NEW YORK CITY—An activist investor has sent an open letter to New York REIT “regarding the substantial gap that has developed between the common stock share price of New York REIT and the underlying value of the company's assets.”

The missive from Sorin Capital Management to Michael Happel, CEO and president of New York REIT reecommends four measures to improve shareholder value.

In part, the letter—written by Sorin managing member James Higgins—reads, “We have seen a continuing deterioration of the stock price over the past six months, with the company's shares currently trading at a greater than 30% discount to our estimate of fair value. This gap has increased in the past 45 days with the company's announcement of two news items: first, the decision of the board of directors to suspend the formal process to evaluate strategic options for the company and, second, the resignation of the company's CFO and COO Gregory Sullivan.

“…As we have discussed, we believe that continuing to actively pursue strategic alternatives (such as a sale of the company or material assets) is the most direct path to unlocking value for the shareholders. To that end, we recommend the following: re-engage Barclays Capital, along with another well-recognized firm that specializes in real estate capital markets, to jointly pursue strategic alternatives for the company; increase the independence of the board by adding members that are truly independent of management and the AR Capital organization; sever all ties with AR Capital and its affiliates, including American Realty Capital New York City REIT; and sell the company's non-core assets as outlined in the June 2015 investor presentation and distribute proceeds to shareholders as a stock buyback or special dividend. Of course, asset sales should be broadly marketed and transactions should exclude all entities affiliated with AR Capital or its principals, officers or directors.

“We intend this letter as a constructive communication, but 'more of the same' from the board and management is neither a strategic alternative nor what shareholders should expect or deserve."

NY REIT has responded publicly to the letter, saying in a written statement, “The NYRT board of directors and management team are committed to acting in the best interests of the company and all NYRT stockholders. The company welcomes open communications with its stockholders and values their input toward the shared goal of enhancing stockholder value.

"Our board of directors and management team are actively pursuing several previously announced strategies that should allow the company to maximize long-term stockholder value. We look forward to continuing our dialogue with all NYRT stockholders as we continue to take actions to achieve this important objective."

Instant Insights /

NY REIT Gets Called on the Carpet

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