UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 001-36416


NEW YORK REIT, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
27-1065431
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
405 Park Ave., 14th Floor, New York, NY
 
10022
(Address of principal executive offices)
 
(Zip Code)
(212) 415-6500
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o  (Do not check if a smaller reporting company)
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨ Yes x No

As of July 31, 2015 , the registrant had 162,525,172 shares of common stock, $0.01 par value per share, outstanding.




NEW YORK REIT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
NEW YORK REIT, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)


 
 
June 30,
 
December 31,
 
 
2015
 
2014
ASSETS
 
(Unaudited)
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
494,065

 
$
494,065

Buildings, fixtures and improvements
 
1,247,070

 
1,235,918

Acquired intangible assets
 
156,657

 
158,383

Total real estate investments, at cost
 
1,897,792

 
1,888,366

Less accumulated depreciation and amortization
 
(166,680
)
 
(124,178
)
Total real estate investments, net
 
1,731,112

 
1,764,188

Cash and cash equivalents
 
27,486

 
22,512

Restricted cash
 
1,854

 
6,347

Investment securities, at fair value
 
3,563

 
4,659

Investments in unconsolidated joint venture
 
226,306

 
225,501

Preferred equity investment
 
—

 
35,100

Derivatives, at fair value
 
10

 
205

Tenant and other receivables
 
4,725

 
4,833

Unbilled rent receivables
 
39,055

 
30,866

Prepaid expenses and other assets
 
14,528

 
13,195

Deferred costs, net
 
13,010

 
13,429

Total assets
 
$
2,061,649

 
$
2,120,835

LIABILITIES AND EQUITY
 
 

 
 

Mortgage notes payable
 
$
171,998

 
$
172,242

Credit facility
 
635,000

 
635,000

Market lease intangibles, net
 
77,921

 
84,220

Derivatives, at fair value
 
1,751

 
1,276

Accounts payable, accrued expenses and other liabilities (including amounts due to affiliates of $268 and $575 as of June 30, 2015 and December 31, 2014, respectively)
 
29,160

 
27,850

Deferred rent
 
4,481

 
4,550

Dividends payable
 
48

 
20

Total liabilities
 
920,359

 
925,158

Preferred stock, $0.01 par value; 40,866,376 shares authorized, none issued and outstanding
 
—

 
—

Convertible preferred stock, $0.01 par value; 9,133,624 shares authorized, none issued and outstanding
 
—

 
—

Common stock, $0.01 par value; 300,000,000 shares authorized, 162,556,189 and 162,181,939 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
 
1,626

 
1,622

Additional paid-in capital
 
1,402,791

 
1,401,619

Accumulated other comprehensive loss
 
(1,570
)
 
(816
)
Accumulated deficit
 
(309,669
)
 
(255,478
)
Total stockholders' equity
 
1,093,178

 
1,146,947

Non-controlling interests
 
48,112

 
48,730

Total equity
 
1,141,290

 
1,195,677

Total liabilities and equity
 
$
2,061,649

 
$
2,120,835

The accompanying notes are an integral part of these consolidated financial statements.

2
Table of Contents
NEW YORK REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
32,130

 
$
26,104

 
$
64,661

 
$
53,275

Hotel revenue
 
7,363

 
6,542

 
11,572

 
9,447

Operating expense reimbursements and other revenue
 
4,184

 
3,303

 
8,346

 
6,819

Total revenues
 
43,677

 
35,949

 
84,579

 
69,541

Operating expenses:
 
 

 
 

 
 

 
 
Property operating
 
10,098

 
8,304

 
21,067

 
17,162

Hotel operating
 
6,495

 
5,775

 
12,165

 
10,922

Operating fees to the Advisor
 
3,101

 
2,274

 
6,245

 
2,274

Acquisition and transaction related
 
96

 
11,577

 
221

 
11,646

Vesting of asset management fees
 
—

 
11,500

 
—

 
11,500

Change in fair value of listing promote
 
—

 
38,100

 
—

 
38,100

General and administrative
 
5,203

 
2,758

 
9,153

 
4,119

Depreciation and amortization
 
22,154

 
20,222

 
42,886

 
41,235

Total operating expenses
 
47,147

 
100,510

 
91,737

 
136,958

Operating loss
 
(3,470
)
 
(64,561
)
 
(7,158
)
 
(67,417
)
Other income (expenses):
 
 

 
 

 
 

 
 
Interest expense
 
(6,024
)
 
(4,813
)
 
(11,957
)
 
(8,752
)
Income (loss) from unconsolidated joint venture
 
570

 
948

 
805

 
(1,036
)
Income from preferred equity investment, investment securities and interest
 
8

 
677

 
938

 
1,301

Gain (loss) on derivative instruments
 
—

 
1

 
(4
)
 
1

Total other expenses
 
(5,446
)
 
(3,187
)
 
(10,218
)
 
(8,486
)
Net loss
 
(8,916
)
 
(67,748
)
 
(17,376
)
 
(75,903
)
Net loss attributable to non-controlling interests
 
257

 
511

 
518

 
510

Net loss attributable to stockholders
 
$
(8,659
)
 
$
(67,237
)
 
$
(16,858
)
 
$
(75,393
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized gain (loss) on derivatives
 
$
427

 
$
(1,035
)
 
$
(666
)
 
$
(1,161
)
Unrealized gain (loss) on investment securities
 
(192
)
 
204

 
(88
)
 
328

Total other comprehensive income (loss)
 
235

 
(831
)
 
(754
)
 
(833
)
Comprehensive loss attributable to stockholders
 
$
(8,424
)
 
$
(68,068
)
 
$
(17,612
)
 
$
(76,226
)
 
 
 
 
 
 
 
 
 
Basic and diluted net loss per share attributable to stockholders
 
$
(0.05
)
 
$
(0.40
)
 
$
(0.10
)
 
$
(0.44
)
Dividends declared per common share
 
$
0.12

 
$
0.08

 
$
0.23

 
$
0.23

The accompanying notes are an integral part of these consolidated financial statements.


3
Table of Contents
NEW YORK REIT, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six Months Ended June 30, 2015
(In thousands, except share data)
(Unaudited)


 
 
Common Stock
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
 
 
 
 
 
Number
of
Shares
 
Par
Value
 
Additional
Paid-In
Capital
 
 
Accumulated
Deficit
 
Total Stockholders'
Equity
 
Non-
controlling
Interests
 
Total
Equity
Balance, December 31, 2014
 
162,181,939

 
$
1,622

 
$
1,401,619

 
$
(816
)
 
$
(255,478
)
 
$
1,146,947

 
$
48,730

 
$
1,195,677

OP units converted to common stock
 
92,751

 
1

 
973

 
—

 
—

 
974

 
(974
)
 
—

Equity-based compensation
 
281,499

 
3

 
199

 
—

 
—

 
202

 
2,235

 
2,437

Distributions to non-controlling interest holders
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,361
)
 
(1,361
)
Dividends declared
 
—

 
—

 
—

 
—

 
(37,333
)
 
(37,333
)
 
—

 
(37,333
)
Net loss
 
—

 
—

 
—

 
—

 
(16,858
)
 
(16,858
)
 
(518
)
 
(17,376
)
Other comprehensive loss
 
—

 
—

 
—

 
(754
)
 
—

 
(754
)
 
—

 
(754
)
Balance, June 30, 2015
 
162,556,189

 
$
1,626

 
$
1,402,791

 
$
(1,570
)
 
$
(309,669
)
 
$
1,093,178

 
$
48,112

 
$
1,141,290

The accompanying notes are an integral part of these consolidated financial statements.

4
Table of Contents
NEW YORK REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Six Months Ended June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(17,376
)
 
$
(75,903
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 
 

Depreciation and amortization
42,886

 
41,235

Amortization of deferred financing costs
2,300

 
2,150

 Accretion of below- and amortization of above-market lease liabilities and assets, net
(3,966
)
 
(4,719
)
Vesting of asset management fees
—

 
11,500

Equity-based compensation
2,437

 
2,074

Loss on fair value of the listing promote and other derivatives
4

 
38,099

   Loss (income) from unconsolidated joint venture
(805
)
 
1,036

   Gain on sale of investment securities
(48
)
 
—

   Bad debt expense
556

 
66

Changes in assets and liabilities:
 

 
 

Tenant and other receivables
89

 
(2,252
)
Unbilled rent receivables
(8,726
)
 
(6,081
)
Prepaid expenses, other assets and deferred costs
(3,274
)
 
1,524

Accrued unbilled ground rent
1,774

 
2,174

Accounts payable and accrued expenses
550

 
(4,972
)
Due from affiliated entities
—

 
(1,041
)
Deferred rent and other liabilities
(69
)
 
(2,738
)
Net cash provided by operating activities
16,332

 
2,152

Cash flows from investing activities:
 

 
 

Proceeds from sale of preferred equity investment
35,100

 
—

Acquisition funds released from escrow
4,551

 
—

Additional investment in unconsolidated joint venture and preferred equity investment
—

 
(3,872
)
Capital expenditures
(12,940
)
 
(2,868
)
Distributions from unconsolidated joint venture
—

 
5,177

Proceeds from sale of investment securities
1,098

 
—

Purchase of investment securities
(42
)
 
(3,000
)
Net cash provided by (used in) investing activities
27,767

 
(4,563
)
Cash flows from financing activities:
 

 
 

Payments on mortgage notes payable
(244
)
 
(234
)
Payments of financing costs
(157
)
 
(7,258
)
Proceeds from issuance of common stock
—

 
11,311

Repurchases of common stock, inclusive of fees and expenses
—

 
(154,269
)
Payments of offering costs and fees related to stock issuances
—

 
(1,462
)
Dividends paid
(37,305
)
 
(28,830
)
Distributions to non-controlling interest holders
(1,361
)
 
(98
)
Proceeds from issuance of operating partnership units
—

 
750

Restricted cash
(58
)
 
(260
)
Net cash used in financing activities
(39,125
)
 
(180,350
)
Net increase (decrease) in cash and cash equivalents
4,974

 
(182,761
)
Cash and cash equivalents, beginning of period
22,512

 
233,377

Cash and cash equivalents, end of period
$
27,486

 
$
50,616


5
Table of Contents
NEW YORK REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Six Months Ended June 30,
 
2015
 
2014
Supplemental disclosures:
 
 
 
Cash paid for interest
$
9,761

 
$
6,630

Dividends payable
48

 
—

Accrued capital expenditures
2,546

 
—

Conversion of OP units to common stock
974

 
—

Common stock issued through distribution reinvestment plan
—

 
19,019


The accompanying notes are an integral part of these consolidated financial statements.

6
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)



Note 1 — Organization
New York REIT, Inc. (the "Company") focuses on acquiring and owning income-producing commercial real estate in New York City, primarily office and retail properties located in Manhattan. The Company may also acquire multifamily, industrial, hotel and other types of real properties as well as originate or acquire first mortgage loans, mezzanine loans, or preferred equity interests related to New York City real estate. The Company purchased its first property and commenced active operations in June 2010. As of June 30, 2015 , the Company owned 23 properties and real estate-related assets.
The Company, incorporated on October 6, 2009, is a Maryland corporation that qualified as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with its taxable year ended December 31, 2010. The Company operated as a non-traded REIT through April 14, 2014. On April 15, 2014, the Company listed its common stock on the New York Stock Exchange ("NYSE") under the symbol "NYRT" (the "Listing").
Substantially all of the Company's business is conducted through New York Recovery Operating Partnership, L.P. (the "OP"), a Delaware limited partnership. The Company has no direct employees. The Company has retained New York Recovery Advisors, LLC (the "Advisor") to manage its affairs on a day-to-day basis. New York Recovery Properties, LLC (the "Property Manager") serves as the Company's property manager, unless services are performed by a third party for specific properties. Realty Capital Securities, LLC (the "Dealer Manager") served as the dealer manager of the initial public offering, which was ongoing from September 2010 to December 2013 (the "IPO") and continues to provide the Company with various services. The Advisor, Property Manager and Dealer Manager are under common control with AR Capital, LLC ("ARC"), the parent of the Company's sponsor, American Realty Capital III, LLC (the "Sponsor"), as a result of which, they are related parties and receive compensation, fees and expense reimbursements for services related to the investment and management of the Company's assets.
Note 2 — Summary of Significant Accounting Policies
The accompanying consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results for the entire year or any subsequent interim period.
These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2014 , which are included in the Company's Annual Report on Form 10-K filed with the SEC on May 11, 2015 . There have been no significant changes to the Company's significant accounting policies during the three and six months ended June 30, 2015 , other than the updates described below and the subsequent notes.
Reclassifications
Certain prior quarter amounts have been reclassified to conform to the current quarter presentation, specifically the amortization of the basis difference related to our unconsolidated joint venture of $3.2 million and $6.5 million , respectively, for the three and six months ended June 30, 2014 , which have been reflected as a component of income (loss) from unconsolidated joint venture instead of depreciation and amortization in the accompanying consolidated statements of operations and comprehensive loss. See Note 4 — Investment in Unconsolidated Joint Venture.

7
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance was to become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption was not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. In July 2015, the FASB deferred the effective date of the revised guidance by one year to annual reporting periods beginning after December 15, 2017, although entities will be allowed to early adopt the guidance as of the original effective date. The Company has not yet selected a transition method and is currently evaluating the impact of the new guidance.
In January 2015, the FASB issued updated guidance that eliminates from GAAP the concept of an event or transaction that is unusual in nature and occurs infrequently being treated as an extraordinary item. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Any amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company has opted to adopt this revised guidance early and has determined that there has been no impact to its financial position, results of operations and cash flows.
Note 3 — Real Estate Investments
 There were no real estate assets acquired or related liabilities assumed during the three and six months ended June 30, 2015 or 2014 .
The following table presents future minimum base cash rental payments due to the Company, excluding future minimum base cash rental payments related to unconsolidated joint ventures, subsequent to June 30, 2015 . These amounts exclude contingent rental payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items.
(In thousands)
 
Future Minimum Base Cash Rental  Payments
July1, 2015 - December 31, 2015
 
$
54,519

2016
 
97,681

2017
 
97,864

2018
 
95,800

2019
 
94,466

Thereafter
 
647,264

 
 
$
1,087,594

The following table lists the tenants whose annualized cash rent represented greater than 10% of total annualized cash rent as of June 30, 2015 and 2014 , including annualized cash rent related to the Company's unconsolidated joint venture:
 
 
 
 
June 30,
Property Portfolio
 
Tenant
 
2015
 
2014
Worldwide Plaza
 
Cravath, Swaine & Moore, LLP
 
16%
 
18%
Worldwide Plaza
 
Nomura Holdings America, Inc.
 
10%
 
12%
The termination, delinquency or non-renewal of any of the above tenants may have a material adverse effect on net income (loss). No other tenant represents more than 10% of annualized cash rent as of June 30, 2015 and 2014 .

8
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Note 4 — Investment in Unconsolidated Joint Venture
On October 30, 2013, the Company purchased a 48.9% equity interest in WWP Holdings, LLC ("Worldwide Plaza") for a contract purchase price of $220.1 million , based on the property value for Worldwide Plaza of $1,325.0 million less $875.0 million of debt on the property. As of June 30, 2015 , the Company's pro-rata portion of debt on Worldwide Plaza was $427.9 million . The debt on the property has a weighted average interest rate of 4.6% and matures in March 2023. The Company accounts for the investment in Worldwide Plaza using the equity method of accounting because the Company exercises significant influence over, but does not control, the entity.
Pursuant to the terms of the membership agreement governing the Company’s purchase of the 48.9% equity interest in Worldwide Plaza, the Company retains an option to purchase the balance of the equity interest in Worldwide Plaza beginning 38 months following the closing of the acquisition, or December 2016, at an agreed-upon property value of $1.4 billion , subject to certain adjustments, including, but not limited to, adjustments for certain loans that are outstanding at the time of exercise, adjustments for the percentage equity interest being acquired and any of the Company's preferred return in arrears. If the Company does not exercise its purchase option, it will be subject to a fee in the amount of $25.0 million .
At acquisition, the Company's investment in Worldwide Plaza exceeded the Company's share of the book value of the net assets of Worldwide Plaza by $260.6 million . This basis difference resulted from the excess of the Company's purchase price for its equity interest in Worldwide Plaza over the book value of Worldwide Plaza's net assets. Substantially all of this basis difference was allocated to the fair values of Worldwide Plaza's assets and liabilities. The Company amortizes the basis difference over the anticipated useful lives of the underlying tangible and intangible assets acquired and liabilities assumed. The basis difference related to the land will be recognized upon disposition of the Company's investment. As of June 30, 2015 and December 31, 2014 , the carrying value of the Company's investment in Worldwide Plaza was $226.3 million and $225.5 million , respectively.
The amounts reflected in the following tables (except for the Company’s share of equity and income) are based on the financial information of Worldwide Plaza. The Company does not record losses of the joint venture in excess of its investment balance because the Company is not liable for the obligations of the joint venture or is otherwise committed to provide financial support to the joint venture.
The condensed balance sheets as of June 30, 2015 and December 31, 2014 for Worldwide Plaza are as follows:
(In thousands)
 
June 30,
2015
 
December 31,
2014
 
 
(Unaudited)
 
 
Real estate assets, at cost
 
$
713,339

 
$
704,143

Less accumulated depreciation and amortization
 
(107,075
)
 
(97,181
)
Total real estate assets, net
 
606,264

 
606,962

Other assets
 
269,005

 
255,784

Total assets
 
$
875,269

 
$
862,746

 
 
 
 
 
Debt
 
$
875,000

 
$
875,000

Other liabilities
 
18,807

 
12,442

Total liabilities
 
893,807

 
887,442

Deficit
 
(18,538
)
 
(24,696
)
Total liabilities and deficit
 
$
875,269

 
$
862,746

 
 
 
 
 
Company's basis
 
$
226,306

 
$
225,501


9
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


The condensed statement of operations for the three and six months ended June 30, 2015 and 2014 for Worldwide Plaza is as follows:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
Rental income
 
$
30,751

 
$
27,739

 
$
61,265

 
$
55,394

Other revenue
 
1,232

 
1,229

 
2,449

 
2,444

Total revenue
 
31,983

 
28,968

 
63,714

 
57,838

Operating expenses:
 
 
 
 
 
 
 
 
Operating expense
 
11,727

 
10,779

 
23,967

 
22,292

Depreciation and amortization
 
6,864

 
6,260

 
13,714

 
12,628

Total operating expenses
 
18,591

 
17,039

 
37,681

 
34,920

Operating income
 
13,392

 
11,929

 
26,033

 
22,918

Interest expense
 
(9,992
)
 
(9,992
)
 
(19,874
)
 
(19,874
)
Net income
 
3,400

 
1,937

 
6,159

 
3,044

Preferred return
 
(3,894
)
 
(1,334
)
 
(7,745
)
 
(7,745
)
Net income (loss) to members
 
$
(494
)
 
$
603

 
$
(1,586
)
 
$
(4,701
)
Net income (loss) related to Worldwide Plaza includes the Company's pro rata share of Worldwide Plaza net income (loss) to members as well as the Company's preferred return less depreciation and amortization expenses related to the amortization of the basis difference. The following table presents the components of the income (loss) related to the Company's investment in Worldwide Plaza for the periods presented, which is included in income (loss) from unconsolidated joint venture on the consolidated statements of operations and comprehensive loss.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
Company's preferred return
 
$
3,894

 
$
3,894

 
$
7,745

 
$
7,745

Company's share of net loss from Worldwide Plaza
 
(242
)
 
(957
)
 
(776
)
 
(2,299
)
Amortization of basis difference
 
(3,082
)
 
(3,241
)
 
(6,164
)
 
(6,482
)
Reallocation of net loss to members
 
—

 
1,252

 
—

 
—

Company's income (loss) from Worldwide Plaza
 
$
570

 
$
948

 
$
805

 
$
(1,036
)
Note 5 — Preferred Equity Investment
On March 27, 2015, the Company's preferred equity investment in a class A office building located at 123 William Street (the "Property") in the Financial District of downtown Manhattan was repaid as a result of the sale of the Property. The preferred equity investment carried a 6.0% current pay rate and a 2.0% accrual rate. Pursuant to the sale of the Property, the Company received $1.1 million in current and accrued interest income earned and $35.1 million for the return of all principal invested.
The preferred equity investment had a fixed return based on contributed capital, no participation in profits or losses of the real estate activities, and property foreclosure rights in the event of default. As such, the Company recorded returns earned in income from preferred equity investment, investment securities and interest income on the consolidated statements of operations and comprehensive loss.
Note 6 — Investment Securities
The Company's investment securities are comprised of investments in redeemable preferred stock and equity securities, with an aggregate fair value of $3.6 million and $4.7 million as of June 30, 2015 and December 31, 2014 , respectively. The equity securities consist of a real estate income fund that is managed by an affiliate of the Sponsor. See Note 14 — Related Party Transactions and Arrangements.

