Thursday, October 30, 2014
Inquirer Daily News

POSTED: Thursday, October 30, 2014, 3:47 PM

Shares of American Realty Capital Properties Inc. fell again today, tumbling below $10 for the first time since the property investment company went public in 2012. The firm, founded by Nicholas Schorsch, based in New York and still run partly from his former offices in the Jenkintown area, struggled to explain the departure of two top financial executives amid an accounting scandal that will force it to restate first and second quarter earnings and delay third quarter earnings. The company says here the restated earnings won't much affect its payments to shareholders. 

Brian Block, American Realty's chief financial officer, and Lisa McAlister, chief accounting officer, left after the board's audit committee found errors in their first-quarter numbers that they had purposely not corrected for the second quarter, chief executive David S. Kay told investors in this conference call (transcript via Financial Times' Seeking Alpha, free, but registration required.) The error and the lies to cover it up followed a change in the company's complex accounting practices. As a real estate investment trust, American Realty is managed to minimize taxes and maximize cash flow to investors. 

"The Securities and Exchange Commission is reviewing the company’s accounting," Bloomberg said here, citing an unnamed "person with knowledge of the matter." The S&P credit rating agency threatened to cut the company's credit rating to below investment grade ratings, which could boost its future borrowing costs.  

POSTED: Thursday, October 30, 2014, 2:09 PM

Cortendo AB, the Radnor and Goteborg, Sweden-based developer of the "orphan drug" COR-03, a cortisol inhibitor it hopes will treat the endrocine condition called Cushing's syndrome, says it has raised $11 million from northern European investors HealthCap, the Third Swedish Pension Fund (AP3), Storebrand, and Arctic Fund Management, and says it will de-list from the Oslo stock exchange. 

The deal is pending approval of Cortendo shareholders at a meeting tentatively scheduled for Dec. 1. “The U.S. represents the largest potential market for our product candidate, COR-003," and the company hopes to list on a U.S. stock market, chief executive Matthew Pauls said in a statement. Not that there's anything wrong with the Oslo market, he added: "Our experience has been positive."

POSTED: Monday, October 27, 2014, 4:29 PM

TUESDAY UPDATE: "People in Wilmington are very open to development - on an appropriate scale," says Rob Buccini, confirming his firm, Buccini/Pollin Group, has taken over the sprawling former Bancroft Mills development site, which stretches uphill from the Brandywine north of downtown Wilmington, Del., from past owner Brian O'Neill, the King of Prussia-based developer who had hoped to put 1,400 apartments in the dramatic waterfront stone, brick and cement mills where thousands worked from the late 1800s into the 1960s. 

Philadelphia-area developers like O'Neill and Stoltz Bros., which hoped to redevelop DuPont Co. offices south of Greenville, have met strong local resistance to big plans in Delaware. How can Buccini win where O'Neill fell short? Compared to O'Neill's projections of a decade ago, "we're going to build a fraction of that," Buccini told me. "Maybe a little office. Maybe tiny retail. Wilmington is the kind of place where you do a little here, a little there." His firm already owns two nearby office buildings built on riverside factory foundations, and they're "98% leased. People like to be by the river," Buccini added.

MONDAY: Delaware's Buccini brothers -- partners in the Buccini/Pollin Group, the hotel-entertainment-apartment development group, whose projects stretch across Wilmington, Del., the Chester, Pa. waterfront, and the Washington, D.C. area -- have acquired control of the ghost city-on-the-Brandywine that is the former Bancroft Mills property in Wilmington, confirms King of Prussia-based developer Brian O'Neill. His past-due $14.8 million loan on the property went on sale earlier this year. He had hoped to build 1,400 homes there.

POSTED: Monday, October 27, 2014, 3:02 PM

"It's good discipline to face investors on a regular basis," says Bruce Van Saun, chief executive of Citizens Financial Group Inc., Rhode Island-based owner of Citizens Bank of Pennsylvania. Van Saun's bank posted higher profits from last year and faced (a few, mostly detail-oriented) questions from Wall Street bank analysts this morning for the first time as a public company CEO: Citizens sold shares in an initial public stock offering (IPO) last month. On a day bank stocks were mixed, Citizens (CFG) slipped to $22.93, down 25 cents, by mid-afternoon. The company is still controlled by Royal Bank of Scotland Group Plc, which is selling Citizens in stages. 

Sales were up, loans were up, but the net interest margin -- the difference between what Citizens pays to raise money and what it charges to lend it -- was tighter. "It's par for the course across the industry," Van Saun said. He expects borrowers are going to be refinancing their loans again and "taking a bite out of the net interest margin" this fall. He's betting analysts at Goldman Sachs are right when they predict the Federal Reserve's Fed funds rate will start moving north next fall, boosting interest income and profit margins: "It would certainly help." 

Meanwhile, Citizens keeps hiring. Its Pennsylvania branch network has shrunk a bit, to 361 offices at midyear, down from 397 ten years ago; while its Pennsylvania deposit-market share has slipped to 7.5%, from 10%, third in the state after Wells Fargo and PNC.

