The Real Deal New York

Apollo’s ARC deal “extremely positive” for New York REIT

Happel talks up dispositions, possible JVs

August 07, 2015 02:15PM
By Rey Mashayekhi

Happel ft

Michael Happel

Apollo Global Management’s investment in American Realty Capital is “extremely positive” for New York REIT and will bring “incredible resources” to the city-focused real estate investment trust, president and CEO Michael Happel said on New York REIT’s second quarter earnings call Friday.

Apollo announced Thursday that it is acquiring a majority stake in AR Global Investments, a new company representing a majority of American Realty Capital’s asset management business. The deal, valued at $378 million, means that the Leon Black-led private equity firm will “become the majority owner of the adviser” to New York REIT, Happel said.

The transaction is expected to close in the late third or early fourth quarter. New York REIT executives downplayed the deal’s impact on the company’s structure, noting that its adviser entity “will continue as it always has” while it is “the parent of the adviser that will have a change in ownership.”

The second quarter saw New York REIT increase portfolio occupancy to 97.2 percent at the end of the second quarter, from 95.2 percent the previous quarter and 93.6 percent at the same point last year. Happel also reiterated the company’s commitment to initiatives like the sale of five “non-core assets” in the outer boroughs for between $120 million to $130 million. New York REIT paid $102 million for the assets it is looking to divest and has hired Cushman & Wakefield and HFF to market them, he said.

The company continues to search for potential joint venture partnerships, with an eye on domestic and foreign institutional investors who “are looking to invest in Manhattan real estate,” Happel noted. A number of potential investors “have shown interest in partnering with us,” he added, with New York REIT expecting “to retain a majority interest with control” in any such deal. Eastdil Secured is helping the REIT find joint venture opportunities.

New York REIT has yet to initiate its planned $150 million share repurchasing plan, which Happel announced in June after shareholders publicly expressed concerns regarding the company’s direction. He added that the delay in initiating the program “should not come as a surprise,” as the company has stated its intention to fund share repurchases with asset sale proceeds.