10
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


The Company's preferred stock investment is redeemable at the issuer's option after five years from issuance.
The following table details the unrealized gains and losses on investment securities as of June 30, 2015 and December 31, 2014 :
(In thousands)
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
June 30, 2015
 
 
 
 
 
 
 
 
Redeemable preferred stock
 
$
238

 
$
15

 
$
—

 
$
253

Equity securities
 
3,169

 
141

 
—

 
3,310

Total
 
$
3,407

 
$
156

 
$
—

 
$
3,563

December 31, 2014
 
 
 
 
 
 
 
 
Redeemable preferred stock
 
$
1,288

 
$
21

 
$
(12
)
 
$
1,297

Equity securities
 
3,127

 
235

 
—

 
3,362

Total
 
$
4,415

 
$
256

 
$
(12
)
 
$
4,659

As of June 30, 2015 , the Company did not have any securities in a continuous unrealized loss position. No other-than-temporary impairment charges were recognized during the three and six months ended June 30, 2015 and 2014 .
Note 7 — Credit Facility
On April 14, 2014, the Company entered into an amendment to its credit facility with Capital One (the "Credit Facility"). The Credit Facility allows for total borrowings of up to $705.0 million with a $305.0 million term loan and a $400.0 million revolving loan. The term loan component of the Credit Facility matures in August 2018 and the revolving loan component matures in August 2016. The Company has two options to extend the maturity date of the revolving loan component of the credit facility through August 2018. The Credit Facility contains an "accordion feature" to allow the Company, under certain circumstances, and with the consent of its lenders, to increase the aggregate loan borrowings to up to $1.0 billion of total borrowings.
The Company has the option, based upon its corporate leverage, to have the Credit Facility priced at either: (a) LIBOR, plus an applicable margin that ranges from 1.50% to 2.25% ; or (b) the Base Rate plus an applicable margin that ranges from 0.50% to 1.25% . Base Rate is defined in the Credit Facility as the greater of (i) the fluctuating annual rate of interest announced from time to time by the lender as its “prime rate,” (ii) 0.50% above the federal funds effective rate and (iii) 1.00% above the applicable one-month LIBOR. The outstanding balance of the term and revolving portions of the Credit Facility was $305.0 million and $330.0 million , respectively, as of June 30, 2015 and December 31, 2014 . The Credit Facility had a combined weighted average interest rate of 2.10% and 2.08% as of June 30, 2015 and December 31, 2014 , respectively, a portion of which is fixed with an interest rate swap. The Credit Facility includes an unused commitment fee per annum of (a) 0.15% if the unused balance of the facility is equal to or less than 50% of the available facility and (b) 0.25% if the unused balance of the facility exceeds 50% of the available facility. The unused borrowing capacity, based on the borrowing base properties as of June 30, 2015 , was $20.2 million . Availability of borrowings is based on a pool of eligible unencumbered real estate assets.
The Credit Facility provides for monthly interest payments for each Base Rate loan and periodic payments for each LIBOR loan, based upon the applicable LIBOR loan period, with all principal outstanding being due on the maturity date. The Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. In the event of a default, the lenders have the right to terminate their obligations under the Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans.
The Credit Facility requires the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of June 30, 2015 , the Company was in compliance with the debt covenants under the Credit Facility.

11
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Note 8 — Mortgage Notes Payable
The Company's mortgage notes payable as of June 30, 2015 and December 31, 2014 consist of the following:
 
 
 
 
Outstanding Loan Amount
 
 
 
 
 
 
Portfolio
 
Encumbered
Properties
 
June 30,
2015
 
December 31,
2014
 
Effective
Interest Rate
 
Interest Rate
 
Maturity
 
 
 
 
(In thousands)
 
(In thousands)
 
 
 
 
 
 
Design Center
 
1
 
$
20,000

 
$
20,198

 
4.4
%
 
Fixed
 
Dec. 2021
Bleecker Street
 
3
 
21,300

 
21,300

 
4.3
%
 
Fixed
 
Dec. 2015
Foot Locker
 
1
 
3,250

 
3,250

 
4.6
%
 
Fixed
 
Jun. 2016
Regal Parking Garage
 
1
 
3,000

 
3,000

 
4.5
%
 
Fixed
 
Jul. 2016
Duane Reade
 
1
 
8,400

 
8,400

 
3.6
%
 
Fixed
 
Nov. 2016
Washington Street Portfolio
 
1
 
4,695

 
4,741

 
4.4
%
 
Fixed
 
Dec. 2021
One Jackson Square
 
1
 
13,000

 
13,000

 
3.4
%
 
Fixed
(1)  
Dec. 2016
350 West 42nd Street
 
1
 
11,365

 
11,365

 
3.4
%
 
Fixed
 
Aug. 2017
1100 Kings Highway
 
1
 
20,200

 
20,200

 
3.4
%
 
Fixed
(1)  
Aug. 2017
1623 Kings Highway
 
1
 
7,288

 
7,288

 
3.3
%
 
Fixed
(1)  
Nov. 2017
256 West 38th Street
 
1
 
24,500

 
24,500

 
3.1
%
 
Fixed
(1)  
Dec. 2017
229 West 36th Street
 
1
 
35,000

 
35,000

 
2.9
%
 
Fixed
(1)  
Dec. 2017
 
 
14
 
$
171,998

 
$
172,242

 
3.6
%
 
(2)  
 
 
______________________ 
(1)
Fixed through an interest rate swap agreement.
(2)
Calculated on a weighted average basis for all mortgages outstanding as of June 30, 2015 .
Real estate investments of $314.9 million , at cost, at June 30, 2015 have been pledged as collateral to their respective mortgages and are not available to satisfy our corporate debts and obligations unless first satisfying the mortgage note payable on the properties.
The following table summarizes the scheduled aggregate principal repayments subsequent to June 30, 2015 :
(In thousands)
 
Future Minimum Principal Payments
July 1, 2015 - December 31, 2015
 
$
21,550

2016
 
28,167

2017
 
102,730

2018
 
4,573

2019
 
4,777

Thereafter
 
10,201

Total
 
$
171,998

Some of the Company's mortgage note agreements require compliance with certain property-level financial covenants including debt service coverage ratios. As of June 30, 2015 , the Company was in compliance with the financial covenants under its mortgage note agreements.

12
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Note 9 — Subordinated Listing Distribution Derivative
Upon occurrence of the Listing, New York Recovery Special Limited Partnership, LLC (the "SLP") became entitled to begin receiving distributions of net sale proceeds pursuant to its special limited partner interest in the OP (the "SLP Interest") in an aggregate amount that was evidenced by the issuance of a note by the OP (the "Listing Note"). The Listing Note was equal to  15.0%  of the amount, if any, by which (a) the average market value of the Company’s outstanding common stock for the period  180  days to  210  days after the Listing, plus dividends paid by the Company prior to the Listing, exceeded (b) the sum of the total amount of capital raised from stockholders during the Company’s IPO and the amount of cash flow necessary to generate a  6.0%  annual cumulative, non-compounded return to such stockholders. Concurrently with the Listing, the Company, as general partner of the OP, caused the OP to enter into the Listing Note Agreement dated April 15, 2014 by and between the OP and the SLP, and caused the OP to issue the Listing Note. The Listing Note was evidence of the SLP's right to receive distributions of net sales proceeds from the sale of the Company's real estate and real estate-related assets up to an aggregate amount equal to the principal balance of the Listing Note. Pursuant to the terms of the Partnership Agreement, the SLP had the right, but not the obligation, to convert all or a portion of the SLP interest into OP units, which are convertible into shares of the Company's common stock.
The principal amount of the Listing Note was determinable based, in part, on the actual market value of the Company’s outstanding common stock for the period  180  days to  210  days after the Listing. Until the final principal amount of the Listing Note was determined in November 2014, the Listing Note was considered a derivative which was marked to fair value at each reporting date, with changes in the fair value recorded in the consolidated statements of operations and comprehensive loss, which totaled $38.1 million during the three and six months ended June 30, 2014 .
The principal amount of the Listing Note was determined to be $33.5 million and was recorded as an expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2014. On November 21, 2014, at the request of the SLP, the Listing Note was converted into 3,062,512 OP units and the value of the Listing Note was reclassified from derivative liabilities to non-controlling interest on the consolidated balance sheets.
Note 10 — Fair Value of Financial Instruments
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the instrument. This alternative approach also reflects the contractual terms of the instruments, as applicable, including the period to maturity, and may use observable market-based inputs, including interest rate curves and implied volatilities, and unobservable inputs, such as expected volatility. The guidance defines three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Unobservable inputs that reflect the entity's own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

13
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Although the Company has determined that the majority of the inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2015 and December 31, 2014 , the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate swap positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company's interest rate swaps. As a result, the Company has determined that its interest rate swap valuations in their entirety are classified in Level 2 of the fair value hierarchy. See Note 11 — Interest Rate Derivatives and Hedging Activities.
The valuation of interest rate swaps is determined using a discounted cash flow analysis on the expected cash flows. This analysis reflects the contractual terms of the interest rate swaps, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company's potential nonperformance risk and the performance risk of the counterparties.
The Company has investments in redeemable preferred stock and an equity security that are traded in active markets and therefore, due to the availability of quoted market prices in active markets, the Company classified these investments as Level 1 in the fair value hierarchy.
The following table presents information about the Company's assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 , aggregated by the level in the fair value hierarchy within which those instruments fall:
(In thousands)
 
Quoted Prices in Active Markets
Level 1
 
Significant Other Observable Inputs
Level 2
 
Significant Unobservable Inputs
Level 3
 
Total
June 30, 2015
 
 
 
 
 
 
 
 
Interest rate swaps, net
 
$
—

 
$
(1,741
)
 
$
—

 
$
(1,741
)
Investment securities
 
$
3,563

 
$
—

 
$
—

 
$
3,563

December 31, 2014
 
 
 
 
 
 
 
 
Interest rate swaps, net
 
$
—

 
$
(1,071
)
 
$
—

 
$
(1,071
)
Investment securities
 
$
4,659

 
$
—

 
$
—

 
$
4,659

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between levels of the fair value hierarchy during the three and six months ended June 30, 2015 .
Financial instruments not carried at fair value
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate the value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, prepaid expenses and other assets, notes payable, accounts payable and dividends payable approximates their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company's financial instruments that are not reported at fair value on the consolidated balance sheet are reported below.
 
 
 
 
Carrying
Amount at
 
Fair Value at
 
Carrying
Amount at
 
Fair Value at
(In thousands)
 
Level
 
June 30, 2015
 
June 30, 2015
 
December 31, 2014
 
December 31, 2014
Mortgage notes payable
 
3
 
$
171,998

 
$
173,315

 
$
172,242

 
$
174,468

Credit facility
 
3
 
$
635,000

 
$
637,865

 
$
635,000

 
$
651,579

Preferred equity investment
 
3
 
$
—

 
$
—

 
$
35,100

 
$
34,800

The fair value of mortgage notes payable, the fixed-rate portions of term loans on the credit facility, and the preferred equity investment are estimated using a discounted cash flow analysis based on similar types of arrangements. The Company's preferred equity investment was repaid in March 2015. See Note 5 — Preferred Equity Investment. Advances under the credit facility with variable interest rates and advances under the revolving portion of the credit facility are considered to be reported at fair value.

14
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Note 11 — Interest Rate Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, collars, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and costs associated with the Company's operating and financial structure as well as to hedge specific anticipated transactions. The Company does not utilize derivatives for speculative or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements will not be able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships.
Cash Flow Hedges of Interest Rate Risk
The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company uses such derivatives to hedge the variable cash flows associated with variable-rate debt.
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. During the next 12 months , the Company estimates that an additional $1.7 million will be reclassified from other comprehensive income (loss) as an increase to interest expense.
As of June 30, 2015 and December 31, 2014 , the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk.
 
 
June 30, 2015
 
December 31, 2014
Interest Rate Derivative
 
Number of
Instruments
 
Notional Amount
 
Number of
Instruments
 
Notional Amount
 
 
 
 
(In thousands)
 
 
 
(In thousands)
Interest rate swaps
 
6
 
$
179,988

 
6
 
$
179,988

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2015 and December 31, 2014 :
(In thousands)
 
Balance Sheet Location
 
June 30, 2015
 
December 31, 2014
Derivatives designated as hedging instruments:
 
 
 
 
Interest rate swaps
 
Derivative assets, at fair value
 
$
10

 
$
205

Interest rate swaps
 
Derivative liabilities, at fair value
 
$
(1,751
)
 
$
(1,276
)

15
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Derivatives in Cash Flow Hedging Relationships
The table below details the location in the financial statements of the income or loss recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 2015 and 2014 :
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
Amount of loss recognized in accumulated other comprehensive income (loss) from interest rate derivatives (effective portion)
 
$
(100
)
 
$
(1,575
)
 
$
(1,719
)
 
$
(2,232
)
Amount of loss reclassified from accumulated other comprehensive income (loss) into income as interest expense (effective portion)
 
$
(527
)
 
$
(540
)
 
$
(1,053
)
 
$
(1,071
)
Amount of loss recognized in loss on derivative instruments (ineffective portion and amount excluded from effectiveness testing)
 
$
—

 
$
—

 
$
(4
)
 
$
—

Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of June 30, 2015 and December 31, 2014 . The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the accompanying balance sheets.
 
 
 
 
 
 
 
 
Gross Amounts Not Offset on the Balance Sheet
 
 
Derivatives  (In thousands)
 
Gross Amounts of Recognized Assets
 
Gross Amounts of Recognized Liabilities
 
Net Amounts of Assets (Liabilities) presented on the Balance Sheet
 
Financial Instruments
 
Cash Collateral Posted
 
Net Amount
June 30, 2015
 
$
10

 
$
(1,751
)
 
$
(1,741
)
 
$
—

 
$
—

 
$
(1,741
)
December 31, 2014
 
$
205

 
$
(1,276
)
 
$
(1,071
)
 
$
—

 
$
—

 
$
(1,071
)
Derivatives Not Designated as Hedges
Derivatives not designated as hedges are not speculative. These derivatives are used to manage the Company's exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements to be classified as hedging instruments. The Company does not have any hedging instruments that do not qualify for hedge accounting.
Credit-risk-related Contingent Features
The Company has agreements with its derivative counterparties that contain a provision whereby if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of June 30, 2015 , the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $1.9 million . As of June 30, 2015 , the Company has not posted any collateral related to its agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at the aggregate termination value of $1.9 million at June 30, 2015 .
Note 12 — Common Stock
As of June 30, 2015 and December 31, 2014 , the Company had 162.6 million and 162.2 million shares of common stock outstanding, respectively, including unvested restricted stock, converted preferred shares and shares issued under the distribution reinvestment plan (the "DRIP"), but not including limited partnership units of the OP (the "OP units") or Long-term Incentive Plan units ("LTIP units") which may in the future be convertible into shares of common stock.

16
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


From December 2010 to April 2014, the Company declared and paid dividends at a dividend rate equal to $0.605 per annum per share of common stock. The dividends were paid by the fifth day following each month end to stockholders of record at the close of business each day during the prior month at a per share rate of 0.0016575342 per day. In April 2014, the Company's board of directors authorized, and the Company declared, a monthly dividend at an annualized rate equal to $0.46 per share per annum. Beginning in April 2014, dividends are paid to stockholders of record on the close of business on the 8th day of each month, payable on the 15th day of such month. The Company's board of directors may reduce the amount of dividends paid or suspend dividend payments at any time and therefore dividend payments are not assured.
Note 13 — Commitments and Contingencies
Future Minimum Lease Payments
The Company entered into operating and capital lease agreements primarily related to certain acquisitions under leasehold interest arrangements. The following table reflects the minimum base cash payments due from the Company over the next five years and thereafter under these arrangements, including the present value of the net minimum payments due under capital leases. These amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes among other items.
 
 
Future Minimum Base Rent Payments
(In thousands)
 
Operating Leases
 
Capital Leases
July 1, 2015 - December 31, 2015
 
$
2,450

 
$
43

2016
 
4,958

 
86

2017
 
4,905

 
86

2018
 
5,089

 
86

2019
 
5,346

 
86

Thereafter
 
251,627

 
3,490

Total minimum lease payments
 
$
274,375

 
$
3,877

Less: amounts representing interest
 
 
 
(1,753
)
Total present value of minimum lease payments
 
 
 
$
2,124

Total rental expense related to operating leases was $1.9 million and $3.9 million , respectively, for the three and six months ended June 30, 2015 . Total rental expense related to operating leases was $1.9 million and $3.9 million , respectively, for the three and six months ended June 30, 2014 . During the three and six months ended June 30, 2015 , interest expense related to capital leases was approximately $16,000 and $32,000 , respectively. During the three and six months ended June 30, 2014 , interest expense related to capital leases was approximately $16,000 and $32,000 , respectively. The following table discloses assets recorded under capital leases and the accumulated amortization thereon as of June 30, 2015 and December 31, 2014 .
(In thousands)
 
June 30, 2015
 
December 31, 2014
Buildings, fixtures and improvements
 
$
11,783

 
$
11,783

Less accumulated depreciation and amortization
 
(1,421
)
 
(1,137
)
Total real estate investments, net
 
$
10,362

 
$
10,646

Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company.

17
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


The Company received a favorable ruling in a suit initiated against the Company by RXR Realty (“RXR”). RXR alleged that it suffered “lost profits” in connection with the Company’s purchase of Worldwide Plaza in October 2013. On August 12, 2014, the Supreme Court of the State of New York dismissed all of RXR’s claims against the seller of Worldwide Plaza and dismissed RXR’s disgorgement claims against the Company, permitting only a limited, immaterial claim against the Company for RXR’s cost of producing due diligence-related material to proceed. RXR is currently appealing the ruling. The Company has not recognized a liability with respect to RXR's claim because the Company does not believe that it is probable that it will incur a related material loss.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company maintains environmental insurance for its properties that provides coverage for potential environmental liabilities, subject to the policy's coverage conditions and limitations. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the consolidated results of operations.
Note 14 — Related Party Transactions and Arrangements
New York City Special Limited Partnership, LLC (the "SLP"), an entity controlled by the Sponsor, held 20,000 shares of the Company's outstanding common stock as of June 30, 2015 and December 31, 2014 .
The Advisor and the SLP each hold an interest in the OP. See Note 19 — Non-Controlling Interests.
As of June 30, 2015 , the Company had $3.2 million invested, at cost, in a real estate income fund managed by an affiliate of the Sponsor (see Note 6 — Investment Securities). There is no obligation to purchase any additional shares and the shares can be sold at any time. The Company recognized income on this investment of approximately $42,000 during the six months ended June 30, 2015 . The Company had no income on this investment during the three months ended June 30, 2015 or the three and six months ended June 30, 2014.
For the three and six months ended June 30, 2015 , the Company had revenues from related parties of approximately $12,000 and $45,000 , respectively, related to room rentals at the Viceroy Hotel. For the three and six months ended June 30, 2014 , the Company had revenues from related parties of $0.1 million and $0.2 million , respectively, related to room rentals at the Viceroy Hotel. As of June 30, 2015 , the Company had no receivables from related parties related to room rentals at the Viceroy Hotel. As of December 31, 2014 , the Company had receivables from related parties of approximately $23,000 related to room rentals at the Viceroy Hotel.
Fees Paid in Connection With the Operations of the Company
Prior to the Listing, the Advisor received an acquisition fee of 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. Additionally, the Company reimbursed the Advisor for expenses incurred for services provided by third parties and incurred acquisition expenses directly from third parties. The total of all acquisition fees, acquisition expenses and any financing coordination fees (as described below) with respect to the Company's portfolio of investments or reinvestments did not exceed 4.5% of the contract purchase price of the Company's portfolio as measured as of the Company's last property acquisition. Subsequent to the Listing, if the Company acquires additional properties in the future, the Company will reimburse the Advisor for expenses incurred for services provided by third parties and incurred acquisition expenses directly from third parties. On April 15, 2014, in conjunction with the Listing, the Company amended its advisory agreement, by and among the Company, the OP and the Advisor. The advisory agreement was subsequently amended on June 26, 2015 (as amended from time to time, the "Advisory Agreement"), which, among other things, terminated the acquisition fee 180 days after the Listing, or October 12, 2014 (the "Termination Date").

