ARC NYC REIT Dissident Shareholders Continue to Blast Schorsch
Cove Partners III LLC, an entity owned by American Realty Capital New York City REIT stockholders Michael Ashner and John Alba, have filed a preliminary proxy statement urging fellow investors to vote against nine proposed charter amendments at the company’s thrice reconvened annual meeting of shareholders.
Cove Partners believe the proposals “eliminate valuable stockholder protections and open the door for unlimited and unfettered control by the company’s advisor, which is controlled by Nicholas Schorsch.”
As previously reported by The DI Wire, the AR Global-sponsored non-traded REIT adjourned and reconvened its June 27th annual meeting on both July 19th and August 2nd. The meeting is currently scheduled to reconvene on September 7th at The Core Club in New York City.
“Given that ARC NYC REIT stockholders have repeatedly voted down these charter amendments, we find the company’s continuous adjournment of the 2017 annual meeting in an attempt to secure passage of the charter amendments, which would otherwise be forbidden under NASAA guidelines, deeply troubling and an apparent manipulation of the company’s corporate machinery,” said Ashner and Alba.
They added, “Unfortunately, these actions are not surprising to stockholders. The company likewise continuously adjourned the 2016 annual meeting to try and obtain approval of nearly the same charter amendments.”
One proposed charter amendment seeks to extend the agreement with the advisor for an indefinite period of time, rather than limiting it to one-year renewals, while another will end the fiduciary obligation of the board to shareholders, including the specific fiduciary duty to supervise the relationship with the company’s advisor.
The REIT is also attempting to prevent the advisory agreement from being terminated on 60 days’ written notice, limiting shareholder access to the company’s books and records, allowing the board to privately sell shares, eliminating the ability of 10 percent of shareholders to call a special meeting and giving the board authority to increase this threshold by 5x, and eliminating the current shareholder majority voting requirement before the board can take certain actions.
The company also wants to eliminate the majority independent director requirement, as well as the requirement that independent directors have prior real estate experience.
Numerous Schorsch-controlled companies have battled serious legal and regulatory issues in the past. Most recently, Brian Block, the former CFO of American Realty Capital Properties (now known as Vereit, Inc.), was recently tried and convicted of conspiracy and securities fraud, among other charges, for his role in the October 2014 accounting scandal.
In November 2015, the Massachusetts Securities Division charged the now defunct Realty Capital Securities with voter fraud and improper solicitation.
Michael Ashner, co-owner of WW Investors Inc., was instrumental in replacing AR Global as the advisor of New York REIT (NYSE: NYRT) and shaking up its board of directors last year.
American Realty Capital New York City REIT is a non-traded real estate investment trust focused on properties located in the five boroughs of New York City, with a focus on Manhattan. The company closed its initial public offering in May 2015 and had raised a total of $764 million in investor equity, as of March 31, 2017. The company owns six properties valued at $785 million.