American Realty Capital (ARCP)
American Realty Capital (ARCP) is an interesting twist on the traditional property-focused investment — it is a so-called “triple net” REIT — its retail tenants pay real estate taxes, insurance and handle maintenance. That means the REIT’s operating costs are lower and the tenants tend to tilt heavily toward larger, more stable retail chains.
ARCP might be a diamond in the rough for the REIT sector: It is well-managed and has grown dramatically through strategic acquisitions of REIT CapLease in 2013. This month, ARCP closed on its blockbuster $6.85 billion merger with Cole Real Estate (NASDAQ:COLE), creating one of the largest triple-net lease REITs.
Size has its benefits, particularly in economies of scale: ARCP expects to realize about $70 million of combined expense synergies and expense savings by the end of the first year.
ARCP has gained 7% so far in 2014, and the REIT boasts a current dividend yield of 7.1%. This triple-net REIT offers investors a lower risk profile than the typical mREIT play, while still offering up an attractive dividend yield. Trading under $14, ARCP hasn’t fully bounced back from last year’s cliff, so it looks like a cheap buy now.