18
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Until the Listing, the Company paid the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the board of directors) to the Advisor a number of performance-based restricted, forfeitable partnership units of the OP designated as "Class B units" equal to a maximum 0.75% per annum of the cost of the Company's assets. The value of issued Class B units was determined and expensed when the vesting condition was met, which occurred as of the Listing. As of April 15, 2014, in aggregate, the board of directors had approved the issuance of 1,188,667 Class B units to the Advisor in connection with this arrangement. The Advisor received distributions on unvested Class B units equal to the per share dividends received on the Company's common stock. The vesting condition related to these Class B units was satisfied upon completion of the Listing, which resulted in $11.5 million of expense on April 15, 2014, which was included in vesting of asset management fees expense in the consolidated statement of operations and comprehensive loss and in non-controlling interest on the consolidated balance sheets. On April 15, 2014, the Class B units were converted to OP units on a one-to-one basis.
As of the Listing, the asset management subordinated participation is no longer issued. Instead an asset management fee became payable to the Advisor equal to 0.50% per annum of the cost of assets up to $3.0 billion and 0.40% per annum of the cost of assets above $3.0 billion . The asset management fee may be paid in the form of cash, OP units, and shares of restricted common stock of the Company, or a combination thereof, at the Advisor’s election. During the three and six months ended June 30, 2015 and the period from the Listing to June 30, 2014 , the asset management fee was paid in cash.
Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee equal to: (i) for non-hotel properties, 4.0% of gross revenues from properties managed, plus market-based leasing commissions; and (ii) for hotel properties, a market-based fee based on a percentage of gross revenues.  The Company also reimburses the Property Manager for property-level expenses. The Property Manager may subcontract the performance of its property management and leasing services duties to third parties and pay all or a portion of its property management fee to the third parties with whom it contracts for these services. If the Company contracts directly with third parties for such services, the Company will pay them customary market fees and pay the Property Manager an oversight fee equal to 1.0% of the gross revenues of the applicable property.
Prior to the Listing, if the Advisor provided services in connection with the origination or refinancing of any debt that the Company obtained and used to acquire assets, or that is assumed, directly or indirectly, in connection with the acquisition of assets, the Company paid the Advisor a financing coordination fee equal to 0.75% of the amount available or outstanding under such financing or such assumed debt. The financing coordination fee terminated on the Termination Date.
The Dealer Manager and its affiliates also provide transfer agency services, as well as transaction management and other professional services. These fees are included in general and administrative expenses on the consolidated statements of operations and comprehensive loss during the period the service was provided.
The following table details amounts incurred, forgiven and contractually due in connection with the operations related services described above as of and for the periods presented:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Payable (Receivable) as of
 
 
2015
 
2014
 
2015
 
2014
 
June 30,
 
December 31,
(In thousands)
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
2015
 
2014
Financing coordination fees
 
$
—

 
$
—

 
$
2,363

 
$
—

 
$
—

 
$
—

 
$
2,363

 
$
—

 
$
—

 
$
—

Ongoing fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Asset management fees (1)
 
3,101

 
—

 
2,274

 
—

 
6,245

 
—

 
2,274

 
—

 
(48
)
 
15

Transfer agent and other professional fees
 
270

 
—

 
1,041

 
—

 
454

 
—

 
1,627

 
—

 
268

 
560

Property management and leasing fees
 
—

 
683

 
—

 
413

 
—

 
1,219

 
—

 
787

 
—

 
—

Dividends on Class B units
 
—

 
—

 
19

 
—

 
—

 
—

 
107

 
—

 
—

 
—

Total related party operational fees and reimbursements
 
$
3,371

 
$
683

 
$
5,697

 
$
413

 
$
6,699

 
$
1,219

 
$
6,371

 
$
787

 
$
220

 
$
575

___________________________________________
(1)
Prior to the Listing, the Company caused the OP to issue to the Advisor restricted performance based Class B units for asset management services, which vested as of the Listing.

19
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


The Company reimburses the Advisor's costs and expenses of providing services. Previously, reimbursement of costs and expenses was subject to the limitation that the Company would not reimburse the Advisor for any amount by which the Company's total operating expenses (as defined in the Advisory Agreement) for the four preceding fiscal quarters exceeded the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income other than any additions to reserves for depreciation, bad debt or other similar non cash reserves and excluding any gain from the sale of assets for that period (the "2%/25% Provision"). Additionally, the Company will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives a separate fee. The 2%/25% provision was deleted from the Advisory Agreement in connection with the revisions to the Advisory Agreement in June 2015. No reimbursement was incurred or required from the Advisor for providing administrative services for the three and six months ended June 30, 2015 or 2014 .
In order to improve operating cash flows and the ability to pay dividends from operating cash flows, the Advisor agreed to waive certain fees including property management fees during the three and six months ended June 30, 2015 and 2014 . Because the Advisor waived certain fees, cash flow from operations that would have been paid to the Advisor was available to pay dividends to stockholders.  The fees that were waived were not deferrals and accordingly, will not be paid to the Advisor in any subsequent periods. Additionally, to improve the Company's working capital, the Advisor may elect to absorb a portion of the Company's expenses. The following table details general and administrative expenses absorbed by the Advisor during the three and six months ended June 30, 2015 and 2014 . These costs are presented net in the accompanying consolidated statements of operations and comprehensive loss.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
General and administrative expenses absorbed
 
$
—

 
$
1,041

 
$
—

 
$
1,041

The Company had no receivables from the Advisor related to absorbed general and administrative expenses as of June 30, 2015 or December 31, 2014 .
Fees Paid in Connection with the Liquidation or Listing of the Company's Real Estate Assets
In December 2013, the Company entered into a transaction management agreement with RCS Advisory Services, LLC, an entity under common control with the Dealer Manager, to provide strategic alternatives transaction management services through the occurrence of a liquidity event and a-la-carte services thereafter. The Company paid $3.0 million pursuant to this agreement. The Company incurred $1.5 million of expenses pursuant to this agreement during the three and six months ended June 30, 2014 and the year ended December 31, 2013, including amounts for services provided in preparation for the Listing, which are included in acquisition and transaction related costs in the consolidated statement of operations and comprehensive loss. The Company does not owe the Dealer Manager any more fees pursuant to this agreement.
In December 2013, the Company entered into an information agent and advisory services agreement with the Dealer Manager and American National Stock Transfer, LLC, an entity under common control with the Dealer Manager, to provide in connection with a liquidity event, advisory services, educational services to external and internal wholesalers, communication support as well as proxy, tender offer or redemption and solicitation services. The Company paid $1.9 million pursuant to this agreement. For the three and six months ended June 30, 2014 , the Company incurred $0.7 million and $1.3 million of expenses pursuant to this agreement, which included amounts for services provided in preparation for the Company's tender offer in April 2014 (the "Tender Offer"), and are included in additional paid-in capital on the accompanying consolidated balance sheets. The Company incurred $0.6 million in fees pursuant to this arrangement during the year ended December 31, 2013 which were included in acquisition and transaction related costs in the consolidated statement of operations and comprehensive loss. Thus, the Company does not owe the Dealer Manager any more fees pursuant to this agreement.
In December 2013, the Company entered into an agreement with RCS Capital, the investment banking and capital markets division of the Dealer Manager, for strategic and financial advice and assistance in connection with (i) a possible sale transaction involving the Company (ii) the possible listing of the Company’s securities on a national securities exchange, and (iii) a possible acquisition transaction involving the Company. The Dealer Manager was entitled to a transaction fee equal to 0.25% of the transaction value in connection with the possible sale transaction, listing or acquisition. In April 2014, in connection with the Listing, the Company incurred and paid $6.9 million in connection with this agreement which were included in acquisition and transaction related costs in the consolidated statement of operations and comprehensive loss. Thus, the Company does not owe the Dealer Manager any more fees pursuant to this agreement.

20
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


During the three and six months ended June 30, 2014 , the Company incurred $0.6 million of expenses to affiliated entities of the Advisor relating to general legal, marketing and sales services provided in connection with the Listing. These expenses are included in acquisition and transaction related costs in the consolidated statement of operations and comprehensive loss. During the three and six months ended June 30, 2014 , the Company also incurred approximately $9,000 of expenses to affiliated entities relating to general legal services provided in connection with the Tender Offer. These expenses are included in additional paid-in capital on the accompanying consolidated balance sheets. As of June 30, 2015 and December 31, 2014 , there were no amounts payable to affiliated entities of the Advisor in accounts payable and accrued expenses on the accompanying balance sheets relating to the Listing or Tender Offer.
For substantial assistance in connection with the sale of properties, the Company will pay the Advisor a property disposition fee, not to exceed the lesser of 2.0% of the contract sale price of the property and 50% of the competitive real estate commission paid if a third party broker is also involved; provided, however that in no event may the property disposition fee paid to the Advisor when added to real estate commissions paid to unaffiliated third parties exceed the lesser of 6.0% of the contract sales price and a competitive real estate commission. For purposes of the foregoing, "competitive real estate commission" means a real estate brokerage commission for the purchase or sale of a property which is reasonable, customary and competitive in light of the size, type and location of the property. No such fees were incurred or paid for the three and six months ended June 30, 2015 and 2014 .
In connection with the Listing, the OP entered into the Listing Note. See Note 9 - Subordinated Listing Distribution Derivative.
In connection with the Listing and the Advisory Agreement, the Company terminated the subordinated termination fee that would be due to the Advisor in the event of termination of the Advisory Agreement.
In October 2014, the Company entered into separate transaction management agreements with Barclays Capital Inc. and the Dealer Manager as financial advisors to assist the board of the Company in evaluating strategic options to enhance long-term shareholder value, including a business combination involving the Company or a sale of the Company. In May 2015, the Company’s board of directors suspended the formal strategic alternatives process and the Company terminated its agreements with Barclays Capital Inc. and RCS Capital. The Company is no longer obligated to pay any transaction fees under either agreement.
Note 15 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company's common stock available for issue, transfer agency services as well as other administrative responsibilities for the Company including accounting services, transaction management and investor relations.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 16 — Share-Based Compensation
Stock Option Plan
The Company has a stock option plan (the "Plan") which authorizes the grant of nonqualified stock options to the Company's independent directors, officers, advisors, consultants and other personnel, subject to the absolute discretion of the board of directors and the applicable limitations of the Plan. The exercise price for all stock options granted under the Plan will be equal to the fair market value of a share on the date of grant. Upon a change in control, unvested options will become fully vested and any performance conditions imposed with respect to the options will be deemed to be fully achieved.  A total of 0.5 million shares have been authorized and reserved for issuance under the Plan. As of  June 30, 2015 and December 31, 2014 , no stock options were issued under the Plan.

21
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NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Restricted Share Plan
The Company's employee and director incentive restricted share plan ("RSP") provides the Company with the ability to grant awards of restricted shares to the Company's directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company.
Prior to the Listing, the RSP provided for the automatic grant of 3,000 restricted shares of common stock to each of the independent directors, without any further action by the Company's board of directors or the stockholders, on the date of initial election to the board of directors and on the date of each annual stockholder's meeting. Restricted stock issued to independent directors vest over a five-year period in increments of 20% per annum. Subsequent to the Listing, the Company amended the RSP to, among other things, remove the fixed amount of shares that are automatically granted to the independent directors. Under the amended RSP, the annual amount granted to the independent directors is determined by the board of directors. Generally, such awards provide for accelerated vesting of (i) all unvested shares upon a change in control or a termination without cause and (ii) the portion of the unvested shares scheduled to vest in the year of voluntary termination or the failure to be re-elected to the board.
  Prior to March 31, 2014, the total number of shares of common stock granted under the RSP could not exceed 5.0% of the Company's outstanding shares on a fully diluted basis at any time, and in any event could not exceed 7.5 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events). On March 31, 2014, the Company adopted an amendment to the Company’s RSP to increase the number of shares of the Company capital stock, par value $0.01 per share, available for awards thereunder to 10% of the Company’s outstanding shares of capital stock on a fully diluted basis at any time. The amendment also eliminated the RSP limit of 7.5 million shares of capital stock.
Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash dividends prior to the time that the restrictions on the restricted shares have lapsed. Any dividends payable in shares of common stock shall be subject to the same restrictions as the underlying restricted shares.
The following table displays restricted share award activity during the six months ended June 30, 2015 :
 
Number of Restricted Shares
 
Weighted-Average Issue Price
Unvested, December 31, 2014
89,499

 
$
10.73

Granted
281,499

 
10.36

Vested
(17,558
)
 
10.75

Forfeited
—

 
—

Unvested, June 30, 2015
353,440

 
$
10.44

During the six months ended June 30, 2015 , the board of directors approved, and the Company awarded, 279,365 restricted shares to employees of the Advisor. The awards vest over a four year period in increments of 25% per annum. The fair value of the awards granted to employees of the Advisor are remeasured quarterly, with the resulting amortization adjustments reflected in general and administrative expense in the consolidated statements of operations and comprehensive loss.
For awards granted to directors of the Company, the fair value of the restricted shares on the date of grant, based on the per share closing price on the NYSE, is expensed on a straight-line basis over the service period.
Compensation expense related to restricted stock was $0.2 million for the three and six months ended June 30, 2015 . Compensation expense related to restricted stock was $0.3 million for the three and six months ended June 30, 2014 .
As of June 30, 2015 , the Company had approximately $2.7 million of unrecognized compensation cost related to unvested restricted share awards granted under the Company’s RSP, which is expected to vest over a period of 3.7 years.
2014 Advisor Multi-Year Outperformance Agreement
On April 15, 2014 (the "Effective Date") in connection with the Listing, the Company entered into the 2014 Advisor Multi-Year Outperformance Agreement (as amended, the "OPP") with the OP and the Advisor. Under the OPP, the Advisor was issued 8,880,579 LTIP units in the OP with a maximum award value on the issuance date equal to 5.0% of the Company’s market capitalization (the “OPP Cap”). The LTIP units are structured as profits interest in the OP.

22
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


The Advisor will be eligible to earn a number of LTIP units with a value equal to a portion of the OPP Cap upon the first, second and third anniversaries of the Effective Date based on the Company’s achievement of certain levels of total return to its stockholders (“Total Return”), including both share price appreciation and common stock dividends, as measured against a peer group of companies, as set forth below, for the three-year performance period commencing on the Effective Date (the “Three-year Period”); each 12 -month period during the Three -Year Period (the “One-Year Periods”); and the initial 24 -month period of the Three -Year Period (the “Two-Year Period”), as follows:
 
 
 
 
Performance Period
 
Annual Period
 
Interim Period
Absolute Component: 4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period:
 
21%
 
7%
 
14%
Relative Component: 4% of any excess Total Return attained above the Total Return for the performance period of the Peer Group*, subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period:
 
 
 
 
 
 
 
•
100% will be earned if cumulative Total Return achieved is at least:
 
18%
 
6%
 
12%
 
•
50% will be earned if cumulative Total Return achieved is:
 
—%
 
—%
 
—%
 
•
0% will be earned if cumulative Total Return achieved is less than:
 
—%
 
—%
 
—%
 
•
a percentage from 50% to 100% calculated by linear interpolation will be earned if the cumulative Total Return achieved is between:
 
0% - 18%
 
0% - 6%
 
0% - 12%
______________________ 
*The “Peer Group” is comprised of the companies in the SNL US REIT Office Index.
The potential outperformance award is calculated at the end of each One-Year Period, the Two-Year Period and the Three-Year Period. The award earned for the Three-Year Period is based on the formula in the table above less any awards earned for the Two-Year Period and One-Year Periods, but not less than zero; the award earned for the Two-Year Period is based on the formula in the table above less any award earned for the first and second One-Year Period, but not less than zero. Any LTIP units that are unearned at the end of the Performance Period will be forfeited.
Subject to the Advisor’s continued service through each vesting date, one third of any earned LTIP units will vest on each of the third, fourth and fifth anniversaries of the Effective Date. Until such time as the LTIP units are fully vested in accordance with the provisions of the OPP, the holders of LTIP units are entitled to distributions equal to 10% of the distributions made on OP units. The Company paid $0.3 million and $0.4 million , respectively, in distributions related to LTIP units during the three and six months ended June 30, 2015 , respectively, which is included in non-controlling interest in the consolidated balance sheets. There were no distributions paid related to LTIP units for the three and six months ended June 30, 2014 . After the LTIP units are fully earned, holders are entitled to a catch-up distribution and then the same distributions as the OP units. At the time the Advisor’s capital account with respect to the LTIP units is economically equivalent to the average capital account balance of the OP units and has been earned and has been vested for 30 days, the Advisor, in its sole discretion, will be entitled to convert the LTIP units into OP units. The OPP provides for early calculation of LTIP units earned and for the accelerated vesting of any earned LTIP units in the event Advisor is terminated by the Company or in the event the Company incurs a change in control, in either case prior to the end of the Three-Year Period.
On April 15, 2015, 367,059 LTIP units were earned by the Advisor under the terms of the OPP.
The Company records equity based compensation expense associated with the awards over the requisite service period of five years. Equity-based compensation expense is adjusted each reporting period for changes in the estimated market-related performance. Compensation expense related to the OPP was $2.0 million and $2.2 million , respectively, for the three and six months ended June 30, 2015 . Compensation expense related to the OPP was $1.8 million for the three and six months ended June 30, 2014 .
The valuation of the OPP is determined using a Monte Carlo simulation. This analysis reflects the contractual terms of the OPP, including the performance periods and total return hurdles, as well as observable market-based inputs, including interest rate curves, and unobservable inputs, such as expected volatility. As a result, the Company has determined that its OPP valuation in its entirety is classified in Level 3 of the fair value hierarchy. For a description of the levels within the fair value hierarchy, see Note 10 — Fair Value of Financial Instruments.

23
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


The following table presents information about the Company's OPP, which is measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 , aggregated by the level in the fair value hierarchy within which the instrument falls:
(In thousands)
 
Quoted Prices in Active Markets
Level 1
 
Significant Other Observable Inputs
Level 2
 
Significant Unobservable Inputs
Level 3
 
Total
June 30, 2015
 
 
 
 
 
 
 
 
OPP
 
$
—

 
$
—

 
$
23,800

 
$
23,800

December 31, 2014
 
 
 
 
 
 
 
 
OPP
 
$
—

 
$
—

 
$
29,100

 
$
29,100

Level 3 Valuations
The following is a reconciliation of the beginning and ending balance for the changes in instruments with Level 3 inputs in the fair value hierarchy for the six months ended June 30, 2015 :
(In thousands)
 
OPP
Beginning balance as of December 31, 2014
 
$
29,100

   Fair value adjustment
 
(5,300
)
Ending balance as of June 30, 2015
 
$
23,800

The following table provides quantitative information about significant Level 3 input used:
Financial Instrument
 
Fair Value
 
Principal Valuation Technique
 
Unobservable Inputs
 
Input Value
 
 
(In thousands)
 
 
 
 
 
 
June 30, 2015
 
 
 
 
 
 
 
 
OPP
 
$
23,800

 
Monte Carlo Simulation
 
Expected volatility
 
24.0%
December 31, 2014
 
 
 
 
 
 
 
 
OPP
 
$
29,100

 
Monte Carlo Simulation
 
Expected volatility
 
27.0%
The following discussion provides a description of the impact on a fair value measurement of a change in each unobservable input in isolation. For the relationship described below, the inverse relationship would also generally apply.
Expected volatility is a measure of the variability in possible returns for an instrument, parameter or market index given how much the particular instrument, parameter or index changes in value over time. Generally, the higher the expected volatility of the underlying instrument, the wider the range of potential future returns. An increase in expected volatility, in isolation, would generally result in an increase in the fair value measurement of an instrument.
Note 17 — Accumulated Other Comprehensive Income (Loss)
The following table illustrates the changes in accumulated other comprehensive loss as of and for the periods indicated:
 
 
Unrealized gains
 
Change in
 
Total
 
 
on available-for-sale
 
unrealized gain
 
accumulated other
(in thousands)
 
securities
 
(loss) on derivatives
 
comprehensive loss
Balance, December 31, 2014
 
$
244

 
$
(1,060
)
 
$
(816
)
Other comprehensive loss, before reclassifications
 
(40
)
 
(1,719
)
 
(1,759
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
(48
)
 
1,053

 
1,005

Net current-period other comprehensive loss
 
(88
)
 
(666
)
 
(754
)
Balance, June 30, 2015
 
$
156

 
$
(1,726
)
 
$
(1,570
)

24
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


For a reconciliation of the income statement line item affected due to amounts reclassified out of accumulated other comprehensive loss for the three and six months ended June 30, 2015 , see Note 11 — Interest Rate Derivatives and Hedging Activities.
Note 18 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computations for the periods presented:  
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Net loss attributable to stockholders (In thousands)
 
$
(8,659
)
 
$
(67,237
)
 
$
(16,858
)
 
$
(75,393
)
Weighted average shares outstanding, basic and diluted
 
162,156,470

 
168,972,601

 
162,124,624

 
172,003,465

Net loss per share attributable to stockholders, basic and diluted
 
$
(0.05
)
 
$
(0.40
)
 
$
(0.10
)
 
$
(0.44
)
Diluted net loss per share assumes the conversion of all common share equivalents into an equivalent number of common shares, unless the effect is antidilutive.  The Company considers unvested restricted stock, OP units and LTIP units to be common share equivalents. The Company had the following common share equivalents for the periods presented, which were excluded from the calculation of diluted loss per share attributable to stockholders as the effect would have been antidilutive:
 
 
Six Months Ended June 30,
 
 
2015
 
2014
Unvested restricted stock
 
353,440

 
214,019

OP units
 
4,178,090

 
1,272,200

LTIP units
 
8,880,579

 
8,880,579

Total anti-dilutive common share equivalents
 
13,412,109

 
10,366,798

Note 19 — Non-Controlling Interests
The Company is the sole general partner of the OP and holds the majority of OP units. As of June 30, 2015 and December 31, 2014 , the Advisor held 4,178,090 and 4,270,841 OP units, respectively. As of June 30, 2015 and December 31, 2014 , the SLP held 8,880,579 unvested LTIP units. There were $0.8 million and $1.4 million , respectively, of distributions paid to OP unit and LTIP unit holders during the three and six months ended June 30, 2015 . There were $0.1 million of distributions paid to OP unit and LTIP unit holders during the three and six months ended June 30, 2014 .
A holder of OP units has the right to distributions and has the right convert OP units for the cash value of a corresponding number of shares of the Company's common stock or a corresponding number of shares of the Company's common stock, at the Company's election, in accordance with the limited partnership agreement of the OP. The remaining rights of the holders of OP units are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP's assets.
On May 13, 2015, 92,751 OP units were redeemed for newly issued shares of the Company's common stock and reclassified from non-controlling interest to stockholders' equity.
The Company is the controlling member of the limited liability company that owns the 163 Washington Avenue Apartments, acquired in September 2012. The Company has the sole voting rights under the operating agreement of this limited liability company. The non-controlling members' aggregate initial investment balance of $0.5 million will be reduced by the dividends paid to each non-controlling member. No dividends were paid during the three and six months ended June 30, 2015 or 2014 .

