Business Context and Reporting Period
This Form 8-K, filed on October 25, 2017, by American Realty Capital New York City REIT, Inc. (the "Company"), reports the Board of Directors' determination of the Estimated Per-Share Net Asset Value ("Estimated Per-Share NAV"). The valuation is based on the Company's assets and liabilities as of June 30, 2017. The Company is a non-listed REIT focused on real estate assets in New York City.
Key Financial Metrics
The filing details the components of the Estimated Per-Share NAV approved by the Board on October 25, 2017, based on data as of June 30, 2017:
- Estimated Per-Share NAV: $20.26
- Shares Outstanding (Fully Diluted): 31,029,865
- Real Estate Assets Value: $806.1 million (per share value: $25.98)
- Other Assets: Per share value of $2.44 (includes cash, restricted cash, and prepaid expenses)
- Fair Value of Debt: Per share value of $(7.85)
- Other Liabilities: Per share value of $(0.31)
- Incentive Fees/Participations: $0 (The Board concluded the Advisor is not entitled to incentive fees in a hypothetical liquidation at this NAV)
Material Changes Versus Prior Period
Compared to the Estimated Per-Share NAV of $21.25 as of June 30, 2016, the value decreased to $20.26 as of June 30, 2017. The filing attributes this decline primarily to the payment of capital expenditures and distributions to common stockholders that exceeded the Company's earnings during the period. While the value of Real Estate Assets increased slightly on a per-share basis (from $25.81 to $25.98), the increase in the fair value of debt (from $(6.56) to $(7.85) per share) and a decrease in other assets contributed to the lower overall NAV.
Guidance, Outlook, and Risks
Valuation Methodology: The valuation was performed by Duff & Phelps, LLC, using a discounted cash flow approach and a sales comparison approach. Key assumptions included a weighted average terminal capitalization rate of 5.18% and a discount rate of 5.58%.
Sensitivity Analysis: The filing notes that varying the discount rate within the determined range results in an Estimated Per-Share NAV range of $18.26 to $20.53.
Program Updates:
- Distribution Reinvestment Plan (DRIP): Beginning November 1, 2017, distributions will be reinvested at the new price of $20.26 per share.
- Share Repurchase Program (SRP): Repurchase prices will be based on the Estimated Per-Share NAV determined on the last day of the applicable six-month period.
Risks and Limitations:
- The Estimated Per-Share NAV does not represent the price at which shares would trade on a national exchange or the amount a stockholder would receive in a liquidation.
- The valuation does not reflect a liquidity discount for the non-traded nature of the shares.
- Future values may fluctuate due to changes in real estate and capital markets, interest rates, and asset performance.
- The filing includes standard forward-looking statement disclaimers regarding uncertainties in future performance.
Investor Verification Checklist
- Verify the impact of the $0.99 per share decrease in NAV on the current Distribution Reinvestment Plan pricing.
- Review the specific assumptions regarding terminal capitalization rates (5.18%) and discount rates (5.58%) used by Duff & Phelps.
- Confirm the Company's cash flow status, as the decline in NAV was driven by distributions and capital expenditures exceeding earnings.
- Assess the sensitivity of the NAV to changes in discount rates, noting the potential range of $18.26 to $20.53.
- Understand that the NAV does not include a liquidity discount and may differ significantly from a potential market trading price.