BOSTON, Aug. 11, 2015 (GLOBE NEWSWIRE) -- First Winthrop Corporation, a private real estate management and investment company, and The Witkoff Group today released a letter sent to the Board of Directors of New York REIT, Inc. (NYSE:NYRT) on July 15, 2015, submitting a revised proposal with respect to their offer to become the external manager of NYRT.
The full text of the letter can be found below
|FIRST WINTHROP CORPORATION||THE WITKOFF GROUP, LLC|
|7 Bulfinch Place||40 West 57th Street|
|Suite 500||Suite 1620|
|Boston, MA 02114||New York, NY 10019|
July 15, 2015
VIA E-MAIL AND
The Board of Directors
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:
As we advised in our letter dated June 30, 2015, we have prepared and are now submitting a revised proposal (the "Revised Proposal") to the Board of Directors of New York REIT ("NYRT" or the "Company") regarding replacement of the current advisor by an affiliate of First Winthrop Corporation and The Witkoff Group, LLC ("Winthrop/Witkoff"). In so doing, the Revised Proposal incorporates feedback that we have received from the investment community since our first correspondence to you on June 10, 2015.
To summarize briefly, we believe that there are three key components to our prior proposal that we are now updating and addressing in this Revised Proposal. The first element remains exclusivity. It beggars the mind that in this day and age of public company fiduciary responsibility that any Board of Directors would permit its existing management team to sponsor and manage new investment entities that compete directly with the investment policies and goals of the company they oversee. The inherent conflicts of interest this situation begets are self-evident. To this point, we can find no publicly traded real estate investment trust in which internalized management is permitted to behave in such a manner. Winthrop/Witkoff, on the other hand, is proposing that its principals perform all of their acquisitions and investment activities with respect to New York metropolitan area REIT tax compliant assets exclusively through NYRT.
We also believe that the second component of our Revised Proposal, an equity commitment to purchase six million newly issued shares from the Company at a purchase price of $12 per share, establishes an alignment of interest with shareholders. By way of comparison, our review of the NYRT public filings indicates that management and the advisors have acquired through April 2015, 4,270,841 shares and operating partnership units of which less than 320,000 were outright purchased. Almost 4,000,000 of those shares were granted to management and the advisor by management and the advisor without any payment to the Company. Our experience, and we believe that of most investors, has been that real estate companies in which management has real "skin" in the game perform significantly better than those in which management takes a free ride. Moreover, our investment would allow the Company to increase its asset base by up to $300 million rather than reducing its size in order to fund a stock redemption plan and a currently underfunded dividend policy.
The third component of our Revised Proposal provides for a process by which shareholders can vote annually to internalize the management structure. The first vote would occur approximately within one year of our appointment as the new advisor. No termination fee would be payable to our advisor if management were internalized and we would commit to vote our shares in proportion to the vote of non-affiliated shareholders. While we believe that exclusivity and capital commitment are of great significance, this issue of internalization is one that investors have raised frequently with us.
We have attempted to structure our Revised Proposal so that substantially all of the principal economic terms are more favorable to NYRT than those that are contained in the existing advisory agreement. If we have misunderstood one or more of the terms and they are less favorable, please feel free to point this out to us.
Attached as Exhibit A hereto is a description of the key terms and provisions of our Revised Proposal. For ease of comparison with the existing advisor's arrangement, we have also attached as Exhibit B a comparison of the key terms and provisions proposed by Winthrop/Witkoff with those of the current advisor.
In addition to the benefits of exclusivity, capital alignment, internalization flexibility and improved economic terms, we want to once again underscore the depth and breadth of our experience as investors, operators, and developers in the New York Metropolitan market and the public capital markets. While you have to date shown no interest in discussions with us, we hope the Revised Proposal will encourage you to reconsider your position and discuss same with us.
We are aware of the existing terms of the current advisory agreement including those relating to renewal and termination. We believe that in order to proceed further, it would be in the mutual best interests of all parties to commence discussions sooner rather than later in view of the multitude of issues to be resolved. Again, we look forward to discussing the above with you.
