New York REIT Inc., a property owner under pressure from investors to boost value, rose the most since June after merger talks with Washington-area landlord JBG Cos. ended because of shareholder opposition to the deal.
New York REIT will now sell properties it owns individually and return the proceeds to investors, the companies said in a statement Tuesday. The real estate investment trust will also seek new financing to buy the stake it doesn't already own in Manhattan's Worldwide Plaza and to repay its existing $485 million credit facility in full.
“We were unable to modify the transaction to the degree that would likely have gained shareholder approval,” Matt Kelly, managing partner at JBG, said in the statement. “Our agreement to terminate will now permit the NYRT board to proceed with the asset sale plan its shareholders desire.”
The shares rose 5.5% to $10 at 9:47 a.m. New York time. It was the biggest gain in the Bloomberg REIT Index, which fell 0.7%.
New York REIT said it plans to re-engage in conversations with those who already expressed an interest in individual assets as well as seek other buyers for its properties. The board would also consider offers for the entire company if they provide more value than selling the real estate off piece by piece, according to the statement.
New York REIT's buildings are mostly in Manhattan and include a 49% stake in Worldwide Plaza, a 1.8 million-square-foot (167,000-square-meter) skyscraper on Eighth Avenue that contains the Americas headquarters of Nomura Holdings Inc. Also among its properties is 1440 Broadway, a 750,000-square-foot tower just south of Times Square whose tenants include Macy's Inc., Mizuho Financial Group Inc. and Citigroup Inc.
Dissident investors opposed New York REIT's agreement to merge with JBG, which would have created a publicly traded landlord with holdings in New York and the Washington area, rather than sell off its assets at market prices. Shareholders Michael Ashner and Steven Witkoff, joint owners of WW Investors LLC, said the deal was “one of the worst strategic transactions proposed to stockholders by a REIT board in recent memory.” On June 27, they proposed a slate of five candidates to replace the board.
Mr. Ashner and Mr. Witkoff had been critics of the REIT's management for at least a year. As opponents of the REIT's external manager, an entity that had connections with investor Nicholas Schorsch, the pair offered to manage the company themselves. Mr. Schorsch had resigned from the board of New York REIT and 12 other companies in late 2014 following disclosure of accounting inaccuracies at another of his companies, American Realty Capital Properties Inc.
A merger with JBG would have triggered long-term performance incentives that would benefit the external manager, WW Investors said.
