New York City REIT bails on trust status

Office landlord plans to expand beyond Big Apple as cash reserves run thin

A photo illustration of New York City REIT CEO Michael Weil (Getty, New York City REIT)
A photo illustration of New York City REIT CEO Michael Weil (Getty, New York City REIT)

New year, new strategy for New York City REIT.

The office landlord is expanding its business beyond the city and changing its status from a real estate investment trust to a taxable C corporation.

The trust, which is part of a web of companies founded by Nicholas Schorsch, boasts 1.2 million square feet of office space in its portfolio, according to Crain’s, but its vacancy rate is a troublesome 30 percent. The company was down to $7 million in cash as of Sept. 30 and in recent months fended off an activist investor.

Its stock has been trading below $2 per share, putting it at risk to be delisted from the market.

CEO Michael Weil in a statement cited the difficulty of the office environment in the wake of the pandemic.

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“While we continue to believe in the long-term necessity of New York City real estate, the pace of recovery of the office segment since the COVID outbreak remains challenged,” Weil said.

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A board-approved 1-for-8 reverse stock split, effective as of close of business on on Jan. 11, will turn each outstanding share of common stock into 0.125 shares of common stock.

The AR Global Investments-managed trust disclosed in May it was in breach of covenants on more than $200 million of debt at four properties, including 9 Times Square and 1140 Sixth Avenue. The company cited “financial difficulties” for its breaches, putting it at risk for default.

Publicly traded REITs are coming off an abysmal year. As of mid-December, the U.S. MSCI index, which tracks real estate investment trusts, plunged more than 20 percent in 12 months, the largest fall since REITs lost 38 percent of their value in 2008.