The Real Deal New York

NY REIT shuffles board, taps Eastdil to advise on deals

Moves come after further criticism this week from activist shareholders

October 01, 2015 11:25AM
By Rey Mashayekhi

Marc Rowan Michael Happel

From left: Marc Rowan and Michael Happel

New York REIT responded to mounting shareholder criticism Thursday by announcing a series of governance and strategic moves, including appointing Apollo Global Management co-founder Marc Rowan to its board of directors and tapping Eastdil Secured to advise on “potential strategic transactions at the asset or entity level.”

The moves came after investor Jonathan Litt became the latest shareholder Wednesday to question the real estate investment trust’s direction, expressing concern in an open letter that New York REIT “has consistently traded at a significant discount to the value of its trophy Manhattan office buildings.”

Litt’s letter was addressed to Rowan – whose firm acquired New York REIT adviser American Realty Capital for $378 million in August – and followed similar, publicly aired concerns from company shareholders Sorin Capital Management and Rambleside Holdings earlier this year.

In response to calls for New York REIT to reform its governance structure – which is closely aligned to beleaguered sponsor AR Capital – the company said Thursday that it had appointed Rowan as a director and is conducting a search for an additional two independent directors to its board.

The REIT has also engaged Eastdil to seek investors “as potential asset-level partners and/or to pursue broader strategic options,” while continuing with its plan to sell “non-core, outer borough assets” – like a Clinton Hill rental building it recently offloaded for $38 million.

Additionally, New York REIT said it is in the process of implanting a joint venture arrangement with American Realty Capital New York City REIT – a non-traded REIT also sponsored by AR Capital and headed by New York REIT CEO Michael Happel.

The companies will “invest in new transactions together” as a 50/50 joint venture designed to “eliminate competition for transactions between the two entities” and reduce the need to raise additional equity capital, New York REIT said — though the boards of both companies will need to approve the terms of the agreement.