25
Table of Contents
NEW YORK REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)


Note 20 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements, except for the following events:
On August 5, 2015, the Company amended the OPP to equitably adjust for share issuances and share repurchases on a go-forward basis.
On August 6, 2015, ARC, the parent of the Sponsor, entered into a Transaction Agreement (the “Transaction Agreement”) with AMH Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership (“AMH”), and an affiliate of Apollo Global Management, LLC (NYSE: APO) (together with its consolidated subsidiaries, “Apollo”), and a newly formed entity, AR Global Investments, LLC, a Delaware limited liability company (“AR Global”). The Transaction Agreement provides that ARC will transfer to AR Global substantially all of the assets of its ongoing asset management business (including equity interests in its subsidiaries). AMH will contribute money and other assets to AR Global. Following the consummation of the transactions (the “Transactions”) contemplated by the Transaction Agreement, AMH will hold a 60% interest in AR Global and ARC will hold a 40% interest in AR Global. The business and affairs of AR Global will be overseen by a board of managers comprised of ten members, six of which will be appointed by AMH and four of which will be appointed by ARC.  The Advisor, Property Manager and Sponsor are currently owned indirectly by ARC and following the Transactions will be owned indirectly by AR Global.
Also on August 6, 2015, RCS Capital Corporation (“RCS Capital”), the parent of the Dealer Manager and a company under common control with ARC, announced that it has entered into an agreement with an affiliate of Apollo to sell RCS Capital’s Wholesale Distribution division, including the Dealer Manager, and certain related entities. Upon completion of the transaction, the Dealer Manager will continue to operate as a stand-alone entity within AR Global. The current management team of the Dealer Manager, which is led by William E. Dwyer III, will continue to operate the day-to-day functions of the business.
The various transactions with Apollo are subject to customary closing conditions and are expected to close in 2015. Despite the indirect change of control that would occur for the Advisor, Property Manager and Sponsor upon consummation of the various Apollo transactions, such entities are expected to continue to serve in their respective capacities to the Company following the Transactions. The Company’s independent directors unanimously endorsed the Transactions.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of New York REIT, Inc. and the notes thereto. As used herein, the terms "we," "our" and "us" refer to New York REIT, Inc., a Maryland corporation, and, as required by context, to New York Recovery Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to their subsidiaries. We are externally managed by New York Recovery Advisors, LLC (our "Advisor"), a Delaware limited liability company. Capitalized terms used herein but not otherwise defined have the meaning ascribed to those terms in "Part I  - Financial Information" included in the notes to consolidated financial statements and contained herein.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
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All of our executive officers are also officers, managers or holders of a direct or indirect interest in our Advisor and other American Realty Capital-affiliated entities; as a result, our executive officers, our Advisor and its affiliates face conflicts of interest, including significant conflicts created by our Advisor’s compensation arrangements with us and other investor entities advised by American Realty Capital affiliates, and conflicts in allocating time among these entities and us, which could negatively impact our operating results;
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Because investment opportunities that are suitable for us may also be suitable for other American Realty Capital-advised programs or investors, our Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders;
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We are party to an investment opportunity allocation agreement with two other programs that are sponsored by American Realty Capital III, LLC (our "Sponsor"), pursuant to which we may not have the first opportunity to acquire all properties identified by our Advisor and its affiliates;
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We depend on tenants for our revenue, and, accordingly, our revenue is dependent upon the success and economic viability of our tenants;
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We may not be able to achieve our rental rate objectives on new and renewal leases and our expenses could be greater, which may impact our results of operations;
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Increases in interest rates could increase the amount of our debt payments and limit our ability to pay dividends;
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We have not and may not generate cash flows sufficient to pay our dividends to stockholders, as such, we may be forced to borrow at higher rates or depend on our Advisor or our property manager, New York Recovery Properties, LLC (our "Property Manager"), to waive fees or reimbursement of certain expenses to fund our operations. There is no assurance these entities will waive such amounts;
•
We may be unable to pay or maintain cash dividends or increase dividends over time. Amounts paid to our stockholders may be a return of capital and not a return on a stockholder's investment;
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We are obligated to pay fees, which may be substantial, to our Advisor and its affiliates, including fees payable upon the sale of properties;
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We are subject to risks associated with the significant dislocations and liquidity disruptions that recently existed or occurred in the credit markets of the United States;
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We may fail to continue to qualify to be treated as a real estate investment trust for U.S. federal income tax purposes (“REIT”);
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Our properties may be adversely affected by economic cycles and risks inherent to the New York metropolitan statistical area (“MSA”), especially New York City; and

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•
We may be adversely affected by changes in general economic, business and political conditions, including the possibility of intensified international hostilities, acts of terrorism, and changes in conditions of United States or international lending, capital and financing markets.
Overview
We are a New York City focused REIT that seeks to provide stockholders with an opportunity to participate in one of the world's most dynamic real estate markets by primarily acquiring income-producing commercial real estate in New York City. We were incorporated on October 6, 2009 as a Maryland corporation that qualified as a REIT beginning with the taxable year ended December 31, 2010. We operated as a non-traded REIT through April 14, 2014. On April 15, 2014, we listed our common stock on the New York Stock Exchange ("NYSE") under the symbol "NYRT" (the "Listing").
We focus on acquiring and owning office and retail properties in Manhattan, the largest and most liquid real estate market in the United States. We purchased our first property and commenced active operations in June 2010.  As of June 30, 2015 , we owned 23 properties located in New York City. As of June 30, 2015 our properties aggregated 3.4 million rentable square feet, had an occupancy of 97.1% and an average remaining lease term of 9.5 years. Our portfolio primarily consisted of office and retail properties, representing 80% and 11% of rentable square feet, respectively, as of June 30, 2015 . We may also acquire multifamily, industrial, hotel and other types of real properties to add diversity to our portfolio. Properties other than office and retail spaces represented 9% of rentable square feet. Additionally, we also may originate or acquire first mortgage loans, mezzanine loans or preferred equity positions related to New York City real estate.
 Substantially all of our business is conducted through the OP. We have no direct employees. Our Advisor manages our affairs on a day-to-day basis. The Property Manager manages our properties, unless services are performed by a third party for specific properties. Realty Capital Securities, LLC (our "Dealer Manager") served as the dealer manager of our initial public offering which was ongoing from September 2010 to December 2013 (our "IPO") and continues to provide us with various services. The Advisor, Property Manager and Dealer Manager are under common control with AR Capital, LLC, the parent of our Sponsor, as a result of which they are related parties and receive compensation, fees and expense reimbursements for services related to the investment and management of our assets.
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates and critical accounting policies include:
Revenue Recognition
Our revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of our leases provide for rental increases at specified intervals, generally accepted accounting principles ("GAAP") require us to record a receivable, and include in revenues on a straight-line basis, unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. We defer the revenue related to lease payments received from tenants in advance of their due dates. When we acquire a property, the terms of existing leases are considered to commence as of the acquisition date for the purposes of this calculation.
Rental revenue recognition commences when the tenant takes possession or controls the physical use of the leased space. For the tenant to take possession, the leased space must be substantially ready for its intended use. To determine whether the leased space is substantially ready for its intended use, we evaluate whether we own or the tenant owns the tenant improvements. When we are the owner of tenant improvements, rental revenue recognition begins when the tenant takes possession of the finished space, which is when such improvements are substantially complete. When we conclude that we are not the owner (as the tenant is the owner) of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space.
When we conclude that we are the owner of tenant improvements, we capitalize the cost to construct the tenant improvements, including costs paid for or reimbursed by the tenants. When we conclude that the tenant is the owner of tenant improvements for accounting purposes, we record our contribution towards those improvements as a lease incentive, which is included in deferred leasing costs, net on the consolidated balance sheets and amortized as a reduction to rental income on a straight-line basis over the term of the lease.

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We will continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, we will record an increase in our allowance for uncollectible accounts or record a direct write-off of the receivable in our consolidated statements of operations.
Cost recoveries from tenants are included in operating expense reimbursement in the period the related costs are incurred, as applicable.
Our hotel revenues are recognized as earned and are derived from room rentals and other sources such as charges to guests for telephone service, movie and vending commissions, meeting and banquet room revenue and laundry services.
We may own certain properties with leases that include provisions for the tenant to pay contingent rental income based on a percent of the tenant's sales upon the achievement of certain sales thresholds or other targets which may be monthly, quarterly or annual targets. As the lessor to the aforementioned leases, we defer the recognition of contingent rental income until the specified target that triggered the contingent rental income is achieved, or until such sales upon which percentage rent is based are known. If we own certain properties with leases that include provisions for the tenant to pay contingent rental income, contingent rental income will be included in rental income on the consolidated statements of operations and comprehensive loss.
Investments in Real Estate
We evaluate the inputs, processes and outputs of each asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statement of operations. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets.
In business combinations, we allocate the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities and noncontrolling interests based on their respective estimated fair values. Tangible assets may include land, land improvements, buildings, fixtures and tenant improvements. Intangible assets or liabilities may include the value of in-place leases, above and below market leases and other identifiable intangible assets or liabilities based on lease or property specific characteristics.
The fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases is determined by considering estimates of carrying costs during the expected lease-up periods, current market conditions, as well as costs to execute similar leases. The fair value of above-market or below-market leases is recorded based on the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and our estimate of the comparable fair market lease rate, measured over the remaining term of the lease. The fair value of other intangible assets, such as real estate tax abatements, are recorded based on the present value of the expected benefit and amortized over the expected useful life including any below-market fixed rate renewal options for below-market leases.
Fair values of assumed mortgages, if applicable, are recorded as debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above- or below-market interest rates.
Non-controlling interests in property owning entities are recorded based on the fair value of units issued at the date of acquisition, as determined by the terms of the applicable agreement.
We utilize a number of sources in making our estimates of fair values for purposes of allocating purchase price including real estate valuations, prepared by independent valuation firms. We also consider information and other factors including: market conditions, the industry in which the tenant operates, characteristics of the real estate such as location, size, demographics, value and comparative rental rates, tenant credit profile and the importance of the location of the real estate to the operations of the tenant’s business.
We present the operations related to properties that have been or are intended to be sold as discontinued operations in the consolidated statements of operations and comprehensive loss where the disposal of a component represents a strategic shift that has had or will have a major effect on our operations and financial results. Properties that are intended to be sold will be designated as "held for sale" on the consolidated balance sheets at the lesser of carrying amount or fair value less estimated selling costs for all periods presented when they meet specific criteria to be presented as held for sale. Properties are no longer depreciated when they are classified as held for sale.

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Depreciation and Amortization
We are required to make subjective assessments as to the useful lives of the components of our real estate investments for purposes of determining the amount of depreciation to record on an annual basis. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our real estate investments, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income.
Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five to seven years for fixtures and improvements, and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.
Acquired above-market leases are amortized as a reduction of rental income over the remaining terms of the respective leases. Acquired below-market leases are amortized as an increase to rental income over the remaining terms of the respective leases and expected below-market renewal option periods.
Acquired above-market ground leases are amortized as a reduction of property operating expense over the remaining term of the respective leases. Acquired below-market ground leases are amortized as an increase to property operating expense over the remaining term of the respective leases and expected below-market renewal option period.
The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to depreciation and amortization expense over the remaining periods of the respective leases.
Assumed mortgage premiums or discounts, if applicable, are amortized as a reduction or increase to interest expense over the remaining term of the respective mortgages.
Impairment of Long Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, we review the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If such estimated cash flows are less than the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is based on the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.
Derivative Instruments
We use derivative financial instruments to hedge the interest rate risk associated with a portion of our borrowings. The principal objective of such agreements is to minimize the risks and costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.
We record all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives also may be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.  We may enter into derivative contracts that are intended to economically hedge certain of our risk, even though hedge accounting does not apply or we elect not to apply hedge accounting.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance was to become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption was not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. In July 2015, the FASB deferred the effective date of the revised guidance by one year to annual reporting periods beginning after December 15, 2017, although entities will be allowed to early adopt the guidance as of the original effective date. We have not yet selected a transition method and is currently evaluating the impact of the new guidance.

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In January 2015, the FASB issued updated guidance that eliminates from GAAP the concept of an event or transaction that is unusual in nature and occurs infrequently being treated as an extraordinary item. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Any amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We have opted to adopt this revised guidance early and have determined that there has been no impact to our financial position, results of operations and cash flows.
In February 2015, the FASB amended the accounting for consolidation of certain legal entities. The amendments modify the evaluation of whether certain legal entities are variable interest entities ("VIEs") or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, affect the consolidation analysis of reporting entities that are involved with VIEs (particularly those that have fee arrangements and related party relationships) and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If we decide to early adopt the revised guidance in an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes the interim period. We have not yet selected a transition method and are currently evaluating the impact of the new guidance.
In April 2015, the FASB amended the presentation of debt issuance costs on the balance sheet. The amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted for financial statements that have not previously been issued. If we decide to early adopt the revised guidance in an interim period, any adjustments will be reflected as of the beginning of the fiscal year that includes the interim period. We are currently evaluating the impact of the new guidance.
Results of Operations
Comparison of Three Months Ended June 30, 2015 to Three Months Ended June 30, 2014
As of January 1, 2014, we owned 22 properties (our "Same Store"), excluding our previously owned preferred equity investment. From January 1, 2014 through June 30, 2015 , we acquired one property (our "Acquisition") and therefore own 23 properties as of June 30, 2015 . Accordingly, due to our Acquisition, our results of operations for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 , reflect increases in revenue, property operating expenses and interest expense. Net loss attributable to stockholders was $8.7 million and $67.2 million for the three months ended June 30, 2015 and 2014 , respectively.
During the three months ended June 30, 2015 , we signed seven new leases for 185,247 square feet, of which our pro rata share is 114,548 square feet. The weighted-average initial rent on the spaces is approximately $56.51 per square foot and the weighted-average term is for 12.9 years. Of the seven new leases signed, three of the leases were for space that was previously leased over the past twelve months ("Replacement Leases"). Initial base cash rents per square foot on Replacement Leases are $48.70 , which is an increase of 33% over prior escalated rent of $36.64 . We expect to incur tenant improvements and leasing commissions on Replacement Leases of approximately $98.62 and $31.61 per square foot, respectively.
Rental Income
Rental income increased $6.0 million to $ 32.1 million for the three months ended June 30, 2015 , from $ 26.1 million for the three months ended June 30, 2014 . The increase in rental income was primarily driven by our Acquisition, which resulted in an increase in rental income of $5.9 million for the three months ended June 30, 2015 , compared to the three months ended June 30, 2014 . This was supplemented by a net increase in rental income of $0.1 million in our Same Store, primarily due to new leasing activity net of the effect of lease modifications and terminations.
Operating Expense Reimbursements and Other Revenue
Operating expense reimbursements and other revenue increased $0.9 million to $ 4.2 million  for the three months ended June 30, 2015 from $ 3.3 million for the three months ended June 30, 2014 , primarily due to our Acquisition and increased property operating expenses which are reimbursed in our Same Store.
Pursuant to many of our lease agreements, tenants are required to pay their pro rata share of certain property operating expenses, in addition to base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties. Therefore, operating expense reimbursements are directly affected by changes in property operating expenses, although not all increases in property operating expenses may be reimbursed by our tenants.

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Property Operating Expenses
Property operating expenses increased $1.8 million to $ 10.1 million for the three months ended June 30, 2015 , from $8.3 million for the three months ended June 30, 2014 . A total of $1.2 million of the increase was primarily related to our Acquisition. Additionally, property operating expenses at our Same Store increased by $0.6 million primarily due to an increase in the real estate tax rate in New York City and utilities.
Hotel Revenue and Operating Expenses
Hotel revenues increased $0.9 million to $7.4 million for the three months ended June 30, 2015 , from $6.5 million for the three months ended June 30, 2014 . Hotel operating expenses increased $0.7 million to $6.5 million for the three months ended June 30, 2015 , from $5.8 million for the three months ended June 30, 2014 . The increase in hotel revenues and hotel operating expenses relate to more stabilized operations at our hotel, which opened in late 2013. Average occupancy and average daily rate was 88.1% and $354.92 , respectively, for the three months ended June 30, 2015 , compared to 79.1% and $346.88 , respectively, for the three months ended June 30, 2014 .
Operating Fees to the Advisor
Operating fees to the Advisor increased $0.8 million to $3.1 million for the three months ended June 30, 2015 , from $2.3 million for the three months ended June 30, 2014 . Operating fees to the Advisor consist of asset management fees incurred from the Advisor. Asset management fees are currently equal to 0.5% per annum of the cost of assets, which have increased since the prior year due to our Acquisition.
Our Property Manager is entitled to fees for the management of our properties. Property management fees increase in direct correlation with gross revenues. Our Property Manager elected to waive these fees for the three months ended June 30, 2015 and 2014 .  For the three months ended June 30, 2015 and 2014 , we would have incurred property management fees of $0.7 million and $0.4 million , respectively, had these fees not been waived.
Acquisition and Transaction Related
Acquisition and transaction related fees and expenses were $0.1 million during the three months ended June 30, 2015 , compared to $11.6 million for the three months ended June 30, 2014 . Acquisition and transaction related expenses for the three months ended June 30, 2014 primarily included costs associated with the Listing, which occurred in April 2014.
Vesting of Asset Management Fees
Vesting of asset management fees expense of  $11.5 million  for the three months  ended  June 30, 2014 , related to the vesting of Class B units previously issued to the Advisor for prior asset management services. The performance condition related to these Class B units was satisfied upon completion of the Listing. On April 15, 2014, the Class B units were converted to OP units on a one-to-one basis.
Fair Value of Listing Promote
Fair value of listing promote of  $38.1 million  for the  three months  ended  June 30, 2014  represents the valuation of the Listing Note. Until the final value of the Listing Note was determined in November 2014, the Listing Note was marked-to-market quarterly, with changes in the value recorded in the consolidated statements of operations and comprehensive loss.
General and Administrative Expenses
General and administrative expenses increased $2.4 million to $5.2 million for the three months ended June 30, 2015 , from $2.8 million for the three months ended June 30, 2014 , largely driven by a $1.0 million increase in legal and professional fees primarily related to the audit of our 2014 financial statements and the external audit requirements associated with being a traded REIT. We operated as a non-traded REIT until our Listing on April 15, 2014. Additionally, our Advisor elected to absorb $1.0 million of general and administrative expenses during the three months ended June 30, 2014 , which did not recur during the three months ended June 30, 2015 . This increase was also due to higher equity-based compensation expense of $0.3 million for the three months ended June 30, 2015 , primarily related to the amortization of the fair value of the 2014 Advisor Multi-Year Outperformance Agreement (the "OPP"), which was adopted in conjunction with the Listing.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $2.0 million to $ 22.2 million for the three months ended June 30, 2015 , compared to $20.2 million for the three months ended June 30, 2014 . Depreciation and amortization expense of $2.2 million related to our Acquisition. This increase was partially offset by a decrease in depreciation and amortization related to our Same Store of $0.2 million , mainly due to prior period tenant lease expirations and terminations.

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Interest Expense
Interest expense increased $1.2 million to $6.0 million for the three months ended June 30, 2015 , from $4.8 million for the three months ended June 30, 2014 , as a result of a higher weighted average credit facility balance outstanding of $635.0 million during the three months ended June 30, 2015 , compared to $305.0 million during the three months ended June 30, 2014 , which primarily increased to fund our Acquisition.
Income from Unconsolidated Joint Venture
Income from unconsolidated joint venture for the three months ended June 30, 2015 decreased $0.3 million to $0.6 million from $0.9 million for the three months ended June 30, 2014 , which represents our preferred return, net of our pro rata share of the net loss of Worldwide Plaza and the amortization of the difference in basis between our investment and the book value of Worldwide Plaza's net assets.
Income from Preferred Equity Investment, Investment Securities and Interest Income
Income from preferred equity investment, investment securities and interest income decreased $0.7 million to approximately $8,000 for the three months ended June 30, 2015 from $0.7 million during the three months ended June 30, 2014 , primarily due to the repayment of our preferred equity investment, which occurred in March 2015.
Net Loss Attributable to Non-Controlling Interests
The net loss attributable to non-controlling interests during the three months ended June 30, 2015 and 2014 was $0.3 million and $0.5 million , respectively, which represents the net loss attributable to non-controlling interests for the period. The decrease in net loss attributable to non-controlling interests was primarily driven by costs associated with the Listing, which occurred during the three months ended June 30, 2014 .
Results of Operations
Comparison of Six Months Ended June 30, 2015 to Six Months Ended June 30, 2014
As of January 1, 2014, we owned 22 properties (our "Same Store"), excluding our previously owned preferred equity investment. From January 1, 2014 through June 30, 2015 , we acquired one property (our "Acquisition") and therefore own 23 properties as of June 30, 2015 . Accordingly, our results of operations for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 , reflect increases in revenue, property operating expenses and interest expense. Net loss attributable to stockholders was $16.9 million and $75.4 million for the six months ended June 30, 2015 and 2014 , respectively.
During the six months ended June 30, 2015 , we signed eight new leases for 207,432 square feet, of which our share is 136,733 square feet. The weighted-average initial rent on the spaces is approximately $67.34 per square foot and the weighted-average term is for 13.5 years. Of the eight new leases signed, four of the leases were Replacement Leases. Initial base cash rents per square foot on Replacement Leases are approximately $90.86 , increased from $68.21 . We expect to incur tenant improvements and leasing commissions on Replacement Leases of $58.00 and $58.92 per square foot, respectively.
Rental Income
Rental income increased $11.4 million to $64.7 million for the six months ended June 30, 2015 , from $53.3 million for the six months ended June 30, 2014 . The increase in rental income was primarily driven by our Acquisition, which contributed an increase in rental income of $11.9 million for the six months ended June 30, 2015 , compared to the six months ended June 30, 2014 . This was partially offset by a net decrease in rental income of $0.5 million in our Same Store, primarily due to a lease modification and terminations, partially offset by new leasing activity.
Operating Expense Reimbursements and Other Revenue
Operating expense reimbursements and other revenue increased $1.5 million to $8.3 million  for the six months ended June 30, 2015 from $6.8 million for the six months ended June 30, 2014 , primarily due to our Acquisition and increased property operating expenses which are reimbursed in our Same Store.
Pursuant to many of our lease agreements, tenants are required to pay their pro rata share of certain property operating expenses, in addition to base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties. Therefore, operating expense reimbursements are directly affected by changes in property operating expenses, although not all increases in property operating expenses may be reimbursed by our tenants.
Property Operating Expenses
Property operating expenses increased $3.9 million to $21.1 million for the six months ended June 30, 2015 , from $17.2 million for the six months ended June 30, 2014 . Property operating expenses related to our Acquisition were $2.4 million . Additionally, property operating expenses at our Same Store increased by $1.5 million primarily as a result of $0.5 million of bad debt expense associated with a tenant bankruptcy and lease termination at 256 West 38th Street and $1.0 million primarily due to an increase in the New York City real estate tax rate and utilities.

