BOSTON, July 9, 2015 (GLOBE NEWSWIRE) -- First Winthrop Corporation, a private real estate management and investment company whose executive management team has served as external advisors to multiple real estate investment trusts, and The Witkoff Group today released a letter recently sent to the Board of Directors of New York REIT, Inc. (NYSE:NYRT), expressing their views on recent actions taken by NYRT.
The full text of both letters and the proposal can be found below
FIRST WINTHROP CORPORATION
7 Bulfinch Place
Boston, MA 02114
June 30, 2015
VIA E-MAIL AND FEDEX
The Board of Directors of New York REIT, Inc.
405 Park Avenue
New York, New York 10022
|Attention:||Michael A. Happel|
|Chief Executive Officer and President|
Dear Messrs. Kahane, Burns and Read and Ms. Perrotty:
It has taken us a few days to digest the proposals you described at the Annual Shareholders Meeting as well as those press released following the meeting. We want to share with you our thoughts.
Appointment of Randolph C. Read as non-executive Chairman of the Board. We think this is a change in form only – there is no real corporate governance substance to it. Mr. Read as well as the two other "independent directors" each serve and/or have served on more than five entities sponsored by American Realty Capital, the sponsor of NYRT and the owner of its advisor. The fourth director still serves on more than twenty sponsored entities including, most disturbingly, at least one that competes directly with NYRT. To us it feels more like cousins marrying than improved corporate governance.
Sale of Non-Core Outer Borough Assets. These assets were acquired in 2012 for approximately $105M and the company is now hoping to sell them three years later for $110M before closing costs including disposition fees to the advisor of $2-3 million. These are assets with leases that have 10% rent increases and renewal options. An almost irreplaceable income stream in today's market. In addition, the future redevelopment potential of these properties could be substantial. Why sell them now? We believe the decision to sell results directly from the Company's inability to access capital markets in a manner non-dilutive to net asset value. More troubling is the issue as to whether these sales are needed to maintain a dividend which is certainly not covered by the company's current operating cash flow. As we all know, paying an operating "dividend" from cash reserves and asset sales is a fool's remedy to maintain stock price, an abusive device commonly seen in the publicly registered non-traded REIT space.
Proposed joint ventures. We similarly believe that the principal reasons behind selling equity interests in the Company's better assets also reflects all of the concerns raised above. We also question whether the Board understands that a sale of an equity interest in an asset reduces disproportionately the value of the retained interest. Rather than being able to sell the building in the future, NYRT would be selling a retained interest in the building then subject to the rights of a third party partner. Has this been considered?
Stock repurchase. NYRT is a public company which investors believed was created to grow in size and value for their benefit. If so, how does it make any sense to shrink the equity base of the company by repurchasing stock through asset sales? This cannot be explained as a recycling of capital because, in this instance, the capital expended in the stock repurchase is permanently lost to the company. While we believe that this is a Company that we can grow creating real long-term shareholder value, we do not see how this can occur through asset sales and participation sales which, on the one hand, may be destructive of shareholder value and, on the other hand, are used to fund stock repurchases. The real motivation appears to us as an attempt to support near term stock price at the expense of long term shareholder value. Something that seems so far unsuccessful.
Future proposals. We believe the Board should reconsider its rejection of open discussions with the Winthrop/Witkoff Group. Putting aside the ugly conflicts that exist when a sponsor and its management team are creating new vehicles that directly compete with NYRT, we believe the Company would be acquiring a "Best in Class" experienced management team willing to provide the company with both exclusivity and a substantial cash infusion insuring its future growth. Since the annual meeting, we have met with and talked to a number of institutional investors who have shared with us their deep concerns relating to the Company, its management, its choices and its direction. We also have listened to how we might improve the prior proposal. Consequently, the Board can expect a revised proposal from us shortly. We certainly hope the Company will be more open minded in its review and restrain itself from those steps which would be destructive of shareholder value in the interim.
Very truly yours,
|The Witkoff Group LLC||First Winthrop Corp.|
|Steve Witkoff||Michael L. Ashner|
Any views expressed in the above letter represent the opinion of First Winthrop Corporation and The Witkoff Group, whose analysis is based solely on publicly available information. No representation or warranty, express or implied, is made as to the accuracy or completeness of any information contained in the letter, and First Winthrop Corporation and The Witkoff Group expressly disclaims any and all liability based, in whole or in part, on such information or any errors therein or omissions therefrom. The letter is not intended to be, and should not be construed as, investment, legal or tax advice. First Winthrop Corporation and The Witkoff Group reserves the right to modify or change its views, conclusions and/or investment positions for any reason or no reason at any time, without notice.
CONTACT: Contact at First Winthrop Corporation Michael L. Ashner Investor or Media Inquiries Phone: (516) 822-0022; e-mail: firstname.lastname@example.orgSource:First Winthrop Corporation