Frequently Asked Questions
Q: What is NorthStar/RXR New York Metro Real Estate, Inc.?
A: We were formed as a Maryland corporation to acquire high-quality commercial real estate, including value-add real estate investment opportunities, concentrated in the New York metropolitan area (defined by us to mean within 90 miles of New York City), which we refer to as the New York metropolitan area, and in particular, New York City, with a focus on office and mixeduse properties and a lesser emphasis on multifamily properties. We believe that combining core property investments with value-add opportunities may create a balanced portfolio that may deliver capital appreciation, cash flow and riskadjusted returns. We intend to complement this strategy by originating and acquiring: (i) CRE debt, including subordinate loans and participations in such loans and preferred equity interests; and (ii) joint ventures and partnership interests in CRE related investments. We expect that a majority of our capital will be invested in commercial real estate located in the New York metropolitan area and the remaining portion in CRE debt and securities, secured primarily by collateral in the New York metropolitan area. We also anticipate that more than a majority of our investments will be located in New York City and that the remaining portion of our investments will be located in surrounding suburban markets within the New York metropolitan area. We cannot, however, predict our actual allocation by investment type or geography of our assets under management at this time because such allocation also will be dependent, in part, on the market conditions, market opportunities and upon the amount of financing we are able to obtain with respect to each asset class in which we invest. We expect to acquire more than a majority of our investments through joint venture arrangements with RXR Real Estate Value Added Fund - Fund III LP, or RXR Value Added Fund III, an institutional real estate investment fund affiliated with RXR, one of our co-sponsors, or future funds or investment entities advised by affiliates of RXR. In addition, we may invest directly in RXR Value Added Fund III as well as current or future funds or investment entities managed or advised by affiliates of RXR. We may also complete investments with RXR’s substrategy entity, RXR New York Metro Emerging Sub-Market Venture LP, or RXR ESM Venture.
The use of the terms NorthStar/RXR, our company, we, us or our in this prospectus refer to NorthStar/RXR New York Metro Real Estate, Inc. and its consolidated subsidiaries, acting through our external advisor and sub-advisor, unless the context indicates otherwise.
We are externally advised by NSAM J-NS/RXR Ltd, or our advisor, and RXR NTR Sub-Advisor LLC, or our subadvisor, and collectively with our advisor, our Advisor Entities. Pursuant to the sub-advisory agreement among us, our advisor and sub-advisor, our sub-advisor, acting on behalf of our advisor, will conduct certain aspects of our operations including sourcing investment opportunities and managing our portfolio of real estate investments. We have no paid employees.
Q: Who might benefit from an investment in shares of our common stock?
Q: What are the major risks of investing in us?
Q: What is a REIT?
A: In general, a REIT is an entity that:
• combines the capital of many investors to acquire or provide financing for a diversified portfolio of real estate investments under professional management, some of which may focus on a particular property type or geographic location;
• is able to qualify as a “real estate investment trust” for U.S. federal income tax purposes and is therefore generally not subject to federal corporate income taxes on its net income that is distributed, which substantially eliminates the “double taxation” treatment (i.e., taxation at both the corporate and stockholder levels) that generally results from investments in a corporation; and
• pays distributions to investors of at least 90% of its annual ordinary taxable income.
In the prospectus, we refer to an entity that qualifies and elects to be taxed as a REIT for U.S. federal income tax purposes as a REIT. We are not currently qualified as a REIT. However, we intend to qualify as a REIT for U.S. federal income tax purposes commencing with the taxable year ending December 31, 2016.
Q: Why should I invest in real estate investments?
Q: What kind of offering is this?
Q: Why are we offering three classes of our common stock and what are the similarities and differences between the classes?
- Class A Shares have higher front-end fees, including higher selling commissions and higher dealer manager fees, compared to Class T Shares. These fees are paid at the time of the purchase of the Class A Shares in the primary offering. There are no distribution fees paid on Class A Shares.
