The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Note 1 Organization
New York REIT, Inc. (the Company) was incorporated on October 6, 2009 as a Maryland corporation that qualified as a
real estate investment trust for U.S. federal income tax purposes (REIT) beginning with its taxable year ended December 31, 2010. On April 15, 2014, the Company listed its common stock on the New York Stock Exchange
(NYSE) under the symbol NYRT.
The Company purchased its first property and commenced active operations in June
2010. As of June 30, 2017, the Company owned 19 properties, aggregating 4.4 million rentable square feet, with an average occupancy of 95.6%. The Companys portfolio primarily consists of office and retail properties, representing 89%
and 8%, respectively, of rentable square feet as of June 30, 2017. The Company has acquired hotel and other types of real properties to add diversity to its portfolio. Properties other than office and retail spaces represent 3% of rentable
square feet.
Substantially all of the Companys business is conducted through its operating partnership, New York Recovery Operating
Partnership, L.P., a Delaware limited partnership (the OP). The Companys only significant asset is the general partnership interests it owns in the OP and assets held by the Company for the use and benefit of the OP.
On August 22, 2016, the Companys Board of Directors (the Board) approved a plan of liquidation to sell in an orderly
manner all or substantially all of the assets of the Company and its OP and to liquidate and dissolve the Company and the OP (the Liquidation Plan), subject to stockholder approval. The Liquidation Plan was approved at a special meeting
of stockholders on January 3, 2017.
The Company has no employees. Prior to March 8, 2017, the Company retained (i) New
York Recovery Advisors, LLC (the Former Advisor) to manage its affairs on a day-to-day basis and (ii) New York Recovery Properties, LLC (the ARG Property Manager) to serve as the Companys property manager, except
for properties where services were performed by a third party. The Former Advisor and ARG Property Manager are under common control with AR Global Investments, LLC (the successor business to AR Capital, LLC, AR Global), (the
Sponsor).
On March 8, 2017, the Company transferred all advisory duties from the Former Advisor to Winthrop REIT
Advisors, LLC (the Winthrop Advisor) and property management services with respect to properties managed by ARG Property Manager were transferred to Winthrop Management, L.P. (the Winthrop Property Manager).
Note 2 Liquidation Plan
The
Liquidation Plan provides for an orderly sale of the Companys assets, payment of the Companys liabilities and other obligations and the winding up of operations and final dissolution of the Company. The Company is not permitted to make
any new investments except to exercise its option (the WWP Option) to purchase additional equity interests in its WWP Holdings, LLC venture (Worldwide Plaza) or to make protective acquisitions or advances with respect to its
existing assets (see Note 7). The Company is permitted to satisfy any existing contractual obligations and fund required tenant improvements and capital expenditures at its real estate properties, including real estate properties owned by joint
ventures in which the Company owns an interest.
The Liquidation Plan enables the Company to sell any and all of its assets without
further approval of the stockholders and provides that liquidating distributions be made to the stockholders as determined by the Board. Pursuant to applicable REIT rules, the Company must complete the disposition of its assets by January 3,
2019, two years after the date the Liquidation Plan was approved by the stockholders, in order to deduct liquidating distributions as dividends. To the extent that all of the Companys assets are not sold by such date, the Company intends to
satisfy the requirement by distributing its remaining assets and liabilities to a liquidating trust.
9
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The dissolution process and the amount and timing of distributions to stockholders involves
risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will be ultimately distributed to stockholders and no assurance can be given that the distributions will equal or exceed the estimate of net
assets presented in the Consolidated Statement of Net Assets.
The Company expects to continue to qualify as a REIT throughout the
liquidation until such time as any remaining assets, if any, are transferred into a liquidating trust. The Board shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status, provided however, the Board may
elect to terminate the Companys status as a REIT if it determines that such termination would be in the best interest of the stockholders.
The Board may terminate the Liquidation Plan without stockholder approval only (i) if the Board approves the Company entering into an
agreement involving the sale or other disposition of all or substantially all of the assets or common stock by merger, consolidation, share exchange, business combination, sale or other transaction involving the Company or (ii) if the Board
determines, in exercise of its duties under Maryland law, after consultation with the Winthrop Advisor, if applicable, or other third party experts familiar with the market for Manhattan office properties, that an adverse change in the market for
Manhattan office properties has occurred and reasonably would expect it to adversely affect continuing with the Liquidation Plan. Notwithstanding approval of the Liquidation Plan by the stockholders, the Board may amend the Liquidation Plan without
further action by our stockholders to the extent permitted under the current law.
Note 3 Summary of Significant Accounting Policies
Basis of Presentation
Pre Plan of Liquidation
The accompanying unaudited consolidated interim financial statements of the Company included herein were prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange
Commission (the SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature,
which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation.
These consolidated financial statements should be read in conjunction with the historical comparative audited consolidated financial
statements and notes thereto as of and for the year ended December 31, 2016, which are included in the Companys Annual Report on Form 10-K filed with the SEC on March 1, 2017.
Post Plan of Liquidation
Liquidation Basis of
Accounting
As a result of the approval of the Liquidation Plan by the stockholders, the Company adopted the liquidation basis of
accounting as of January 1, 2017 and for the periods subsequent to December 31, 2016 in accordance with GAAP. Accordingly, on January 1, 2017, the carrying value of the Companys assets were adjusted to their liquidation value,
which represents the estimated amount of cash that the Company will collect on disposal of assets as it carries out its Liquidation Plan. The current estimate of net assets in liquidation has been calculated based on projections that all the
properties will be sold by March 31, 2018. The actual timing of sales has not yet been determined and is subject to future events and uncertainties. These estimates are subject to change based on the actual timing of future asset sales. The
liquidation value of the Companys operating properties is presented on an undiscounted basis. Estimated costs to dispose of assets have been presented separately from the related assets. Liabilities are carried at their contractual amounts due
or estimated settlement amounts adjusted for the timing and other assumptions related to the liquidation process.
10
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The Company accrues costs and revenues that it expects to incur and earn through the end of
liquidation to the extent it has a reasonable basis for estimation. Estimated costs expected to be incurred through the end of the liquidation period include budgeted property expenses and corporate overhead, costs to dispose of the properties,
mortgage interest expense, costs associated with satisfying known and contingent liabilities and other costs associated with the winding up and dissolution of the Company. Revenues are based on in-place leases plus managements estimates of
revenue upon re-lease based on market assumptions. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statement of Net Assets. Actual costs and revenues may differ
from amounts reflected in the financial statements due to the inherent uncertainty in estimating future events. These differences may be material. See Note 4 for further discussion. Actual costs incurred but unpaid as of June 30, 2017 are
included in accounts payable, accrued liabilities and other liabilities on the Consolidated Statement of Net Assets.
Net assets in
liquidation represents the estimated liquidation value available to stockholders upon liquidation. Due to the uncertainty in the timing of the anticipated sale dates and the estimated cash flows, actual operating results and sale proceeds may differ
materially from the amounts estimated.
As a result of the change to the liquidation basis of accounting, the Company no longer presents a
Consolidated Balance Sheet, a Consolidated Statement of Operations and Comprehensive Income, a Consolidated Statement of Changes in Equity or a Consolidated Statement of Cash Flows. These statements are only presented for prior year periods.
Use of Estimates
Certain
of the Companys accounting estimates are particularly important for an understanding of the Companys financial position and results of operations and require the application of significant judgment by management. As a result, these
estimates are subject to a degree of uncertainty. The Company is required to estimate all costs and revenue it expects to incur and earn through the end of liquidation including the estimated amount of cash it expects to collect on the disposal of
its assets and the estimated costs to dispose of its assets. All of the estimates and evaluations are susceptible to change and actual results could differ materially from the estimates and evaluations.
Revenue Recognition
Under
liquidation accounting, the Company has accrued all revenue that it expects to earn through the end of liquidation to the extent it has a reasonable basis for estimation. Revenues are accrued based on contractual amounts due under the leases in
place over the estimated hold period of each asset. These amounts are classified in liability for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statement of Net Assets.
