Yesterday the New York REIT declared a $4.85 liquidation distribution. The liquidation of the company is progressing as planned and the only two assets remaining are the Viceroy Hotel and the WWP building. They are planning to sell the hotel later this year while they will hold on to the WWP building for the next couple of years while it’s being renovated and upgraded. In connection with the successfully completed sales NYRT also paid down all their mortgage debt, and their balance sheet, pro-forma for the $4.85 dividend, is now looking as follows:
Pro-forma NYRT balance sheet, based on latest 10-K and adjusted for all dividends and sales after year-end
After the $4.85 liquidation distribution is paid, there still is approximately $1.74/share in cash left, and the sale of the Viceroy Hotel later this year might fetch around $4/share. But it’s clear that what really matters is the value of the WWP building. The building itself, listed as “investment in JV” on the balance sheet is by far the biggest piece of the pie, and additionally, the restricted cash is all earmarked to be spend on upgrading the building as well.
Disclosure
Author is long NYRT
Thanks for the updated spreadsheet. Was in NYC last week and walked around the buildings and they are beautiful and in a good location Feel pretty comfortable with this investment. The property did sell for $600 million in 2009, so the potential downside is high in the extreme, but realistically, the economy is doing well, New York economy seems too strong if anything, so I think this works out well. The bigger risk I see is this drags out and and the annualized return drops as opposed to the absolute return.
Given the ~$1/share per year that the WWP building will generate in yield I think that the downside of a prolonged liquidation is sort of limited. That’s a pretty decent yield even if it’s never sold.
Looks like Viceroy is going to come in a little above $2/ share net of expenses. All that’s left is to make final liquidation payment before being unlisted.
The latest financials are out:
“Based on the liquidation basis of accounting, the current estimate of net assets in liquidation at June 30, 2018 results in estimated future liquidating distributions of approximately $25.09 per share.”
“The Company currently projects that the remaining interest in Worldwide Plaza will be sold by November 1, 2021.”
So, looks like a 38% return or about 11.5% annualized. Not sure if this includes ongoing rental income, but I suspect it would. I’m wondering about locking money up for 3 years for 11.5% when this return could be significantly different and you have no ability to sell during this period if, for example, rising interest rates cause NY real estate prices to start dropping. Plus, it would not surprise me to have a pretty good market correction in the next 3 years, so have extra cash would be good.
Do you think I am missing anything in this simple analysis? Are you comfortable holding this through the likely 3 years?
Thanks.
That number doesn’t include ongoing rental income (approximately $3.50/share when holding until 2021). And perhaps their redevelopment plan for the WWP building can create a bit of value as well.