- Class T Shares have lower front-end fees paid at the time of the purchase of the Class T Shares in the primary offering compared to Class A Shares. Subject to, among other things, the 10% limit on underwriting compensation, we will pay an ongoing distribution fee in an amount equal to 1.0% per annum of the then current primary offering price per Class T Share (or, in certain cases, the amount of our estimated net assets value per share) payable on a monthly basis. This fee is not paid on Class A Shares and will result in the per share distributions on Class T Shares being less than the per share distributions on Class A Shares or Class I Shares. There is no assurance that we will pay distributions in any particular amount, if at all.
- Class I Shares have no front end fees and no distribution fees. The following summarizes the differences in fees and selling commissions among the classes of our common stock.
|Class A||Class T||Class I
|Initial Offering Price||$10.11||$9.55||$9.10|
|Selling Commission (per share)||7.0%||2.0%||None|
|Dealer Manager (per share)||3.00%||2.75%||None|
|Annual Distribution Fee (per share)||None||1.0% (1)||None|
(1) The distribution fee is calculated on outstanding Class T Shares issued in the primary offering in an amount equal to 1.0% per annum of the gross offering price per share (or, if we are no longer offering shares in a public offering, the most recent gross offering price per share or the estimated per share value of Class T Shares, if any has been disclosed). We will cease paying distribution fees with respect to each Class T Share on the earliest to occur of the following: (i) a listing of shares of our common stock on a national securities exchange; (ii) such Class T Share is no longer outstanding; (iii) our dealer manager’s determination that total underwriting compensation from all sources, including dealer manager fees, selling commissions, distribution fees and any other underwriting compensation paid to participating broker dealers with respect to all Class A Shares, Class T Shares and Class I Shares would be in excess of 10% of the gross proceeds of the primary portion of this offering; or (iv) the end of the month in which the transfer agent, on our behalf, determines that total underwriting compensation with respect to the Class T primary shares held by a stockholder within his or her particular account, including dealer manager fees, selling commissions, and distribution fees, would be in excess of 10% of the total gross offering price at the time of the investment in the Class T Shares held in such account. We cannot predict if or when this will occur. All Class T Shares will automatically convert into Class A Shares upon a listing of shares of our common stock on a national securities exchange. With respect to item (iv) above, all of the Class T Shares held in a stockholder’s account will automatically convert into Class A Shares as of the last calendar day of the month in which the 10% limit on a particular account is reached. With respect to the conversion of Class T Shares into Class A Shares, each Class T Share will convert into an amount of Class A Shares based on the respective net asset value per share for each class. Stockholders will receive notice that their Class T Shares have been converted into Class A Shares in accordance with industry practice at that time, which we expect to be either a transaction confirmation from the transfer agent, notification from the transfer agent or notification through the next account statement following the conversion. We currently expect that the conversion will be on a one-for-one basis, as we expect the net asset value per share of each Class A Share and Class T Share to be the same, except in the unlikely event that the distribution fees payable by us exceed the amount otherwise available for distribution to holders of Class T Shares in a particular period (prior to the deduction of the distribution fees), in which case the excess will be accrued as a reduction to the net asset value per share of each Class T Share. See “Description of Capital Stock- Distributions.”
Our Class A Shares, Class T Shares and Class I Shares are available for different categories of investors. Class A Shares and Class T Shares each are available for purchase by the general public. Class I Shares may generally be purchased only by investors who pay an asset-based fee for investment advisory services, such as clients of registered investment advisors or broker-dealer customers who have so-called wrap accounts. See “Plan of Distribution.”
In the event of any voluntary or involuntary liquidation, dissolution or winding up of us, or any liquidating distribution of our assets, then such assets, or the proceeds therefrom, will be distributed between the holders of Class A, Class T and Class I Shares ratably in proportion to the respective net asset value for each class until the net asset value for each class has been paid. We expect the estimated net asset value per share of each Class A Share, Class T Share and Class I Share to be the same, except in the unlikely event that the distribution fees exceed the amount otherwise available for distribution to holders of Class T shares in a particular period (prior to the deduction of the distribution fees), in which case the excess will be accrued as a reduction to the estimated net asset value per share of each Class T share, which would result in the net asset value and distributions upon liquidation with respect to Class T shares being lower than the net asset value and distributions upon liquidation with respect to Class A Shares and Class I Shares. Each holder of shares of a particular class of common stock will be entitled to receive, proportionately with each other holder of shares of such class, that portion of the aggregate assets available for distribution as the number of outstanding shares of the class held by such holder bears to the total number of outstanding shares of such class then outstanding.
