Institutional investment firms Sorin Capital Management and Rambleside Holdings each issued public letters this week to New York REIT (NYSE: NYRT) president and CEO Michael Happel to voice concerns with the company and recommend specific changes, including increasing the independence of the board of directors and severing all ties with AR Capital and its affiliates.
Significant shareholders of New York REIT, Sorin and Rambleside each decried a perceived valuation gap between the REIT’s share price and the underlying value of its assets.
Additional concerns of the institutional investors include the “suspension of a formal process to evaluate strategic alternatives,” the absence of a “realistic or comprehensive plan for closing the value gap,” and the company’s “close relationship with AR Capital.”
The Sorin letter expressed concern that potential conflicts of interest resulting from ties between NYRT’s officers and directors and AR Capital could affect shareholders, “Not only is the executive chairman of the company also the co-founder of AR Capital, but the company’s public filings indicate that the board’s three independent members currently hold and/or have previously held several other directorships with AR Capital related entities.”
Sorin also cited the June 4 resignation of Gregory Sullivan, the REIT’s former chief financial officer and chief operating officer, as another cause of concern.
In response to the critical letters from Sorin and Rambleside, First Winthrop Corp., a private Boston-based real estate management and investment company whose executive management team has served as external advisor to multiple real estate investment trusts, and The Witkoff Group released their own letter in which they offered to replace AR Capital as the external advisor to NYRT.
They also offered to buy 8.33 million shares of New York REIT’s stock at $12 per share, which is a 32 percent premium to the current trading price of the stock.
New York REIT responded that it was open to communications with its stockholders and values their input and will continue to take actions to achieve similar objectives, while rejecting the First Winthrop/Witkoff suggestion outright.