Business Context and Reporting Period
Company: American Realty Capital New York City REIT, Inc.
Filing Type: Form 8-K (Current Report)
Reporting Date: June 17, 2016 (Event Date: June 15, 2016)
Context: The Company reported the completion of an asset acquisition and the entry into a material definitive loan agreement to finance the purchase.
Key Financial Metrics and Transaction Details
- Asset Acquired: Leasehold interest in an institutional-quality office building at 1140 Avenue of the Americas, Manhattan, NY.
- Purchase Price: $180.0 million (exclusive of closing costs).
- Financing: $99.0 million loan from Ladder Capital Finance I LLC.
- Loan Terms:
- Interest Rate: 4.109% (monthly interest payments).
- Maturity Date: July 6, 2026.
- Structure: Nonrecourse; secured by mortgage on the Property.
- Prepayment Penalty: Yield maintenance premium of 3.0% prior to August 2018; 1.0% thereafter through maturity.
- Transaction Costs: Approximately $3.4 million in acquisition/financing coordination fees and $0.9 million in reimbursed insourced expenses paid to the advisor.
- Property Metrics:
- Size: Approximately 250,000 rentable square feet.
- Occupancy: 91% leased.
- Ground Lease: Remaining term of 50 years.
Material Changes and Tenant Concentration
The Company expanded its portfolio with the acquisition of the 1140 Avenue of the Americas property. The filing highlights significant tenant concentration:
- City National Bank: Represents approximately 19% of annualized cash base rent ($3.72 million). Lease expires June 2023 with two 5-year renewal options.
- Waterfall Asset Management: Represents approximately 10% of annualized cash base rent ($2.03 million). Lease expires August 2022 with one 5-year renewal option. Note: Occupancy expands in May 2017.
These two tenants represent greater than 10% of total rentable square feet. No other tenants exceed this threshold.
Guidance, Outlook, and Disclosures
- Financial Statements: Audited and unaudited financial statements for the Property (Rule 3-14) and pro forma financial information (Article 11) are not included in this filing. They will be filed within 71 calendar days of the 8-K filing date.
- Funding Source: The purchase price was funded by proceeds from the Company's initial public offering (May 2014–May 2015) and the new $99.0 million loan.
- Relationships: No other material relationships exist between the Company and the lender (Ladder) outside of this Loan.
Investor Verification Checklist
- Verify the upcoming filing of Rule 3-14 financial statements and Article 11 pro forma information within the 71-day window.
- Review the full text of the Loan agreement (to be filed as an exhibit to the next 10-Q) for specific affirmative and negative covenants.
- Monitor the lease renewal status of City National Bank and Waterfall Asset Management, given their combined ~29% share of annualized cash base rent.
- Confirm the impact of the 50-year ground lease on the Company's long-term asset valuation.