Q: What is the experience of your NSAM sponsor?
A: NSAM is a global asset management firm focused on strategically managing real estate and other investment platforms in the United States and internationally. NSAM commenced operations on July 1, 2014 upon the spin-off by NorthStar Realty Finance Corp., or NorthStar Realty (NYSE: NRF), a publicly traded, diversified commercial real estate company that completed its initial public offering in October 2004, of its asset management business into NSAM, as a Delaware corporation and separate publicly-traded company, with its common stock listed on the New York Stock Exchange, or NYSE, under the ticker symbol “NSAM.” As a result of the completion of the spin-off, affiliates of NSAM now manage NorthStar Realty pursuant to a long-term management contract for an initial term of 20 years. In addition, on October 31, 2015, NorthStar Realty completed the spin-off of its European real estate business into a separate publiclytraded REIT, NorthStar Realty Europe Corp. (NYSE: NRE), or NorthStar Europe, which is now managed by affiliates of NSAM pursuant to a long-term management contract on substantially similar terms as NorthStar Realty’s management agreement with NSAM. We refer to NorthStar Realty and NorthStar Europe collectively as the NorthStar Listed Companies. Affiliates of NSAM also manage companies that raise capital through the retail market, including NorthStar Real Estate Income Trust, Inc., or NorthStar Income, NorthStar Healthcare Income, Inc., or NorthStar Healthcare, NorthStar Real Estate Income II, Inc., or NorthStar Income II, NorthStar Corporate Income Master Fund and its two feeder funds, or collectively, NorthStar Corporate Income Fund, NorthStar Real Estate Capital Income Master Fund and its two feeder funds, or collectively, NorthStar Real Estate Capital Income Fund, and us, which we refer to collectively as the Retail Companies. We refer to the NorthStar Listed Companies and the Retail Companies collectively as the NSAM Managed Companies.
As of June 30, 2016, adjusted for Townsend Holdings LLC, or Townsend, and sales, acquisitions and commitments to sell or acquire investments by the NSAM Managed Companies, NSAM had $40 billion of assets under management. Following its acquisition of Townsend in January 2016, NSAM had 383 employees, domestically and internationally, with its principal executive offices located in New York, New York and additional offices in Denver, Colorado, Dallas, Texas, Bethesda, Maryland, Los Angeles, California, Cleveland, Ohio, Hong Kong, China, San Francisco, California, London, England, Luxembourg, and Bermuda. NSAM’s management team averages over 23 years of real estate investment and capital markets expertise and has a demonstrated track record of positive returns to shareholders for the last decade.
On June 3, 2016 NSAM announced that it entered into a definitive merger agreement with NorthStar Realty and Colony Capital, Inc., or Colony. The merger agreement provides for the combination of NSAM, NorthStar Realty and Colony into a wholly-owned subsidiary of NSAM, as the surviving publicly-traded company for the combined organization. The transaction, referred to herein as the mergers, is expected to close during the first quarter of 2017, subject to customary closing conditions, including regulatory approvals, and approval by the NSAM, NorthStar Realty and Colony shareholders. For more information regarding the mergers and the merger agreement, see “Prospectus Summary — Our Sponsors — NSAM.”
Q: What is the experience of your RXR sponsor?
Q: How do we differ from the other publicly traded and public, non-traded REITs sponsored or managed by NSAM, one of our co-sponsors, including NorthStar Realty, NorthStar Income, NorthStar Income II and NorthStar Healthcare?
Q: Will you compete with other vehicles sponsored by NSAM and RXR?
