Business Context and Reporting Period
Company: American Realty Capital New York City REIT, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 18, 2016
Event: Entry into a Material Definitive Agreement to acquire a leasehold interest in an institutional-quality office building located at 1140 Avenue of the Americas in Manhattan.
Key Financial Metrics and Transaction Details
- Purchase Price: $180.0 million (exclusive of closing costs).
- Deposit Paid: $18.0 million (nonrefundable).
- Property Size: Approximately 250,000 rentable square feet.
- Occupancy: Currently 91% leased.
- Largest Tenant: City National Bank (19% of annualized cash base rent).
- Ground Lease Obligations:
- Through Dec 31, 2016: $0.3 million per annum.
- Jan 1, 2017 through Dec 31, 2041: $4.7 million per annum.
- Jan 1, 2042 through Dec 31, 2066: $5.1 million per annum.
Material Changes and Funding Strategy
The Company intends to primarily fund the purchase price with cash on hand derived from its initial public offering (closed May 31, 2015). The Company also intends to seek additional financing in connection with the acquisition. The filing does not provide specific revenue, profit, or cash flow metrics for the reporting period, as this is a transactional report rather than a periodic financial statement.
Outlook, Risks, and Contingencies
- Closing Conditions: The obligation to close is subject to customary closing conditions.
- Financing Risk: There is no assurance that the Company will secure financing on favorable terms or at all.
- Transaction Certainty: While the acquisition is believed to be probable, there is no assurance it will be consummated.
- Lease Concentration: City National Bank holds a lease through June 2023 with an 8.4% rent increase in July 2018 and two 5-year renewal options.
Investor Verification Checklist
- Verify the Company's current cash balance to confirm sufficiency for the $180.0 million purchase price.
- Monitor the status of the financing arrangements mentioned as intended but not secured.
- Review the full text of the purchase agreement (to be filed in the next Form 10-Q) for specific closing conditions.
- Assess the impact of the ground lease rent step-up to $4.7 million annually starting in 2017 on future cash flows.
- Confirm the status of the 91% occupancy rate and the stability of the largest tenant, City National Bank.