NYRT - New York REIT

[LowIQinvestor]

Anyone think that there is a possibility that Wendy & Co could sell 1WWP before the liquidation date of Jan 2019?

 

I think by saying publicly that NYRT is willing to hold on to it longer than originally planned they are playing the hand they were dealt well. If they were a forced seller, than potential buyers would obviously know that and bid lower for 1WWP.

 

Comps to 1WWP are trading hands at around $1000/sq ft while the recent sale to SLG was at $840/sq ft

 

No- the main reason for holding on to it is to eliminate the transfer tax.  They need to hold for 3 years to get rid of it.

 

Thanks, how long have they held it?

[given2invest]

It just changed hands.  Either clock re-started when they exercised the option in June or when the sold half in Nov.

[Foreign Tuffett]

A couple thoughts / questions about the Viceroy Hotel:

 

240 room, 5 star hotel. Subject to ground lease. Managed by 3rd party. Marked at approximately $127 million. There was a $27.9 million impairment charge in 2016. It was marginally unprofitable in FY 2016. I believe Silverstein mentioned on one of the CC's that it was operating at roughly break even.

 

Does anyone have any thoughts on where this is marked?

Also, it looks like the previous management team attempted to sell the hotel without success.

 

https://therealdeal.com/2016/01/20/760549/

[BG2008]

A couple thoughts / questions about the Viceroy Hotel:

 

240 room, 5 star hotel. Subject to ground lease. Managed by 3rd party. Marked at approximately $127 million. There was a $27.9 million impairment charge in 2016. It was marginally unprofitable in FY 2016. I believe Silverstein mentioned on one of the CC's that it was operating at roughly break even.

 

Does anyone have any thoughts on where this is marked?

Also, it looks like the previous management team attempted to sell the hotel without success.

 

https://therealdeal.com/2016/01/20/760549/

 

Just be really careful about Real Estate business that don't actually own the dirt.  Look at the transaction of the Steinway building.  They didn't own the dirt.  People thought that it was worth $200mm, it got sold for $46mm.  The Steinway building is directly across the street from the Viceroy Hotel on 57th Street. 

 

https://commercialobserver.com/2013/03/steinway-agrees-to-sell-109-west-57th-street/

 

In New York City, if you don't own the dirt, you don't own squat. 

[given2invest]

I think it's marked lower than that.  Says 127m but then there is a 35m deduction at bottom and says this:

 

"Under the liquidation basis of accounting, our real estate holdings are now carried at their estimated value. As a result, the net liquidation adjustment is the net adjustment that we have made to the carrying value of the property in order to reflect its fair value.".

 

You will have a hard time figuring out what the hotel is worth.  Have to believe at this point management has gotten indications of interest and would have marked it down more when they slashed NAV in the fall if they felt it was gonna come up short.  In fact, they had another opportunity to do so this last quarter and did not. 

 

I believe the previous time it was on the market they probably wanted a lot more for it given they paid $148.5M. 

 

In the end, if it sells for $75m or $50M, it's not the end of the investment thesis.  You're still buying 1WWP at a discount to what it sold at to SLG.  But I think we'll end up ok.  It needs to be rebranded and not be sold as a premium product.  The price/key is low enough where I'd think they get it sold.

 

Andrew has it marked at b/w 75 and 85M fwiw.  He explains how he gets to this in the blog post.

 

http://www.yetanothervalueblog.com/2017/10/bagholding-with-nyrt.html

[Foreign Tuffett]

I think it's marked lower than that.  Says 127m but then there is a 35m deduction at bottom and says this:

 

"Under the liquidation basis of accounting, our real estate holdings are now carried at their estimated value. As a result, the net liquidation adjustment is the net adjustment that we have made to the carrying value of the property in order to reflect its fair value.".

 

You will have a hard time figuring out what the hotel is worth.  Have to believe at this point management has gotten indications of interest and would have marked it down more when they slashed NAV in the fall if they felt it was gonna come up short.  In fact, they had another opportunity to do so this last quarter and did not. 

 

I believe the previous time it was on the market they probably wanted a lot more for it given they paid $148.5M. 

 

In the end, if it sells for $75m or $50M, it's not the end of the investment thesis.  You're still buying 1WWP at a discount to what it sold at to SLG.  But I think we'll end up ok.  It needs to be rebranded and not be sold as a premium product.  The price/key is low enough where I'd think they get it sold.

 

Andrew has it marked at b/w 75 and 85M fwiw.  He explains how he gets to this in the blog post.

