GTJ REIT, INC. (OTCMKTS:GTTJ) Files An 8-K Regulation FD Disclosure

GTJ REIT, INC. (OTCMKTS:GTTJ) Files An 8-K Regulation FD Disclosure

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Item 7.01. Regulation FD Disclosure

On May 15, 2017, GTJ REIT, Inc., a Maryland corporation (the
“Registrant”), sent a letter to its stockholders to provide
information regarding the establishment of the Registrant’s
share repurchase program (“SRP”) and estimated net asset value
per share as described below in Item 8.01. A copy of the letter
is filed as Exhibit 99.1 to this Current Report on Form 8-K and
is incorporated herein solely for purposes of this Item 7.01
disclosure.

to the rules and regulations of the Securities and Exchange
Commission (“SEC”), the information in this Item 7.01
disclosure, including Exhibit 99.1 and information set forth
therein, is deemed to have been furnished and shall not be deemed
to be “filed” under the Securities Exchange Act of 1934.

Item 8.01. Other Events

Determination of Estimated Value Per Share

Overview

On May 10, 2017, the Registrant’s board of directors (the
“Board”), including all of the Boards independent directors,
unanimously approved an estimated net asset value per share of
the Registrant’s shares of common stock, $0.0001 par value per
share (the Common Stock), of $13.94 based on the estimated value
of the Registrant’s assets less the estimated value of the
Registrant’s liabilities, or net asset value (NAV), divided by
the number of shares of Common Stock issued and outstanding on an
as adjusted fully diluted basis, calculated as of December 31,
2016. The Registrant is providing this estimated NAV per share in
connection with establishing a repurchase price for the Common
Stock under the SRP. This is the first time that the Board has
determined the estimated NAV per share for the SRP.It is
anticipated that the Registrant will publish an updated estimated
NAV per share on at least an annual basis.This valuation was
performed in accordance with the provisions of Practice Guideline
2013-01, Valuations of Publicly Registered Non-Listed REITs,
issued by the Investment Program Association (“IPA”) in April
2013 (“IPA Valuation Guidelines”), in addition to guidance from
the SEC.

The Board is responsible for the oversight of the valuation
process, including the review and approval of the valuation
process and methodology used to determine the Registrant’s
estimated NAV per share, the consistency of the valuation and
appraisal methodologies with real estate industry standards and
practices and the reasonableness of the assumptions used in the
valuations and appraisals. The Board approved the engagement of
Duff Phelps, LLC (“Duff Phelps”), an independent third-party
valuation firm, to provide appraised values (the “Appraisal
Report”) for each of the Registrant’s 47 properties located in
New York, New Jersey, Connecticut and Delaware owned as of
December 31, 2016 (the “Appraised Properties”) and a
calculation of the range of the estimated NAV per share of the
Common Stock as of December 31, 2016. Duff Phelps based this
range of estimated NAV per share upon (i) its appraisals of the
Appraised Properties, (ii) valuations of the Registrant’s other
assets and liabilities, and (iii) the estimated value of the
Registrant’s mortgage loans and other debt. Duff Phelps does not
have any direct interests in any transaction with the Registrant
or its affiliates and has not performed any other services for
the Registrant during the past two years. The Board is ultimately
and solely responsible for the determination of the NAV per
share.

After considering all information provided, and based on the
Boards extensive knowledge of the Appraised Properties, other
assets and liabilities, the Board concluded that the range of
estimated NAV per share of its Common Stock of $12.55 to $15.44,
with an approximate mid-range NAV per

share of $13.94, as indicated in the Appraisal Report, was
reasonable and unanimously agreed upon the estimated NAV per
share for the Common Stock of $13.94, the mid-range NAV per
share.

The table below sets forth the calculation of the Registrant’s
estimated NAV of Common Stock as of December 31, 2016.

