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ARC’s New York REIT Stockholders Challenge Schorsch

Two stockholders of AR Global-managed New York REIT Inc. (NYSE: NYRT), a former non-traded real estate investment trust known as American Realty Capital New York Recovery REIT, nominated five members to the company’s board of directors in reaction to the REIT’s proposed merger with JBG Companies, a private real estate firm. If approved by stockholders, the merger would create an $8.4 billion REIT with properties in New York and Washington D.C.

Michael Ashner, chairman and chief executive officer of Winthrop Realty Trust, and Steven Witkoff, chairman and chief executive officer of The Witkoff Group, have been outspoken opponents of New York REIT’s board-approved merger with JBG Companies. The pair own more than one million shares of NYRT stock through their jointly-owned entity, WW Investors LLC.

Ashner and Witkoff are among the five nominees to the board, which also include James Hoffmann, former partner and senior vice president of asset management firm Wellington Management Company; Gregory Hughes, principal for investment firm Roscommon Capital Limited Partnership; and Neil Koenig, co-founder of accounting firm Imowitz Koenig & Co.

WW Investors said in a statement that New York REIT has “failed to create meaningful long-term value for stockholders,” and that the JBG merger “would cause material and permanent destruction of NYRT stockholder value if consummated.”

“As a result of NYRT management’s many misjudgments, including its disastrous decision to approve the JBG transaction, we have absolutely no confidence in the ability of this board to unlock the significant value that remains trapped in NYRT’s shares,” stated Ashner. “We believe it is imperative that the board be reconstituted, at the upcoming annual meeting, with new independent directors who will instill an emphasis on maximizing stockholder value and whose independence affords them an ability to properly evaluate and address strategic and transformative opportunities.”

He added, “Our proposed board would, among other needed improvements, initiate an open and transparent strategic sale process unlike the failed and secretive current and prior sales processes conducted by NYRT management…We have had enough of NYRT management’s continuing abuse of stockholders, and we will not stand for this value destructive JBG transaction or maintenance of the composition of NYRT’s current board.”

Last week, in an investor presentation titled “NY REIT – JBG Proposed Combination: A path to the sure destruction of NYRT shareholder value,” WW Investors detailed its opposition to the merger in favor of a stand-alone sale or liquidation instead.

“We believe there is a compelling case that the principle motivation behind the combination is to provide JBG management primarily, and Nick Schorsch, who controls the company’s sponsor, and his cronies with an enormous payday at the expense of NYRT shareholders,” said the investor duo in the presentation.

Schorsch resigned from the board of New York REIT in 2014 following the disclosure of accounting irregularities and a subsequent cover-up at an affiliated company, American Realty Capital Properties.

WW Investors projected that if the merger goes through, shares could potentially trade between $3.52 –$5.71 each. The investors estimate that NYRT has a liquidation net asset value range between $11.39 – $12.31 per share.

WW Investors also urged the board to hold its annual meeting either before or simultaneously with any special meeting connected with the JBG merger. The company’s annual meeting is currently scheduled for October 24th .

New York REIT currently owns 19 New York City properties totaling 3.3 million square feet. Shares of NYRT stock closed at $8.94 each on Monday.

Controversy over the management of New York REIT follows a wave of criticism of their management of several non-traded REITs and proposed roll-up transactions, as reported by The DI Wire.

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