August 5, 2017 Comments (0) Blog, Current Investigations, Securities Fraud

Investigating Potential Claims in ARC New York City REIT

ARC New York City REIT
(Last Updated On: August 8, 2017)

ARC New York City REIT Dissident Shareholders Speak out against proposed amendments

Did you lose money investing in ARC New York City REIT? The securities attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that sold you the investment.

American Realty Capital New York City REIT is a non-traded real estate investment trust sponsored by AR Global and focused on properties located in the five boroughs of New York City, with a focus on Manhattan. The company closed its initial public offering in May 2015 and had raised a total of $764 million in investor equity, as of March 31, 2016. The company owns six properties valued at $785 million.

As we previously told you, ARC New York City REIT held its annual meeting of stockholders last week and elected all four director nominees and ratified the appointment of KPMG as the REIT’s independent registered accounting firm. The meeting was adjourned to solicit additional votes on proposed charter amendments and will be reconvened on September 7, 2017, according to SEC filings.

The meeting was initially scheduled for June 27th, and reconvened on July 19th, and again on August 2nd.

Cove Partners III LLC, an entity owned by American Realty Capital New York City REIT stockholders Michael Ashner and John Alba, have filed a preliminary proxy statement urging fellow investors to vote against nine proposed charter amendments at the company’s repeatedly reconvened annual meeting of shareholders.

According to Cove Partners, the proposals “eliminate valuable stockholder protections and open the door for unlimited and unfettered control by the company’s advisor, which is controlled by Nicholas Schorsch.”

Alba and Asher state, “Given that ARC NYC REIT stockholders have repeatedly voted down these charter amendments, we find the company’s continuous adjournment of the 2017 annual meeting in an attempt to secure passage of the charter amendments, which would otherwise be forbidden under NASAA guidelines, deeply troubling and an apparent manipulation of the company’s corporate machinery.”

“Unfortunately, these actions are not surprising to stockholders. The company likewise continuously adjourned the 2016 annual meeting to try and obtain approval of nearly the same charter amendments,” Alba and Asher added.

The proposed charter amendments include extending the agreement with the advisor for an indefinite period of time, rather than limiting it to one-year renewals, and ending the fiduciary obligation of the board to shareholders, including the specific fiduciary duty to supervise the relationship with the company’s advisor.

The REIT is also attempting to prevent the advisory agreement from being terminated on 60 days’ written notice, limiting shareholder access to the company’s books and records, allowing the board to privately sell shares, eliminating the ability of 10 percent of shareholders to call a special meeting and giving the board authority to increase this threshold by 5x, and eliminating the current shareholder majority voting requirement before the board can take certain actions.

The company also wants to eliminate the majority independent director requirement, as well as the requirement that independent directors have prior real estate experience.

Are Non-Traded REITs a safe bet?

Non-traded REITS,  compared to traditional investments, such as stocks, bonds and mutual funds, are considerably more complex and involve a high degree of risk. Unfortunately many investors were not made adequately aware of the risks and liquidity problems associated with REITs.

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience.

Broker dealers that fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses.

Free Consultation

The White Law Group has represented numerous investors in claims against the brokerage firm that recommended non-traded REITs such as ARC New York City REIT to its investors.

If you have suffered losses investing in ARC New York City REIT at the recommendation of your broker and would like to speak to a securities attorney about the potential to recover your losses, please call The White Law Group at 1-888-637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.