In accordance with liquidation accounting, as of January 1, 2017, tenant and other receivables were adjusted to their net realizable
values. Management continually reviews tenant and other receivables to determine collectability. Any changes in the collectability of the receivables is reflected in the net realizable value of the receivable.
The Company owns certain properties with leases that include provisions for the tenant to pay contingent rental income based on a percent of
the tenants sales upon the achievement of certain sales thresholds or other targets which may be monthly, quarterly or annual targets. Contingent rental income is not contemplated under liquidation accounting unless there is a reasonable basis
to estimate future receipts.
Investments in Real Estate
As of January 1, 2017, the investments in real estate were adjusted to their estimated net realizable value upon sale, or liquidation
value, to reflect the change to the liquidation basis of accounting. The liquidation value represents the estimated amount of cash the Company expects to collect on the disposal of its assets as it carries out its Liquidation Plan. The liquidation
value of the Companys investments in real estate are presented on an undiscounted basis. Estimated revenue during the period prior to the expected sale date and costs to dispose of these assets are presented separately from the related assets.
Subsequent to January 1, 2017, all changes in the estimated liquidation value of the investments in real estate are reflected as a change in the Companys net assets in liquidation.
11
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The liquidation value of investments in real estate is based on a number of factors including
discounted cash flow and direct capitalization analyses, detailed analysis of market comparables and broker opinions of value, and binding purchase offers to the extent available.
Amortization
Under
liquidation accounting, intangible assets and liabilities are included in the liquidation value of investments in real estate and are no longer amortized.
Derivative Instruments
The
Company uses derivative financial instruments to hedge the interest rate risk associated with a portion of its borrowings. The principal objective of such agreements is to minimize the risks and costs associated with the Companys operating and
financial structure as well as to hedge specific anticipated transactions.
As these instruments will not be converted into cash or other
consideration, derivative financial instruments have been valued at $0 as of January 1, 2017 in accordance with liquidation accounting. These financial instruments are still in place and effective as of June 30, 2017.
Restricted Cash
Restricted
cash primarily consists of maintenance, real estate tax, structural and debt service reserves.
Recent Accounting Pronouncement
There are no new accounting pronouncements that are applicable or relevant to the Company under the liquidation basis of accounting.
Note 4 Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation
The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with
implementing and completing the plan of liquidation. The Company currently estimates that it will have costs in excess of estimated receipts during the liquidation. These amounts can vary significantly due to, among other things, the timing and
estimates for executing and renewing leases, estimates of tenant improvement costs, the timing of property sales, direct costs incurred to complete the sales, the timing and amounts associated with discharging known and contingent liabilities and
the costs associated with the winding up of operations. These costs are estimated and are anticipated to be paid out over the liquidation period.
12
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Upon transition to the liquidation basis of accounting on January 1, 2017, the Company
accrued the following revenues and expenses expected to be earned or incurred during liquidation (in thousands):
|
|
|
|
|
|
|
Amount
|
|
Rents and reimbursements
|
|
$
|
102,309
|
|
Hotel revenues
|
|
|
25,261
|
|
Property operating expenses
|
|
|
(27,006
|
)
|
Hotel operating expense
|
|
|
(21,467
|
)
|
Interest expense
|
|
|
(39,756
|
)
|
General and administrative expenses
|
|
|
(40,124
|
)
|
Capital expenditures
|
|
|
(8,274
|
)
|
Sales costs
|
|
|
(69,524
|
)
|
|
|
|
|
|
Liability for estimated costs in excess of estimated receipts during liquidation
|
|
$
|
(78,581
|
)
|
|
|
|
|
|
The change in the liability for estimated costs in excess of estimated receipts during liquidation as of
June 30, 2017 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2017
|
|
|
Net Change
in Working
Capital (1)
|
|
|
Remeasurement
of Assets and
Liabilities
|
|
|
Consolidation (2)
|
|
|
June 30, 2017
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net inflows from investments in real estate
|
|
$
|
58,303
|
|
|
$
|
(31,285
|
)
|
|
$
|
(1,456
|
)
|
|
$
|
(1,572
|
)
|
|
$
|
23,990
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales costs
|
|
|
(69,524
|
)
|
|
|
|
|
|
|
84
|
|
|
|
(57,334
|
)
|
|
|
(126,774
|
)
|
Corporate expenditures
|
|
|
(67,360
|
)
|
|
|
32,934
|
|
|
|
(1,882
|
)
|
|
|
|
|
|
|
(36,308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(136,884
|
)
|
|
|
32,934
|
|
|
|
(1,798
|
)
|
|
|
(57,334
|
)
|
|
|
(163,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liability for estimated costs in excess of estimated receipts during liquidation
|
|
$
|
(78,581
|
)
|
|
$
|
1,649
|
|
|
$
|
(3,254
|
)
|
|
$
|
(58,906
|
)
|
|
$
|
(139,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents changes in cash, restricted cash, accounts receivable, accounts payable and accrued expenses as a result of the Companys operating activity for the period ended June 30, 2017.
|
|
(2)
|
Represents adjustments necessary to reflect the consolidation of Worldwide Plaza (See Note 7).
|
13
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Note 5 Net Assets in Liquidation
The following is a reconciliation of Total Equity under the going concern basis of accounting as of December 31, 2016 to net assets in
liquidation under the liquidation basis of accounting as of January 1, 2017 (in thousands):
|
|
|
|
|
Total Equity as of December 31, 2016
|
|
$
|
941,669
|
|
Increase due to estimated net realizable value of investments in real estate
|
|
|
382,985
|
|
Increase due to estimated net realizable value of investments in unconsolidated joint
venture
|
|
|
319,548
|
|
Decrease due to write off of unbilled rent receivables
|
|
|
(52,620
|
)
|
Increase due to write off of market lease intangibles
|
|
|
65,187
|
|
Decrease due to write-off of assets and liabilities
|
|
|
(25,262
|
)
|
Liability for estimated costs in excess of estimated receipts during liquidation
|
|
|
(78,581
|
)
|
|
|
|
|
|
Adjustment to reflect the change to the liquidation basis of accounting
|
|
|
611,257
|
|
|
|
|
|
|
Estimated value of net assets in liquidation as of January 1, 2017
|
|
$
|
1,552,926
|
|
|
|
|
|
|
Net assets in liquidation decreased by $5.9 million during the six months ended June 30, 2017. The
primary reasons for the decrease in net assets was due to (i) a $2.5 million decrease in the liquidation value of investments in real estate as a result of the contract for sale of the 50 Varick Street office property (see Subsequent Events),
(ii) an increase of $1.7 million of projected tenant and capital improvement costs primarily at the 1440 Broadway and 256 West 38
th
Street properties, (iii) an increase of $1.8 million
in estimated corporate expenditures and (iv) other cumulative adjustments across the portfolio which net to a $1.0 million decrease in net operating cash flow. The increase in projected corporate expenditures is primarily the result of a $1.2
million increase in the estimated asset management fee payable to the Winthrop Advisor as a result of the timing of the acquisition of the additional interest in Worldwide Plaza and a change in the anticipated holding periods of certain assets, and
a $0.4 million increase in interest expense due to an increase in the LIBOR rate.
These items were partially offset by a $1.1 million
increase in estimated cash flows resulting from extended holding periods of certain assets.
The net assets in liquidation at
June 30, 2017 would result in liquidating distributions of approximately $9.21 per common share. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the period required to complete the
Liquidation Plan. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, the performance of the underlying assets and any changes in the underlying assumptions of the projected cash
flows.
Note 6 Real Estate Investments
The Company acquired an additional 49.9% equity interest in Worldwide Plaza on June 1, 2017. (See Note 7).