 

http://www.yetanothervalueblog.com/2017/10/bagholding-with-nyrt.html

 

With all due respect, I disagree with most everything you wrote:

 

(Assuming we are both referring to the table on the last page of the most recent 10-K): It's a $35.3 million addition, not deduction. Easy to verify by adding together all the numbers in the "Total" column on the far right of the table.

 

If the property sells for the $75 million Andrew estimates instead of the $127 million it appears to be marked at, that's a $52 million difference in equity value. That's nearly $0.31 per share (using the pre reverse share split #s).* That's very significant!

 

* Note that I relied on the numbers provided by Alpha Vulture to make this estimate. The blog can be found below:

 

https://alphavulture.com/2018/03/08/jumping-on-the-new-york-reit-bandwagon/

 

[given2invest]

Foreign Tuffett:

 

Whoops, I screwed that up.  You are right.  But also wrong.

 

That 35m ADDITION is in total for all of the properties listed.  It is quite possible that some are underpriced and some are overpriced.  The NET result is the 35m addition.

 

To prove my point, one of the largest properties listed their is 333 W. 34th Street, listed at $192M.  Guess what?  It sold for $255M.

 

http://www.snl.com/IRWebLinkX/file.aspx?IID=4246025&FID=391033479

 

Right there, alone, is a 50+M difference after fees. 

 

Design Center sold for $47M, listed at 27M.  15M+ difference after fees.

 

https://www.bisnow.com/new-york/news/office/new-york-reit-liquidation-306-east-61st-st-sale-interior-design-building-82825

 

So anyway, I've just proved that it's not marked at 127m.  If you want to go through each of the remaining properties and "true them up" you can come to an exact price that Viceroy is marked at.  Andrew went into detail how he figured out the marks and they have been very accurate.

 

If the property sells for $50M vs the mark of 75m it's $1.50/share in NAV.  Might sound like a lot but it's not!  It's 15 cents pre reverse split.  You can go back through this entire thread to see how paying 15 cents more for 1WWP stub is not going to kill the IRR.

 

I also don't think it will sell for $50m.

 

EDIT:  In fact, from ALPHA VULTURES blog, you can see the updated PRO FORMA financials.  There are only 2 assets left - a garage and Viceroy.  The garage is worth 7M.  He has total remaining assets at just 70m.  Means Viceroy marked at 63m.

 

Finally, I just asked the CEO.  This is her response:

 

"We have never revealed the NAV estimate of any asset we have for sale. I assure you the number is not $127 and that we do feel comfortable with our most recent estimate as reflected in our most recent financial statement. "

[Hielko]

Thanks for the ALL CAPS shout-out ;)

 

But yes, that table at the end of the 10-K is just totally useless and meaningless. And yes, I think it's correct that Viceroy is valued at roughly 63M. Given that they have sold almost everything else you can just deduct all the announced sales from the numbers in the 10-K to see what's left.

[given2invest]

Thanks for the ALL CAPS shout-out ;)

 

But yes, that table at the end of the 10-K is just totally useless and meaningless. And yes, I think it's correct that Viceroy is valued at roughly 63M. Given that they have sold almost everything else you can just deduct all the announced sales from the numbers in the 10-K to see what's left.

 

It's funny I replied to Wendy with precisely that and she hasn't responded yet.  I think she is used to not commenting on individual properties but she fails to realize now that it's just the garage and Viceroy you can back into it!  Great blog post - thanks.

[Foreign Tuffett]

Thanks for the ALL CAPS shout-out ;)

 

But yes, that table at the end of the 10-K is just totally useless and meaningless. And yes, I think it's correct that Viceroy is valued at roughly 63M. Given that they have sold almost everything else you can just deduct all the announced sales from the numbers in the 10-K to see what's left.

 

I tried to independently back into the GAAP NAV # this afternoon while Rome (aka the S&P 500) burned. You and given2invest look to be right that the two remaining buildings are, combined, valued at something like $70 million.

 

My main concern allayed, I bought back in today. 

 

 

 

 

 

[given2invest]

Thanks for the ALL CAPS shout-out ;)

 

But yes, that table at the end of the 10-K is just totally useless and meaningless. And yes, I think it's correct that Viceroy is valued at roughly 63M. Given that they have sold almost everything else you can just deduct all the announced sales from the numbers in the 10-K to see what's left.

 

I tried to independently back into the GAAP NAV # this afternoon while Rome (aka the S&P 500) burned. You and given2invest look to be right that the two remaining buildings are, combined, valued at something like $70 million.

 

My main concern allayed, I bought back in today. 

