FrontView REIT Board Fires CFO After Less Than 2 Months

FrontView REIT, which owns more than 300 net-leased properties, fired its chief financial officer Monday. 

The board of directors at Dallas-based FrontView, which had its initial public offering in October, terminated Randall Starr from the role, effective immediately. Starr had been in the role for less than two months. The move led J.P. Morgan analysts to downgrade the stock and trim 15% from its target price.

Starr was fired after an audit committee investigation that was assisted by outside counsel determined he had violated his employment agreement, the company said in a statement. FrontView, which trades under the ticker symbol FVR, said his termination was unrelated to the company’s business operations or previously reported financial results. 

J.P. Morgan analysts, who shifted their rating on the stock from overweight to neutral with a $12-per-share target price, said company executives told them Starr’s termination was related to a matter outside the scope of the company’s business. Still, they said the executive shake-up had tested their confidence in the stock’s performance. 

“We continue to think the FVR portfolio is worth more than the current stock level … but with limited ability to grow externally at this point and what appears to be a bruised c-suite, we find it hard to recommend the stock,” they wrote in an investor note. 

It’s growing more likely that the REIT, which was trading up 3% on the news early Tuesday, will be acquired, given it is consistently trading at a discount, the analysts wrote. 

“The sudden changes in the management team less than one year since the company’s IPO may make it difficult to execute its growth plan and be challenging to return to investor radars,” they wrote. “Conversely, we do think the stock is discounted to the underlying real estate.”

Sean Fukumura, FVR’s chief accounting officer, is taking over as interim chief financial officer. A search for someone to take over the role permanently has already begun, CEO Stephen Preston said in a statement. 

FrontView, which operates a portfolio spanning from the East Coast to the Mountain West, debuted on the public market nine months ago with a share price above $19, but it began to slide steeply in March and was trading for less than $12 Tuesday. 

The REIT lost $1.3M, or 6 cents per share, in the first quarter on $16M in revenue and a 21-cent-per-share dividend. At the end of March, FVR owned 323 properties, 12 of which were vacant, and carried $312M in outstanding debt.

FrontView reaffirmed its projected adjusted funds from operations in its first-quarter guidance released in mid-May. But it cut its planned acquisitions, said it would sell more assets and cut administrative expenses to balance costs. 

It purchased 17 properties for $49M and sold one noncore asset for $2.1M at a 6.9% cash capitalization rate during the first quarter. 

The REIT’s properties span 150 unique brands. Its two largest tenants, Fast Pace Health and Verizon, each make up less than 3% of FVR’s total portfolio, according to a Q1 investor report. 

“Its simple structure and portfolio is one that we believe could be quickly integrated into another platform,” the J.P. Morgan analysts wrote.