14
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The following table presents future minimum base cash rental payments due to the Company,
subsequent to June 30, 2017. These amounts exclude contingent rental payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain
economic indexes among other items.
|
|
|
|
|
(In thousands)
|
|
Future Minimum
Base Cash Rental
Payments
|
|
July 1, 2017 - December 31, 2017
|
|
$
|
116,702
|
|
2018
|
|
|
231,787
|
|
2019
|
|
|
227,393
|
|
2020
|
|
|
230,219
|
|
2021
|
|
|
225,569
|
|
Thereafter
|
|
|
1,294,493
|
|
|
|
|
|
|
Total
|
|
$
|
2,326,163
|
|
|
|
|
|
|
Of the contractual base cash payments, excluding reimbursements, the Company expects to realize approximately
$69.0 million over the remaining anticipated hold periods for all of its properties.
The following table lists the tenants whose
annualized cash rent represented greater than 10% of total annualized cash rent as of June 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
Property Portfolio
|
|
Tenant
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Worldwide Plaza
|
|
Cravath, Swaine & Moore, LLP
|
|
|
24
|
%
|
|
|
16
|
%(1)
|
Worldwide Plaza
|
|
Nomura Holdings America, Inc.
|
|
|
16
|
%
|
|
|
11
|
%(1)
|
|
(1)
|
Calculated based on the Companys prorata share of base rent for 2016.
|
The termination,
delinquency or non-renewal of any of the above tenants may have a material adverse effect on the Companys operations.
Intangible Assets and
Liabilities
Under the liquidation basis of accounting, intangible assets and liabilities are considered in the liquidation value of
investments in real estate and are no longer amortized. Acquired intangible assets and liabilities as of December 31, 2016 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(In thousands)
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Net Carrying Amount
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
In-place leases
|
|
$
|
108,253
|
|
|
$
|
36,645
|
|
|
$
|
71,608
|
|
Other intangibles
|
|
|
3,804
|
|
|
|
750
|
|
|
|
3,054
|
|
Above-market leases
|
|
|
20,291
|
|
|
|
5,036
|
|
|
|
15,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets
|
|
$
|
132,348
|
|
|
$
|
42,431
|
|
|
$
|
89,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Below-market leases
|
|
$
|
75,484
|
|
|
$
|
26,864
|
|
|
$
|
48,620
|
|
Above-market ground lease liability
|
|
|
17,968
|
|
|
|
1,401
|
|
|
|
16,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market lease intangibles
|
|
$
|
93,452
|
|
|
$
|
28,265
|
|
|
$
|
65,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The following table discloses amounts recognized within the consolidated statement of
operations and comprehensive loss for the three and six months ended June 30, 2016 (on a going concern basis) related to amortization of in-place leases and other intangibles, amortization and accretion of above- and below-market lease assets
and liabilities, net and the amortization of above-market ground lease, for the period presented:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
June 30, 2016
|
|
|
Six Months Ended
June 30, 2016
|
|
Amortization of in-place leases and other intangibles (1)
|
|
$
|
2,767
|
|
|
$
|
5,807
|
|
|
|
|
|
|
|
|
|
|
Amortization and (accretion) of above- and below-market leases, net (2)
|
|
$
|
(1,504
|
)
|
|
$
|
(3,116
|
)
|
|
|
|
|
|
|
|
|
|
Amortization of above-market ground lease (3)
|
|
$
|
(113
|
)
|
|
$
|
(225
|
)
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflected within depreciation and amortization expense.
|
(2)
|
Reflected within rental income.
|
(3)
|
Reflected within hotel expenses.
|
Real Estate Sales
The Company did not sell any properties during the six months ended June 30, 2017. During the six months ended June 30, 2016, the
Company sold its properties located at 163-30 Cross Bay Boulevard in Queens, New York (Duane Reade), 1623 Kings Highway in Brooklyn, New York (1623 Kings Highway) and 2061-2063 86th Street in Brooklyn, New York (Foot
Locker). The following table summarizes the properties sold during the six months ended June 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Borough
|
|
Disposition Date
|
|
Contract Sales Price
|
|
|
Gain on Sale (1) (2)
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
Duane Reade
|
|
Queens
|
|
February 2, 2016
|
|
$
|
12,600
|
|
|
$
|
126
|
|
1623 Kings Highway
|
|
Brooklyn
|
|
February 17, 2016
|
|
|
17,000
|
|
|
|
4,293
|
|
Foot Locker
|
|
Brooklyn
|
|
March 30, 2016
|
|
|
8,400
|
|
|
|
2,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38,000
|
|
|
$
|
6,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflected within gain on sale of real estate investments, net in the consolidated statement of operations and comprehensive loss for the six months ended June 30, 2016.
|
|
(2)
|
During the six months ended June 30, 2016, the Company repaid three mortgage notes payable totaling $18.9 million with the proceeds from of the sales of Duane Reade, 1623 Kings Highway and Foot Locker.
|
The disposal of Duane Reade, 1623 Kings Highway and Foot Locker did not represent a strategic shift that had a major effect
on the Companys operations and financial results. Accordingly, the results of operations of these properties were classified within continuing operations for the six months ended June 30, 2016.
Note 7 Acquisition of Equity Interest in Worldwide Plaza
On October 30, 2013, the Company purchased a 48.9% equity interest in Worldwide Plaza for a contract purchase price of $220.1 million,
based on the property value at that time for Worldwide Plaza of $1.3 billion less $875.0 million of debt on the property.
16
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
On March 30, 2017, the Company exercised the WWP Option pursuant to the Companys
rights under the joint venture agreement for Worldwide Plaza subject to the Companys joint venture partners rights to retain up to 1.2% of the aggregate membership interest, which the joint venture partner has elected to retain.
On June 1, 2017, the Company acquired an additional 49.9% equity interest for a contract purchase price of $276.7 million, based on the
option price of approximately $1.4 billion less $875.0 million of debt on the property. Following the exercise of the option, the Company now owns a total equity interest of 98.8% in Worldwide Plaza. As a result, the Company consolidates Worldwide
Plaza as of June 1, 2017. In accordance with GAAP, the Company has recorded the Worldwide Plaza debt at its fair value of $897.0 million on its consolidated statement of net assets.
Note 8 Mortgage Notes Payable
Mortgage notes payable are carried at their contractual amounts due under liquidation accounting. The Company had outstanding mortgage notes
payable of $2.0 billion at June 30, 2017 and $1.13 billion at December 31, 2016. The mortgage notes payable are collateralized, directly or, in the case of the mezzanine note, indirectly, by the real estate held by the Company identified
in the table below.
The Companys mortgage notes payable as of June 30, 2017 and December 31, 2016 consist of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Loan Amount
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Encumbered
Properties
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
Effective
Interest Rate
|
|
|
Interest Rate
|
|
|
Maturity
|
Mortgage Loan (1)
|
|
|
12
|
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
3.2
|
%
|
|
|
Variable
|
(2)
|
|
Dec 2017
|
Mezzanine Loan (1)
|
|
|
12
|
|
|
|
260,000
|
|
|
|
260,000
|
|
|
|
6.5
|
%
|
|
|
Variable
|
(2)
|
|
Dec 2017
|
256 West 38th Street
|
|
|
1
|
|
|
|
24,500
|
|
|
|
24,500
|
|
|
|
3.1
|
%
|
|
|
Fixed
|
(6)
|
|
Dec 2017
|
1100 Kings Highway
|
|
|
1
|
|
|
|
20,200
|
|
|
|
20,200
|
|
|
|
3.4
|
%
|
|
|
Fixed
|
(3)
|
|
Aug 2017
|
1440 Broadway (4)
|
|
|
1
|
|
|
|
305,000
|
|
|
|
305,000
|
|
|
|
4.3
|
%
|
|
|
Variable
|
(2)
|
|
Oct 2019
|
Design Center
|
|
|
1
|
|
|
|
19,216
|
|
|
|
19,380
|
|
|
|
6.3
|
%
|
|
|
Variable
|
(5)
|
|
Dec 2021
|
Worldwide Plaza (7)
|
|
|
1
|
|
|
|
875,000
|
|
|
|
|
|
|
|
4.6
|
%
|
|
|
Fixed
|
|
|
Mar 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable, gross principal amount
|
|
|
|
2,003,916
|
|
|
|
1,129,080
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment
|
|
|
|
|
|
|
22,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable
|
|
|
|
|
|
$
|
2,025,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: deferred financing costs, net
|
|
|
|
|
|
|
|
|
|
|
(21,554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable, net of deferred financing costs
|
|
|
|
|
|
|
|
|
|
$
|
1,107,526
|
|
|
|
4.4
|
%(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Encumbered properties are 245-249 West 17th Street, 333 West 34th Street, 216-218 West 18th Street, 50 Varick Street, 229 West 36th Street, 122 Greenwich Street, 350 West 42nd Street, 382-384 Bleecker Street, 350
Bleecker Street, 416-425 Washington Street, 33 West 56th Street and 120 West 57th Street (the POL Loan Properties).
