4/15/2014 | By Sarah Borchersen-Keto
Shares of the company’s stock opened at a price of $10.70 and closed their first day of trading at $10.75.
The company, which was previously known as American Realty Capital New York Recovery REIT, Inc., focuses on acquiring and operating a portfolio of institutional-quality office and retail properties in New York.
Manhattan assets make up 96 percent of New York REIT’s portfolio, which the company said gives it the highest concentration of Manhattan real estate of all public REITs. The remaining assets are located in the New York boroughs of Brooklyn and Queens.
Nicholas Schorsch, chairman and CEO of New York REIT, said the NYSE listing marks “another important milestone for the company and provides it more efficient access to the capital markets, which will help drive its future growth, while also creating a liquidity opportunity for our shareholders.”
In an interview with REIT.com, Schorsch said the company has about $500 million of leverage, credit availability of over $365 million, and cash on hand of about $250 million: “It’s a very, very strong balance sheet.”
New York REIT has assembled a portfolio of 23 properties in New York. It joins a small group of REITs that are highly concentrated in New York assets. Others include SL Green Realty Corp. (NYSE:SLG), Empire State Realty Trust (NYSE: ESRT), and Vornado Realty Trust (NYSE: VNO).
Schorsch noted that in terms of office space, New York REIT is more likely to be competing with the large New York real estate families, rather than fellow REITs. Occasionally, Schorsch noted, the company does compete against SL Green for retail assets.
New York REIT noted that it acquired $1.8 billion in assets in 2013 and is expecting to buy about $400 million in assets in 2014. New York REIT is anticipating 14 percent net operating income (NOI) growth in 2015. The average lease term of its properties is 10.1 years, and the portfolio is 94 percent occupied.
The company noted that existing below-market rents add to its growth potential in 2015 and beyond. Schorsch said that the REIT already has contractual rent growth of more than 14 percent year-over-year. “That’s extraordinary, and that’s already all leased and committed,” he added.
John Bejjani, an analyst at Green Street Advisors, observed that some of the properties that New York REIT acquired from 2010 through 2012 “have likely appreciated, as has most Manhattan commercial real estate since the financial crisis.” However, the vast majority of its asset value was acquired at some point during 2013 when prices had increased, he added.
Bejjani also noted that while public market securities investors generally prefer REITs to be focused both geographically and from a property perspective, the strategy is not without its risks. “Manhattan office fundamentals have historically been volatile and have the potential to cause large swings in asset values,” Bejjani said.