Nicholas Schorsch's resignation from the boards of 13 companies marks another step back for the public face of a real estate empire that has been roiled by an accounting scandal.
Schorsch, 53, will leave the boards of the companies — including two that are publicly traded, RCS Capital Corp. (RCAP) and New York REIT Inc. — to focus on strategy at his investment firm AR Capital LLC, according to a statement on Tueday.
The other resignations are from nontraded real estate investment trusts and direct-investment programs sponsored by AR Capital.
The departures come two weeks after Schorsch resigned as chairman of American Realty Capital Properties Inc., a publicly traded owner of more than 4,000 U.S. buildings, which in October disclosed that it had accounting errors that were intentionally concealed. He's now moving to the background for other REITs he helped start at AR Capital, which has raised billions of dollars from individual investors seeking to put money in real estate.
"If Nick's not on those boards, those boards are more independent than they were before," Kevin Gannon, president of investment bank Robert A. Stanger & Co., said in a telephone interview. "They're deciding that it's probably best that Nick and others aren't at the helm of these entities while this is going on."
The accounting errors at American Realty Capital Properties, or ARCP, have led to regulatory investigations and shareholder lawsuits and helped reduce money flowing into Schorsch's entities. RCS Capital — whose businesses include raising money from investors for AR Capital nontraded REITs — has lost 38 percent of its value since the ARCP disclosure. The stock rose 7.6 percent Tuesday to $12.16 in New York, and was trading near that price on Wednesday. Schorsch is its biggest shareholder.
Corvex Stake
ARCP separately gained 7.4 percent to $9.11 after activist investor Keith Meister's Corvex Management LP reported a 7.1 percent stake in the company on Tuesday.
Investment products managed by AR Capital, primarily its nontraded REITs, have raised about $20 billion in equity mainly from individual investors since 2008, according to Stanger. AR Capital has generated more than $600 million in fees since it began in 2007, data from Stanger show.
"I am completely confident in our management teams and our independent directors," Schorsch said in a statement from AR Capital today. "These changes are part of the natural evolution of our businesses given our size and continuing growth."
The errors at ARCP have hurt companies tied to Schorsch and prompted some broker-dealers to suspend selling nontraded REITs sponsored by ARCP's Cole Capital unit and some AR Capital nontraded REITs. AR Capital has said that Schorsch wasn't involved in any unlawful conduct.
A telephone message and two e-mails to Schorsch weren't immediately returned.