|
(2)
|
LIBOR portion is capped through an interest rate cap agreement.
|
(3)
|
Fixed through interest rate swap agreement through July 31, 2017. The maturity date was extended to April 1, 2018.
|
(4)
|
Total commitments of $325 million; additional $20 million available, subject to lender approval, to fund certain tenant allowances, capital expenditures and leasing costs.
|
(5)
|
The variable interest rate reset in December 2016 and will remain fixed at this rate until December 2017.
|
(6)
|
Fixed through an interest rate swap agreement.
|
(7)
|
The property was consolidated as of June 1, 2017.
|
(8)
|
Calculated on a weighted average basis for all mortgages outstanding as of June 30, 2017.
|
17
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
On August 1, 2017, the Companys mortgage loan collateralized by the 1100 Kings
Highway property was modified to extend the maturity date to April 1, 2018 and to allow for partial release of the collateral. The loan also requires a cash sweep starting January 1, 2018 unless the property is under contract for sale for
an amount equal to or greater than 133% of the outstanding mortgage loan payable.
On December 20, 2016, the Company, through
indirect wholly owned subsidiaries of the OP, entered into a mortgage loan (the Mortgage Loan) in the aggregate amount of $500.0 million and a mezzanine loan in the aggregate amount of $260.0 million (the Mezzanine
Loan and, together with the Mortgage Loan, the POL Loans). The POL Loans are secured directly, in the case of the mortgage loan, and indirectly in the case of the mezzanine loan, by our properties located in New York, New York at
245-249 West 17th Street, 333 West 34th Street, 216-218 West 18th Street, 50 Varick Street, 229 West 36th Street, 122 Greenwich Street, 350 West 42nd Street, 382-384 Bleecker Street, 350 Bleecker Street, 416-425 Washington Street, 33 West 56th
Street and 120 West 57th Street (the POL Loan Properties).
At the closing of the POL Loans, a portion of the net proceeds
after closing costs was used to repay the $485.0 million principal amount then outstanding under the Companys credit facility. As of December 31, 2016, the $260.0 million proceeds from the Mezzanine Loan were held
in an escrow account by the servicer of the POL Loans and were recorded as a receivable in the Companys consolidated balance sheet. Subsequently, on January 9, 2017, the $260.0 million proceeds were deposited into an operating
account for the purpose of purchasing the additional equity interests in Worldwide Plaza (see Note 7). Prior to the repayment in full of the credit facility, all of the POL Loan Properties were included as part of the borrowing base thereunder.
The Mortgage Loan requires monthly interest payments at an initial weighted average interest rate of LIBOR plus 2.38% and the
Mezzanine Loan requires monthly interest payments at an initial weighted average interest rate of LIBOR plus 5.65%. The LIBOR portions of the interest rates due under the POL Loans are capped at 3.0% pursuant to interest rate cap
agreements.
The POL Loans mature in December 2017. The POL Loans include one option to extend the maturity date for one year, if certain
conditions are met including a debt yield test, and subject to a 0.25% increase in the applicable monthly interest rate payable.
The POL Loans are recourse to the Company and may be accelerated only in the event of a default. The POL Loans may be prepaid, in whole or in
part, without payment of any prepayment premium or spread maintenance premium or any other fee or penalty.
In connection with a sale or
disposition of an individual POL Loan Property to a third party, such POL Loan Property may be released from the collateral securing the Mortgage Loan, subject to certain conditions, by prepayment of a release price (the Release Amount)
as defined in the Mortgage Loan agreements. In certain instances, 110% of the Release Amount will be required to be paid in order to release the property. Concurrently with the payment of the Release Amount, the borrower entity under the Mezzanine
Loan is obligated to prepay a corresponding portion of the Mezzanine Loan, in accordance with the terms of the Mezzanine Loan, for which it will receive a release of a corresponding portion of the collateral under the Mezzanine Loan.
Concurrently with the POL Loans, the Company entered into guaranty agreements with respect to the POL Loans that requires the Company to
maintain, (i) on a consolidated basis, a minimum net worth of $300.0 million, which minimum net worth will be reduced pro rata with any prepayment of the POL Loans once the outstanding principal amount of the POL Loans is less
than $300.0 million, but in no event will the minimum net worth be reduced below $150.0 million, and (ii) liquid assets having a market value of at least $25.0 million, which minimum market value of liquid assets may be reduced
to $15.0 million in the event the outstanding amount under the POL Loans is equal to or less than $100.0 million.
18
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
On September 30, 2015, in connection with the mortgage notes payable secured by its
property located at 1440 Broadway, the Company executed guarantees in favor of the lenders with respect to the costs of certain unfunded obligations of the Company related to tenant allowances, capital expenditures and leasing costs, which
guarantees are capped at $5.3 million in the aggregate. The guarantees expire in October 2019, the maturity date of the 1440 Broadway mortgage. As of June 30, 2017, the Company has not been required to perform under the guarantees and
has not recognized any assets or liabilities related to the guarantees.
Some of the Companys mortgage note agreements require
compliance with certain property-level financial covenants including debt service coverage ratios. As of June 30, 2017, the Company was in compliance with the financial covenants under its mortgage note agreements.
Note 9 Fair Value of Financial Instruments
Prior to the adoption of liquidation accounting, the Company determined fair value of its financial instruments based on quoted prices when
available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the instrument. This alternative approach also reflected the
contractual terms of the instruments, as applicable, including the period to maturity, and used observable market-based inputs, including interest rate curves and implied volatilities, and unobservable inputs, such as expected volatility. The
guidance defines three levels of inputs that may be used to measure fair value:
|
|
|
Level 1 -
|
|
Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
|
Level 2 -
|
|
Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or
liability.
|
Level 3 -
|
|
Unobservable inputs that reflect the entitys own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular
valuation techniques.
|
The determination of where an asset or liability fell in the hierarchy required significant judgment and
considered factors specific to the asset or liability. In instances where the determination of the fair value measurement was based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement fell was based on the lowest level input that was significant to the fair value measurement in its entirety.
The Company determined that the majority of the inputs used to value its derivatives, such as interest rate swaps and caps, fell within Level
2 of the fair value hierarchy, whereas the credit valuation adjustments associated with those derivatives utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its
counterparties. However, as of December 31, 2016, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments
were not significant to the overall valuation of the Companys derivatives. As a result, the Company determined that its derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy. See Note 10 Interest
Rate Derivatives and Hedging Activities.
The valuation of derivatives was determined using a discounted cash flow analysis on the
expected cash flows. This analysis reflected the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit
valuation adjustments were incorporated into the fair values to account for the Companys potential nonperformance risk and the performance risk of the counterparties.
19
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The following table presents information about the Companys derivatives that were
presented net, measured at fair value on a recurring basis as of December 31, 2016, aggregated by the level in the fair value hierarchy within which those instruments fell:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Quoted Prices in
Active Markets
Level 1
|
|
|
Significant Other
Observable Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
Total
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives, net
|
|
$
|
|
|
|
$
|
91
|
|
|
$
|
|
|
|
$
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no transfers between levels of the fair value hierarchy during the year ended December 31,
2016.
Financial instruments not carried at fair value
Under going concern accounting, the Company was required to disclose the fair value of financial instruments for which it was practicable to
estimate the value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable and dividends payable approximates their carrying value on the
consolidated balance sheet due to their short-term nature. The carrying amount and fair value of the Companys financial instruments that were not reported at fair value on the consolidated balance sheet are reported below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(In thousands)
|
|
Level
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
Mortgage notes payable
|
|
|
3
|
|
|
$
|
1,129,080
|
|
|
$
|
1,138,576
|
|
The fair value of mortgage notes payable was estimated using a discounted cash flow analysis based on similar types of
arrangements.
