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Witkoff and Ashner claim NY REIT blew off potential suitor

Activist shareholders take aim at struggling office REIT in latest open letter to board

From left: Michael Happel and Steve Witkoff
From left: Michael Happel and Steve Witkoff

The drama over struggling real estate investment trust New York REIT continues with yet another shareholder letter to the board – this time from investors Michael Ashner and Steve Witkoff, who claim the company has shown “a clear disdain of duty and ugly discourtesy to potential suitors” interested in buying or merging with New York REIT.

On Wednesday, Ashner and Witkoff’s WW Investors shared a letter sent to the New York REIT board of directors detailing how, as part of the REIT’s ongoing “strategic review process,” Ashner had contacted an unnamed “publicly traded company” that was “enthusiastic about the opportunity to revisit an acquisition of NYRT.”

But overtures from the unnamed party were met with silence from New York REIT, according to the letter. After the company sent a proposal to the REIT’s board “on or about May 4” and set a deadline for a response one week later, New York REIT allowed the deadline to pass “with no response” to the interested party.

“When I say ‘no response,’ I mean not a counter offer, not a suggestion to meet, not a blow off letter, not even [a] telephone call,” Ashner wrote in the letter . “Nada. Nothing. In my 20 years of personal involvement in public companies, I cannot recall such an egregious disregard of process, nay simple courtesy.”

Ashner declined to comment on the letter, beyond offering that WW Investors is “keenly informed of the dates needed in which to run a [shareholder] slate” against the current board of New York REIT in advance of its annual shareholder meeting in October. Neither Witkoff nor New York REIT returned requests for comment.

Reports emerged earlier this month that New York REIT was in talks with Maryland-based private real estate investment firm JBG Companies over a possible merger. That deal, should it come to pass, would involve a “reverse merger” that would see JBG join forces with New York REIT under its publicly traded umbrella.

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New York REIT has been in the market for a merger or buyout since October, when it hired Eastdil Secured to advise on “potential strategic transactions.” In January, SL Green Realty denied reports that it was in negotiations to buy New York REIT, and sources told The Real Deal that SL Green is not the unnamed public company that expressed an interest in acquiring New York REIT.

Ashner and Witkoff’s correspondence is the latest in a string of activist shareholder letters sent to New York REIT over the past year – with current and former investors such as Sorin Capital Management, Greg Cohen’s Rambleside Holdings and Jonathan Litt’s Land and Buildings all expressing concerns over the company’s governance and direction.

The shareholder discontent has heeded results; New York REIT announced it was tapping Eastdil to market the company, as well as Cushman & Wakefield and HFF to market select outer borough assets, in wake of the correspondences.

But the activists are understood to have agreed to back down from their aggressive stance late last year, when New York REIT announced it was delaying the annual stockholder meeting to allow the strategic review process more time and put off any potential shareholder slates against the current board of directors.

Ashner and Witkoff’s letter, however, indicates continued shareholder unhappiness with the way the beleaguered REIT is being run. The two previously penned an open letter to the company’s board last year offering to replace Nicholas Schorsch’s AR Global as New York REIT’s external advisor. The board shot down that offer, stating that it was “not in the best interests” of the company.

New York REIT is trading at a significant discount to its net asset value and in need to liquidity to exercise its $270 million purchase option early next year on the 49-story, 1.8 million-square-foot One Worldwide Plaza office building in Midtown.

The REIT holds a 49 percent ownership interest in One Worldwide Plaza. In November, CEO Michael Happel said he “fully expect[s]” the company to exercise the buyout option on the property.

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