Investors in New York City REIT May Have Recourse to Recover Their Losses
On November 12, 2020, New York City REIT, Inc. (NYC REIT, or the Company) (NYSE: NYC) filed its quarterly report with the SEC, for the period ending September 30, 2020. Unsurprisingly, in light of ongoing economic distress impacting the New York City commercial real estate market, the Company reported poor numbers. Notably, NYC REIT reported a net loss per common share of $(0.96), versus a loss of $(0.38) from the third quarter of 2019. Furthermore, the Company reported negative funds from operations (FFO)—a key real estate metric designed to measure cash flow generated from a REIT’s business operations—of $(0.29) per common share.
In addition to reporting a negative FFO of $(0.29) per common share, the Company disclosed through its quarterly report that it only collected 85% of the cash rents due across its portfolio, which includes some eight properties consisting of 1.2 million rentable square feet within the five boroughs of New York City. Further, the Company acknowledged that “The negative impacts of the COVID-19 pandemic has caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all, which has had, and could continue to have, an adverse effect on the amount of cash we receive from our operations and therefore our ability to fund operating expenses and other capital needs, which, beginning in October 2020, include dividends to our common stockholders.”
To date, NYC REIT’s performance since going public on August 18, 2020, has been abysmal. In fact, on pre-split basis, investors who acquired their NYC shares pre-IPO—when the Company was still structured as a non-traded REIT—have suffered massive losses. As of this writing, NYC REIT shares closed at around $10.50 per share, after going public at a price of $30 per share in August 2020. On a pre-split basis, when accounting for a 2.43 to 1 reverse split on NYC shares effected before its IPO, NYC shares are only currently trading for about $4.32 per share.
As a publicly registered non-traded REIT, NYC REIT was sold through a public offering from around 2013 through 2017 at an offering price of $25 per share. Unfortunately, in certain instances, investors who purchased shares on the recommendation of a stockbroker may have been uninformed of the complex nature of the investment and its many risks, including its high up-front commissions and fees. Such high commissions and fees for non-traded REITs add up quickly and act as an immediate drag on investment performance.
Investors in NYC REIT—particularly those pre-IPO investors who acquired their shares before the Company’s August 18, 2020 listing—who invested on the advice of a financial advisor may be able to recover their losses through FINRA arbitration, if the recommendation to invest lacked a reasonable basis or if the investment was sold through a misleading sales presentation. The attorneys at Giarrusso Law Group LLC have significant experience in prosecuting claims on behalf of investors in non-traded REITs such as NYC REIT, in addition to other complex and illiquid financial products. Investors may pursue a claim to recover losses through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.