Low

Mid-point

High

Appraised Properties(1)

$

607,120,000

$

635,930,000

$

666,870,000

Other Assets(2)

$

22,109,937

$

22,109,937

$

22,109,937

Total Assets

$

629,229,937

$

658,039,937

$

688,979,937

Mortgage Notes Payable Secured

and Revolving Credit Facility(3)

$

359,800,354

$

359,800,354

$

359,800,354

Other Liabilities(4)

$

9,652,119

$

9,652,119

$

9,652,119

Total Liabilities

$

369,452,473

$

369,452,473

$

369,452,473

Net Asset Value (NAV)

$

259,777,464

$

288,587,464

$

319,527,464

Number of Shares of

Common Stock Outstanding()

20,700,538

20,700,538

20,700,538

NAV per share

$

12.55

$

13.94

$

15.44

(1) The value for the
Appraised Properties was determined by Duff Phelps in the manner
described in detail below. For the Appraised Properties, Duff
Phelps adjusted the discount rate /- 50 basis points, and the
capitalization rates /- 25 basis, from a mid-point estimate in
order to estimate a range of values.The key assumptions that were
used by Duff Phelps in its models to estimate the value of each
of the Appraised Properties are set forth in the following table:

Range

Weighted Average

Terminal Capitalization Rate

6.00% – 8.75%

7.29%

Discount Rate

7.00% – 9.50%

8.23%

(2) Includes amounts
associated with the following line items from the Registrants
audited financial statements for the year ended December 31,
2016: (i) cash and cash equivalents; (ii) rent receivables; (iii)
restricted cash; and (iv) prepaid expenses and other assets.The
Registrant believes that the carrying value of these assets
estimates fair value.

(3) The value of the
Registrants mortgage notes payable was estimated by comparing the
contractual terms of the mortgage against market
terms.Contractual cash flows were projected based on the mortgage
terms.A market interest rate was estimated and used to discount
the contractual cash flows to December 31, 2016.The resulting
asset (below market) or liability (above market) is the value of
the assumed debt as of December 31, 2016. The mortgage notes
payable amounts are equal to the outstanding principal due minus
the cumulative mark-to-market adjustment of $9,421,704.

(4) Includes amounts
associated with the following line items from the Registrants
audited financial statements for the year ended December 31,
2016: (i) accounts payable and accrued expenses; (ii) dividends
payable; and (iii) other liabilities.The Registrant believes that
the carrying value of these liabilities estimates fair value.

(5) Calculated on an as
adjusted fully diluted basis, including shares of Common Stock
into which units of GTJ Realty LP may be converted.

Methodology and Key Assumptions

In determining an estimated NAV per share, the Board considered
information and analyses, including the Appraisal Report provided
by Duff Phelps. The Registrant’s goal in calculating an
estimated NAV per share is to arrive at a value that is
reasonable and supportable using what the Board deems to be
appropriate valuation methodologies and assumptions. The
following is a summary of the valuation and appraisal
methodologies, assumptions, and estimates used to value the
Registrant’s assets and liabilities.

Independent Valuation Firm

Duff Phelps was selected by the Board to appraise the 47
Appraised Properties. Duff Phelps is engaged in the business of
appraising commercial real estate properties and is not
affiliated with the Registrant. The compensation the Registrant
pays to Duff Phelps is based on the scope of work and not on the
appraised values of the Registrant’s Appraised Properties. The
appraisals were performed in accordance with the Code of Ethics
and the Uniform Standards of Professional Appraisal Practice, or
USPAP, the real estate appraisal industry standards created by
the Appraisal Foundation, as well as the requirements of the
state where each real property is located. The appraisals were
reviewed, approved, and signed by an individual with the
professional designation of MAI (Member of Appraisal Institute)
as well as an individual licensed in the state where each
property is located. The use of the Appraisal Report is subject
to the requirements of the Appraisal Institute relating to review
by its duly authorized representatives. In preparing the
Appraisal Report, Duff Phelps did not, and was not requested to,
solicit third-party indications of interest for the Common Stock
in connection with possible purchases thereof or the acquisition
of all or any part of the Registrant.

