Over at SunTrust Robinson Humphrey, analyst Michael Lewis wrote that after a “very rough analysis” it appeared that there would be a material dilution in net asset value for New York REIT shareholders.

A Filing Missing the Combination Agreement

Analysts and shareholders could well have been reacting to some key missing information in the filing New York REIT made with the Securities and Exchange Commission about the acquisition.

Namely, it stated that the full text of the combination agreement will be filed as an exhibit to a future filing.

A Peek at JGB's Empire

Some details about the properties in the transaction were included of course. Whether the deal ultimately goes through or not, the filing provides a glimpse of the extent of JBG's local empire.

According to the filing, the properties seeding the deal include:

….an operating portfolio consisting of 72 assets located in the metropolitan area of Washington, D.C. comprised of 38 office assets, 19 multifamily assets and 15 retail assets. In addition to this operating portfolio, the JBG Property Interests also include (i) a construction pipeline consisting of eight assets, (ii) a pre-development pipeline consisting of 12 assets and (iii) a land bank comprised of 41 future development parcels. JBG currently holds 40 of its operating assets, three of its construction assets, eight of its pre-development assets and 27 of its future development parcels through joint venture arrangements. In addition to these real estate assets, JBG has a management platform that provides fee-based real estate services to the JBG Funds, the JBG joint ventures and, in certain limited cases, third parties.

The filing also emphasized that JBG will continue to have operations outside of the merged entity. It noted that certain JBG funds will continue to own assets that will not be contributed to the company and the principals of JBG, including the principals who will become executive officers of the company at closing, will retain interests in these JBG Funds, which entitle them to “promotes” with respect to the so-called excluded assets. According to the filing:

The excluded assets can generally be categorized as (i) condominium and townhome assets, (ii) a number of hotels owned by the JBG Funds, (iii) assets likely to be sold in the near term, whether because they are under contract for sale, being marketed for sale or likely to be marketed for sale in the near term, (iv) assets that the company is not acquiring because they are located in markets that will not be core markets for the company going forward, (v) assets recently acquired through like kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), which must be held by the transferee for productive use or investment in order to defer recognition of capital gain or loss otherwise due upon sale of the asset, and (vi) certain specified Included Interests for which necessary consents cannot be obtained by closing as further described in the “Consideration” section below.

An Unclear Asset Count

The filing also noted that JBG's assets that are planning to be contributed to the combined company still must get approval from stakeholders.

The contribution of certain property interests to the company parties in connection with the combination transactions will require the consent of certain third parties, including joint venture partners, lenders and ground lessors of JBG. The combination agreement requires JBG to seek to obtain such consents, and with respect to any required debt consent, to seek to refinance the applicable loan if a required consent is not likely to be obtained by the closing. If a consent (or, with respect to debt consents, a refinancing in a manner that does not restrict the combination transactions) is not obtained with respect to certain specified included interests prior to the closing, such included interests will be not be contributed at the closing, and the consideration payable to JBG at the closing will be reduced by a predetermined amount allocated to that included interest.

CHEVY CHASE, MD—On Wednesday after market trading closed, JGB Cos. and New York REIT announced that JBG would be acquiring the New York-based company, creating a $8.4 billion entity that would be publicly traded. JBG Cos. likes the deal; the activist shareholders urging New York REIT to do something presumably like it as well.

But as a report in Bloomberg has noted, some REIT analysts are finding the information provided about the pending transaction wanting — largely because there has not been enough transparency around the valuation. It is hard to tell, in other words, whether New York REIT shareholders are getting a fair deal. And indeed, New York REIT's shareholders seems to have come to the same conclusion. On Thursday, New York REIT's stock price dropped 8.1% to $9 per share by the market's close.

Sheila McGrath, an Evercore ISI analyst, wrote in a client note, that “….New York REIT's board owes its shareholders a lot more transparency quantitatively why this transaction is better than all viable alternatives in the short, medium and long term.”

Specifically, she said: Shareholders need to know how they are “being compensated over and above the net asset value for its public shell.”

Over at SunTrust Robinson Humphrey, analyst Michael Lewis wrote that after a “very rough analysis” it appeared that there would be a material dilution in net asset value for New York REIT shareholders.

A Filing Missing the Combination Agreement

Analysts and shareholders could well have been reacting to some key missing information in the filing New York REIT made with the Securities and Exchange Commission about the acquisition.

Namely, it stated that the full text of the combination agreement will be filed as an exhibit to a future filing.

A Peek at JGB's Empire

Some details about the properties in the transaction were included of course. Whether the deal ultimately goes through or not, the filing provides a glimpse of the extent of JBG's local empire.

According to the filing, the properties seeding the deal include:

….an operating portfolio consisting of 72 assets located in the metropolitan area of Washington, D.C. comprised of 38 office assets, 19 multifamily assets and 15 retail assets. In addition to this operating portfolio, the JBG Property Interests also include (i) a construction pipeline consisting of eight assets, (ii) a pre-development pipeline consisting of 12 assets and (iii) a land bank comprised of 41 future development parcels. JBG currently holds 40 of its operating assets, three of its construction assets, eight of its pre-development assets and 27 of its future development parcels through joint venture arrangements. In addition to these real estate assets, JBG has a management platform that provides fee-based real estate services to the JBG Funds, the JBG joint ventures and, in certain limited cases, third parties.

The filing also emphasized that JBG will continue to have operations outside of the merged entity. It noted that certain JBG funds will continue to own assets that will not be contributed to the company and the principals of JBG, including the principals who will become executive officers of the company at closing, will retain interests in these JBG Funds, which entitle them to “promotes” with respect to the so-called excluded assets. According to the filing:

The excluded assets can generally be categorized as (i) condominium and townhome assets, (ii) a number of hotels owned by the JBG Funds, (iii) assets likely to be sold in the near term, whether because they are under contract for sale, being marketed for sale or likely to be marketed for sale in the near term, (iv) assets that the company is not acquiring because they are located in markets that will not be core markets for the company going forward, (v) assets recently acquired through like kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), which must be held by the transferee for productive use or investment in order to defer recognition of capital gain or loss otherwise due upon sale of the asset, and (vi) certain specified Included Interests for which necessary consents cannot be obtained by closing as further described in the “Consideration” section below.

An Unclear Asset Count

The filing also noted that JBG's assets that are planning to be contributed to the combined company still must get approval from stakeholders.

The contribution of certain property interests to the company parties in connection with the combination transactions will require the consent of certain third parties, including joint venture partners, lenders and ground lessors of JBG. The combination agreement requires JBG to seek to obtain such consents, and with respect to any required debt consent, to seek to refinance the applicable loan if a required consent is not likely to be obtained by the closing. If a consent (or, with respect to debt consents, a refinancing in a manner that does not restrict the combination transactions) is not obtained with respect to certain specified included interests prior to the closing, such included interests will be not be contributed at the closing, and the consideration payable to JBG at the closing will be reduced by a predetermined amount allocated to that included interest.