Note 10 Interest Rate Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company uses derivative financial instruments, including interest rate swaps and caps, to hedge all or a portion of the interest rate risk
associated with its borrowings. The principal objective of such arrangements is to minimize the risks and costs associated with the Companys operating and financial structure as well as to hedge specific anticipated transactions. The Company
does not utilize derivatives for speculative purposes or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual
arrangements will not perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties that the Company believes to have high credit ratings and with major financial institutions
with which the Company and the Advisor and its affiliates may also have other financial relationships.
Under going concern accounting,
the Companys derivative financial instruments were classified as separate assets and liabilities on the balance sheet. As these instruments will not be converted to cash or other consideration, derivative financial instruments have been valued
at $0 as of January 1, 2017 in accordance with liquidation accounting. The financial instruments are still in place and effective as of June 30, 2017. The Company has accrued the estimated monthly settlement amounts for its swap
agreements. The amount is included in the liability for estimated costs in excess of estimated receipts during liquidation.
20
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Cash Flow Hedges of Interest Rate Risk
The Companys objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to
interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of
variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the
receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract.
The effective portion of changes in
the fair value of derivatives designated and that qualified as cash flow hedges was recorded in accumulated other comprehensive loss and was subsequently reclassified into earnings in the period that the hedged forecasted transaction affected
earnings. The Company uses such derivatives to hedge the variable cash flows associated with variable-rate debt.
During the six months
ended June 30, 2016, the Company terminated one of its interest rate swaps as the related hedged debts were repaid, which made it probable that the forecasted transactions would not occur and, as a result, accelerated the reclassification of
immaterial amounts in accumulated other comprehensive loss to earnings. The accelerated amounts resulted in a loss of approximately $24,000 for the six months ended June 30, 2016.
Amounts reported in accumulated other comprehensive loss related to derivatives were reclassified to interest expense as interest payments
were made on the Companys variable-rate debt.
As of December 31, 2016, the Company had the following outstanding interest rate
derivatives that were designated as cash flow hedges of interest rate risk.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Interest Rate Derivative
|
|
Number of
Instruments
|
|
|
Notional Amount
(In thousands)
|
|
Interest rate swaps
|
|
|
2
|
|
|
$
|
44,700
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedges
Derivatives not designated as hedges are not speculative and are used to manage the Companys exposure to interest rate movements and
other identified risks, but do not meet the strict hedge accounting requirements under GAAP. Changes in the fair value of derivatives not designated in hedging relationships were recorded directly in earnings, which resulted in an expense of $0.1
million and $0.4 million during the three and six months ended June 30, 2016, respectively, and included in loss on derivative instruments on the consolidated statement of operations and comprehensive loss.
As of December 31, 2016, the Company had the following outstanding interest rate derivatives that were not designated as hedges in
qualified hedging relationships.
21
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Interest Rate Derivative
|
|
Number of
Instruments
|
|
|
Notional Amount
(In thousands)
|
|
Interest rate caps
|
|
|
4
|
|
|
$
|
1,065,000
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Classification
The table below presents the fair value of the Companys derivative financial instruments as well as their classification on the
consolidated balance sheet as of December 31, 2016:
|
|
|
|
|
|
|
(In thousands)
|
|
Balance Sheet Location
|
|
December 31, 2016
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate swaps
|
|
Derivative liablities, at fair value
|
|
$
|
(74
|
)
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate caps
|
|
Derivative assets, at fair value
|
|
$
|
165
|
|
|
|
|
|
|
|
|
Derivatives in Cash Flow Hedging Relationships
The table below details the location in the financial statements of the income or loss recognized on interest rate derivatives designated as
cash flow hedges for the three and six months ended June 30, 2016, respectively:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
June 30, 2016
|
|
|
Six Months Ended
June 30, 2016
|
|
Amount of loss recognized in accumulated other comprehensive loss from interest rate derivatives
(effective portion)
|
|
$
|
(423
|
)
|
|
$
|
(1,658
|
)
|
|
|
|
|
|
|
|
|
|
Amount of loss reclassified from accumulated other comprehensive loss into income as interest
expense (effective portion)
|
|
$
|
(324
|
)
|
|
$
|
(680
|
)
|
|
|
|
|
|
|
|
|
|
Amount of loss recognized in loss on derivative instruments (ineffective portion,
reclassifications of missed forecasted transactions and amounts excluded from effectiveness testing)
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
22
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Offsetting Derivatives
The Company does not offset its derivatives on the accompanying consolidated balance sheet. The table below presents a gross presentation, the
potential effects of offsetting, and a potential net presentation of the Companys derivatives as of December 31, 2016. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The
tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the accompanying consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts
of Recognized
Assets
|
|
|
Gross Amounts
of Recognized
Liabilities
|
|
|
Potential Net Amounts
of Assets (Liabilities)
Presented on the
Balance Sheet
|
|
|
Gross Amounts Not Offset on the
Balance Sheet
|
|
|
|
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Posted
|
|
|
Net
Amount
|
|
Derivatives (In thousands)
|
|
|
|
|
|
|
December 31, 2016
|
|
$
|
165
|
|
|
$
|
(74
|
)
|
|
$
|
91
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-risk-related Contingent Features
The Company has agreements with its derivative counterparties that contain a provision whereby if the Company either defaults or is capable of
being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. As of December 31, 2016, the fair value of derivatives in a net liability position including accrued
interest but excluding any adjustment for nonperformance risk related to these agreements was $0.1 million.
As of December 31, 2016,
the Company had not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements
at their aggregate termination value of $0.1 million at December 31, 2016.
Note 11 Common Stock
As of June 30, 2017 and December 31, 2016, the Company had 167.9 million and 167.1 million shares of common stock
outstanding, respectively, including shares of unvested restricted common stock (restricted shares), but not including OP units or Long-term Incentive Plan units (LTIP units) which may in the future be converted into shares
of common stock. On January 3, 2017, the Company issued 841,660 shares of its common stock upon redemption of 841,660 OP units held by certain individuals who are members of the Former Advisor or its affiliates. As of June 30, 2017, there
were no OP units outstanding, other than OP units held by the Company, and no vested LTIP units outstanding. See Note 17 Non-Controlling Interests.
From April 2014 through October 2016, the Board authorized, and the Company declared and paid, a monthly dividend at an annualized rate equal
to $0.46 per share per annum. Dividends were paid to stockholders of record on the close of business on the 8th day of each month, payable on the 15th day of such month. In October 2016, the Company announced that, in light of the
Liquidation Plan, which was then subject to stockholder approval, the Board determined that the Company would not pay a regular dividend for the month of November 2016 and did not expect to pay a regular monthly dividend for the month of December
2016 or thereafter. Because the Liquidation Plan was approved by the Companys stockholders, the Company will not resume paying monthly dividends. In lieu of regular monthly dividends, the Company expects to make periodic liquidating
distributions out of net proceeds of asset sales, subject to satisfying its liabilities, obligations and debt covenants. There can be no assurance as to the actual amount or timing of liquidating distributions stockholders will receive.
