RNY Property Trust Probably Winding-Up: A Sad Story Comes To An End

Martin Keck profile picture
Martin Keck


  • The trust lost money for years and recent asset sales made RNY unsustainably unprofitable going-forward.
  • 19.9% holder Aurora requested a meeting and proposed to take RAML's position as manager of the trust.
  • External manager RAML proposal would lead to winding-up RNY with 24% upside in base case.

RNY Property Trust (Grey Market: OTC:RYPTF) is a special situation investment. Keeping things as is would burn the remaining cash and lead to bankruptcy. At the shareholder meeting on September 12, 2017 unitholders will probably approve the proposal to liquidate RNY. Liquidation would provide undiscounted 24% upside in management's base case. Despite meaning business failure, liquidation corresponds with investment success at the right price. A market uncorrelated 24% compares favorably to 10-year government bond yields of 2.2% and 2.7% for the USA and Australia respectively. In case unitholders choose to liquidate, most of the proceeds could possibly be distributed in about one year.

Background on the trust

RNY is an Australian listed property trust with office properties in the New York Tri State area. Since listing in 2015 at A$1.00 per unit on the Australian Securities Exchange the unit price has fallen to about 1.2 cent now. Despite seven distributions, totaling 20.1 cents per unit, an investment into the trust has been a disaster for the mainly Australian investors.

The trust had an initial portfolio of a 75% indirect interest in 25 office properties located in the New York Tri-State area. With the benefit of hindsight suburban office was a bad choice. Management sees the "lack of office-using job creation in the suburbs, and in turn modest demand for suburban office space" since 2009 as one reason for the bad performance. In the NYC area most new jobs were in the technology, advertising, media, and information technology industries, which prefer urban areas. Secondly, the boom in development in areas close to Manhattan (Brooklyn, Queens and the New Jersey water-front) has soaked up demand. Management sees those "structural shifts" as responsible for the underwhelming performance despite "operating the Portfolio to the best of our abilities". Obviously, going leveraged into the global financial crisis has not helped either.

This article was written by

Martin Keck profile picture
Most of my investment knowledge is self-taught. 20+ years of experience managing my own money has given me perspective. Suffering from multiple severe drawdowns like in the dotcom crash or the financial crisis and enjoying some multibaggers have been part of my investment journey. Books, SEC filings, annual reports, analyst reports, blogs, free MOOCs (I recommend Mr. Damodaran's), message boards, podcasts, conference calls and newspapers like The Economist are my main sources.To close knowledge gaps resulting from my serendipitous learning process, I have entered the CFA program and passed the three exams on first try. It was fun. I have not applied to become a charterholder. My academic background is in engineering and management.If you point out an honest mistake in my writings, you can always PM me and I am grateful for the feedback. I even like short reports on my long positions. Behavioral finance and all the biases encouraged me to try to stay objective and incorporate new facts.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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