realized in that area.

I wanted to follow up on the board number and CEO process. And just wondered you had a couple of primary investors make some comments and some suggestions.

I'm just curious as to what if any engagement you have had with shareholders in this process?

We engage frequently and openly with our all shareholders and stakeholders. And we take any ideas or suggestions seriously and all that have come to us have been considered and/or continue to be in the process of being considered.

We've had a constructive dialogue with many of these people. We welcome their input and we invite any further suggestions or recommendations that they may have.

Do you worry at all that they have essentially noted that you have ties as well as for several of the other board members to the prior chairman and whether or not their views are being heard as it relates to having an independent process?

Yes. The board is fully aware of the fact that conflicts have – and some continue to remain relative to other ARC related entities.

That is one of the issues that has been and will continue to be reviewed. And we believe that you'll hear positive news relative to changes addressing those particular issues.

Thanks. My question regards estimating net asset value.

Thank you for providing a cash NOI for the third quarter. Was wondering if you could comment on - it looks at there was an adjustment to operating expenses in the review process because, I am just speaking if you’d comment on when you comments on that line item and part B of my question would be was wondering if you comment on these consensus NAV estimate that’s out there of – I am showing it as line 62.

Let me start with the broad response to your question and then I will send it over to Mike Sodo, who can take a little bit more some of the accounting adjustments. But as the audit process began in September, its scope expanded.

And adjustments, other adjustments occurred along the way. Mike, maybe you can give a little more specific information, the question has been asked.

More or so reiterating what Bill is saying and as disclosed within our financial statements. As we go from September to today there was an evolution of the investigation and the accounting work is not only was there cleaning up of certain material adjustments as we disclosed there are certain immaterial adjustments that management still felt were prudent to make inclusive of items that would have affected operating expenses.

And as a related question, did the investigation look at the actual asset values on the balance sheet and take any impairments if necessary? Was that part of this process?

Yes.

And so you are saying that there was no impairments triggered through your review?

You should go through the related filing. There were a couple that were recorded in there in the related state -- restatement footnote to the respective filing.

Good morning. Bill, is it a goal of this board to regain the company's investment-grade credit rating?

And can you talk a little bit about target capital structure? Are you where you need to be or do you envision reducing leverage further?

Yes. The regaining investment-grade with the rating agencies is an important goal for the company.

We've been working actively to restore the confidence of both the investor community and the rating agencies. We believe that this is important to the company.

However that being said, we believe that we have multiple options to access the capital markets given our strong balance sheet and high-performing portfolio. And we're confident that in between now and the time that we restore those ratings that we will be able to sufficiently access capital markets and provide value for our shareholders.

Great. Any comment on reducing leverage further from the pro forma numbers at year-end?

Yes. The composition of the portfolio, the leverage, the various silos of assets, are all currently under review.

That review has been -- has taken place with the assistance of Morgan Stanley and we expect to do a deeper dive with the new management team.

Just a quick follow-up on the cash NOI you provided on Slide 34. Is that pro forma for the shopping center sale to Blackstone and DDR?

If not, is there an adjustment you could provide to get to that clean run rate number?

This table, Juan, is not pro forma for the sale to Blackstone. I apologize, I don't have the page in front of me.

There is a footnote for the sale within the deck itself. I will circle back and give you the page number separately.

And then with regards to the PCM business, can you comment if that business is breakeven at this point today with a limited inflow it’s seeing and what the G&A level is to support that business?

Mike, do you want to address the capital business?

Juan, to follow up on the – sorry I was trying to find it for you, it’s on slide 26. If you -- adjustment for Blackstone sale.

As it pertains to Cole, I think a question was in terms of profitability, not only historically, but on a go-forward, Cole Capital did contribute $0.03 per share to FFO in Q3 and $0.07 for the year -- for the nine months, excuse me. Obviously, the capital raise efforts have declined as we've gone through this process, but we're all very optimistic now that we're out with the financial statements for a near term uptick in the profitability of Cole Capital.

Bill or Mike, I mean how much in terms of -- are there any assets on the market today for sale? And maybe you could provide a number of how much is being marketed?

Yes. The current management team along with -- has evaluated multiple opportunities.

We have taken significant inbound recommendations. We have heard various suggestions from constituents and believe that right now it will be most appropriate to wait until we get the input of our new CEO before we make any significant or dramatic changes to the current portfolio.

Thanks. If I go back to the November and May REIT and around that timeframe I can’t remember exactly when.

But when you guys were working out your liquidity with the bank group, it seems like you guys had several hundred million dollars of acquisitions either pending or under contract. But it doesn't look like that really happens.

I'm trying to understand what happened there.

Sure. As a landscape changed for ARCP over the course of the last couple of months, we've been trying to be the best stewards of our capital, Tony.

Acquisitions within the pipeline would be comprised of things that were under LOI as well as things under contract. And we've been very mindful of what were the appropriate deals to close for ARCP during this timeframe.

So then it was just -- there really wasn't much. It was just that, I think the $27 million?

Is that what it was?

On the balance sheet.

Okay. And then could you give us an updated -- can you give us a sketch of the line of credit and liquidity as of today?

As it pertains to the line of credit, it's publicly disclosed within the 8-Ks. Our current – our permanent capacity under the line of credit is $3.6 billion as I stated in remarks.

We have $3.2 billion outstanding as of today. Once we are out with our 10-K for the year ending 2014, we will have $400 million of availability.

On the cost of this investigation, was there any cost at all booked in the third quarter? And do we have an estimate as to now that it's concluded what we should be looking at for fourth quarter, first quarter and how that will be accounted for?

Will it all fall into fourth quarter? Will we see some slide in the first quarter as well?

As disclosed the Audit Committee’s investigating commenced on September 7, any costs incurred during the month of September are recorded in our third-quarter results. All other costs associated with the investigation are being expensed as incurred and it would be reasonable to see them not only in Q4 but also in 2015.

And just to follow on the dividend policy if I could. I guess one of the questions that we've been trying to understand is how you guys think about what's sort of recurring.

And so, when you talk about consistent payout ratios, I'm wondering if that's related to the AFFO that's generated at the balance sheet level or inclusive of Cole as well?

Basically the dividend policy we expect to set and we are looking at setting a policy somewhere within the guidelines of our net lease peers. In terms of the setting it at a prudent rate, we're going to take the input of our CEO, certainly factor into any potential changes in the construction of the portfolio, any possible changes that may or may not occur as it relates to our current leverage.

And so all of those items will be factored in, and the board will set a prudent dividend that they believe they can sustain and build upon going into the future. End of Q&A

Thanks. Thank you again everyone for joining us today.

If you have any follow-up questions, please contact our investor relations team at 877-405-2653. Thank you.