ARC NYC REIT Fails to Garner Stockholder Votes, Annual Meeting Adjourned
American Realty Capital New York City REIT Inc., a publicly registered non-traded real estate investment trust, announced that yesterday’s annual meeting of stockholders was adjourned to July 19, 2017, according to a filing with the Securities and Exchange Commission.
An attendee of the meeting told The DI Wire that the adjournment was due to lack of votes in favor of the board’s proposed charter amendments.
The charter amendments, which were substantially the same as charter amendments that failed to gain approval at last year’s meeting, pertain to stock, stockholder voting rights, stockholder information rights, board compensation and conduct, transfer and ownership of shares, conduct of company business, and provisions relating to AR Global, the REIT’s advisor, and their affiliates.
Earlier this month, dissident shareholder Cove Partner III LLC – and entity overseen by Michael Asher and John Alba – issued a letter to fellow investors urging that they vote against the proposals, calling it a “basket of outrageous self-serving and entrenchment-minded proposals to amend the company’s charter…which were recommended and approved by the handpicked Schorsch board of directors.”
Among other changes, the board is seeking to remove the charter provision that prevents the REIT from retaining any advisor for longer than one year. ARC NYC REIT is currently managed by an external advisor controlled by Nick Schorsch, and Ashner believes that like other AR Global REITs, it will attempt to enact a controversial 20-year management agreement with its advisor.
The REIT is also seeking to remove the charter provision that imposes a fiduciary responsibility on the advisor and duty to the company and to the stockholders.
Ashner, along with Steven Witkoff, was instrumental in replacing AR Global as the advisor of New York REIT (NYSE: NYRT) and shaking up its board of directors.
The investors believe that, if approved, the proposals will “eliminate valuable shareholder protections” and “open up the door for unlimited and unfettered Schorsch control” of shareholders’ investments.
The REIT is attempting to prevent the advisory agreement from being terminated on 60 days’ written notice, limiting access to the books and records of the company, allowing the board to privately sell shares in the company, eliminating the ability of 10 percent of shareholders to call a special meeting and giving the board authority to increase this threshold by 5x, and eliminating the current shareholder majority voting requirement before the board can take specified actions.
In other NYC REIT news, The DI Wire reported this week that research and due diligence firm Summit Investment Research issued a report stating that ARC New York City REIT investors should brace for a valuation decline of 50-70 percent when it completes its updated valuation this Fall.
According to Summit Investment Research, ARC NYC REIT had a 19 percent distribution coverage in the first quarter of 2017 for its 6 percent distribution rate and a $2.91 per share total overdistribution. Shares were originally sold for $25.00 each, and the board approved its first estimated net asset value of $21.25 per share last October.
Stockholders will also vote to approve Edward Weil Jr., Elizabeth Tuppeny, Lee Elman and Abby Wenzel to continue their roles as directors, and ratify the appointment of KPMG LLP as the company’s independent registered public accounting firm for 2017.
The adjourned meeting will be held at 4:00 p.m. at The Core Club in New York City.
American Realty Capital New York City REIT is a non-traded real estate investment trust focused on properties located in the five boroughs of New York City, with a focus on Manhattan. The company closed its initial public offering in May 2015 and had raised a total of $764 million in investor equity, as of March 31, 2017. The company owns six properties valued at $785 million.
