American Strategic Investment Co. current report, 27 January 2015

Business Context and Reporting Period

This Form 8-K, filed on February 2, 2015, reports on an event occurring on January 27, 2015. American Realty Capital New York City REIT, Inc. (the "Company") entered into a definitive agreement to acquire an institutional-quality office building located at 123 William Street in Downtown Manhattan.

Key Financial Metrics and Transaction Details

  • Purchase Price: $253.0 million (exclusive of closing costs).
  • Deposit: $25.3 million (nonrefundable).
  • Property Size: Approximately 545,000 rentable square feet.
  • Occupancy: Currently 81% leased.
  • Funding Source: Intended to be funded by proceeds from the Company's ongoing initial public offering; potential future financing from an unidentified lender.

Material Changes and Tenant Concentration

The filing discloses a significant change in the Company's asset portfolio through the proposed acquisition. The property is heavily concentrated with government tenants, which represent the majority of annualized cash base rent:

  • The People of the State of New York: ~21% of rent (4 leases, 101,619 sq. ft.).
  • The City of New York: ~15% of rent (2 leases, 61,487 sq. ft.).
  • The United States of America: ~12% of rent (1 lease, 48,221 sq. ft., terminating June 2022).

The seller is a subsidiary of a joint venture where New York REIT, Inc. ("NYRT") holds a $35.1 million preferred equity interest. The sponsors of NYRT and the Company are under common control.

Outlook, Risks, and Contingencies

  • Closing Conditions: The acquisition is subject to customary closing conditions; consummation is not assured.
  • Financing Risk: There is no assurance the Company will secure favorable financing or any financing at all for the property post-closing.
  • Lease Risks: Leases with the State of New York contain executory clauses limiting liability to available funds. The City of New York retains the right to terminate leases for a fee.
  • Related Party: The transaction involves a seller connected to a related entity (NYRT) under common control.

Investor Verification Checklist

  • Verify the status of the Company's ongoing initial public offering to confirm funding availability for the $253.0 million purchase price.
  • Review the full text of the sale and purchase agreement (to be filed in the next Form 10-K) for specific closing conditions and representations.
  • Assess the impact of the executory clause in State of New York leases on the stability of the 21% revenue concentration.
  • Confirm the timeline and terms of the lease with the United States of America, which terminates in June 2022.
  • Investigate the relationship and potential conflicts of interest between the Company and NYRT regarding the $35.1 million preferred equity interest held by NYRT in the seller's parent entity.