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Hotel Revenue and Operating Expenses
Hotel revenues increased $2.2 million to $11.6 million for the six months ended June 30, 2015 , from $9.4 million for the six months ended June 30, 2014 . Hotel operating expenses increased $1.3 million to $12.2 million for the six months ended June 30, 2015 , from $10.9 million for the six months ended June 30, 2014 . The increase in hotel revenues and hotel operating expenses relate to more stabilized operations at our hotel, which opened in late 2013. Average occupancy and average daily rate was 75.6% and $326.10 , respectively, for the six months ended June 30, 2015 compared to 60.7% and $334.63 for the six months ended June 30, 2014 .
Operating Fees to the Advisor
Operating fees to the Advisor were $6.2 million for the six months ended June 30, 2015 . Operating fees to the Advisor consist of asset management fees incurred from the Advisor. Prior to the Listing, we issued to the Advisor restricted, performance-based, forfeitable Class B units for asset management services, which vested and were expensed as of the Listing. Subsequent to the Listing, the asset management fee is earned and expensed in the related period. As such, the $2.3 million operating fees to the Advisor for the six months ended June 30, 2014 represents fees earned beginning after the Listing.
Our Property Manager is entitled to fees for the management of our properties. Property management fees increase in direct correlation with gross revenues. Our Property Manager elected to waive these fees for the six months ended June 30, 2015 and 2014 .  For the six months ended June 30, 2015 and 2014 , we would have incurred property management fees of $1.2 million and $0.8 million , respectively, had these fees not been waived.
Acquisition and Transaction Related
Acquisition and transaction related fees and expenses were $0.2 million during the six months ended June 30, 2015 compared to $11.6 million for the six months ended June 30, 2014 . Acquisition and transaction related expenses for the six months ended June 30, 2014 , primarily included costs associated with our Listing, which occurred in April 2014.
Vesting of Asset Management Fees
Vesting of asset management fees expense of  $11.5 million  for the  six months  ended  June 30, 2014 related to the vesting of Class B units previously issued to the Advisor for asset management services. The performance condition related to these Class B units was satisfied upon completion of the Listing. On April 15, 2014, the Class B units were converted to OP units on a one-to-one basis.
Fair Value of Listing Promote
Fair value of listing promote of  $38.1 million  for the  six months  ended  June 30, 2014  represents the valuation of the Listing Note. Until the final value of the Listing Note was determined in November 2014, the Listing Note was marked-to-market quarterly, with changes in the value recorded in the consolidated statements of operations and comprehensive loss.
General and Administrative Expenses
General and administrative expenses increased $5.1 million to $9.2 million for the six months ended June 30, 2015 , from $4.1 million for the six months ended June 30, 2014 , largely driven by a $3.4 million increase in legal and professional fees primarily related to the audit of our 2014 financial statements and the external audit requirements associated with being a traded REIT. We operated as a non-traded REIT until our Listing on April 15, 2014. Additionally, our Advisor elected to absorb $1.0 million of general and administrative expenses during the six months ended June 30, 2014 , which did not recur during the six months ended June 30, 2015 . This increase was also due to higher equity-based compensation expense of $0.5 million for the six months ended June 30, 2015 , primarily related to the amortization of the fair value of the OPP, which was adopted in conjunction with the Listing.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $1.7 million to $42.9 million for the six months ended June 30, 2015 , compared to $41.2 million for the six months ended June 30, 2014 . This increase was primarily related to our Acquisition, which contributed an additional $4.2 million in depreciation and amortization. This increase was partially offset by a decrease of $2.5 million related to our Same Store due to prior period tenant lease expirations and terminations.
Interest Expense
Interest expense increased $3.2 million to $12.0 million for the six months ended June 30, 2015 , from $8.8 million for the six months ended June 30, 2014 , as a result of a higher weighted average credit facility balance outstanding during the six months ended June 30, 2015 of $635.0 million to fund our Acquisition, compared to $305.0 million during the six months ended June 30, 2014 , as well as the associated increased amortization of deferred financing costs resulting from expanding our credit facility in April 2014.

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Income (Loss) from Unconsolidated Joint Venture
Income (loss) from unconsolidated joint venture for the six months ended June 30, 2015 was $0.8 million of income and $1.0 million of loss for the six months ended June 30, 2014 , respectively, which represents our preferred return, net of our pro rata share of the net loss of Worldwide Plaza and the amortization of the difference in basis between our investment and the book value of Worldwide Plaza's net assets.
Income from Preferred Equity Investment, Investment Securities and Interest Income
Income from preferred equity investment, investment securities and interest income decreased $0.4 million to $0.9 million for the six months ended June 30, 2015 from $1.3 million during the six months ended June 30, 2014 , primarily due to the repayment of our preferred equity investment, which occurred in March 2015.
Net Loss Attributable to Non-Controlling Interests
The net loss attributable to non-controlling interests for the six months ended June 30, 2015 and 2014 was $0.5 million , which represents the net loss attributable to non-controlling interests for the period. The net loss attributable to non-controlling interests has increased as a result of the vesting of Class B OP units, the OPP and the conversion of the Listing Note.
Cash Flows for the Six Months Ended June 30, 2015
For the six months ended June 30, 2015 , net cash provided by operating activities was $16.3 million . The level of cash flows used in or provided by operating activities is affected by the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of property operating expenses. Cash flows provided by operating activities included a net loss adjusted for non-cash items, resulting in a cash inflow of $26.0 million (net loss of $17.4 million adjusted for depreciation and amortization of tangible and intangible real estate assets and other non-cash charges of $43.4 million ), an increase in accrued unbilled ground rent of $1.8 million from recording ground rent expense on a straight-line basis, an increase in accounts payable and accrued expenses of $0.6 million , primarily due to legal and professional fees related to our outsourced internal audit firm as well as proxy costs, and a decrease in tenant and other receivables of $0.1 million . These cash inflows were partially offset by an increase in unbilled rent receivables of $8.7 million from recording rental income on a straight-line basis, an increase in prepaid expenses and other assets of $3.3 million , primarily related to leasing costs and a net decrease in deferred revenue of $0.1 million .
Net cash provided by investing activities during the six months ended June 30, 2015  of $27.8 million primarily related to the sale of 123 William Street and the return of our principal invested of $35.1 million , free rent credits released from escrow of $4.6 million related to our August 2014 acquisition of 245-249 West 17th Street and $1.1 million of proceeds from the sale of investment securities. These cash inflows were partially offset by $12.9 million of capital expenditures.
Net cash used in financing activities of $39.1 million during the six months ended June 30, 2015 primarily related to dividends to common stockholders of $37.3 million , $1.4 million of distributions to OP unit and participating LTIP unit holders, increases to restricted cash of $0.1 million , primarily related to real estate tax escrows, payments of financing costs of $0.2 million and principal payments on mortgage notes payable of $0.2 million .
Cash Flows for the Six Months Ended June 30, 2014
For the six months ended June 30, 2014 , net cash provided by operating activities was $2.2 million .  The level of cash flows used in or provided by operating activities is affected by the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of property operating expenses. Cash flows provided by operating activities included a net loss adjusted for non-cash items, resulting in a cash inflow of $15.5 million (net loss of $75.9 million adjusted for depreciation and amortization of tangible and intangible real estate assets and other non-cash charges of $91.4 million ), an increase in accrued unbilled ground rent of $2.2 million from recording ground rent expense on a straight-line basis and a decrease in prepaid expenses and other assets of $1.5 million , primarily related to the amortization of prepaid real estate taxes. These cash inflows were partially offset by an increase in unbilled rent receivables of $6.1 million from recording rental income on a straight-line basis, a decrease in accounts payable and accrued expenses of $5.0 million primarily due to payments to our Dealer Manager for services rendered in 2013 related to exploring our Listing and payments for tenant improvements, an increase in tenant and other receivables of $2.3 million relating to tenant accounts receivable and accrued income on our preferred equity investment in 123 William Street as well as a decrease in deferred revenue of $2.7 million and an increase in receivable from the Advisor of  $1.0 million  relating to absorbed expenses .
Net cash used in investing activities during the six months ended June 30, 2014  of $4.6 million primarily related to $3.9 million of additional investments in Worldwide Plaza and our preferred equity investment, $3.0 million in purchases of investment securities and $2.9 million for capital expenditures and tenant improvements. These cash inflows were partially offset by $5.2 million of distributions from our unconsolidated joint venture in Worldwide Plaza.

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Net cash used in financing activities of $180.4 million during the six months ended June 30, 2014 primarily related to $154.3 million in share repurchases related to our tender offer, including associated fees and expenses, dividends to stockholders of $28.8 million , deferred financing costs of $7.3 million to expand our credit facility, accrued offering costs of $1.5 million , increases to restricted cash of $0.3 million , principal payments on mortgage notes payable of $0.2 million and $0.1 million of distributions to OP unit holders. These cash outflows were partially offset by proceeds received from the sale of common stock of $11.3 million and a $0.8 million contribution from the Advisor for OP units.
Non-GAAP Financial Measures
This section includes non-GAAP financial measures, including Funds from Operations, Core Funds from Operations, Adjusted Funds from Operations, Earnings before Interest, Taxes and Depreciation and Amortization, Net Operating Income, Cash Net Operating Income and Adjusted Cash Net Operating Income. A description of these non-GAAP measures and reconciliations to the most directly comparable GAAP measure, which is net income, is provided below.
Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has promulgated a measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure but is not equivalent to our net income or loss as determined under GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property but including asset impairment writedowns, plus depreciation and amortization, after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s definition.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of a real estate asset diminishes predictably over time, especially if not adequately maintained or repaired and renovated as required by relevant circumstances or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation and certain other items may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, among other things, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, core funds from operations ("Core FFO") and adjusted funds from operations (“AFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. In calculating FFO, Core FFO and AFFO, other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do and/or calculate Core FFO and/or AFFO differently than we do. Consequently, our presentation of FFO, Core FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs.
We consider FFO, Core FFO and AFFO useful indicators of our performance. Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), FFO facilitates comparisons of operating performance between periods and between other REITs in our peer group.
Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT's definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses.

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Core FFO is FFO, excluding acquisition and transaction related costs, equity-based compensation expenses, other costs that are considered to be non-recurring, such as gains on sales of securities and investments, non-recurring revenue, gains, losses and expenses related to the early extinguishment of debt and other non-recurring expenses. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to pay dividends or other amounts to our stockholders. In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. By excluding expensed acquisition and transaction related costs, equity-based compensation as well as non-recurring revenues and expenses, we believe Core FFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties.
We exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments and gains or losses on contingent valuation rights. We also exclude dividends on Class B units as the related shares are assumed to have converted to common stock in our calculation of fully diluted weighted average shares of common stock. In addition, by excluding non-cash income and expense items such as amortization of above-market and below-market lease intangibles, amortization of deferred financing costs and straight-line rent from AFFO, we believe we provide useful information regarding income and expense items which have no cash impact and do not provide liquidity to the company or require capital resources of the company. Similarly, we include items such as free rent credits paid by sellers in our calculation of AFFO because these funds are paid to us during the free rent period and therefore improve our liquidity. By providing AFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that are not making a significant number of acquisitions. Investors are cautioned that AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as it excludes certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.
In calculating AFFO, we exclude certain expenses, which under GAAP are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued merger, acquisition and transaction related fees and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired will also have negative effects on returns to investors, the ability to fund dividends or distributions in the future, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property and certain other expenses. AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments as items which are unrealized and may not ultimately be realized. We view both gains and losses from fair value adjustments as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management's analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information.
As a result, we believe that the use of FFO, Core FFO and AFFO, together with the required GAAP presentations, provide a more complete understanding of our performance relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

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The table below reflects the items deducted from or added to net loss in our calculation of FFO, Core FFO and AFFO during the period presented.  Items are presented net of non-controlling interest portions where applicable.
 
 
Three Months Ended
Six Months Ended
(In thousands)
 
March 31,
2015
 
June 30,
2015
 
June 30,
2015
Net loss (in accordance with GAAP)
 
$
(8,460
)
 
$
(8,916
)
 
$
(17,376
)
Depreciation and amortization, net of adjustments related to joint ventures
 
20,723

 
22,144

 
42,867

Depreciation and amortization related to unconsolidated joint venture (1)
 
6,431

 
6,439

 
12,870

FFO
 
18,694

 
19,667

 
38,361

Acquisition and transaction-related expenses
 
125

 
96

 
221

    Gain on sale of investment securities
 
(48
)
 
—

 
(48
)
    Non-recurring other income
 
(158
)
 
—

 
(158
)
    Non-recurring general and administrative expense (2)
 
500

 
1,500

 
2,000

    Non-recurring straight-line rent bad debt expense
 
529

 
8

 
537

    Non-cash compensation expense (3)
 
248

 
2,189

 
2,437

Core FFO
 
19,890

 
23,460

 
43,350

Plus:
 
 
 
 
 
 
Deferred financing costs
 
1,138

 
1,162

 
2,300

Seller free rent credit
 
3,679

 
872

 
4,551

Minus:
 
 
 
 
 
 
Amortization of market lease intangibles
 
(2,124
)
 
(1,842
)
 
(3,966
)
Mark-to-market adjustments on derivatives
 
4

 
—

 
4

Straight-line rent
 
(5,870
)
 
(2,856
)
 
(8,726
)
Straight-line ground rent
 
987

 
787

 
1,774

Leasing commissions - second generation
 
(3
)
 
(3
)
 
(6
)
Building improvements - second generation
 
(9
)
 
(51
)
 
(60
)
Proportionate share of straight-line rent related to unconsolidated joint venture
 
(714
)
 
(773
)
 
(1,487
)
AFFO
 
$
16,978

 
$
20,756

 
$
37,734

___________________________
(1)
Proportionate share of depreciation and amortization related to unconsolidated joint venture and amortization of difference in basis.
(2)
Represents our estimate of non-recurring audit fees.
(3)
During the second quarter 2015, we began excluding equity-based compensation from our calculation of Core FFO as these non-cash expenses are volatile in nature due to fair value estimates relating to non-employee restricted share grants and the OPP. As a result of this change, we reclassified these prior period amounts from our reconciliation to AFFO to our reconciliation to Core FFO.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, Net Operating Income, Cash Net Operating Income and Adjusted Cash Net Operating Income.
We believe that earnings before interest, taxes, depreciation and amortization adjusted for acquisition and transaction-related expenses, other non-cash items and including our pro-rata share from unconsolidated joint ventures ("Adjusted EBITDA") is an appropriate measure of our ability to incur and service debt. Adjusted EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities. Other REITs may calculate Adjusted EBITDA differently and our calculation should not be compared to that of other REITs.

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Net operating income ("NOI") is a non-GAAP financial measure equal to net income (loss), the most directly comparable GAAP financial measure, less discontinued operations, interest, other income and income from preferred equity investments and investments securities, plus corporate general and administrative expense, acquisition and transaction-related expenses, depreciation and amortization, other non-cash expenses and interest expense. NOI is adjusted to include our pro-rata share of NOI from unconsolidated joint ventures. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets and to make decisions about resource allocations. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income. NOI excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of our liquidity.
Cash NOI is NOI presented on a cash basis, which is NOI after eliminating the effects of straight-lining of rent and the amortization of above and below market leases.
Adjusted Cash NOI is Cash NOI after eliminating the effects of free rent.
The table below reflect the reconciliation of net loss to Adjusted EBITDA, NOI, Cash NOI and Adjusted Cash NOI during the period presented.
 
 
Three Months Ended
Six Months Ended
(In thousands)
 
March 31, 2015
 
June 30, 2015
 
June 30, 2015
Net loss (in accordance with GAAP)
 
$
(8,460
)
 
$
(8,916
)
 
$
(17,376
)
Acquisition and transaction related
 
125

 
96

 
221

Depreciation and amortization
 
20,732

 
22,154

 
42,886

Interest expense
 
5,933

 
6,024

 
11,957

Loss on derivatives
 
4

 
—

 
4

Adjustments related to unconsolidated joint venture (1)
 
11,264

 
11,324

 
22,588

Adjusted EBITDA
 
29,598

 
30,682

 
60,280

General and administrative
 
3,950

 
5,203

 
9,153

Asset management fee to affiliate
 
3,144

 
3,101

 
6,245

Income from preferred equity investment, investment securities and interest
 
(930
)
 
(8
)
 
(938
)
Preferred return on unconsolidated joint venture
 
(3,851
)
 
(3,894
)
 
(7,745
)
Proportionate share of other adjustments related to unconsolidated joint venture
 
1,883

 
1,905

 
3,788

NOI
 
33,794

 
36,989

 
70,783

Amortization of above/below market lease assets and liabilities
 
(2,124
)
 
(1,842
)
 
(3,966
)
Straight-line rent
 
(5,341
)
 
(2,848
)
 
(8,189
)
Straight-line ground rent
 
987

 
787

 
1,774

Proportionate share of adjustments related to unconsolidated joint venture
 
(714
)
 
(773
)
 
(1,487
)
Cash NOI
 
26,602

 
32,313

 
58,915

Free rent
 
4,498

 
1,880

 
6,378

Adjusted Cash NOI
 
$
31,100

 
$
34,193

 
$
65,293

_________________
(1)
Proportionate share of adjustments related to unconsolidated joint venture and amortization of difference in basis.

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Liquidity and Capital Resources
As of June 30, 2015 , we had cash and cash equivalents of $27.5 million . In the normal course of business, our principal demands for funds are for operating expenses, dividends to our stockholders and principal and interest on our outstanding indebtedness. We expect to continue to increase the amount of cash flow generated from operating activities in future periods through future acquisitions and the stabilization of our current investment portfolio. Furthermore, we anticipate increased cash flow through future leasing activity and the contractual rent escalations included in a majority of our current leases during the primary term of the lease. Such increased cash flow will positively impact the amount of funds available for payments to our stockholders. Future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from offerings, including issuances of equity or debt securities, proceeds from the sale of properties and undistributed funds from operations. Our principal sources and uses of funds are further described below.
Principal Sources of Funds
Availability of Funds from Credit Facility
On April 14, 2014, we entered into our amended and restated credit facility ("Credit Facility") with Capital One, National Association ("Capital One"). The Credit Facility allows for total borrowings of up to $705.0 million with a $305.0 million term loan and a $400.0 million revolving loan which mature on August 20, 2018 and August 20, 2016, respectively. We have two one-year options to extend the revolving loan to August 20, 2018. The Credit Facility contains an "accordion feature" to allow us, under certain circumstances, to increase the aggregate loan borrowings to up to $1.0 billion of total borrowings. As of June 30, 2015 , the outstanding balance of the term loan and revolving components of the credit facility was $305.0 million and $330.0 million , respectively, with a combined weighted average interest rate of 2.1% . The unused borrowing capacity, based on the value of the borrowing base properties as of June 30, 2015 , was $20.2 million . Availability of borrowings is based on a pool of eligible unencumbered real estate assets.
The Credit Facility requires monthly interest payments for each Base Rate loan and periodic payments for each LIBOR loan, based upon the applicable LIBOR loan period, with all principal outstanding being due on the maturity date. The Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. In the event of a default, the lenders have the right to terminate their obligations under the Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans.
We view a mix of secured and unsecured financing sources as an efficient and accretive means to acquire properties and manage working capital.  Our interest expense in future periods will vary based, in part, on our level of future borrowings, which will depend on the cost of borrowings and the opportunity to acquire real estate assets which meet our investment objectives.
Other Sources of Funds
On March 27, 2015, the owner of 123 William Street, the property in which we held our $35.1 million preferred equity investment, sold the property to American Realty Capital New York City REIT, Inc. ("NYCR"), which is advised by entities under common control with our Advisor. The sponsor of NYCR is also our Sponsor. On such date, we received our entire principal balance plus accrued income receivable. Cash received from the sale of our preferred equity investment has increased our liquidity and the funds are available for dividends to our stockholders and other working capital requirements.
During the second quarter 2015, we announced several initiatives to both increase our liquidity and create long-term value for our stockholders. These initiatives include 1) increasing cash NOI by leasing currently vacant space, stabilizing revenue at the Viceroy Hotel and releasing currently below-market expiring space at market rates; 2) considering joint venture partners in our top five assets to unlock excess value; 3) exploring the sale of five non-core assets in the Brooklyn and Queens boroughs of New York City; and 4) realizing internal growth opportunities by repositioning office and basement space to retail space at 1440 Broadway as well as converting the lobby to rentable retail space. We are also in the process of refinancing the mortgage notes payable secured by the Design Center and Bleecker Street.
Additionally, we are currently exploring adjustments to our Credit Facility to maximize borrowing availability.
Principal Use of Funds
Acquisitions and Capital Expenditures
As of June 30, 2015 , we owned 23 properties. Our Advisor is actively and continuously evaluating potential acquisitions of real estate and real estate-related assets and engages in negotiations with sellers and borrowers on our behalf. 
In connection with the leasing of our properties, we have entered into and will continue to enter into agreements with our tenants to provide allowances for tenant improvements. These allowances require us to fund capital expenditures up to amounts specified in our lease agreements. We intend to fund tenant improvement allowances with cash on hand and cash flows from operations.