Q: What is the role of your advisor and sub-advisor and what do they do?
A: NSAM J-NS/RXR Ltd, a recently-formed wholly owned subsidiary of NSAM, one of our co-sponsors, is our advisor. Our advisor will be responsible for coordinating the management of our day-to-day operations and for making and managing investments in real estate properties and CRE debt and securities on our behalf, subject to the supervision of our board of directors. Subject to the terms of the advisory agreement between our advisor and us and the sub-advisory agreement among us, our advisor and our sub-advisor, our advisor through its affiliates has delegated certain of its duties, including identifying, negotiating and managing our investments, as well as providing disposition services for property assets on our behalf, to our sub-advisor, an entity whose management team has the experience to identify, acquire and manage our investments. Our advisor’s affiliated entities may be organized under the laws of the United States or foreign jurisdictions. Notwithstanding such delegation to the sub-advisor or affiliates of our advisor or sub-advisor, our advisor retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement. All our investments must be approved by a majority vote of the investment committee of our advisor. In addition, our board of directors must approve all acquisitions of property and other investments and originations of CRE debt that require an investment of our equity exceeding the greater of: (i) $100 million; and (ii) 10% of our total assets, including cash available for investment. RXR NTR Sub-Advisor LLC, a wholly owned subsidiary of RXR, our other co-sponsor, is our sub-advisor. Our sub-advisor will have primary responsibility for the duties that have been delegated by our advisor to our sub-advisor pursuant to the sub-advisory agreement. In addition, pursuant to property management and leasing agreements with us, an affiliate of our sub-advisor will be providing property management, construction, leasing and development services for all of our property assets. Our advisor works jointly with our sub-advisor with respect to the following major decisions: decisions with respect to the retention of investment banks, the extension, termination or suspension of this offering and the initiation of a follow-on offering, mergers, other change-of-control transactions and any liquidity events.
An affiliate of our advisor and our sub-advisor owns 100% of the special units of our operating partnership, a Delaware limited partnership.
Q: What is the experience of your advisor and sub-advisor?
A: Our advisor is a company that was formed in Jersey on June 23, 2014, as a wholly-owned subsidiary of NSAM, one of our co-sponsors. Our advisor has no operating history and no prior experience managing a public company.
Our sub-advisor is a limited liability company that was formed in the State of Delaware on March 25, 2014, as a whollyowned subsidiary of RXR, our other co-sponsor. Our sub-advisor has no operating history and no prior experience managing a public company.
Q: Do you currently own any real estate?
Q: What will you do with the proceeds from your primary offering?
Q: How does a “best efforts” offering work?
Q: Who can buy shares?
A: Generally, you may purchase shares if you have either:
• a minimum net worth (excluding the value of your home, furnishings and personal automobiles) of at least $70,000 and a minimum annual gross income of at least $70,000; or
• a minimum net worth (not including home, furnishings and personal automobiles) of at least $250,000.
However, these minimum levels may vary from state to state, so you should carefully read the suitability requirements explained in the “Suitability Standards” section of the prospectus.
Q: How do I subscribe for shares?
Q: Is there any minimum initial investment required?
Q: How does the payment of fees and expenses by us affect your invested capital?
Q: How long will our offering last?
Q: What is the liquidity event history of programs sponsored by our sponsors?
A: The prospectuses of each of the Retail Companies disclose that, subject to then-existing market conditions, each Retail Company expects to consider alternatives for providing liquidity to their stockholders beginning five years from the completion of their respective offering stages. Each of NorthStar Income and NorthStar Healthcare has completed its offering stage as of the date of this prospectus. While each of the Retail Companies expects to consider a liquidity transaction in this time frame, there can be no assurance that a suitable transaction will be available or that market conditions for a transaction will be favorable during that time frame. The board of directors of each of the Retail Companies has the discretion to consider a liquidity transaction at any time if it determines such event to be in the best interests of their respective stockholders. A liquidity transaction could consist of a sale or partial sale or roll-off, as
applicable, to scheduled maturity of their assets, a sale or merger of such Retail Company, a listing of such Retail Company’s shares on a national securities exchange or a similar transaction. Some types of liquidity transactions require, after approval by their board of directors, approval of each company’s stockholders. NSAM’s management team has a track record of listing and experience in managing publicly traded companies, including NorthStar Realty’s initial public offering, the completion of the NSAM spin-off and listing of NSAM’s common stock on the NYSE and, most recently, the successful completion of the NorthStar Europe spin-off from NorthStar Realty and the listing of NorthStar Europe’s shares of common stock on the NYSE.