Duff Phelps collected reasonably available material information
that it deemed relevant in appraising the Registrant’s Appraised
Properties. Duff Phelps relied in part on property-level
information provided by the Registrant, including (i) property
historical and projected operating revenues and expenses; (ii)
property lease agreements and/or lease abstracts; and (iii)
information regarding recent or planned capital expenditures.

In conducting its investigation and analyses, Duff Phelps took
into account customary and accepted financial and commercial
procedures and considerations as it deemed relevant. Although
Duff Phelps reviewed information supplied or otherwise made
available by the Registrant for reasonableness, it assumed and
relied upon the accuracy and completeness of all such information
and of all information supplied or otherwise made available to it
by any other party and did not independently verify any such
information. Duff Phelps has assumed that any operating or
financial forecasts and other information and data provided to or
otherwise reviewed by or discussed with Duff Phelps were
reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of the Registrant’s
management and the Board. Duff Phelps relied on the Registrant to
advise it promptly if any information previously provided became
inaccurate or was required to be updated during the period of its
review.

In performing its analyses, Duff Phelps made numerous other
assumptions as of various points in time with respect to industry
performance, general business, economic, and regulatory
conditions, and other matters, many of which are beyond its
control and the Registrant’s control. Duff Phelps also made
assumptions with respect to certain factual matters. In addition,
Duff Phelps’s analyses, opinions, and conclusions were
necessarily based upon market, economic, financial, and other
circumstances and conditions existing as of or prior to the date
of the Appraisal Report, and any material change in

such circumstances and conditions may affect Duff Phelps’s
analyses and conclusions. Duff Phelps’s Appraisal Report
contains other assumptions, qualifications, and limitations that
qualify the analyses, opinions, and conclusions set forth
therein. Furthermore, the prices at which the Registrant’s real
estate properties may actually be sold could differ materially
from Duff Phelps’s analyses.

Although Duff Phelps considered any comments received from the
Registrant relating to its Appraisal Report, the final appraised
values of the Appraised Properties were determined by Duff
Phelps. The Appraisal Report is addressed solely to the Board to
assist it in calculating an estimated NAV per share of the Common
Stock. The Appraisal Report is not addressed to the public, may
not be relied upon by any other person to establish an estimated
NAV per share of the Common Stock, and does not constitute a
recommendation to any person to purchase or sell any shares of
Common Stock.

The foregoing is a summary of the standard assumptions,
qualifications, and limitations that generally apply to the
Appraisal Report. The Appraisal Report, including the analysis,
opinions, and conclusions set forth in such Appraisal Report, is
qualified by the assumptions, qualifications, and limitations set
forth in the Appraisal Report.

Real Estate Valuation

As described above, the Registrant engaged Duff Phelps to provide
an appraisal of the Appraised Properties consisting of 47
properties in the Registrant’s portfolio, as of December 31,
2016. The scope of work by Duff Phelps in performing the
appraisal of the Appraised Properties included:

Identification of the Appraised Properties through
information provided by the Registrant, assessors parcel
numbers and street addresses;

Review of (and reliance upon) the Registrant provided
data regarding rent rolls, lease rates and terms, real
estate taxes, and operating expense data;

A study of the markets to measure current market
conditions, supply and demand factors, growth patterns,
and their effect on the subject properties;

A complete as vacant and as improved highest and best use
analysis for the Appraised Properties;

Completion of the income capitalization approach for each
of the Appraised Properties, with the use of the direct
capitalization approach for any of the Appraised
Properties with long-term, stable income, and the use of
a discounted cash flow approach for any of the Appraised
Properties with shorter remaining terms and/or when
future fixed-rate options were not reasonably assured;

Estimate of the market values (range and midpoint
estimate) of each of the Appraised Properties as of
December 31, 2016;

Review of the balance sheet items of the Registrant, such
as cash and other assets, as well as debt and other
liabilities;

Establishing a fair value of the debt, based on the
Registrant provided mortgage summaries and amortization
schedules;

Discussing with the Registrant regarding finalization of
the market value estimates of all assets and liabilities
held by the Registrant in order for the Registrant to
arrive at a fair value estimate of NAV per share in
conformance with the IPA Valuation Guidelines.

