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Activist Land and Buildings wants New York REIT to reshape its board so that at least 50% of it is comprised of new independent Directors. Here’s the full letter:
Warren Buffett’s 2018 Activist Investment
We appreciate your taking the time to meet with us last week to discuss Apollo’s pending acquisition of AR Capital, the owner of the external manager and adviser of New York REIT (“NYRT” or the “Company”).
As we discussed, Land and Buildings is a substantial shareholder of NYRT. We are concerned that the Company has consistently traded at a significant discount to the value of its trophy Manhattan office buildings, which we believe is approximately $14 per share. We view this discount as largely a result of institutional investor concerns regarding NYRT’s corporate governance, lack of appropriate board stewardship, and the legacy external management structure. Governance issues at the Company are numerous and well-documented and include the fact that all four Board of Director members are employed by the adviser and/or are currently serving on other boards of entities advised by AR Capital.
In addition, we believe investors are concerned with the credibility of the Board and management given that the Company announced a plan to pursue strategic alternatives in October 2014, a process that is now “suspended”, and AR Capital ultimately earned a $33.5 million incentive fee based on, in our view, a potentially inflated stock price. Since Q2 2015 and prior to our meeting with you, we had been speaking with Mike Happel, Chief Executive Officer of NYRT, and Randy Read, Chairman of the Board, about our concerns. We have offered specific recommendations to help NYRT close its significant discount to NAV and restore investors’ faith in the Company.
Thus far, NYRT and its Board have failed to take meaningful steps to alleviate investor concerns and establish a new culture of accountability to shareholders. We were, however, encouraged by our meeting with you and hope that we can have a constructive dialogue regarding enhancing the value of the Company moving forward.
In the spirit of collaboration, we ask you to work with the Board of NYRT to consider our proposal that the Board should be reconstituted so that at least 50 percent of the Board is comprised of new independent Directors who have a track-record of creating value for shareholders and governance credibility with institutional REIT investors. The people we recommended as Board candidates in the course of our previous conversations with you and the Company have these characteristics and we urge you to seriously consider them. Further, the reconstituted Board should include shareholder representation.
It is our sincere desire to continue to work collaboratively with you and the Board of NYRT to maximize value for all shareholders.