RXR, our other co-sponsor, has not previously sponsored any non-traded REITs. RXR is comprised of members of the former senior management and operating team of Reckson and has sponsored or co-sponsored Reckson, RNY Property Trust, or RNY, RXR Real Estate Opportunity Fund II, L.P., or RXR Opportunity Fund, RXR Real Estate Value Added Fund LP, or RXR Value Added Fund, RXR ESM Venture and RXR Value Added Fund III in addition to a significant number of co-investment and separate account arrangements. We collectively refer to RXR Value Added Fund, RXR Value Added Fund III, RXR ESM Venture and RXR Opportunity Fund as the RXR Funds. The prospectuses of each of the RXR Funds disclose that, a specific investment decision to seek liquidity will be made in the context of its total return focus, its targeted holding periods and the management team’s evaluation of market cycles, capital markets, macro trends and regional real estate market conditions. Exit analysis, exit discipline and exit execution are demonstrated competencies at RXR, as highlighted by the management team’s execution of the sale of Reckson for an amount in excess of $6.0 billion to SL Green in January 2007, as well as the June 2015 sale of a blended 50% interest in a $4.0 billion portfolio of investments in the New York metropolitan area to affiliates of Blackstone Group LP.
Q: Will I be notified of how my investment is doing?
A: Yes, we will provide you with periodic updates on the performance of your investment in us, including:
• an annual report;
• supplements to this prospectus, generally provided quarterly during our offering; and
• three quarterly financial reports.
In addition, unless the rules and regulations governing valuations change, from and after 150 days following the second anniversary of breaking escrow in this offering and annually thereafter, our advisor or another firm we choose for that purpose will establish an estimated value per share of each class of our common stock based on an appraisal of our assets and operations and other factors deemed relevant. Once established, we will provide the estimated value per share to you in a periodic report and in each annual report thereafter. The estimated value per share of each class of our common stock will be based upon the fair value of our assets less the fair value of our liabilities under market conditions existing at the time of the valuation. We will obtain independent third party appraisals for our properties and will value our other assets in a manner we deem most suitable under the circumstances, which will include an independent appraisal or valuation. A committee comprised of independent directors will be responsible for the oversight of the valuation process, including approval of the engagement of any third parties to assist in the valuation of assets, liabilities and unconsolidated investments. We anticipate that any property appraiser we engage will be a member of the Appraisal Institute with the MAI designation or such other professional valuation designation appropriate for the type and geographic locations of the assets being valued and will provide a written opinion, which will include a description of the reviews undertaken and the basis for such opinion. Any such appraisal will be provided to a participating dealer upon request. After the initial appraisal, appraisals will be done annually and may be done on a quarterly rolling basis. The valuations are estimates and consequently should not necessarily be viewed as an accurate reflection of the fair value of our investments nor will they necessarily represent the amount of net proceeds that would result from an immediate sale of our assets.
We will provide the periodic updates and the estimated value per share, once required, to you via one or more of the following methods, in our discretion and with your consent, if necessary:
• U.S. mail or other courier;
• electronic delivery; or
• posting on our website at www.NorthStarSecurities.com/RXR.
Information on our website is not incorporated into this prospectus.
Q: When will I get my detailed tax information?
Q: Who can help answer my questions about our offering?
NorthStar Securities, LLC
Attn: Investor Relations
5299 DTC Blvd., Ste. 900
Greenwood Village, CO 80111
*Frequently Asked Questions were derived from the Prospectus dated October 26, 2016.