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Repurchase of Common Stock
On June 22, 2015, our board of directors authorized us to repurchase up to $150.0 million of our common stock. We expect that share repurchases will take place over the next two years. We expect to fund repurchases with cash on hand, cash flow from operations and excess cash from the sale of non-core assets.
Dividends
We are required to distribute at least 90% of our annual REIT taxable income. During the six months ended June 30, 2015 , we declared and paid a dividend rate equal to $0.46 per share per annum. Payments are made to stockholders of record at the close of business on the 8th day of each month, and payable on the 15th day of such month. Payments are dependent on the availability of funds. Amounts paid to our stockholders may be a return of capital and not a return on a stockholder's investment. Our board of directors may reduce the amount of dividends or distributions paid or suspend dividend payments at any time and therefore dividend payments are not assured.
During the six months ended June 30, 2015 , dividends paid totaled $38.7 million , inclusive of $1.4 million of dividends paid on unvested restricted shares and distributions paid on OP units and participating LTIP units. During the six months ended June 30, 2015 , cash used to pay our dividends was primarily generated from cash flows provided by operations and proceeds from the return of our preferred equity investment in 123 William Street. We expect to fund dividend payments over the next six months primarily from cash flows from operations and the remaining proceeds from the return of our preferred equity investment in 123 William Street.
The following table shows the sources for the payment of dividends for the periods presented:
 
 
Three Months Ended
 
Six Months Ended
 
 
March 31, 2015
 
June 30, 2015
 
June 30, 2015
(In thousands)
 
 
 
Percentage
of
Distributions
 
 
 
Percentage
of
Distributions
 
 
 
Percentage
of
Distributions
Distributions:
 
 
 
 
 
 
 
 
 
 
 
 
Dividends paid in cash
 
$
18,654

 
 
 
$
18,651

 
 
 
$
37,305

 
 
Other (1)
 
593

 
 
 
768

 
 
 
1,361

 
 
Total dividends
 
$
19,247

 
 
 
$
19,419

 
 
 
$
38,666

 
 
Source of dividend coverage:
 
 
 
 
 
 
 
 
 
 

 
 
Cash flows provided by operations  
 
$
14,446

 
75.1
%
 
$
1,886

 
9.7
%
 
$
16,332

 
42.2
%
Proceeds from return of preferred equity investment
 
4,801

 
24.9
%
 
17,533

 
90.3
%
 
22,334

 
57.8
%
Total sources of dividends
 
$
19,247

 
100.0
%
 
$
19,419

 
100.0
%
 
$
38,666

 
100.0
%
Cash flows provided by operations (GAAP basis)
 
$
14,446

 
 
 
$
1,886

 
 
 
$
16,332

 
 

Net loss attributable to stockholders (in accordance with GAAP)
 
$
(8,199
)
 
 
 
$
(8,659
)
 
 
 
$
(16,858
)
 
 

__________________
(1)
Includes distributions on OP units and participating LTIP units.
Strategic Alternatives Fees
In October 2014, we entered into separate transaction management agreements with Barclays Capital Inc. and RCS Capital, the investment banking and capital markets division of the Dealer Manager, as financial advisors to assist us and our board of directors in evaluating strategic options to enhance long-term shareholder value, including a business combination involving us or our sale. In May 2015, our board of directors suspended the formal strategic alternatives process and we terminated our agreements with Barclays Capital Inc. and RCS Capital. We are no longer obligated to pay any transaction fees under either agreement.
Loan Obligations
As of June 30, 2015 , we had consolidated mortgage notes payable of $172.0 million , excluding our pro rata share, of $427.9 million , of unconsolidated mortgage debt relating to Worldwide Plaza's total mortgage debt of $875.0 million . As of June 30, 2015 , the consolidated mortgage notes payable had a weighted average interest rate of 3.6% and our pro-rata share of unconsolidated mortgage debt relating to Worldwide Plaza had a weighted average interest rate of 4.6% .
The payment terms of our loan obligations require principal and interest amounts payable monthly with all unpaid principal and interest due at maturity. Our loan agreements require us to comply with specific reporting covenants. As of June 30, 2015 , we were in compliance with the debt covenants under our loan agreements.

41
Table of Contents

Our mortgage loan securing the three buildings in our Bleecker Street portfolio in the amount of $21.3 million will mature in December 2015. The Company intends to refinance this obligation utilizing a mortgage loan or unused proceeds from our credit facility. See Note 7 - Credit Facility of the notes to our consolidated financial statements.
Incurring mortgage debt increases the risk of loss because defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default and cause us to recognize taxable income on foreclosure for federal income tax purposes even though we do not receive any cash proceeds. In such event, we may be unable to pay the amount of distributions required in order to maintain our REIT status.
Contractual Obligations
Debt Obligations
The following is a summary of our contractual debt obligations as of June 30, 2015 :
 
 
 
 
 
 
Years Ended December 31,
 
 
(In thousands)
 
Total
 
July 1, 2015 - December 31, 2015
 
2016 — 2017
 
2018 — 2019
 
Thereafter
Principal payments due:
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable
 
$
171,998

 
$
21,550

 
$
130,897

 
$
9,350

 
$
10,201

Credit facility
 
635,000

 
—

 
330,000

 
305,000

 
—

 
 
$
806,998

 
$
21,550

 
$
460,897

 
$
314,350

 
$
10,201

Interest payments due:
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable
 
$
13,687

 
$
3,065

 
$
8,825

 
$
1,324

 
$
473

Credit facility
 
28,439

 
6,489

 
17,601

 
4,349

 
—

 
 
$
42,126

 
$
9,554

 
$
26,426

 
$
5,673

 
$
473

Lease Obligations
We entered into lease agreements primarily related to 350 Bleecker Street and the Viceroy Hotel under leasehold interest agreements. The following table reflects the minimum base rental cash payments due from us over the next five years and thereafter under these arrangements. These amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes among other items.
 
 
 
 
 
 
Years Ended December 31,
 
 
(In thousands)
 
Total
 
July 1, 2015 - December 31, 2015
 
2016 — 2017
 
2018 — 2019
 
Thereafter
Capital lease obligations
 
$
3,877

 
$
43

 
$
172

 
$
172

 
$
3,490

Operating lease obligations
 
274,375

 
2,450

 
9,863

 
10,435

 
251,627

Total lease obligations
 
$
278,252

 
$
2,493

 
$
10,035

 
$
10,607

 
$
255,117

Election as a REIT
We elected and qualified to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), effective for our taxable year ended December 31, 2010. We believe that, commencing with such taxable year, we are organized and operate in such a manner as to qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner to qualify for taxation as a REIT, but no assurance can be given that we will operate in a manner so as to remain qualified for taxation as a REIT. In order to qualify for taxation as a REIT we must, among other things, distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regard for the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax on that portion of our REIT taxable income that we distribute to our stockholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties as well as federal income and excise taxes on our undistributed income.

42

Inflation
Some of our leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions. In addition, our net leases require the tenant to pay its allocable share of operating expenses, which may include common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation.
Related-Party Transactions and Agreements
We have entered into agreements with affiliates of our Sponsor, whereby we have paid or may in the future pay certain fees or reimbursements to our Advisor, its affiliates and entities under common ownership with our Advisor in connection with acquisition and financing activities, sales and maintenance of common stock under our offering, transfer agency services, asset and property management services and reimbursement of operating and offering related costs. See Note 14 — Related Party Transactions and Arrangements to our financial statements included in this report for a discussion of the various related party transactions, agreements and fees.
Off-Balance - Sheet Arrangements
We have no off-balance-sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our long-term debt, which consists of secured financings and our Credit Facility, bears interest at fixed rates and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. From time to time, we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
As of June 30, 2015 , our debt consisted of both fixed and variable-rate debt. We had fixed-rate secured mortgage notes payable and fixed-rate loans under our Credit Facility, with an aggregate carrying value of $252.0 million and a fair value of $256.2 million . Changes in market interest rates on our fixed-rate debt impact the fair value of the notes, but it has no impact on interest due on the notes. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our obligation to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed–rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2015 levels, with all other variables held constant.  A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt by $2.7 million . A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $2.7 million .
As of June 30, 2015 , our variable-rate portion of the Credit Facility had a carrying and fair value of $555.0 million . Interest rate volatility associated with this variable-rate Credit Facility affects interest expense incurred and cash flow. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2015 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate Credit Facility would increase or decrease our interest expense by $5.6 million annually.
These amounts were determined by considering the impact of hypothetical interest rates changes on our borrowing costs, and assuming no other changes in our capital structure. As the information presented above includes only those exposures that existed as of June 30, 2015 , it does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

43
Table of Contents

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 promulgated under the Exchange Act, we are required to establish and maintain disclosure controls and procedures as defined in subparagraph (e) of that rule. Management is required to evaluate, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of each fiscal quarter. Management previously concluded that our disclosure controls and procedures were not effective as of December 31, 2014 or March 31, 2015 due to the material weaknesses in internal control over financial reporting described in our Annual Report on Form 10-K filed with the SEC on May 11, 2015. As described below, a remediation plan has been implemented and, as of June 30, 2015, management deems the material weaknesses previously identified to be remediated and our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting.
During our most recent fiscal quarter, we executed our remediation plan, as further described below. In connection with the evaluation required by Rule 13a-15(d), we identified the execution of this remediation plan as having materially affected, or reasonably likely to materially affect, our internal control over financial reporting. Other than the execution of the remediation plan, there were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Remediation of Material Weaknesses
Management, with the concurrence and oversight of the Audit Committee of our Board of Directors, executed its remediation plan described in our Annual Report on Form 10-K filed with the SEC on May 11, 2015 during the quarter ended June 30, 2015. As part of the remediation, management:
•
Designed and conducted an effective risk assessment process to identify and analyze risks impacting financial reporting, and implemented business process level controls and monitoring activities that are responsive to those risks;
•
Enhanced information technology access controls over its financial reporting system and accounts payable application;
•
Strengthened segregation of duties within the purchasing, accounts payable and cash disbursements process;
•
Implemented appropriate controls, including general IT controls, over the use of significant Excel spreadsheets supporting the financial reporting process; and
•
Implemented appropriate controls over the authorization, completeness, existence and accuracy of manual journal entries.
Management verified that the aforementioned controls were appropriately designed and implemented as of June 30, 2015. Management will continue to monitor and test, as applicable, the ongoing operating effectiveness of its new and enhanced controls.
Our internal controls over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. We recognize that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.


44
Table of Contents

PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The information related to litigation and regulatory matters contained in “Note 13 — Commitments and Contingencies” of our notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2014.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sale of Unregistered Equity Securities
On May 13, 2015, we redeemed 92,751 OP units and issued common shares.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On August 5, 2015, we amended and restated our OPP (the “Amended OPP”) with the OP and our Advisor to amend certain definitions related to performance measurement to equitably adjust for share issuances and share repurchases for the Amended OPP's remaining valuation dates.
The description of the Amended OPP in this Quarterly Report on Form 10-Q is a summary and is qualified in its entirety by the terms of the Amended OPP attached as Exhibit 10.8 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
Item 6. Exhibits.
The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.

45
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
NEW YORK REIT, INC.
 
By:
/s/ Michael A. Happel
 
 
Michael A. Happel
 
 
Chief Executive Officer and President
(Principal Executive Officer)
 
 
 
 
By:
/s/ Nicholas Radesca
 
 
Nicholas Radesca
 
 
Interim Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)

Date: August 7, 2015


46
EXHIBIT INDEX


The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No.
 
Description
10.1 (1)
 
Seventh Amended and Restated Advisory Agreement by and among New York REIT, Inc., New York Recovery Operating Partnership, L.P. and New York Recovery Advisors, LLC, dated as of June 26, 2015.
10.8 *
 
Amended and Restated 2014 Advisor Multi-Year Outperformance Agreement by and among New York REIT, Inc., New York Recovery Operating Partnership, L.P. and New York Recovery Advisors, LLC made as of August 5, 2015
10.20 *
 
Indemnification Agreement between New York REIT, Inc. and each of Nicholas Radesca and Patrick O'Malley, dated as of June 22, 2015.
31.1 *
 
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *
 
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 *
 
Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 *
 
XBRL (eXtensible Business Reporting Language). The following materials from New York REIT, Inc.'s Quarterly Report on Form 10-Q for the six months ended June 30, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this information in furnished and not filed for purpose of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934
_____________________
* Filed herewith.
(1)
Filed as an exhibit to New York REIT, Inc.’s Current Report on Form 8-K filed with the SEC on June 26, 2015.



47
Exhibit 10.8

NEW YORK REIT, INC.
AMENDED AND RESTATED
2014 ADVISOR MULTI-YEAR OUTPERFORMANCE AGREEMENT
This 2014 ADVISOR MULTI-YEAR OUTPERFORMANCE AGREEMENT (this “ Agreement ”) made as of August 5, 2015, by and among NEW YORK REIT, INC., a Maryland corporation (the “ Company ”), its subsidiary NEW YORK RECOVERY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership and the entity through which the Company conducts substantially all of its operations (the “ Partnership ”), and NEW YORK RECOVERY ADVISORS, LLC, a Delaware limited liability company, the Company’s manager (the “ Advisor ”).
RECITALS
The Advisor provides services to the Company pursuant to the Seventh Amended and Restated Advisory Agreement by and among the Company, the Partnership and the Advisor, dated as of June 26, 2015.
The Compensation Committee (the “ Committee ”) of the Board of Directors of the Company (the “ Board ”) approved this Agreement to provide the Advisor with the incentive compensation described in this Agreement (the “ Award ”) and thereby provide additional incentive for the Advisor to promote the progress and success of the business of the Company and its affiliates, including the Partnership. This Agreement evidences the Award and is subject to the terms and conditions set forth herein and in the Partnership Agreement (as defined herein).
NOW, THEREFORE, the Company, the Partnership and the Advisor agree as follows:
1. Administration . The Award granted under this Agreement shall be administered by the Committee; provided that all powers of the Committee hereunder can be exercised by the full Board if the Board so elects. The Committee shall have the discretionary authority to make all determinations regarding the Award, including, without limitation, the interpretation and construction of the Award and the determination of relevant facts; provided such determinations are made in good faith and are consistent with the purpose and intent of the Award. Except as expressly provided herein, no such action by the Committee shall adversely affect the rights of the Advisor to any earned and outstanding Award LTIP Units (as defined below). Subject to the terms hereof, all decisions made by the Committee shall be final, conclusive and binding on all persons, including the Company, the Partnership and the Advisor. No member of the Committee, nor any other member of the Board or any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Award, and all members of the Committee and each other member of the Board and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.


2.      Definitions . As used herein:
“ Additional Shares ” means (without double-counting), as of a particular date of determination, the sum of (A) the number of shares of Common Stock plus (B) the REIT Shares Amount for all Partnership Units (assuming that such Partnership Units were converted, exercised, exchanged or redeemed for OP Units as of such date of determination at the applicable conversion, exercise, exchange or redemption rate (or rate deemed applicable by the Committee if there is no such stated rate) and such OP Units were then tendered to the Partnership for redemption pursuant to the Partnership Agreement as of such date) other than those Partnership Units held by the Company, in the case of each (A) and (B), to the extent issued after the Effective Date and on or before such date of determination in a capital raising transaction, in exchange for assets or securities, or upon the acquisition of another entity; provided , that for the avoidance of doubt, this definition of “Additional Shares” shall exclude: (i) shares of Common Stock issued after the Effective Date upon exercise of stock options or upon the exchange (directly or indirectly) of LTIP Units or other Partnership Units issued to employees, non‑employee directors, consultants, advisors or other persons or entities as incentive or other compensation, (ii) shares of Common Stock awarded after the Effective Date to employees or other persons or entities in exchange for services provided or to be provided to the Company or any of its affiliates, and (iii) all Initial Shares.
“ Adjusted Market Cap ” means (A) the Company’s Initial Market Cap less an amount equal to the total number of Buyback Shares bought back over the measurement period multiplied by $9.00 with respect to the calculation of (i) the Annual Amount on the First Valuation Date, (ii) the Interim Amount, (iii) the Final Absolute TRS Amount, and (iv) the Final Relative TRS Amount, and (B) the Total Shares as of the prior Valuation Date less any Buyback Shares bought back over the measurement period multiplied by the spot closing stock price on the prior Valuation Date, with respect to the calculation of the Annual Amount on the Second Valuation Date and the Final Valuation Date.
“ Annual Absolute TRS ” means, as of the each Valuation Date and provided the Company’s TRS Percentage exceeds seven percent (7%) for the period commencing on (A) the Effective Date with respect to the First Valuation Date and (B) the prior Valuation Date with respect to the Second Valuation Date and the Final Valuation Date, a dollar amount equal to four percent (4%) of the dollar amount by which, if any, the amount of the Company’s Total Return, determined as of such date, exceeds the Threshold Amount, determined as of such date.
“ Annual Amount ” means, as of a Valuation Date, an amount equal to up to one and one-quarter percent (1.25%) of the Company’s Initial Market Cap based on the level of achievement of Annual Absolute TRS and Annual Relative TRS as of such Valuation Date for the period commencing on (A) the Effective Date with respect to the First Valuation Date and (B) the prior Valuation Date with respect to the Second Valuation Date and the Final Valuation Date.
“ Annual Relative TRS ” means, as of each Valuation Date, a dollar amount equal to four percent (4%) of any amount by which the Company’s Total Return for the period commencing on (A) the Effective Date with respect to the First Valuation Date and (B) the prior Valuation Date with respect to the Second Valuation Date and the Final Valuation Date, exceeds the Relative Threshold Amount as of such date; provided , that the amount so earned will be subject to reduction


in accordance with a ratable sliding scale factor so that (A) if the Company’s TRS Percentage for the applicable period is six percent (6%) or more, there will be no reduction to Annual Relative TRS for such period; (B) Annual Relative TRS for such period shall be reduced by fifty percent (50%) if such TRS Percentage for the applicable period is zero percent (0%); (C) Annual Relative TRS for such period shall be reduced based on a linear interpolation between the foregoing reduction factors if the Company’s TRS Percentage for the applicable period is between zero percent (0%) and six percent (6%); and (D) Annual Relative TRS for such period shall be reduced by one hundred percent (100%) if the TRS Percentage for the applicable period is below zero percent (0%).
“ Award OP Units ” has the meaning set forth in Section 7 hereof.
“ Award LTIP Units ” has the meaning set forth in Section 3(a) hereof.
“ Beneficial Owner ” has the meaning set forth in Rule 13d-3 under the Exchange Act.
“ Buyback Shares ” means (without double-counting), as of a particular date of determination, (A) shares of Common Stock or (B) the REIT Shares Amount for Partnership Units (assuming that such Partnership Units were converted, exercised, exchanged or redeemed for OP Units as of such date of determination at the applicable conversion, exercise, exchange or redemption rate (or rate deemed applicable by the Committee if there is no such stated rate) and such OP Units were then tendered to the Partnership for redemption pursuant to the Partnership Agreement as of such date), other than those Partnership Units held by the Company, in the case of each (A) and (B), to the extent repurchased by the Company after the Effective Date and on or before such date of determination in a stock buyback transaction or in a redemption of Partnership Units for cash pursuant to the Partnership Agreement; provided , that for the avoidance of doubt, this definition of “Buyback Shares” shall exclude: (i) shares of Common Stock issued after the Effective Date upon exercise of stock options or upon the exchange (directly or indirectly) of LTIP Units or other Partnership Units issued to employees, non‑employee directors, consultants, advisors or other persons or entities as incentive or other compensation, and (ii) shares of Common Stock awarded after the Effective Date to employees or other persons or entities in exchange for services provided or to be provided to the Company or any of its affiliates.
“ Change of Control ” means and includes any of the following events:
(i) any Person is or becomes Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the then outstanding securities of the Company, excluding (A) any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x) of subsection (ii) below and (B) any Person who becomes such a Beneficial Owner through the issuance of such securities with respect to purchases made directly from the Company; or
(ii)      the consummation of a merger or consolidation of the Company with any other Person or the issuance of voting securities of the Company in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (x) a merger or consolidation which would


result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) seventy percent (70%) or more of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (y) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the then outstanding securities of the Company; or
(iii)      the consummation of a sale or disposition by the Company of all or substantially all of the assets of the Company; or
(iv)      persons who, as of the Effective Date, constitute the Board (the “ Incumbent Directors ”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to such date shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election a vote of at least a majority of the Incumbent Directors.
Notwithstanding the foregoing, with respect to any payment that is triggered upon a Change in Control, a transaction shall not be deemed to be a Change in Control unless such transaction constitutes a “change in control event” within the meaning of Section 409A of the Code.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Common Stock ” means the Company’s common stock, par value $0.01 per share, either currently existing or authorized hereafter.
“ Common Stock Price ” means, as of a particular date, the average of the Fair Market Value of one share of Common Stock over the fifteen (15) consecutive trading days ending on, and including, such date (or, if such date is not a trading day, the most recent trading day immediately preceding such date); provided , however, that if such date is the date upon which a Transactional Change of Control occurs, the Common Stock Price as of such date shall be equal to the fair value, as determined by the Committee, of the total consideration paid or payable in the transaction resulting in the Transactional Change of Control for one share of Common Stock.
“ Continuous Service ” means the Advisor’s continuous service as manager of the Company without interruption or termination.
“ Conversion Factor ” has the meaning set forth in the Partnership Agreement.
“ Effective Date ” means April 15, 2014.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.


