The Real Deal New York

How NY REIT became an LLC with just a single asset

The company went from $2.8B in assets, to liquidation, to owning just over half of One Worldwide Plaza
By Kathryn Brenzel | November 07, 2018 06:30PM

One Worldwide Plaza at 350 West 50th Street (Credit: iStock and Wikipedia)

New York REIT, once a company with 4.4 million square feet of commercial space in the city, is now a limited liability company with a 50.1 percent stake in one office tower.

The company completed its conversion into an LLC Wednesday evening, according to New York REIT representatives. The move winds down the REIT’s liquidation of its $2.8 billion portfolio, a process that began in January 2017. At the time, the company set a deadline of January 2019 to shed its 19 commercial properties, but its remaining stake in One Worldwide Plaza means liquidation won’t be complete by then.

Michael Ashner, of Winthrop REIT Advisors, which will manage the LLC, said the decision to convert the REIT will save the company money. The REIT’s other option was to form a liquidating trust, which would’ve exposed the company to about $25.4 million in New York State and New York City transfer taxes, according to a proxy statement filed with the according to the latest filings with the Securities and Exchange Commission in August. Representatives for NY REIT declined to comment.

It’s been a rough four years for the company. The company’s troubles began in October 2014, when news of an accounting scandal surfaced at American Realty Capital, which previously controlled NYRT and was led by disgraced former REIT czar, Nicholas Schorsch. The news sent stock prices at NYRT tumbling and set off a months-long battle over the REIT’s leadership. Schorsch subsequently resigned from NYRT and 12 other affiliated companies. Settlements from related investor lawsuits could reportedly ultimately cost shareholders hundreds of millions of dollars.

In May 2016, NYRT and Maryland-based JBG Companies announced that they would merge to form a new REIT with $8.4 billion in assets. But following objections by some investors, the plan was scrapped. JBG instead merged with a Vornado Realty subsidiary. That August, NYRT announced plans to instead sell off all its assets. Four months later, it tapped Wendy Silverstein to lead the company’s liquidation and Winthrop as an adviser.

Silverstein stepped down as NYRT’s CEO in July to become chief investment officer of ARK, a real estate investment fund recently launched by WeWork. Silverstein declined to comment on Wednesday.

The new LLC’s purpose is to ultimately shed its remaining stake in One World Wide Plaza. The LLC will overseen by the REIT’s current five board of directors, and will remain in existence until the 1.8-million-square-foot office tower is fully sold. After four years, if the property stake isn’t sold, the board can extend the LLC’s term. This means five board members will oversee the asset, in addition to Winthrop, as well as RXR Realty and SL Green Realty Trust, which purchased a 49 percent stake in the building.