Business Context and Reporting Period
This Form 8-K, filed on October 26, 2016, by American Realty Capital New York City REIT, Inc. (the "Company"), reports the determination of the Estimated Per-Share Net Asset Value ("Estimated Per-Share NAV"). The valuation was approved by the independent directors of the Board on October 24, 2016, based on asset and liability values as of June 30, 2016. This represents the first time the Board has determined an Estimated Per-Share NAV, shifting from a planned quarterly schedule to an annual basis following regulatory guidance.
Key Financial Metrics
The filing details the components of the Estimated Per-Share NAV calculated as of June 30, 2016, based on 30,419,798 fully diluted shares outstanding.
| Component | Per Share Value | Total Value (Approx.) |
|---|---|---|
| Real Estate Assets | $25.81 | $785.0 million |
| Other Assets | $2.60 | N/A |
| Fair Value of Debt | ($6.56) | N/A |
| Other Liabilities | ($0.60) | N/A |
| Estimated Per-Share NAV | $21.25 | N/A |
The concluded value of the Real Estate Assets reflects a 10.4% increase over the sum of original purchase prices ($687.5 million) and post-acquisition capital expenditures ($23.3 million). The valuation utilized a weighted average terminal capitalization rate of 5.18% and a discount rate of 5.98%.
Material Changes and Comparisons
The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the prior period. However, it notes that the Advisor believes there have been no material changes to assets and liabilities between June 30, 2016, and the filing date, other than changes related to distribution payments exceeding cash flows from operations. The determined Estimated Per-Share NAV of $21.25 is lower than the average price paid by investors for outstanding shares as of June 30, 2016, which was $24.79 per share.
Guidance, Outlook, and Risks
Outlook and Policy Changes: The Company anticipates publishing an updated Estimated Per-Share NAV on at least an annual basis. Effective November 1, 2016, the Distribution Reinvestment Plan (DRIP) will use the Estimated Per-Share NAV as the purchase price. The Share Repurchase Program (SRP) will also utilize the Estimated Per-Share NAV, with repurchase prices ranging from 92.5% to 100% of the NAV depending on the holding period (1 to 4+ years).
Risks and Limitations: The filing emphasizes that the Estimated Per-Share NAV does not represent the price at which shares would trade on an exchange, the amount a stockholder would receive in a liquidation, or the price a third party would pay for the Company. It does not reflect a liquidity discount or transaction costs. The valuation is sensitive to assumptions regarding discount rates; a sensitivity analysis showed the NAV could range from $19.65 to $21.51 based on varying discount rates.
Unusual Items: The property at 1140 Avenue of the Americas was valued at its acquisition cost rather than fair value because it was owned for less than one quarter as of the valuation date.
Investor Verification Checklist
- Verify the specific valuation assumptions (discount rates and capitalization rates) used by Duff & Phelps against current market conditions.
- Confirm the impact of the new DRIP and SRP pricing mechanisms on future share issuance and repurchase costs.
- Review the sensitivity analysis to understand the potential range of NAV values ($19.65 - $21.51) if market rates shift.
- Assess the liquidity implications, as the NAV does not account for the lack of a public trading market or transaction costs associated with selling assets.
- Monitor future filings for the annual update of the Estimated Per-Share NAV as promised by the Board.