ARC NYC REIT Grabs Downtown Office Property

American Realty Capital New York City REIT Inc. has jumped at the chance to own this downtown Manhattan office property, which the company views as an "important New York City submarket."
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American Realty Capital New York City REIT, Inc., a public non-traded REIT, is planning to buy 123 William St., a 27-story, 545,000-square-foot Class A office building in Lower Manhattan’s Financial District for $253 million.

NYCR has made a $25.3 million non-refundable deposit toward the purchase price, according to a filing with the U.S. Securities and Exchange Commission. A closing date was not announced.

The company intends to fund the acquisition price with proceeds from its ongoing initial public offering, the SEC filing stated. The SEC document also noted that NYCR may seek financing at or after closing but a lender has yet to be identified.

The building, located near the new Fulton Street Transit Hub, is 81 percent leased. The largest tenants are the State of New York, City of New York, the federal government, Securities Trade Corp. and McAloon & Friedman, P.C.

“We are very excited to be adding 123 William St. to our portfolio,” Michael Happel, CEO of NYCR, said in a news release. “The property is located in Downtown Manhattan, an important New York City submarket benefitting considerably from recent infrastructure improvements, especially with regard to transportation. The lobby and many important elements of the building have been substantially renovated, and we are acquiring the investment below its replacement cost.”

Happel added that the REIT sees “an opportunity to create near-term value at 123 William St. through leasing up the remainder of the building and marking below-market rents to current market levels as leases roll.”

The seller is EEGO 123 William Owner, L.L.C., a wholly owned subsidiary of EEGO-ARC 123 William JV, L.L.C., a joint venture in which New York REIT, Inc., holds a $35.1 million preferred equity interest, according to the SEC filing. Various media reports note that EEGO is a partnership of East End Capital and GreenOak Real Estate. East End Capital still has 123 William St. listed as part of its portfolio on its website.

NYCR acquired 570 Seventh Ave., a 170,000-square-foot office building in Times Square for $170.3 million in November. In September, the REIT purchased the 58,000-square-foot Laurel Commercial Condominiums at 400 E. 67th St. on Manhattan’s Upper East Side. It also owns a 12,300-square-foot commercial condo unit at The Hit Factory at 421 W. 54th St. in Midtown, which is fully leased by Gibson Guitar Corp.

NYCR and NYRT, a publicly traded REIT, are both sponsored and advised by American Realty Capital.  AR Capital, based in New York, is an investment management firm co-founded by Nicholas Schorsch that provides advisory services to retail and institutional investors. It is also a sponsor and manager of numerous alternative investment programs including REITs like NYCR and NYRT. Another REIT co-founded by Schorsch, American Realty Capital Properties, Inc., which is self-managed, was rocked by an accounting scandal in recent months. At the end of December, two months after the news broke that the $23 million error was intentionally covered up, Schorsch stepped down as chairman and CEO of NYRT and from the boards of RCS Capital Corp., NYRT and 11 non-traded REITs and direct investment programs sponsored by AR Capital. He had resigned in mid-December as executive chairman of ARCP and from the ARCP Board of Directors. Schorsch remains as chairman of the board and CEO of AR Capital.