23
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Note 12 Commitments and Contingencies
Future Minimum Lease Payments
The Company
entered into operating and capital lease agreements primarily related to certain properties under leasehold interest arrangements. The following table reflects the minimum contractual base cash payments, excluding reimbursements, due from the
Company over the next five years and thereafter under these arrangements, including the present value of the net minimum payments due under capital leases. These amounts exclude contingent rent payments, as applicable, that may be payable based on
provisions related to increases in annual rent based on exceeding certain economic indexes among other items.
|
|
|
|
|
|
|
Future Minimum
Base Rent Payments
|
|
(In thousands)
|
|
Ground Leases
|
|
July 1, 2017December 31, 2017
|
|
$
|
2,496
|
|
2018
|
|
|
5,175
|
|
2019
|
|
|
5,432
|
|
2020
|
|
|
5,432
|
|
2021
|
|
|
5,633
|
|
Thereafter
|
|
|
244,051
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
268,219
|
|
|
|
|
|
|
Total rental expense related to operating leases was $1.9 million and $3.9 million, respectively, for the
three and six months ended June 30, 2016. During the three and six months ended June 30, 2016, interest expense related to capital leases was approximately $16,000 and $32,000, respectively. The following table discloses assets recorded
under capital leases and the accumulated amortization thereon as of December 31, 2016:
|
|
|
|
|
(In thousands)
|
|
December 31, 2016
|
|
Buildings, fixtures and improvements
|
|
$
|
11,785
|
|
Less accumulated depreciation and amortization
|
|
|
(2,273
|
)
|
|
|
|
|
|
Total real estate investments, net
|
|
$
|
9,512
|
|
|
|
|
|
|
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no legal or
regulatory proceedings pending or known to be contemplated against the Company from which the Company expects to incur a material loss.
RXR Litigation
RXR Realty (RXR) initiated a suit against the Company alleging that it suffered lost profits in connection
with the Companys purchase of its 48.9% interest in Worldwide Plaza in October 2013. On August 12, 2014, the Supreme Court of the State of New York dismissed all of RXRs claims against the seller of Worldwide Plaza and
dismissed RXRs disgorgement claims against the Company, permitting only a limited, immaterial claim against the Company for RXRs cost of producing due diligence-related material to proceed. RXR appealed the ruling and, on
October 13, 2015, the appellate court upheld the previous decisions; however, the appellate court held that the trial courts exclusion of lost profit damages was premature and would have to be considered through a motion for summary
24
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
judgment. The Company moved for partial summary judgment to reinstate the damages limitation, and the trial court granted the motion at oral argument on March 24, 2016. On June 16,
2016, RXR appealed, and on December 8, 2016, the appellate court entered an order denying RXRs appeal and affirming the trial courts damages limitation. On January 9, 2017, RXR filed a motion seeking reargument of the appellate
court decision, or, in the alternative, leave to appeal to the Court of Appeals. On March 21, 2017, RXRs motion for reargument or leave to appeal was denied. On June 22, 2017, RXR agreed to discontinue the claim and the proceeding
has been discontinued in its entirety, with prejudice, and without fees or costs against any party.
Harris Derivative Suit
In October 2016, Berney Harris (the Plaintiff) filed a derivative complaint (the Harris Complaint) on behalf of public
stockholders of the Company against the Company, certain current and former members of its board of directors (the director defendants), the Former Advisor, and certain affiliates of the Former Advisor (together with the Former Advisor,
the Former Advisor defendants). The Complaint was filed in New York Supreme Court, New York County on October 13, 2016. The Harris Complaint alleges, among other things, that the director defendants breached their fiduciary duties
to the public stockholders of the Company by putting the interests of the Former Advisor defendants before those of the public stockholders, which breach was aided and abetted by the Former Advisor defendants. The Harris Complaint also asserts
claims of corporate waste against the director defendants and unjust enrichment against certain of the Former Advisor defendants. On December 16, 2016, the defendants filed motions to dismiss on the basis of a provision in the Companys
bylaws providing that the state or federal courts of Maryland are the sole and exclusive forum for claims such as those raised in the Harris Complaint. An Evaluation Committee of the Board of Directors, which consists of three independent,
disinterested directors and was appointed to evaluate what actions should be taken by the Company in connection with the Harris Complaint, filed a memorandum of law on August 4, 2017 in support of this motion. If the motion is granted and the case
is dismissed, the Harris Complaint may be refiled in Maryland. If the motion is denied, the case will proceed in New York Supreme Court, New York County. In either event, the defendants still have various other grounds on which to move to dismiss,
and the Company intends to vigorously defend against all claims.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to
environmental matters. The Company maintains environmental insurance for its properties that provides coverage for potential environmental liabilities, subject to the policys coverage conditions and limitations. The Company has not been
notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the consolidated results of operations.
Note 13 Related Party Transactions and Arrangements
The Former Advisor, individual members of the Former Advisor, and employees or former employees of the Former Advisor held interests in the OP.
See Note 17 Non-Controlling Interests.
Viceroy Hotel
The following table details revenues from related parties at the Viceroy Hotel. The Company did not have any receivables from related parties
as of June 30, 2017 or December 31, 2016.
25
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Hotel revenues
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
5
|
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winthrop Advisor and its Affiliates
On December 19, 2016 the Company entered into an agreement (the Services Agreement) with Winthrop Advisor, pursuant to which
Winthrop Advisor served as the Companys exclusive advisor with respect to all matters primarily related to any plan of liquidation and dissolution of the Company and as a consultant to the Board on certain other matters during the period from
January 3, 2017 through March 7, 2017 and is serving as exclusive advisor to the Company from and after March 8, 2017.
On
each of January 3, 2017 and February 1, 2017, the Company paid Winthrop Advisor a fee of $500,000 in cash as compensation for advisory services and consulting services rendered prior to March 1, 2017.
Beginning on March 1, 2017, the Company pays Winthrop Advisor an asset management fee equal to 0.325% per annum of the cost of
assets (as defined in the Services Agreement) up to $3.0 billion and 0.25% per annum of the cost of assets in excess of $3.0 billion. In connection with the adoption of liquidation accounting, the Company accrues costs it expects to incur
through the end of liquidation. In this regard, at June 30, 2017 the Company has accrued, based on its estimate of the timing of sales, asset management fees of $3,506,000 payable to the Winthrop Advisor. This amount is included in liabilities
for estimated costs in excess of estimated receipts during liquidation. Actual fees incurred may differ significantly from these estimates due to inherent uncertainty in estimating future events.
In connection with the payment of (i) any distributions of money or other property by the Company to its stockholders during the term of
the Services Agreement and (ii) any other amounts paid to the Companys stockholders on account of their shares of common stock in connection with a merger or other change in control transaction pursuant to an agreement with the Company
entered into after March 8, 2017 (such distributions and payments, the Hurdle Payments), in excess of $11.00 per share (the Hurdle Amount), when taken together with all other Hurdle Payments, the Company will pay an
incentive fee to the Winthrop Advisor in an amount equal to 10.0% of such excess (the Incentive Fee). The Hurdle Amount will be increased on an annualized basis by an amount equal to the product of (a) the Treasury Rate plus 200
basis points and (b) the Hurdle Amount minus all previous Hurdle Payments. Based on the current estimated net assets in liquidation, the Winthrop Advisor would not be entitled to receive any such incentive fee.
Effective March 2017, Winthrop Property Manager began providing property management services to those properties for which the ARG Property
Manager had been providing property management services. The Company pays to Winthrop Property Manager 1.75% of gross revenues, inclusive of all third party property management fees, for property management services provided to the Company by the
Winthrop Property Manager or any of its affiliates.
26
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The following table details amounts incurred by the Company to the Winthrop Advisor and its
affiliates in connection with the operations related services described above for the periods presented and any amounts payable to or due from the Winthrop Advisor as of the dates specified:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
Payable (Receivable) as of
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
(In thousands)
|
|
Incurred
|
|
|
Incurred
|
|
|
Incurred
|
|
|
Incurred
|
|
|
|
Asset management fees
|
|
$
|
2,003
|
|
|
$
|
|
|
|
$
|
3,670
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Property management fees
|
|
|
218
|
|
|
|
|
|
|
|
264
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total related party operational fees and reimbursements
|
|
$
|
2,221
|
|
|
$
|
|
|
|
$
|
3,934
|
|
|
$
|
|
|
|
$
|
60
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Advisor and its Affiliates
Prior to March 8, 2017, the Company paid to the Former Advisor an asset management fee equal to 0.50% per annum of the cost of assets
up to $3.0 billion and 0.40% per annum of the cost of assets above $3.0 billion.
