Business Context and Reporting Period
This Form 8-K filing 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") as of June 30, 2018. The report was filed on October 23, 2018, following the unanimous approval of the independent directors of the Board on that date. The Company is a non-listed REIT focused on real estate assets in New York City.
Key Financial Metrics
The filing provides a detailed breakdown of the Estimated Per-Share NAV components as of June 30, 2018, compared to June 30, 2017. The Company does not report standard GAAP revenue, profit, or cash flow metrics in this specific filing, as it focuses on fair value estimates for NAV purposes.
| Component (Per Share) | June 30, 2017 | June 30, 2018 |
|---|---|---|
| Real Estate Assets | $25.98 | $27.12 |
| Other Assets | $2.44 | $2.64 |
| Fair Value of Debt | ($7.85) | ($9.21) |
| Other Liabilities | ($0.31) | ($0.29) |
| Estimated Per-Share NAV | $20.26 | $20.26 |
Additional Metrics:
- Total Real Estate Asset Value: $850.1 million (within a valuation range of $796.4 million to $860.0 million).
- Shares Outstanding: 31,346,179 (fully diluted basis as of June 30, 2018).
- Recent Acquisition: A medical office building in Bay Ridge, Brooklyn, acquired on October 17, 2018, for $15.93 million.
Material Changes Versus Prior Period
The Estimated Per-Share NAV remained flat at $20.26 per share compared to the prior year. This stability resulted from an increase in the fair value of Real Estate Assets, which was partially offset by the payment of distributions to common stockholders in excess of cash flows from operations. The fair value of debt increased from $7.85 to $9.21 per share, reflecting changes in the estimated fair value of mortgage notes payable.
Guidance, Outlook, and Risks
Management Commentary and Outlook:
- Valuation Frequency: The Company anticipates publishing an updated Estimated Per-Share NAV on at least an annual basis.
- Distribution Policy: Distributions were suspended effective March 1, 2018. The Board expects to assess the distribution policy no sooner than February 2019.
- Share Repurchase Program (SRP): The SRP is currently suspended and will remain so until the Company announces the resumption of regular cash distributions.
- DRIP Pricing: Future distributions, if any, reinvested under the Distribution Reinvestment Plan (DRIP) will be priced at $20.26 per share.
Risks and Contingencies:
- Valuation Limitations: The Estimated Per-Share NAV does not represent the price at which shares would trade on an exchange, the amount received in a liquidation, or the value a third party would pay. It does not reflect a liquidity discount.
- Sensitivity to Assumptions: The NAV is highly sensitive to discount rates. A sensitivity analysis showed the NAV could range from $18.55 to $20.58 based on varying discount rates.
- Market Fluctuations: Real estate values fluctuate based on market conditions, interest rates, and individual asset performance.
Important Facts for Investors to Verify
- NAV Stability: Verify the rationale for the flat NAV despite asset appreciation, specifically the impact of distributions exceeding operating cash flows.
- Distribution Suspension: Confirm the timeline for the potential resumption of cash distributions, currently set for no sooner than February 2019.
- Valuation Methodology: Review the assumptions used by Duff & Phelps, particularly the weighted average terminal capitalization rate (5.04%) and discount rate (5.42%).
- Liquidity Constraints: Acknowledge that the shares are not traded on a national exchange and the NAV does not include a liquidity discount.
- Recent Acquisition Impact: Assess whether the $15.93 million acquisition of the Bay Ridge property will materially impact future NAV calculations.