 

 

 

Oh that's good...in all seriousness.  I thought you were just debating for shits sake and I was wasting my time.  Glad it amounted to something.

[Foreign Tuffett]

Is anyone familiar with the legal constraints of the liquidating trust structure that Worldwide Plaza will be placed in? Google is telling me that "generally" liquidating trusts can only exist for around 3 years. The worst case scenario here would be a forced liquidation into a poor market and/or immediately after a botched negotiation with Cravath.

 

 

 

 

   

[given2invest]

Is anyone familiar with the legal constraints of the liquidating trust structure that Worldwide Plaza will be placed in? Google is telling me that "generally" liquidating trusts can only exist for around 3 years. The worst case scenario here would be a forced liquidation into a poor market and/or immediately after a botched negotiation with Cravath.

 

 

 

There is no timeframe.  It will be de-listed.  They are not under constraint to sell w/in 3 years of the delisting.  I'm 99% certain of this.

[Hielko]

Is anyone familiar with the legal constraints of the liquidating trust structure that Worldwide Plaza will be placed in? Google is telling me that "generally" liquidating trusts can only exist for around 3 years. The worst case scenario here would be a forced liquidation into a poor market and/or immediately after a botched negotiation with Cravath.

 

 

 

There is no timeframe.  It will be de-listed.  They are not under constraint to sell w/in 3 years of the delisting.  I'm 99% certain of this.

The 3 years might not be a hard constraint, but my Google skills agree with Foreign Tuffett findings. Liquidation trusts should have a term that "generally" should not exceed 3 years and the time period should not be "unreasonably prolonged".

[given2invest]

They plan on selling 1WWP once the transfer tax penalty is cleared which is 3 years from Nov 2017 (I believe).  Since liquidating trust won't be formed till Jan 2019 will have plenty of cushion w/ that 3 year language (Jan 2022).  But "generally" is not a firm law anyway.

[Foreign Tuffett]

They plan on selling 1WWP once the transfer tax penalty is cleared which is 3 years from Nov 2017 (I believe).  Since liquidating trust won't be formed till Jan 2019 will have plenty of cushion w/ that 3 year language (Jan 2022).  But "generally" is not a firm law anyway.

 

Here's some relevant language from Winthrop Realty Liquidating Trust's most recent 10-K:

 

"The Liquidating Trust will terminate upon the earlier of (i) the distribution of all of the remaining assets of the Liquidating Trust in accordance with the terms of the Liquidating Trust Agreement, or (ii) August 5, 2019. The Liquidating Trust may be extended beyond August 5, 2019 if our Trustees determine that an extension is reasonably necessary to fulfill the purpose of the Liquidating Trust."

 

Note that August 5, 2019 date is exactly 3 years from the day the assets were transferred to the trust structure.

 

One might ask how "reasonably necessary" is defined here. Probably only an attorney with experience dealing with these types of issues would be in a position to know.

[given2invest]

They plan on selling 1WWP once the transfer tax penalty is cleared which is 3 years from Nov 2017 (I believe).  Since liquidating trust won't be formed till Jan 2019 will have plenty of cushion w/ that 3 year language (Jan 2022).  But "generally" is not a firm law anyway.

 

Here's some relevant language from Winthrop Realty Liquidating Trust's most recent 10-K:

 

"The Liquidating Trust will terminate upon the earlier of (i) the distribution of all of the remaining assets of the Liquidating Trust in accordance with the terms of the Liquidating Trust Agreement, or (ii) August 5, 2019. The Liquidating Trust may be extended beyond August 5, 2019 if our Trustees determine that an extension is reasonably necessary to fulfill the purpose of the Liquidating Trust."

 

Note that August 5, 2019 date is exactly 3 years from the day the assets were transferred to the trust structure.

 

One might ask how "reasonably necessary" is defined here. Probably only an attorney with experience dealing with these types of issues would be in a position to know.

 

I think making too much of this.  It will be one single asset and no shareholders are going to sue to make them sell it if it's distressed.  Nobody is getting fees while it sits in the trust.  Really only two options:  Market is fine and they punt it after transfer tax goes away OR market is terrible and they hold on to it.  But you can email CEO/CFO and ask them if it bothers you.  They should be reporting earnings today or tomorrow.

[Hielko]

They plan on selling 1WWP once the transfer tax penalty is cleared which is 3 years from Nov 2017 (I believe).  Since liquidating trust won't be formed till Jan 2019 will have plenty of cushion w/ that 3 year language (Jan 2022).  But "generally" is not a firm law anyway.