“ Fair Market Value ” means, as of any given date, the fair market value of a security determined by the Committee using any reasonable method and in good faith (such determination will be made in a manner that satisfies Section 409A of the Code and in good-faith as required by Section 422(c)(1) of the Code); provided that (A) if such security is admitted to trading on a national securities exchange, the fair market value of such security on any date shall be the closing sale price reported for such security on the principal stock exchange or, if applicable, any other national exchange on which the security is traded or admitted to trading on such date on which a sale was reported; and (B) if such security is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“ NASDAQ ”) or a successor quotation system, the fair market value of such security on any such date shall be the average of the highest bid and lowest asked prices for such security on the system on such date on which both the bid and asked prices were reported.
“ Final Absolute TRS Amount ” means, as of the Final Valuation Date and provided the Company’s TRS Percentage exceeds twenty-one percent (21%) for the period commencing on the Effective Date through the Final Valuation Date, a dollar amount equal to four percent (4%) of the dollar amount by which, if any, the amount of the Company’s Total Return, determined as of such date, exceeds the Threshold Amount, determined as of such date.
“ Final Relative TRS Amount ” means, as of the Final Valuation Date, a dollar amount equal to four percent (4%) of any amount by which the Company’s Total Return for the period commencing on the Effective Date through the Final Valuation Date exceeds the Relative Threshold Amount as of such date; provided , that the amount so earned will be subject to reduction in accordance with a ratable sliding scale factor so that (A) if the Company’s TRS Percentage for the period commencing on the Effective Date through the Final Valuation Date is eighteen percent (18%) or more, there will be no reduction to the Final Relative TRS Amount; (B) the Final Relative TRS Amount shall be reduced by fifty percent (50%) if such TRS Percentage is zero percent (0%); (C) the Final Relative TRS Amount shall be reduced based on a linear interpolation between the foregoing reduction factors if the Company’s TRS Percentage is between zero percent (0%) and eighteen percent (18%); and (D) the Final Relative TRS Amount shall be reduced by one hundred percent (100%) if such TRS Percentage is below zero percent (0%).
“ Final Valuation Date ” means April 15, 2017.
“ First Valuation Date ” means April 15, 2015.
“ Initial Market Cap ” means (A) $9 multiplied by (B) the number of Initial Shares outstanding on the Effective Date.
“ Initial Shares ” means the sum of (A) all shares of Common Stock outstanding as of the Effective Date (including any vested and nonvested restricted shares of Common Stock issued under any other incentive plan maintained by the Company prior to the Effective Date), plus (B) any shares of Common Stock representing the REIT Shares Amount for all Partnership Units outstanding as of the Effective Date (assuming such Partnership Units were converted, exercised, exchange or redeemed for OP Units as of the Effective Date at the applicable conversion, exercise, exchange or redemption rate (or rate deemed applicable by the Committee if there is no such stated


rate) and such OP Units were then tendered to the Partnership for redemption pursuant to the Partnership Agreement as of such date) other than Partnership Units held by the Company; provided, that for the avoidance of doubt, this definition of “Initial Shares” shall exclude shares of Common Stock issuable upon exercise of stock options or upon the exchange (directly or indirectly) of LTIP Units or other Partnership Units issued to employees, non-employee directors, consultants, advisors or other persons or entities as incentive or other compensation.
“ Interim Amount ” means, as of the Second Valuation Date, an amount equal to (A) up to three percent (3%) of the Company’s Initial Market Cap, less (B) any amount of the Annual Amount achieved through the Second Valuation Date (such that the maximum level of achievement through the Second Valuation Date shall not exceed three (3%) of the Company’s Initial Market Cap), based on the level of achievement of: (x) as of the Second Valuation Date and provided the Company’s TRS Percentage exceeds fourteen percent (14%) for the period commencing on the Effective Date, a dollar amount equal to four percent (4%) of the dollar amount by which, if any, the amount of the Company’s Total Return, determined as of such date, exceeds the Threshold Amount, determined as of such date (“ Interim Absolute TRS ”), and (y) as of the Second Valuation Date, a dollar amount equal to four percent (4%) of any amount by which the Company’s Total Return for the period commencing on the Effective Date, exceeds the Relative Threshold Amount as of such date (“ Interim Relative TRS ”); provided , that the amount so earned will be subject to reduction in accordance with a ratable sliding scale factor so that (A) if the Company’s TRS Percentage for the applicable period is twelve percent (12%) or more, there will be no reduction to Interim Relative TRS for such period; (B) Interim Relative TRS for such period shall be reduced by fifty percent (50%) if such TRS Percentage for the applicable period is zero percent (0%); (C) Interim Relative TRS for such period shall be reduced based on a linear interpolation between the foregoing reduction factors if the Company’s TRS Percentage for the applicable period is between zero percent (0%) and twelve percent (12%); and (D) Interim Relative TRS for such period shall be reduced by one hundred percent (100%) if the TRS Percentage for the applicable period is below zero percent (0%). For the avoidance of doubt, any Interim Amount will be determined based on the formula in the preceding sentence which provides for a reduction for any Annual Amounts determined at the First and Second Valuation Dates, but not less than zero.
“ LTIP Units ” means LTIP Units, as such term is defined in the Partnership Agreement.
“ Maximum Total Outperformance Amount ” means five percent (5%) of the Company’s Initial Market Cap.
“ OP Units ” has the meaning set forth in the Partnership Agreement.
“ Partnership Agreement ” means the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of April 15, 2014, among the Company, as general partner, New York Recovery Special Limited Partnership, LLC, as special limited partner, the Advisor, as the initial limited partner, and any limited partners that are admitted from time to time to the Partnership and listed on Exhibit A thereto, as amended, restated or supplemented from time to time.


“ Partnership Units ” has the meaning set forth in the Partnership Agreement.
“ Peer Group ” means each of the companies in the SNL US REIT Office Index.
“ Peer Group Return Percentage ” means, the median percentage return to stockholders of the Peer Group (A) for the period commencing on the Effective Date and ending on the First Valuation Date with respect to the calculation of Annual Relative TRS for the First Valuation Date, (B) for the period commencing on the day after the prior Valuation Date and ending on the next Valuation Date with respect to calculation of Annual Relative TRS for the Second Valuation Date and the Final Valuation Date and (C) for the period commencing on the Effective Date and ending on the Second Valuation Date and the Final Valuation Date with respect to calculating Interim Relative TRS and Final Relative TRS, respectively; in each case as calculated by a consultant engaged by the Committee and as approved by the Committee in its reasonable discretion.
“ Person ” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, other entity or “group” (as defined in the Exchange Act).
“ REIT Shares Amount ” has the meaning set forth in the Partnership Agreement.
“ Relative Threshold Amount ” means an amount calculated in the same manner as the Threshold Amount, provided that instead of the 7%, 14%, and 21% required return percentages for the Annual Absolute TRS, Interim Absolute TRS, and Final Absolute TRS Amount, respectively, the Peer Group Return Percentage shall be utilized in calculating the required return on the Adjusted Market Cap and proportional required returns on the values of the Buyback Shares and Additional Shares for the Relative Threshold Amount.
“ Second Valuation Date ” means April 15, 2016.
“ Securities Act ” means the Securities Act of 1933, as amended.
“ Subsidiary ” means any corporation or other entity (other than the Company) in which the Company has more than a fifty percent (50%) interest, either directly or indirectly.
“ Threshold Amount ” means for each measurement period an amount equal to the sum of (A) an amount equal to (i) seven percent (7%) multiplied by the Adjusted Market Cap for each annual measurement period, (ii) fourteen percent (14%) multiplied by the Adjusted Market Cap for purposes of calculating Interim Absolute TRS and (iii) twenty-one percent (21%) multiplied by the Adjusted Market Cap for purposes of calculating the Final Absolute TRS Amount; plus (B) an amount equal to the proportional required return (based on a non-compounded daily rate of .0001918) from the issuance dates of any Additional Shares to the end of the measurement period on the values of any Additional Shares issued since the start of the measurement period (based on the spot closing spot prices on the issuance dates of the Additional Shares); plus (C) an amount equal to the proportional required return (based on a non-compounded daily rate of .0001918) from the start of the measurement period to the buyback dates of any Buyback Shares based on the number


of Buyback Shares bought back since the start of the measurement period and the closing spot price at the start of the measurement period (or $9.00 for measurement periods beginning on the Effective Date).
“ Total Outperformance Amount ” means, as of the Final Valuation Date, a dollar amount equal to the algebraic sum of: (A) the Final Absolute TRS Amount, (B) the Final Relative TRS Amount, (C) the Annual Amounts determined as of each Valuation Date and (D) the Interim Amount; provided that (i) if the resulting amount is a negative number, the Total Outperformance Amount shall be zero, and (ii) in no event shall the Total Outperformance Amount exceed the Maximum Total Outperformance Amount. For the avoidance of doubt, the Total Outperformance Amount is based on (i) the Annual Amounts granted at the First, Second and Final Valuation Dates, plus (ii) the Interim Amount less any Annual Amounts granted at the First and Second Valuation Dates, plus (iii) the sum of the Final Absolute TRS Amount plus the Final Relative TRS Amount, less any Annual Amounts granted at the First, Second and Third Valuation Dates and any Interim Amount granted at the Second Valuation Date, but not less than zero and not greater than the Maximum Total Outperformance Amount.
“ Total Return ” means (without double-counting), as of a particular date of determination, a dollar amount equal to the sum of: (A) the Total Shares as of such date of determination multiplied by the Common Stock Price as of such date, minus (B) the Adjusted Market Cap, minus (C) the values of any Additional Shares issued since the start of the measurement period (based on the spot closing prices on the issuance dates of the Additional Shares), plus (D) the difference between the buyback values of any Buyback Shares (based on spot prices on the buyback dates) and the baseline values of the buyback shares at the start of the measurement period (also based on spot prices or $9.00 on the Effective Date), plus (E) an amount equal to the sum of the total dividends and other distributions declared between the Effective Date and such date of determination so long as the “ex-dividend” date with respect thereto falls prior to such date of determination (excluding dividends and distributions paid in the form of additional shares of Common Stock or Partnership Units), in respect of the Total Shares as of such date of determination (it being understood, for the avoidance of doubt, that such total dividends and distributions shall be calculated by reference to actual securities outstanding as of each record date with respect to each applicable dividend or distribution payment date, and not by multiplying the aggregate amount of distributions paid on one OP Unit that was outstanding as of the Effective Date between the Effective Date and such date of determination by the number of Total Shares as of the date of determination).
“ Total Shares ” means (without double-counting), as of a particular date of determination, the algebraic sum of: (A) the Initial Shares, plus (B) the Additional Shares, minus (C) all Buyback Shares repurchased or redeemed between the Effective Date and such date of determination.
“ Total OPP Unit Equivalent ” means the aggregate of the (i) sum of Annual OPP Unit Equivalents and the Interim OPP Unit Equivalent (the “Earned Annual and Interim OPP Unit Equivalents”) and (ii) the excess (if any) of the Final OPP Unit Equivalent over the Earned Annual and Interim OPP Unit Equivalents.


“ Transactional Change of Control ” means (A) a Change of Control described in clause (a) of the definition thereof where the Person makes a tender offer for Common Stock, (B) a Change of Control described in clause (b) of the definition thereof where the Company is not the surviving entity, or (C) a Change of Control described in clause (c) of the definition thereof.
“ Transfer ” has the meaning set forth in Section 7 hereof.
“ TRS Percentage ” means the Company’s Total Return divided by the sum of (A) the Adjusted Market Cap; (B) the baseline value of any Buyback Shares purchased or redeemed over the measurement period based on the spot closing stock price at the start of the measurement period (or $9.00 for measurement periods beginning on the Effective Date); and (C) the value of any Additional Shares issued during the measurement period based on the closing spot prices on the issuance dates, with the result multiplied by 100 and expressed as a percentage.
“ Valuation Date ” means the First Valuation Date, the Second Valuation Date and the Final Valuation Date, as applicable.
3.      Outperformance Award .
a.      On April 15, 2014 (the “ Grant Date ”) the Advisor was granted the Award, consisting of 8,880,579 LTIP Units (the “ Award LTIP Units ”), which will be subject to forfeiture and vesting to the extent provided in this Section 3 and Section 4 hereof.
b.      As soon as practicable following each Valuation Date, but as of such Valuation Date, the Committee will determine the applicable Annual Amount and divide the resulting dollar amount by the Common Stock Price calculated as of the applicable Valuation Date (appropriately adjusted to the extent that the Conversion Factor is greater or less than 1.0); the resulting number of unit equivalents determined for each Valuation Date referred to herein as the “ Annual OPP Unit Equivalent ”.
c.      As soon as practicable following the Second Valuation Date, but as of the Second Valuation Date, the Committee will determine the Interim Amount and divide the resulting dollar amount by the Common Stock Price calculated as of the Second Valuation Date (appropriately adjusted to the extent that the Conversion Factor is greater or less than 1.0); the resulting number of unit equivalents determined as of the Second Valuation Date referred to herein as the “ Interim OPP Unit Equivalent ”.
d.      As soon as practicable following the Final Valuation Date, but as of the Final Valuation Date, the Committee will:
(i)      determine the Final Absolute TRS Amount;
(ii)      determine the Final Relative TRS Amount;
(iii)      determine the Total Outperformance Amount; and


(iv)      divide the resulting dollar amounts by the Common Stock Price calculated as of the Final Valuation Date (appropriately adjusted to the extent that the Conversion Factor is greater or less than 1.0); the resulting number of unit equivalents determined as of the Final Valuation Date referred to herein as the “ Final OPP Unit Equivalent. ”
If the Total OPP Unit Equivalent is smaller than the number of Award LTIP Units previously issued to the Advisor, as of the Final Valuation Date, the Advisor shall forfeit the number of Award LTIP Units equal to the difference without payment of any consideration by the Partnership; thereafter the term Award LTIP Units will refer only to the Award LTIP Units that were not so forfeited and neither the Advisor nor any of its successors, members or their respective assigns or personal representatives will have any further rights or interests in the Award LTIP Units that were so forfeited. If the Total OPP Unit Equivalent is greater than the number of Award LTIP Units previously issued to the Advisor: (A) the Company shall cause the Partnership to issue to the Advisor, as of the Final Valuation Date, a number of additional LTIP Units equal to the difference; (B) such additional LTIP Units shall be added to the Award LTIP Units previously issued, if any, and thereby become part of this Award; and (C) the Company and the Partnership shall take such action as is necessary to accomplish the grant of such additional LTIP Units; provided that such issuance will be subject to the Advisor executing and delivering such documents, comparable to the documents executed and delivered in connection with this Agreement, as the Company and/or the Partnership reasonably request in order to comply with all applicable legal requirements, including, without limitation, federal and state securities laws. If the Total OPP Unit Equivalent is the same as the number of Award LTIP Units previously issued to the Advisor, then there will be no change to the number of Award LTIP Units under this Award.
e.      If any of the Award LTIP Units have been earned based on performance as provided in Sections 3(b), (c) and (d) , subject to Section 4 hereof, the Award LTIP Units shall become vested in the following amounts and at the following times, provided that the Continuous Service of the Advisor must continue through the applicable vesting date or the accelerated vesting date provided in Section 4 hereof, as applicable:
(i)      one-third (1/3) on April 15, 2017;
(ii)      one-third (1/3) on April 15, 2018; and
(iii)      one-third (1/3) on April 15, 2019.
f.      Within thirty (30) days following each vesting date under Section 3(e) , the Advisor, in its sole discretion, shall be entitled to convert such Award LTIP Units that vested on such date into OP Units.
g.      Any Award LTIP Units that do not become vested pursuant to Section 3(e) or Section 4 hereof shall, without payment of any consideration by the Partnership automatically and without notice be forfeited and be and become null and void, and neither the Advisor nor any of its successors, heirs, assigns, members or their respective assigns or personal representatives will thereafter have any further rights or interests in such forfeited Award LTIP Units.


4.      Termination/ Change of Control .
a.      In the event the Company terminates the Advisor’s Continuous Service for any reason prior to the Final Valuation Date, the calculations provided in Sections 3(b), (c) and (d) hereof shall be performed as of the Valuation Date next following such termination (and if such Valuation Date is not the Final Valuation Date, on the Final Valuation Date as well) as if the termination of Continuous Service had not occurred and the Advisor shall be fully (100%) vested in the Total OPP Unit Equivalent as so determined. In the event the Advisor terminates its Continuous Service prior to the Final Valuation Date, the calculations described in the preceding sentence shall be performed as of the Valuation Date next following such termination and the Advisor shall be fully (100%) vested in the Total OPP Unit Equivalent as determined on such date. In either case, within thirty (30) days of the date such calculations are completed, the Advisor, in its sole discretion, shall be entitled to convert the Total OPP Unit Equivalent so determined into OP Units or their equivalent in cash.
b.      In the event of a termination of the Advisor’s Continuous Service for any reason after the Final Valuation Date, any then unvested Award LTIP Units shall be fully (100%) vested and nonforfeitable hereunder. Within thirty (30) days of the date such termination, the Advisor, in its sole discretion, shall be entitled to convert such Award LTIP Units into OP Units or their equivalent in cash.
c.      In the event of a Change in Control prior to the Final Valuation Date, (i) the Advisor shall become fully (100%) vested in any Award LTIP Units that had been earned but were unvested prior to the Change in Control and within thirty (30) days of the date such Change in Control, the Advisor, in its sole discretion, shall be entitled to convert such Earned Annual and Interim OPP Units into OP Units or their equivalent in cash; and (ii) the calculations provided in Sections 3(b), (c) and (d) hereof shall be performed as of the Valuation Date next following such Change in Control (and if such Valuation Date is not the Final Valuation Date, on the Final Valuation Date as well) and the Advisor shall be fully (100%) vested in the Total OPP Unit Equivalent as so determined and within thirty (30) days of the date such calculations are completed, the Advisor, in its sole discretion, shall be entitled to convert the number of Award LTIP Units so determined into OP Units or their equivalent in cash.
d.      In the event of a Change in Control after the Final Valuation Date, any then unvested Award LTIP Units shall be fully (100%) vested and nonforfeitable hereunder. Within thirty (30) days of the date such Change in Control, the Advisor, in its sole discretion, shall be entitled to convert such Award LTIP Units into OP Units or their equivalent in cash.
5.      Rights of Advisor . The Advisor shall have no rights with respect to this Agreement (and the Award evidenced hereby) unless the Advisor shall have accepted this Agreement prior to the close of business on the Effective Date by signing and delivering to the Partnership a copy of this Agreement. Upon acceptance of this Agreement by the Advisor, the Partnership Agreement shall be amended to reflect the issuance to the Advisor of the Award LTIP Units so accepted. Thereupon, the Advisor shall have all the rights of a Limited Partner of the Partnership with respect to the Award LTIP Units, as set forth in the Partnership Agreement, subject, however, to the restrictions and conditions specified herein. Award LTIP Units constitute and shall be treated


for all purposes as the property of the Advisor, subject to the terms of this Agreement and the Partnership Agreement.
6.      Distributions .
a.      The Advisor shall be entitled to receive distributions with respect to the Award LTIP Units to the extent provided for in the Partnership Agreement, as modified hereby.
b.      The LTIP Unit Distribution Participation Date (as defined in the Partnership Agreement) with respect to any Award LTIP Unit shall be the date as of which such Award LTIP Unit is earned pursuant to Sections 3(b), (c) and (d) , and on such date, the Partnership will pay the Advisor, for each Award LTIP Unit earned, an amount in cash equal to the quotient of (i) the per unit amount of all distributions paid with respect to each OP Unit on or after the Effective Date and before the date on which such Award LTIP Unit is earned (other than those with respect to which an adjustment was made pursuant to Section 8 hereof) divided by (ii) the Conversion Factor.
c.      All distributions paid with respect to Award LTIP Units shall be fully vested and non-forfeitable when paid, whether or not the underlying LTIP Units have been earned based on performance or have become vested based on the passage of time as provided in Section 3 or Section 4 hereof.
7.      Restrictions on Transfer . Except as otherwise permitted by the Committee in its sole discretion, none of the Award LTIP Units granted hereunder nor any of the OP Units of the Partnership into which such Award LTIP Units may be converted (the “ Award OP Units ”) shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of, encumbered, whether voluntarily or by operation of law (each such action a “ Transfer ”). The transferee in any Transfers of Award LTIP Units or Award OP Units permitted by the Committee must agree in writing with the Company and the Partnership to be bound by all the terms and conditions of this Agreement and that subsequent transfers shall be prohibited except those in accordance with this Section 7 . Additionally, all Transfers of Award LTIP Units or Award OP Units must be in compliance with all applicable securities laws (including, without limitation, the Securities Act) and the applicable terms and conditions of the Partnership Agreement. In connection with any Transfer of Award LTIP Units or Award OP Units, the Partnership may require the Advisor to provide an opinion of counsel, satisfactory to the Partnership, that such Transfer is in compliance with all federal and state securities laws (including, without limitation, the Securities Act). Any attempted Transfer of Award LTIP Units or Award OP Units not in accordance with the terms and conditions of this Section 7 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any Award LTIP Units or Award OP Units as a result of any such Transfer, shall otherwise refuse to recognize any such Transfer and shall not in any way give effect to any such Transfer of any Award LTIP Units or Award OP Units. Except as provided in this Section 7 , this Agreement is personal to the Advisor, is nonassignable and is not transferable in any manner, by operation of law or otherwise.
8.      Changes in Capital Structure . If (i) the Company shall at any time be involved in a merger, consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all