Prior to March 8, 2017, unless the Company
contracted with a third party, the Company paid the ARG Property Manager a property management fee equal to: (i) for non-hotel properties, 4.0% of gross revenues from properties managed, plus market-based leasing commissions; and (ii) for
hotel properties, a market based fee equal to a percentage of gross revenues. The Company also reimbursed the ARG Property Manager for property-level expenses. The ARG Property Manager was permitted to subcontract the performance of its property
management and leasing services duties to third parties and pay all or a portion of its property management fee to the third parties with whom it contracted for these services. If the Company contracted directly with third parties for such services,
the Company paid them customary market fees and paid the ARG Property Manager an oversight fee equal to 1.0% of the gross revenues of the applicable property.
The Company reimbursed the Former Advisor for costs and expenses paid or incurred prior to March 8, 2017 by the Former Advisor and its
affiliates in connection with providing services to the Company (including reasonable salaries and wages, benefits and overhead of all employees directly involved with the performance of such services), although the Company did not reimburse the
Former Advisor for personnel costs in connection with services for which the Former Advisor received a separate fee.
The Company was also
party to a transfer agency agreement with American National Stock Transfer, LLC, a subsidiary of the parent company of the Former Dealer Manager (ANST), pursuant to which ANST provided the Company with transfer agency services (including
broker and stockholder servicing, transaction processing, year-end IRS reporting and other services), and supervisory services overseeing the transfer agency services performed by DST Systems, Inc., a third-party transfer agent (DST).
The Sponsor received written notice from ANST on February 10, 2016 that it would wind down operations by the end of February and would withdraw as the transfer agent effective February 29, 2016. DST continued to provide the Company with
transfer agency services and, on March 10, 2016, the Company entered into a definitive agreement with DST to provide the Company directly with transfer agency services (including broker and stockholder servicing, transaction processing,
year-end IRS reporting and other services). For the six months ended June 30, 2016, fees for these services are included in general and administrative expenses on the consolidated statement of operations and comprehensive income (loss) during
the period in which the service was provided.
27
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The following table details amounts incurred and paid by the Company to, and amounts waived
by, the Former Advisor and its affiliates in connection with the operations related services described above for the periods presented and any amounts payable to or due from the Former Advisor as of the dates specified:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
Payable (Receivable) as of
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
(In thousands)
|
|
Incurred
|
|
|
Waived
|
|
|
Incurred
|
|
|
Waived
|
|
|
Incurred
|
|
|
Waived
|
|
|
Incurred
|
|
|
Waived
|
|
|
|
To the Former Advisor and affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset management fees
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,050
|
|
|
$
|
|
|
|
$
|
2,339
|
|
|
$
|
|
|
|
$
|
6,124
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
51
|
|
Transfer agent and other professional fees
|
|
|
|
|
|
|
|
|
|
|
658
|
|
|
|
|
|
|
|
414
|
|
|
|
|
|
|
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
299
|
|
Property management fees
|
|
|
|
|
|
|
|
|
|
|
508
|
|
|
|
508
|
|
|
|
560
|
|
|
|
|
|
|
|
994
|
|
|
|
994
|
|
|
|
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total related party operational fees and reimbursements
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,216
|
|
|
$
|
508
|
|
|
$
|
3,313
|
|
|
$
|
|
|
|
$
|
8,468
|
|
|
$
|
994
|
|
|
$
|
|
|
|
$
|
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Former Advisor agreed to waive certain fees, including property management fees, during the three and six
months ended June 30, 2016. The fees that were waived were not deferrals and accordingly, were not and will not be paid to the Former Advisor.
In connection with the sale of one or more properties, for which the Former Advisor provided a substantial amount of services as determined by
the Companys independent directors, the Company was required to pay the Former Advisor a property disposition fee not to exceed the lesser of 2.0% of the contract sale price of the property or 50% of the competitive real estate commission paid
if a third party broker was also involved; provided, however that in no event could the property disposition fee paid to the Former Advisor when added to real estate commissions paid to unaffiliated third parties exceed the lesser of 6.0% of the
contract sales price and a competitive real estate commission. For purposes of the foregoing, competitive real estate commission meant a real estate brokerage commission for the purchase or sale of a property which was reasonable,
customary and competitive in light of the size, type and location of the property. The Company incurred and paid $0.2 million in property disposition fees to the Former Advisor during the six months ended June 30, 2016 related to the sale of
certain properties. No such fees were incurred or paid during the three months ended June 30, 2016.
Note 14 Economic Dependency
Under various agreements, the Company has engaged or will engage Winthrop Advisor, its affiliates and entities under common control with
Winthrop Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, as well
as other administrative responsibilities for the Company including accounting services, transaction management and investor relations.
As
a result of these relationships, the Company is dependent upon Winthrop Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative
providers of these services.
Note 15 Share-Based Compensation
Stock Option Plan
The Company has
a stock option plan (the Plan) which authorizes the grant of nonqualified stock options to the Companys independent directors, officers, advisors, consultants and other personnel, subject to the absolute discretion of the board of
directors and the applicable limitations of the Plan. The exercise price for all stock options granted under the Plan is equal to the fair market value of a share on the date of grant. Upon a change in control, unvested options will become fully
vested and any performance conditions imposed with respect to the options will be deemed to be fully achieved. A total of 0.5 million shares have been authorized and reserved for issuance under the Plan. As of June 30, 2017 and
December 31, 2016, no stock options were issued under the Plan.
28
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Restricted Share Plan
The Companys employee and director incentive restricted share plan (RSP) provides the Company with the ability to grant
awards of restricted shares to the Companys directors, officers and employees (if the Company ever has employees), employees of the Former Advisor or the Advisor and its affiliates, employees of entities that provide services to the Company,
directors of the Former Advisor or of entities that provide services to the Company, certain consultants to the Company and the Former Advisor and its affiliates or to entities that provide services to the Company.
Under the RSP, the annual amount granted to the independent directors is determined by the board of directors. The maximum number of shares of
stock granted under the RSP cannot exceed 10% of the Companys outstanding shares of common stock, par value $0.01 per share, on a fully diluted basis at any time. Restricted shares issued to independent directors generally vest over a
three-year period in increments of 33.3% per annum. Generally, such awards provide for accelerated vesting of (i) all unvested restricted shares upon a change in control or a termination without cause and (ii) the portion of the
unvested restricted shares scheduled to vest in the year of voluntary termination or the failure to be reelected to the board. The restricted stock award agreements provide that the shares will vest on the consummation of the sale or disposition by
the Company of all or substantially all of the Companys assets (or any transaction or series of transactions within a period of twelve months), which could occur as a result of the Liquidation Plan.
Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of
restricted shares receive cash dividends and other distributions (including any liquidating distributions made pursuant to the Liquidation Plan) prior to the time that the restrictions on the restricted shares have lapsed. Any dividends payable in
shares of common stock are subject to the same restrictions as the underlying restricted shares.
The following table displays restricted
share award activity during the six months ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
Shares
|
|
|
Weighted-Average Issue
Price per Share
|
|
Unvested, December 31, 2016
|
|
|
268,780
|
|
|
$
|
10.50
|
|
Vested
|
|
|
(160,558
|
)
|
|
$
|
10.47
|
|
Forfeited
|
|
|
(22,979
|
)
|
|
$
|
10.30
|
|
|
|
|
|
|
|
|
|
|
Unvested, June 30, 2017
|
|
|
85,243
|
|
|
$
|
10.31
|
|
|
|
|
|
|
|
|
|
|
Under going concern accounting, the Company measured stock-based compensation expense at each reporting date
for any changes in the fair value and recognized the expense prorated for the portion of the requisite service period completed. Accordingly, the Company recognized $0.2 million and $0.3 million in non-cash compensation expense for the three and six
months ended June 30, 2016, respectively. Under liquidation accounting, compensation expense is no longer recorded as the vesting of the restricted shares does not result in cash outflow for the Company.
2014 Multi-Year Outperformance Agreement
On April 15, 2014 (the Effective Date), the Company entered into a multi-year outperformance agreement (the OPP)
with New York Recovery Operating Partnership, L.P., a Delaware limited partnership (the Operating Partnership) and the Former Advisor. Under the OPP, the Former Advisor was issued 8,880,579 LTIP Units in the Operating Partnership with a
maximum award value on the issuance date equal to 5.0% of the Companys market capitalization (the OPP Cap). The LTIP Units are structured as profits interests in the Operating Partnership.