 

Here's some relevant language from Winthrop Realty Liquidating Trust's most recent 10-K:

 

"The Liquidating Trust will terminate upon the earlier of (i) the distribution of all of the remaining assets of the Liquidating Trust in accordance with the terms of the Liquidating Trust Agreement, or (ii) August 5, 2019. The Liquidating Trust may be extended beyond August 5, 2019 if our Trustees determine that an extension is reasonably necessary to fulfill the purpose of the Liquidating Trust."

 

Note that August 5, 2019 date is exactly 3 years from the day the assets were transferred to the trust structure.

 

One might ask how "reasonably necessary" is defined here. Probably only an attorney with experience dealing with these types of issues would be in a position to know.

 

I think making too much of this.  It will be one single asset and no shareholders are going to sue to make them sell it if it's distressed.  Nobody is getting fees while it sits in the trust.  Really only two options:  Market is fine and they punt it after transfer tax goes away OR market is terrible and they hold on to it.  But you can email CEO/CFO and ask them if it bothers you.  They should be reporting earnings today or tomorrow.

I think it's the IRS who would have a potential problem with the 3+ year liquidating trust, not investors.

[Foreign Tuffett]

They plan on selling 1WWP once the transfer tax penalty is cleared which is 3 years from Nov 2017 (I believe).  Since liquidating trust won't be formed till Jan 2019 will have plenty of cushion w/ that 3 year language (Jan 2022).  But "generally" is not a firm law anyway.

 

Here's some relevant language from Winthrop Realty Liquidating Trust's most recent 10-K:

 

"The Liquidating Trust will terminate upon the earlier of (i) the distribution of all of the remaining assets of the Liquidating Trust in accordance with the terms of the Liquidating Trust Agreement, or (ii) August 5, 2019. The Liquidating Trust may be extended beyond August 5, 2019 if our Trustees determine that an extension is reasonably necessary to fulfill the purpose of the Liquidating Trust."

 

Note that August 5, 2019 date is exactly 3 years from the day the assets were transferred to the trust structure.

 

One might ask how "reasonably necessary" is defined here. Probably only an attorney with experience dealing with these types of issues would be in a position to know.

 

I think making too much of this.  It will be one single asset and no shareholders are going to sue to make them sell it if it's distressed.  Nobody is getting fees while it sits in the trust.  Really only two options:  Market is fine and they punt it after transfer tax goes away OR market is terrible and they hold on to it.  But you can email CEO/CFO and ask them if it bothers you.  They should be reporting earnings today or tomorrow.

I think it's the IRS who would have a potential problem with the 3+ year liquidating trust, not investors.

 

Yes, exactly. Basically what I'm worried about here is "forced" selling at an inopportune time.

[Foreign Tuffett]

The much-discussed Viceroy Hotel finally has a sale contract. Maybe a ~$20M hit to NAV?

 

Wendy Silverstein is stepping down. Media is reporting she'll be joining WeWork. I think few NYRT investors are shedding any tears over this development.

 

http://www.snl.com/IRWebLinkX/file.aspx?IID=4246025&FID=394207113

[johnny]

Maybe a ~$20M hit to NAV?

 

By my math, community-adjusted NAV remains at 100%

[given2invest]

The much-discussed Viceroy Hotel finally has a sale contract. Maybe a ~$20M hit to NAV?

 

Wendy Silverstein is stepping down. Media is reporting she'll be joining WeWork. I think few NYRT investors are shedding any tears over this development.

 

http://www.snl.com/IRWebLinkX/file.aspx?IID=4246025&FID=394207113

 

It's sub 5m hit to NAV or 30-40 cents a share.  Can back into it from the 10Q.  I confirmed w/ CFO who is now also CEO ha.  Now it's a pure play on 1WWP.  There is no job for a CEO anymore.  One day the trustees will sell 1WWP and that will be the end.

[Foreign Tuffett]

Cravath playing hardball?

 

https://www.bloomberg.com/news/articles/2018-07-26/cravath-law-firm-is-said-to-shop-for-potential-new-headquarters

[given2invest]

Not concerned about that.  CFO (now CEO) told me that it's been their goal since the deal to get this renegotiated so they can free up some of the space as Cravath doesn't need all the space they have now.

[Gregmal]

Not concerned about that.  CFO (now CEO) told me that it's been their goal since the deal to get this renegotiated so they can free up some of the space as Cravath doesn't need all the space they have now.

 

I think this is obvious BS. They think they can get higher rent? These guys are incompetent IMO