POSTED: Monday, October 27, 2014, 12:14 PM
Ed Snider (Photo by Mitchell Leff/Getty Images)

Ed Snider, longtime owner of the Philadelphia Flyers (NHL) and chairman of Comcast-Spectacor, says he has given $5 million to the Robert H. Smith School of Business at Snider's alma mater, the University of Maryland, to fund the Ed Snider Center for Enterprise and Markets. Billionaire chemical magnate and political donor Charles Koch is kicking in another $1 million, Maryland says in this statement (link fixed)

The center will be run by Maryland's Prof. Rajshree Agarwal , an India-born student of "innovation and technological change." The granted millions will also help fund three tenured professors, students, staff. "Truly successful businesses are moral enterprises, resulting from productivity, integrity and a sense of purpose,” Agarwal said in a statement. The Snider center will "explor(e) the institutions that affect human enterprise, thereby impacting the prosperity and wellbeing of individuals and societies.”

UPDATE: I asked Prof. Agarwal a note how scholars manage conflicts if they ever conflict with donors' ideas. Snider traces his, partly, to his reading of Ayn Rand. She wrote back: "I cannot speak for Mr. Snider and Mr. Koch regarding their views. As for myself, I have pursued research in innovation and entrepreneurship because I believe that truly successful businesses are moral enterprises, resulting from productivity, integrity and a sense of purpose. Human enterprise, when done right, is not only a personal achievement, but also benefits society by filling needs,solving problems and creating jobs."

POSTED: Monday, October 27, 2014, 10:45 AM

Brandywine Realty Trust, the Radnor company that is the dominant office landlord in Center City, says it has a partner and detailed plans to build a 29-story, 321-apartment, $140 million tower on the grassy lot it controls at 1919 Market St. in Center City. The 455,000 sq. ft. tower will include 24,000 sq. ft. of commercial space, mostly leased to Independence Blue Cross (IBC) and the CVS drugstore chain. Statement here.

Brandywine's 50-50 joint venture partner for 1919 Market is Berwyn-based LCOR CalSTRS, a successor to the former Linpro Co., which now manages property investments for the California State Teachers Retirement System. The partners arranged to borrow $88.9 million for the project, pricing the credit at Libor plus 2.25%. Equity investment is $59.2 million, split by the two partners; Brandywine's half includes the $13 million value of the land. The company projects a cash yield (rent/cost) of 7% a year (vs 8% for Brandywine's $385 million FMC office/apartment tower, and 7.6% at Brandywine's $158 million Evo apartment project, both in University City). 

In 2012, Brandywine proposed a mixed 292-apartment/ 55,000 sq ft-commercial project for the same space, with IBC as a partner, targeted to open this year. The project stalled until Brandywine found its new investor, with IBC as tenant instead of partner. The delay had the result of strengthening Brandywine at the expense of would-be competing office developers along that stretch of Market St., Timothy Monahan of broker Savills Studley told me last summer.

POSTED: Monday, October 27, 2014, 8:43 AM

Some of America's biggest retailers have disabled or refused Apple Pay, the new smartphone payment system, because they're working on a rival system, CurrentC, that cuts out the middleman -- not just Apple, but also Visa, MasterCard, American Express, Bloomberg reports here. CurrentC looks cheaper -- for merchants, at least; Apple Pay is slick, convenient -- and first to market.

"Rite-Aid, CVS, Walmart, Best-Buy and about 50 other retailers have been working on their own mobile payments system, called CurrentC. Unlike Apple Pay, which works in conjunction with Visa, Mastercard, and American Express, CurrentC cuts out the credit card networks altogether," Bloomberg reports. "The benefit to the merchants is clear: They would save the swipe fees they pay to the credit card companies now, which average about 2% of the cost of transactions." 

CurrentC, due in 2015, "is also likely to allow merchants to gather data about transactions and offer discounts and loyalty programs," as the card companies already do, but "in marked contrast to the anonymity built into Apple Pay, which has drawn concerns even from some merchants."

POSTED: Thursday, October 23, 2014, 3:02 PM

Vanguard Group, the Malvern mutual fund giant, has responded to a New York whistleblower lawsuit by former Vanguard tax lawyer David Danon with accusations of betrayal, theft and ethics violations the company says should bar him or his lawyers from bringing the complaint.

The company also offers a defense of Vanguard's "unique" legal structure, noting company officials have testified about its practices before Congress, and widely publicized its arrangements since its founding by John C. Bogle 40 years ago.

In documents made public after New York state court Judge Joan A. Madden declined Vanguard requests to keep them sealed away, the $3 trillion-asset company argues Danon "grossly betrayed" his former employer, violated confidentiality agreements and broke state bar association ethics rules when he illegally "stole hundred of privileged and confidential documents" related to Vanguard's income tax and financial arrangements.

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at or 215 854 5194.

Joseph N. DiStefano
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