Very truly yours,
|The Witkoff Group LLC||First Winthrop Corporation|
|Steve Witkoff||Michael L. Ashner|
|Chief Executive Officer|
|PRIMARY TERMS OF ADVISORY AGREEMENT|
|New Advisor:||An entity controlled by Winthrop/Witkoff (the "New Advisor").|
|Capital Investment:||The Winthrop/Witkoff group would acquire up to 6,000,000 newly issued shares of common stock of the Company for a purchase price of $72,000,000 upon appointment as the New Advisor.|
|Term:||An initial one year term renewable annually subject to shareholder vote as described below.|
|On an annual basis, shareholders shall be given the opportunity to vote on internalization of the manager or renewing the existing advisory agreement for an additional one year term. In the event of internalization, no termination fee would be payable to the New Advisor. Management and their affiliates would vote all of their shares in proportion to the shares of non-affiliated voting shareholders. The initial vote would occur on the later of (i) the first annual shareholder meeting following appointment of the New Advisor; or (ii) one year following such appointment.|
|The Asset Management Fee and expense reimbursement ("Reimbursements") shall be essentially the same as currently provided in the Sixth Amended and Restated Advisory Agreement between NYRT and New York Recovery Advisors, LLC (the "Existing Advisory Agreement"), that is 50 basis points on the first $3.0 Billion of Cost of Assets with a reduction to 35 basis points on the Cost of Assets in excess, as similarly defined, of $3.0 Billion. The Asset Management fee inclusive of Reimbursements will be capped annually, however, so as not to exceed the lesser of (i) 0.75% of the Cost of Assets; and (ii) 1.5% of the imputed equity value of NYRT. For purposes of determining the imputed equity value, one would multiply the number of existing issued and outstanding shares by the year end 90 day trailing price of the common stock. That sum would be increased or decreased, as the case may be, by the issuance price of future common and/or preferred share issuances less the price paid by NYRT for common and/or preferred share redemptions or liquidating distributions. If one were to assume a 90 day trailing price of $10.00 per share and an outstanding share count of 168,000,000 shares, (the current approximate share count increased by the 6,000,000 new shares with no new share issuances or redemptions) the imputed equity value would be $1.68B thereby capping the total Asset Management fee and Reimbursement for purposes of (ii) above at $25,200,000.|
|The New Advisor and its affiliates will not be entitled to receive any of the following fees:|
|· Acquisition Fee|
|· Financing Coordination Fee|
|· Property Disposition Fee|
|· Dealer Manager Fee|
|The New Advisor would be entitled to incentive compensation as determined by the Compensation Committee of the newly-restructured Board, as described below, which would be based on current REIT industry standards and practices. Such compensation may include one or a combination of a promoted interest, restricted securities, option and/or other types of compensation.|
|Property Management Fees:||Property Management and related fees would be modified as follows:|
|For office properties and retail properties, the fee would be reduced from 4% to 3%.|
|All hotel properties would be third party managed.|
|The Oversight Fee, where applicable, would be reduced from 1% to .65%.|
|Unlike the current arrangement, neither the New Advisor nor its affiliates would be entitled to any leasing commissions.|
|Termination Fee/Severance:||Except in the event of internalization as described above, if the proposed Advisory Agreement is terminated by NYRT without Cause (as defined in the Existing Advisory Agreement), the New Advisor will be entitled to a termination fee equal only to the unpaid portion of the projected Asset Management Fee for the unexpired portion of that twelve month period.|
|Employees and Existing Advisor:||The New Advisor will not involuntarily terminate any current personnel providing services on behalf of the current advisor for a period of not less than 60 days on their current terms and conditions.|
|To the extent severance costs may be due to employees pursuant to existing employment contracts, NYRT, at the Board of Director's discretion, may fund such payments from the sale of additional common shares that may be purchased by Winthrop/Witkoff at the then trailing 90 day average price of shares.|
|The New Advisor would agree that it is a fiduciary of NYRT similar to the existing advisor.|
|Winthrop/Witkoff shall offer to NYRT all new real estate investment opportunities which are REIT tax compliant within the five boroughs of New York City, extending to a radius of 20 miles from Times Square during the term of the New Agreement.|
|The Board of Directors shall be expanded from four directors to not less than seven directors with a majority meeting the independence standards under NYSE rules. The Board will maintain customary committees for public companies including an audit committee, compensation committee and corporate governance committee, the members of which will consist of independent directors. The revised board structure would not be classified.|
|Other Terms:||To be consistent where relevant with the Existing Advisory Agreement and as disclosed in NYRT's most recent proxy statement|
|New Advisor||Existing Advisor|
|Exclusivity:||All New York metropolitan REIT tax compliant assets.||None|
|Capital Investment:||Purchase 6,000,000 shares for $72,000,000.||$750,000 for 83,333 shares|
|Term:||One Year||One Year|
|Internalization:||Mandatory annual shareholder vote||Discretionary|
|Advisory Fee:||50 basis points up to $3B and 35 basis points over $3B on Cost of Assets||50 basis points up to $3B and 40 basis points over $3B on Cost of Assets|
|Cap of Fees:||Fee and reimbursements capped at the lesser of: (i) 75 basis points of the Cost of Assets; and (ii) 1.5% of the imputed equity value of NYRT.||No cap on fee and reimbursements|
|Disposition Fee:||None||Lesser of: (i) 2% of Contract Sales Price; and (ii) one-half of the Competitive Real Estate Commission paid to a 3rd Party Broker (Capped at 6% of total sale price)|
|Property Management Fee:||Office and Retail - 3%||Office and Retail - 4%|
|Hotel Management- Third party management only.||Hotel Management - Market Based|
|Oversight Fee - 65 basis points||Oversight Fee - 100 basis points, if not the property manager|
|Leasing Commissions: None. Third party payments to leasing brokers only.||Market Based to Advisor in addition to third party payments.|
|Board Structure:||Not less than seven members of which a majority will be independent||Four members all of whom serve or have served on boards of companies affiliated with the current advisor|
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: First Winthrop Corporation Michael L. Ashner Investor or Media Inquiries Phone: (516) 822-0022; e-mail: firstname.lastname@example.orgSource:First Winthrop Corporation