American Realty Capital New York City REIT Inc., a publicly registered non-traded real estate investment trust sponsored by AR Global, reached a settlement agreement with dissident shareholder Cove Partners III regarding a contested charter amendment vote at last year’s annual meeting of shareholders.
ARC NYC REIT proposed nine amendments to the company’s charter, none of which were approved by shareholders, leading the REIT to challenge the preliminary results.
Dissident shareholder Cove Partners III opposed the proposals and issued a letter to fellow shareholders urging that they vote against the amendments, believing that the proposals “eliminate valuable shareholder protections” and “open the door for unlimited and unfettered Schorsch control” of shareholders’ investments. NYC REIT is managed by an external advisor controlled by Nicholas Schorsch, the founder of AR Global.
The proposals, among others, included 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.
While the REIT said that it disagrees with certain decisions made in connection with tabulating the votes, it concluded that resolving the contest and entering into the settlement agreement with Cove was in the company’s best interest.
Cove agreed to standstill restrictions that would last three years which would prohibit them from soliciting proxies, calling a special meeting of stockholders, recommending that fellow shareholders vote against any proposal made by the company, or instituting certain litigation against the company.
The REIT agreed to pay Cove for its time, effort, and expenses relating to the company, the annual meeting, and the execution of the settlement agreement. The company plans to release the details of the settlement agreement in a future SEC filing.
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.
In other company news, the REIT recently launched a $30 million tender offer in response to a $23.5 million unsolicited tender offer made a private investment fund based in Tel Aviv, Israel.
American Realty Capital New York City REIT invests in properties located in the five boroughs of New York City, with a focus on Manhattan. The company closed its offering in May 2015 and continues to raise capital through its distribution reinvestment plan and shares repurchase program. The company raised a total of $772 million in investor equity, as of the third quarter of 2017, and owned six properties with an investment cost of $725 million, according to Summit Investment Research. In October 2016, the board approved an estimated net asset value of $21.25 per share. Shares were originally sold for $25.00 each.