American Realty Capital New York City REIT Inc., a publicly registered non-traded real estate investment trust sponsored by AR Global, disclosed the preliminary voting results for a number of charter amendments proposed by the company. None of the charter amendments were approved by shareholders and the company is challenging the preliminary results. NYC REIT is managed by an external advisor controlled by Nicholas Schorsch, the founder of AR Global.
Dissident shareholder Cove Partners III issued a letter to fellow shareholders in June 2017 urging that they vote against certain charter amendments that were proposed at the annual meeting. Cove believes the proposals “eliminate valuable shareholder protections” and “open the door for unlimited and unfettered Schorsch control” of shareholders’ investments.
ARC NYC REIT is challenging the preliminary voting results, as it believes the results are incorrect and “failed to give effect to a significant number of votes cast on each of the proposals.” Approximately 31 million shares were entitled to vote at the annual meeting, of which 18.1 million shares, or 58.3 percent, voted.
The proposals, among others, include ending the fiduciary obligation of the board to shareholders, including the fiduciary duty to supervise the relationship with the company’s advisor; allowing an advisory agreement with the Schorsch-controlled advisor for longer than the current one-year term; and limiting access to the books and records of the company.
The REIT is also seeking to prevent the Schorsch advisory agreement from being terminated on 60 days’ written notice, 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.
Cove Partners III is an entity overseen by Michael Ashner and John Alba. Ashner, along with Steven Witkoff, also owns WW Investors LLC which was instrumental in replacing AR Global as the advisor of New York REIT (NYSE: NYRT) with their affiliate Winthrop Realty Partners and shaking up the board of directors.
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, 2016. The company owns six properties valued at $785 million, and in October 2016, the company’s board approved an estimated net asset value of $21.25 per share. Shares were originally sold for $25.00 each.