or substantially all of the assets or stock of the Company or other transaction similar thereto, (ii) any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, significant repurchases of stock, or other similar change in the capital stock of the Company, (iii) any cash dividend or other distribution to holders of share of Common Stock or OP Units shall be declared and paid other than in the ordinary course, or (iv) any other extraordinary corporate event shall occur that in each case in the good faith judgment of the Committee necessitates action by way of equitable or proportionate adjustment in the terms of this Agreement or the Award LTIP Units to avoid distortion in the value of this Award, the Committee shall make equitable or proportionate adjustment and take such other action as it deems necessary to maintain the Advisor’s rights hereunder so that they are substantially proportionate to the rights existing under this Award and the terms of the Award LTIP Units prior to such event, including, without limitation: (A) interpretations of or modifications to any defined term in this Agreement; (B) adjustments in any calculations provided for in this Agreement, and (C) substitution of other awards. All adjustments made by the Committee shall be final, binding and conclusive.
9.      Miscellaneous .
a.      Amendments . This Agreement may be amended or modified only with the consent of the Company and the Partnership acting through the Committee; provided that any such amendment or modification that adversely affects the rights of the Advisor hereunder must be consented to by the Advisor to be effective as against it. Notwithstanding the foregoing, this Agreement may be amended in writing signed only by the Company and the Partnership to correct any errors or ambiguities in this Agreement and/or to make such changes that do not adversely affect the Advisor’s rights hereunder.
b.      Legend . The records of the Partnership evidencing the Award LTIP Units shall bear an appropriate legend, as determined by the Partnership in its sole discretion, to the effect that such Award LTIP Units are subject to restrictions as set forth herein and in the Partnership Agreement.
c.      Compliance With Law . The Partnership and the Advisor will make reasonable efforts to comply with all applicable securities laws. In addition, notwithstanding any provision of this Agreement to the contrary, no Award LTIP Units will become vested or be paid at a time that such vesting or payment would result in a violation of any such law.
d.      Advisor Representations; Registration .
(i)      The Advisor hereby represents and warrants that (A) it understands that it is responsible for consulting its own tax advisor with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which the Advisor is or by reason of this Award may become subject, to its particular situation; (B) the Advisor has not received or relied upon business or tax advice from the Company, the Partnership or any of their respective Affiliates (as defined in the Partnership Agreement), employees, agents, consultants or advisors, in their capacity as such; (C) the Advisor provides services to the Partnership on a regular basis and in such capacity has access to such information, and has such experience of and involvement in the business and operations of the Partnership, as


the Advisor believes to be necessary and appropriate to make an informed decision to accept this Award; (D) Award LTIP Units are subject to substantial risks; (E) the Advisor has been furnished with, and has reviewed and understands, information relating to this Award; (F) the Advisor has been afforded the opportunity to obtain such additional information as it deemed necessary before accepting this Award; and (G) the Advisor has had an opportunity to ask questions of representatives of the Partnership and the Company, or persons acting on their behalf, concerning this Award.
(ii)      The Advisor hereby acknowledges that: (A) there is no public market for Award LTIP Units or Award OP Units and neither the Partnership nor the Company has any obligation or intention to create such a market; (B) sales of Award LTIP Units and Award OP Units are subject to restrictions under the Securities Act and applicable state securities laws; and (C) because of the restrictions on transfer or assignment of Award LTIP Units and Award OP Units set forth in the Partnership Agreement and in this Agreement, the Advisor may have to bear the economic risk of its ownership of the Award LTIP Units covered by this Award for an indefinite period of time.
e.      Section 83(b) Election . In connection with each separate issuance of LTIP Units under this Award pursuant to Section 3 hereof, the Advisor may elect to include in gross income in the year of transfer the applicable Award LTIP Units pursuant to Section 83(b) of the Code substantially in the form attached hereto as Exhibit A and to supply the necessary information in accordance with the regulations promulgated thereunder. The Advisor agrees to file such election (or to permit the Partnership to file such election on the Advisor’s behalf) within thirty (30) days after the Grant Date with the IRS Service Center where the Advisor files its personal income tax returns, provide a copy of such election to the Partnership, and to file a copy of such election with the Advisor’s U.S. federal income tax return for the taxable year in which the LTIP Units are awarded to the Advisor. So long as the Advisor holds any Award LTIP Units, the Advisor shall disclose to the Partnership in writing such information as may be reasonably requested with respect to ownership of LTIP Units as the Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code applicable to the Partnership or to comply with requirements of any other appropriate taxing authority.
f.      Severability . If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not so held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect.
g.      Governing Law . This Agreement is made under, and will be construed in accordance with, the laws of State of Delaware, without giving effect to the principles of conflict of laws of such state.
h.      No Obligation to Continue Service as a Consultant or Advisor . Neither the Company nor any affiliate is obligated by or as a result of this Agreement to continue to have the Advisor as a consultant, advisor or other service provider and this Agreement shall not


interfere in any way with the right of the Company or any affiliate to terminate the Advisor’s service relationship at any time.
i.      Notices . Any notice to be given to the Company shall be addressed to the Secretary of the Company at 405 Park Avenue, New York, New York, 10022, and any notice to be given the Advisor shall be addressed to the Advisor at the Advisor’s address as it appears on the records of the Company, or at such other address as the Company or the Advisor may hereafter designate in writing to the other.
j.      Withholding and Taxes . The Advisor shall be solely responsible for all federal, state, local or foreign taxes or any taxes under the Federal Insurance Contributions Act with respect to this Award. Notwithstanding the foregoing, if at any time the Company or Partnership are required to withhold any such taxes, the Advisor shall make arrangements satisfactory to the Committee regarding the payment of any United States federal, state or local or foreign taxes required by law to be withheld with respect to such amount; provided , however, that if any Award LTIP Units or Award OP Units are withheld (or returned), the number of Award LTIP Units or Award OP Units so withheld (or returned) shall be limited to the number which have a fair market value on the date of withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income. The obligations of the Company under this Agreement will be conditional on such payment or arrangements, and the Company and its affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Advisor.
k.      Excise Tax . In the event that the Advisor becomes entitled to any amounts under this Agreement that will be subject to the tax imposed by Section 4999 of the Code, the provisions of Section 8 of the Company’s Equity Plan will apply to such amounts.
l.      Headings . The headings of paragraphs hereof are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.
m.      Counterparts . This Agreement may be executed in multiple counterparts with the same effect as if each of the signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.
n.      Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and any successors to the Company and the Partnership, on the one hand, and any successors to the Advisor, on the other hand, by will or the laws of descent and distribution, but this Agreement shall not otherwise be assignable or otherwise subject to hypothecation by the Advisor.
o.      Section 409A . This Agreement shall be construed, administered and interpreted in accordance with a good faith interpretation of Section 409A of the Code. Any provision of this Agreement that is inconsistent with Section 409A of the Code, or that may result in penalties under Section 409A of the Code, shall be amended, with the reasonable cooperation of the Advisor


and the Company and the Partnership, to the extent necessary to exempt it from, or bring it into compliance with, Section 409A of the Code. Any payment to Advisor made pursuant to Section 9(k) will be made in a manner intended to comply with Regulation Section 1.409A-3(i)(1)(v).
[Signature page follows]




IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first set forth above.
NEW YORK REIT, INC.
By: /s/ Michael A. Happel            
Name: Michael A. Happel
Title: Chief Executive Officer and President

NEW YORK RECOVERY OPERATING PARTNERSHIP, L.P.
By:
New York REIT, Inc., its general partner
By: /s/ Michael A. Happel            
Name: Michael A. Happel
Title: Chief Executive Officer and President

NEW YORK RECOVERY ADVISORS, LLC
By:
New York Recovery Special Limited Partnership, LLC its Member
By:
American Realty Capital III, LLC its Managing Member
By: /s/ William M. Kahane            
Name: William M. Kahane
Title: Manager



EXHIBIT A

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:
1.
The name, address and taxpayer identification number of the undersigned are:
Name: New York Recovery Advisors LLC (the “ Taxpayer ”)
Address:     
Social Security No./Taxpayer Identification No.: ____-____-____
2.
Description of property with respect to which the election is being made: ____ LTIP Units in New York Recovery Operating Partnership, L.P. (the “ Partnership ”).
3.
The date on which the LTIP Units were transferred is April 15, 2014. The taxable year to which this election relates is calendar year 2014.
4.
Nature of restrictions to which the LTIP Units are subject:
(a)
With limited exceptions, until the LTIP Units vest, the Taxpayer may not transfer in any manner any portion of the LTIP Units without the consent of the Partnership.
(b)
The Taxpayer’s LTIP Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested LTIP Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto.
5.
The fair market value at time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the LTIP Units with respect to which this election is being made was $____ per LTIP Unit.
6.
The amount paid by the Taxpayer for the LTIP Units was $0 per LTIP Unit.
7.
A copy of this statement has been furnished to the Partnership and New York REIT, Inc.
Dated:      Name:     




SCHEDULE TO EXHIBIT B

Vesting Provisions of LTIP Units
The LTIP Units are subject to time-based and performance-based vesting with the final vesting percentage equaling the product of the time-based vesting percentage and the performance-based vesting percentage. Performance-based vesting will be from 0% to 100% based (i) 50% on New York REIT, Inc.’s (the “ Company’s ”) per-share total return to shareholders and (ii) 50% on total return against the total percentage return to stock holders of a specified peer group, in each case for the period from April 15, 2014 to April 15, 2017 (or earlier in certain circumstances). Under the time-based vesting hurdles, one-third (1/3) of the LTIP Units will vest on April 15, 2017, one-third (1/3) of the LTIP Units will vest on April 15, 2018, and the remaining one-third (1/3) of the LTIP Units will vest on April 15, 2019, provided that the Taxpayer continues its service relationship with the Company and the Partnership through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with the Company under specified circumstances. Unvested LTIP Units are subject to forfeiture in the event of failure to vest based on the determination of the performance-based percentage or the passage of time.

Exhibit 10.20

INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “ Agreement ”) is made and entered into as of the 22nd of June, 2015 (the “ Effective Date ”), by and between New York REIT, Inc., a Maryland corporation (the “ Company ”), and Nicholas Radesca and Patrick O’Malley (each, an “ Indemnitee ”).
WHEREAS, at the request of the Company, Indemnitee currently serves or has previously served as a director, officer or service provider of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of his or her service; and
WHEREAS, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law; and
WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Definitions . For purposes of this Agreement:
(a)      “ Bylaws ” means the Bylaws of the Company, as amended from time to time.
(b)      “ Charter ” means the charter of the Company, as amended, supplemented or otherwise modified from time to time.
(c)      “ Change in Control ” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if, after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of all of the Company’s then-outstanding securities entitled to vote generally in the election of directors without the prior approval of at least two-thirds of the members of the Board of Directors of the Company (the “ Board of Directors ”) in office immediately prior to such person’s attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) at any time, a majority of the members of the Board of Directors are not individuals (A) who were directors as of the Effective Date or (B) whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by the affirmative vote of at least two-thirds of the members of the Board of Directors then in office who were directors as of the Effective Date or whose election for nomination for election was previously so approved.


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(d)      “ Corporate Status ” means the status of a person as a present or former director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company. As a clarification and without limiting the circumstances in which Indemnitee may be serving at the request of the Company, service by Indemnitee shall be deemed to be at the request of the Company if Indemnitee serves or served as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (i) of which a majority of the voting power or equity interest is owned directly or indirectly by the Company or (ii) the management of which is controlled directly or indirectly by the Company.
(e)      “ Disinterested Director ” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by Indemnitee.
(f)      “ Effective Date ” means the date set forth in the first paragraph of this Agreement.
(g)      “ Expenses ” means any and all reasonable and out-of-pocket attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, Employee Retirement Income Security Act of 1974, as amended, excise taxes and penalties and any other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in or otherwise participating in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.
(h)      “ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
(i)      “ Proceeding ” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative (formal or informal) nature, including any appeal therefrom, except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee. If Indemnitee reasonably believes that a given situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a Proceeding.

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Section 2.      Services by Indemnitee . Indemnitee serves or has previously served as a director, officer or service provider of the Company. However, this Agreement shall not impose any independent obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company. This Agreement shall not be deemed an employment contract between the Company (or any other entity) and Indemnitee.
Section 3.      General . The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the Effective Date and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the Effective Date. The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the “ MGCL ”).
Section 4.      Standard for Indemnification . If, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall indemnify Indemnitee against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding unless it is established that (a) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) Indemnitee actually received an improper personal benefit in money, property or services or (c) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
Section 5.      Certain Limits on Indemnification . Notwithstanding any other provision of this Agreement (other than Section 6), Indemnitee shall not be entitled to:
(a)      indemnification hereunder if the Proceeding was one by or in the right of the Company and Indemnitee is adjudged to be liable to the Company;
(b)      indemnification hereunder if Indemnitee is adjudged to be liable on the basis that personal benefit was improperly received in any Proceeding charging improper personal benefit to Indemnitee, whether or not involving action in the Indemnitee’s Corporate Status; or
(c)      indemnification or advance of Expenses hereunder if the Proceeding was brought by Indemnitee, unless: (i) the Proceeding was brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Section 12 of this Agreement, or (ii) the Charter or Bylaws, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise.
Section 6.      Court-Ordered Indemnification . Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances:

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(a)      if such court determines that Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or
(b)      if such court determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses.
Section 7.      Indemnification for Expenses of an Indemnitee Who Is Wholly or Partially Successful . Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee was or is, by reason of his or her Corporate Status, made a party to (or otherwise becomes a participant in) any Proceeding and is successful, on the merits or otherwise, in the defense of such Proceeding, Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each such claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section 7 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 8.      Advance of Expenses for Indemnitee . If, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall, without requiring a preliminary determination of Indemnitee’s ultimate entitlement to indemnification hereunder, advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with such Proceeding within ten days after the receipt by the Company of a statement or statements requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met by Indemnitee and which have not been successfully resolved as described in Section 7 of this Agreement. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor.
Section 9.      Indemnification and Advance of Expenses as a Witness or Other Participant . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is or may be, by

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reason of Indemnitee’s Corporate Status, made a witness or otherwise asked to participate in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party, Indemnitee shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith within ten days after the receipt by the Company of a statement or statements requesting any such advance or indemnification from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee.
Section 10.      Procedure for Determination of Entitlement to Indemnification .
(a)      To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. Indemnitee may submit one or more such requests from time to time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole discretion. The officer of the Company receiving any such request from Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.
(b)      Upon written request by Indemnitee for indemnification pursuant to Section 10(a) above, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, which Independent Counsel shall be selected by the Indemnitee and approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors or, if such a quorum cannot be obtained, then by a majority vote of a duly authorized committee of the Board of Directors consisting solely of one or more Disinterested Directors, (B) if Independent Counsel has been selected by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 10(b). Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.
(c)      The Company shall pay the reasonable fees and expenses of Independent Counsel, if one is appointed.
Section 11.      Presumptions and Effect of Certain Proceedings .

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(a)      In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.
(b)      The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, upon a plea of nolo contendere or its equivalent, or entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.
(c)      The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise shall not be imputed to Indemnitee for purposes of determining any other right to indemnification under this Agreement.
Section 12.      Remedies of Indemnitee .
(a)      If (i) a determination is made pursuant to Section 10(b) of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Sections 8 or 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(b) of this Agreement within 60 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 7 or 9 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to any other section of this Agreement or the Charter or Bylaws is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence a proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce his or her rights under Section 7 of this Agreement. Except as set forth herein, the provisions of Maryland law (without regard to its conflicts of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b)      In any judicial proceeding or arbitration commenced pursuant to this Section 12, Indemnitee shall be presumed to be entitled to indemnification or advance of Expenses, as the case may be, under this Agreement and the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 12, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 8 of this Agreement until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed). The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section

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12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all of the provisions of this Agreement.
(c)      If a determination shall have been made pursuant to Section 10(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.
(d)      In the event that Indemnitee is successful in seeking, pursuant to this Section 12, a judicial adjudication of or an award in arbitration to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.
(e)      Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Company pays or is obligated to pay for the period (i) commencing with either the tenth day after the date on which the Company was requested to advance Expenses in accordance with Sections 8 or 9 of this Agreement or the 60 th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 10(b) of this Agreement, as applicable, and (ii) ending on the date such payment is made to Indemnitee by the Company.
Section 13.      Defense of the Underlying Proceeding .
(a)      Indemnitee shall notify the Company promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding. The failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.
(b)      Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 13(a) above. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee or

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(iii) would impose any Expense, judgment, fine, penalty or limitation on Indemnitee. This Section 13(b) shall not apply to a Proceeding brought by Indemnitee under Section 12 of this Agreement.
(c)      Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that Indemnitee may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld, at the expense of the Company (subject to Section 12(d) of this Agreement), to represent Indemnitee in connection with any such matter.
Section 14.      Non-Exclusivity; Survival of Rights; Subrogation .
(a)      The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter or Bylaws, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. Unless consented to in writing by Indemnitee, no amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal, regardless of whether a claim with respect to such action or inaction is raised prior or subsequent to such amendment, alteration or repeal. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.
(b)      In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
Section 15.      Insurance . The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee by reason of his or her Corporate Status and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee by reason of his or her Corporate Status. Without in any way limiting any other obligation under this Agreement, the Company shall

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indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence. The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies. If, at the time the Company receives notice from any source of a Proceeding to which Indemnitee is a party or a participant (as a witness or otherwise) the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.
Section 16.      Coordination of Payments . The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
Section 17.      Reports to Stockholders . To the extent required by the MGCL, the Company shall report in writing to its stockholders the payment of any amounts for indemnification of, or advance of Expenses to, Indemnitee under this Agreement arising out of a Proceeding by or in the right of the Company with the notice of the meeting of stockholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.
Section 18.      Duration of Agreement; Binding Effect .
(a)      This Agreement shall continue until and terminate on the later of (i) the date that Indemnitee shall have ceased to serve as a director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company and (ii) the date that Indemnitee is no longer subject to any actual or possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement).
(b)      The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.
(c)      The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to

9

Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
(d)      The Company and Indemnitee agree that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled. Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith. The Company acknowledges that, in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court, and the Company hereby waives any such requirement of such a bond or undertaking.
Section 19.      Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 20.      Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.
Section 21.      Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 22.      Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 23.      Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, on the day of such delivery, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:
(a)      If to Indemnitee, to the address set forth on the signature page hereto.

10

(b)      If to the Company, to:
New York REIT, Inc.
405 Park Avenue, 14 th Floor
New York, New York 10022
Attention: General Counsel
with a copy to:
Proskauer Rose LLP
Eleven Times Square
New York, New York 10036
Attention: Peter M. Fass, Esq.
Michael J. Choate, Esq.

or to such other address as may have been furnished in writing to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
Section 24.      Governing Law . This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.
[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
COMPANY:

NEW YORK REIT, INC.

By:
/s/ Michael A. Happel        
Name: Michael A. Happel
Title: Chief Executive Officer and President

INDEMNITEE

/s/ Nicholas Radesca        

11

Name: Nicholas Radesca

INDEMNITEE

/s/ Patrick O’Malley        
Name: Patrick O’Malley



-12-

EXHIBIT A     

AFFIRMATION AND UNDERTAKING TO REPAY EXPENSES ADVANCED
To: The Board of Directors of New York REIT, Inc.
Re: Affirmation and Undertaking
Ladies and Gentlemen:
This Affirmation and Undertaking is being provided pursuant to that certain Indemnification Agreement dated the 22 nd day of June, 2015, by and between New York REIT, Inc., a Maryland corporation (the “ Company ”), and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of Expenses in connection with [Description of Proceeding] (the “ Proceeding ”).
Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.
I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm my good faith belief that at all times, insofar as I was involved as [a director] [an officer] [and] [service provider] of the Company, in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.
In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related Expenses incurred by me in connection with the Proceeding (the “ Advanced Expenses ”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established.
IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this __  day of _________________, 20 __ .
Name:     


Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Michael A. Happel, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of New York REIT, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 7th day of August, 2015
/s/ Michael A. Happel
 
Michael A. Happel
 
Chief Executive Officer and President
 
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Nicholas Radesca, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of New York REIT, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated this 7th day of August, 2015
/s/ Nicholas Radesca
 
Nicholas Radesca
 
Interim Chief Financial Officer, Treasurer and Secretary
 
(Principal Financial Officer and Principal Accounting Officer)




Exhibit 32
SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer of New York REIT, Inc. (the “Company”), each hereby certify as follows:
The quarterly report on Form 10-Q of the Company which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated this 7th day of August, 2015
 
/s/ Michael A. Happel
 
Michael A. Happel
 
Chief Executive Officer and President
 
(Principal Executive Officer)
 
 
 
/s/ Nicholas Radesca
 
Nicholas Radesca
 
Interim Chief Financial Officer, Treasurer and Secretary
 
(Principal Financial Officer and Principal Accounting Officer)