29
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
Prior to the OPP Side Letter dated December 19, 2016 (OPP Side Letter),
subject to the Former Advisors continued service through each vesting date, one third of any earned LTIP Units would vest on each of the third, fourth and fifth anniversaries of the Effective Date.
On April 15, 2015 and 2016, in connection with the end of the One-Year Period and Two-Year Period, 367,059 and 805,679 LTIP Units,
respectively, were earned by the Former Advisor under the terms of the OPP. Pursuant to the OPP Side Letter, these LTIP Units immediately vested upon approval by the Compensation Committee and converted on a one-for-one basis into unrestricted
shares of the Companys common stock.
Based on calculations for the Three-Year Period, the Former Advisor earned 43,685 LTIP Units
under the terms of the OPP on April 15, 2017. Pursuant to the terms of the OPP Side Letter, these LTIP units were immediately vested on April 15, 2017, were converted on a one-for-one basis into unrestricted shares of the Companys
common stock on May 9, 2017, and issued to the Former Advisor on May 9, 2017. Following the issuance of the shares of common stock on May 9, 2017, the remaining 7,664,156 LTIP Units issued to the Former Advisor were forfeited.
Under the OPP, the Former Advisors eligibility to earn a number of LTIP Units with a value equal to a portion of the OPP Cap upon the
first, second and third anniversaries of the Effective Date was based on the Companys achievement of certain levels of total return to the Companys stockholders (Total Return), including both share price appreciation and
common stock dividends, as measured against a peer group of companies, as set forth below, for the three-year performance period commencing on the Effective Date (the Three-Year Period); each 12-month period during the Three-Year Period
(the One-Year Period); and the initial 24-month period of the Three-Year Period (the Two-Year Period), as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Period
|
|
|
Annual
Period
|
|
|
Interim Period
|
|
Absolute Component: 4% of any excess Total Return if total stockholder return attained above an
absolute hurdle measured from the beginning of such period:
|
|
|
21
|
%
|
|
|
7
|
%
|
|
|
14
|
%
|
Relative Component: 4% of any excess Total Return attained above the Total Return for the
performance period of the Peer Group*, subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period:
|
|
|
|
|
|
|
|
|
|
|
|
|
100% will be earned if total stockholder return achieved is at
least:
|
|
|
18
|
%
|
|
|
6
|
%
|
|
|
12
|
%
|
50% will be earned if total stockholder return achieved is:
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
0% will be earned if total stockholder return achieved is less
than:
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
a percentage from 50% to 100% calculated by linear interpolation
will be earned if the cumulative Total Return achieved is between:
|
|
|
0
|
%-18%
|
|
|
0
|
% -6%
|
|
|
0
|
% -12%
|
*
|
The Peer Group was comprised of the companies in the SNL US REIT Office Index as of the Effective Date.
|
30
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The potential outperformance award was calculated at the end of each One-Year Period, the
Two-Year Period and the Three-Year Period. The award earned for the Three-Year Period was based on the formula in the table above less any awards earned for the Two-Year Period and One-Year Periods, but not less than zero; the award earned for the
Two-Year Period was based on the formula in the table above less any award earned for the first and second One-Year Period, but not less than zero. Any LTIP Units that were unearned at the end of any performance period have been forfeited.
After an LTIP Unit was earned, the holder of such LTIP Unit was entitled to a catch-up distribution and thereafter the same distributions as
paid to the holder of an OP Unit.
The following table presents information about the Companys OPP, which was measured at fair value
on a recurring basis as of December 31, 2016, aggregated by the fair value hierarchy within which the instrument falls:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Quoted Prices in
Active Markets
Level 1
|
|
|
Significant Other
Observable Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
Total
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPP
|
|
|
|
|
|
|
|
|
|
$
|
5,457
|
|
|
$
|
5,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 valuations
The following table provides quantitative information about significant Level 3 input used:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument
|
|
Fair
Value
|
|
|
Principal Valuation
Technique
|
|
|
Unobservable
Inputs
|
|
|
Input Value
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPP
|
|
$
|
5,457
|
|
|
|
Monte Carlo Simulation
|
|
|
|
Expected volatility
|
|
|
|
28.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected volatility is a measure of the variability in possible returns for an instrument, parameter or market
index given how much the particular instrument, parameter or index changes in value over time. Generally, the higher the expected volatility of the underlying instrument, the wider the range of potential future returns. An increase in expected
volatility, in isolation, would generally result in an increase in the fair value measurement of an instrument. For the relationship described above, the inverse relationship would also generally apply.
Prior to the adoption of the liquidation basis of accounting, share based compensation related to the OPP was recorded as part of general and
administrative expenses and non-controlling interest, a component of equity. Under liquidation basis accounting, since no cash outflow is associated with the OPP, the value of the converted OP units is incorporated in the estimated liquidating
distributions per share.
Note 16 Earnings Per Share
Prior to the adoption of liquidation basis accounting, the Company determined basic earnings per share on the weighted average number of common
shares outstanding during the period. The Company computed diluted earnings per share based on the weighted average number of common shares outstanding combined with the incremental weighted average effect for all outstanding potentially dilutive
instruments.
31
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)
The following is a summary of the basic and diluted net loss per share computations for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
(In thousands, except share and per share data)
|
|
June 30, 2016
|
|
|
June 30, 2016
|
|
Basic and diluted net loss attributable to stockholders
|
|
$
|
(11,540
|
)
|
|
$
|
(11,053
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
164,835,872
|
|
|
|
164,354,242
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to stockholders, basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
Diluted net income per share assumes the conversion of all common share equivalents into an equivalent number
of common shares, unless the effect is anti-dilutive. The Company considers unvested restricted shares, OP units and LTIP units to be common share equivalents.
Note 17 Non-Controlling Interests
Under going concern accounting, consolidated joint ventures are recorded on a gross basis with an allocation of equity to non-controlling
interest holders.
The Company is the sole general partner of the OP, and the Company and a subsidiary of the Company hold all of the OP
units as of June 30, 2017. As of December 31, 2016, the Former Advisor or members, employees or former employees of the Former Advisor held 841,660 OP units and 7,707,841 unvested LTIP units. On January 3, 2017, the Company issued
841,660 shares of its common stock upon redemption of 841,660 OP units following which no OP units remained outstanding other than OP units held by the Company corresponding to shares of the Company common stock. There were $0 and $0.4 million of
distributions paid to OP unit and LTIP unit holders during the six months ended June 30, 2017 and 2016, respectively.
A holder of OP
units has the right to distributions on the same basis as a holder of shares of the Companys common stock, and has the right to redeem OP units for the cash value of a corresponding number of shares of the Companys common stock or a
corresponding number of shares of the Companys common stock, at the election of the OP, in accordance with the limited partnership agreement of the OP. The remaining rights of the holders of OP units are limited, however, and do not include
the ability to replace the general partner or to approve the sale, purchase or refinancing of the OPs assets.
Under liquidation
accounting, consolidated joint ventures will be presented on a gross basis with a payable to the non-controlling interest holder which is reflected on the Consolidated Statement of Net Assets as liability for non-controlling interests.
Note 18 Subsequent Events
On
August 7, 2017, the Company sold to an independent third party its 50 Varick Street office property in Manhattan, New York for a gross sales price of $135.0 million. The property was part of the collateral for the Companys $760.0 million POL
Loans. In connection with the sale, the Company paid down $78.1 million of debt as required under the POL Loans. After satisfaction of debt, pro-rations and closing costs the Company received net proceeds of approximately $49.1 million. The
liquidation value of the property was $137.5 million at March 31, 2017. The liquidation value was adjusted to $135.0 million at June 30, 2017 based on the contract sale price.
32
NEW YORK REIT, INC.
Notes to Consolidated Financial Statements
June 30, 2017
(unaudited)