New York REIT to Be Acquired by Washington-Area Landlord JBG

  • New company formed with $8.4 billion enterprise value
  • REIT had been under pressure to boost shareholder returns

New York REIT Inc., a landlord that’s been under pressure from investors to boost shareholder value, agreed to be acquired by closely held JBG Cos., creating an $8.4 billion real estate company focused on New York and Washington-area properties.

JBG will receive 319.9 million shares of common stock and operating units of New York REIT in exchange for stakes in buildings owned by JBG, according to a statement by the companies Wednesday. JBG will own 65.2 percent of the combined entity, which will be a publicly traded landlord known as JBG Realty Trust, with New York REIT shareholders owning the rest.

JBG, a 56-year-old real estate company that counts Yale University’s endowment as a top shareholder, will expand beyond the Washington area to New York, where New York REIT owns stakes in properties such as Manhattan’s Worldwide Plaza. The new real estate investment trust will have more than 14.5 million square feet (1.35 million square meters) of office, residential and retail real estate, according to the statement. Its enterprise value will be about $8.4 billion, the landlords said. JBG will manage the combined company, terminating New York REIT’s current management agreement.

‘Value Creation’

“We believe the expertise of the JBG management team is recognized throughout the industry, and that this combination will provide the New York REIT stockholders with the unique opportunity to participate in the value creation potential that this combination will bring,” Randolph Read, New York REIT’s chairman, said on a conference call about the transaction.

New York REIT in October hired Eastdil Secured LLC to review options such as a sale of the company or all or some of its assets. Activist investors including Land & Buildings Investment Management LLC’s Jonathan Litt and Winthrop Realty Trust’s Michael Ashner had urged the landlord to overhaul its board and take steps to boost shareholder value. The stock has returned 1.4 percent in the past two years, including dividends, compared with a 22 percent increase in the Bloomberg REIT Index.

The shares have been hurt since founder Nicholas Schorsch became embroiled in a scandal in 2014 over accounting inaccuracies at American Realty Capital Properties Inc. Schorsch resigned late that year from the boards of New York REIT and 12 other companies.

“This is not the all-cash bid that we were hoping for NYRT shareholders,” Sheila McGrath, an analyst at Evercore ISI, said in an e-mail, referring to the REIT by its ticker symbol. “That said, JBG is a highly regarded platform.”

Manhattan Properties

New York REIT, formed in 2010 as a nontraded trust, started buying property during the early stages of the city’s comeback from the financial crisis. Its portfolio consists of 18 Manhattan properties and a retail building in Brooklyn, according to its website. The company has a 49 percent stake in Worldwide Plaza, a 1.8 million-square-foot skyscraper in Midtown that serves as the Americas headquarters for Nomura Holdings Inc.

About 22 percent of the new company’s assets will be in New York City, with the rest located in the Washington metro area, New York REIT and JBG said.

Yale University’s investments office and JBG employees, the two largest stakeholders in JBG, will own about 10 percent and 15 percent, respectively, of the combined company. Yale’s tax filing as of June 2015 shows the endowment has invested in JBG Investment Fund IV LLC, with its share of end-of-year assets as $123 million, and JBG Investment Fund III LP, with end-of-year assets of $103 million.

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