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NYC REIT Discloses Troubles

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1140 New York 6th Avenue and REIT President Michael Weil (Google Maps, LinkedIn, iStock)

In the midst of a fierce proxy fight, New York City REITs are on the verge of defaulting on several real estate properties in New York.

REITs managed by AR Global Investments have violated contracts for over $ 200 million in debt on four New York properties over the past year, the company discloses in its latest quarterly report.

In the disclosure, NYC REITs announced early expiry of tenant “financial difficulties” and breaches on four properties: 9 Times Square, 1140 Six Avenue, 400 East 67 Street / 200 Riverside Boulevard and 8713 Fifth Avenue. I quoted it.

The breach did not automatically default the company, but in one of the buildings, REITs were able to regain compliance based on the terms of the last two quarters. However, the company, led by Michael Weil, warns in a filing with the Securities and Exchange Commission that it is expected to violate some of the loans in the coming months, and if that continues, the company may default. Did.

When asked to comment, a REIT representative emailed “there was no default for either a company loan or a mortgage.”

The building covers an area of ​​approximately 550,000 sq ft, which is equivalent to approximately half of REIT’s eight REIT properties, a 1.2 million sq ft portfolio.

The company has lost compliance with its debt repayment coverage, or the amount of cash needed to cover mortgage payments. This had to keep cash in separate accounts for it to loan.

At 9 Times Square, we worked to repay a portion of the loan’s principal, and at 400 East 67th Street / 200 Riverside Boulevard, we were able to return to compliance for the last two quarters.

This disclosure is an attempt to prevent activist shareholders, Comrit Investments, from electing candidates to the REIT’s board of directors.

At the end of last year, Comrit appointed an independent director to the board, claiming that its members were being watched over by Weil and AR Global’s managers.

New York City REITs are part of the corporate web founded by Nicholas Schorsch. One of those companies, American Realty Capital Properties, announced in 2014 that it had misrepresented its previous earnings. The scandal led to Schorsch’s resignation and conviction of securities fraud against CFO Brian Block.

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