## Friday, May 9, 2014

### How is NYRT Doing?

By Craig McCann

We’ve posted extensively about the evils of non-traded REITs. You can find those previous posts here. Two weeks ago we posted the summary results of our investigation into the performance of 27 non-traded REITs which had had a liquidity event by December 31, 2013. We found that investors are $27.7 billion worse as a result of investing in these 27 REITs rather than investing in a diversified portfolio of traded REITs. That post is available here. In our April 17, 2014 post, “NYRT’s Listing is More Evidence That Even the Non-Traded REITs Winners Are Losers” we pointed out that American Realty Capital New York Recovery REIT, Inc., which became a listed REIT renamed New York REIT (Ticker: NYRT) on April 15, 2014, had lost its investors about$100 million by the end of its third day of trading as compared to a traded REIT that similarly concentrated its portfolio in Manhattan real estate. The NYRT post is available here.

In the NYRT post, we said “We think the relative performance of NYRT relative to SLG is going to get worse.” We are so skeptical of what passes for market wisdom that we never make predictions but this one seemed like a safe bet. It’s only been a few weeks but let’s see how that prediction is doing.

In Figure 1, we plot the value of investors’ net investment in NYRT while it was a non-traded REIT once it became a traded REIT in red and the value of the same net investments had they been made in SLG, the traded REIT which concentrates in Manhattan real estate.

At the close on April 17, 2014 investors’ net investment in NYRT was worth approximately $1.82 billion and the same amounts invested at the same time in SLG would have been worth$1.92 billion. Thus, we pointed out that investors were about $100 million worse off as a result of investing the non-traded REIT. Between the close on April 17, 2014 and May 8, 2014, NYRT’s price has dropped from$10.62 to $10.52 offset in part by a 3.8 cent dividend paid on May 6, 2014. The non-traded investors’ net investment is now worth$1.81 billion.

Over the same three weeks, SLG’s price has increased 6.3% from $101.49 to$107.89. The non-traded investors’ net investment if they had been made in the traded REIT instead of the non-traded REIT would now be worth $2.04 billion. Thus, the non-traded REIT investors, assuming they stayed in NYRT, are now$230 million worse off than if they had invested in the traded REIT, SLG.