As noted above, Duff Phelps performed a full valuation of the
Appraised Properties utilizing the income capitalization approach
as the primary indicator of value and the sales comparison
approach as a secondary approach to value.Set forth below is a
summary of those approaches:

Income Capitalization Approach

Duff Phelps estimated the as is market value of the Appraised
Properties as of December 31, 2016 using an income capitalization
approach, which is comprised of two methodologies: direct
capitalization and discounted cash flow.In particular, Duff
Phelps applied a range of market-supported direct capitalization
rates and discount rates to projected net income (NI) or cash
flow, as applicable.An income capitalization approach,
specifically the discounted cash flow method, simulates the
reasoning of an investor who views the cash flows that would
result from the anticipated revenue and expense on a property
throughout its projection period.NI developed in Duff Phelpss
analysis is the balance of potential income remaining after
collection loss and operating expenses.This NI was then
discounted by an appropriate yield rate over a typical projection
period in a discounted cash flow analysis.Thus, two key steps
were involved: (1) estimating the NI applicable to each of the
Appraised Properties and (2) choosing appropriate direct
capitalization rates and discount rates.

Sales Comparison Approach

A sales comparison approach was used to assess the reasonableness
of the conclusions reached through the income capitalization
approach.A sales comparison approach considers what other
purchasers and sellers in the applicable market had agreed to as
a price for comparable real estate assets.This approach is based
on the principle of substitution, which states that the limits of
prices, rents and rates tend to be set by the prevailing prices,
rents and rates of equally desirable substitutes.

Valuation of Cash, Other Assets and Other Liabilities

Values for the mortgage debt and revolving credit facility
(collectively, the “Loans”) are reflective of the Registrant’s
balance sheet as of December 31, 2016. The value of the
Registrants mortgage notes payable was estimated by comparing the
contractual terms of the mortgage against market
terms.Contractual cash flows were projected based on the mortgage
terms.A market interest rate was estimated and used to discount
the contractual cash flows as of December 31, 2016.The resulting
asset (below market) or liability (above market) is the value of
the assumed debt as of December 31, 2016.As of December 31, 2016,
the fair value and carrying value of the Loans were, in the
aggregate, $359,800,354, which amount includes the outstanding
principal of the mortgage debt minus the cumulative
mark-to-market adjustment of $9,421,704.

Other Assets and Liabilities

To derive the estimated NAV per share of the Registrant, Duff
Phelps added the other tangible assets and liabilities of the
Registrant from the Registrant’s December 31, 2016 balance sheet
to its estimated value of the real estate assets and mortgage
loans.

Different parties using different assumptions and estimates could
derive a different estimated NAV per share, and these differences
could be significant. The value of the Registrant’s shares of
Common Stock will fluctuate over time in response to developments
related to individual assets in the Registrant’s portfolio and
the management of those assets and in response to the real estate
and finance markets.

Limitations of Estimated NAV Per Share

The various factors considered by the Board in determining the
estimated NAV per share were based on a number of assumptions and
estimates that may not be accurate or complete. As mentioned
above, the Registrant is providing this estimated NAV per share
in connection with establishing the repurchase price under the
SRP. As with any valuation methodology, the methodologies used
are based upon a number of estimates and assumptions that may not
be accurate or complete. Different parties with different
assumptions and estimates could derive a different estimated NAV
per share. The estimated NAV per share is not audited and does
not represent the fair value of the Registrant’s assets or
liabilities according to GAAP.

Accordingly, with respect to the estimated NAV per share, the
Registrant can give no assurance that:

a stockholder would be able to resell his or her shares
of Common Stock at this estimated value;

a stockholder would ultimately realize distributions per
share equal to the Registrant’s estimated NAV per share
upon liquidation of the Registrant’s assets and
settlement of its liabilities or a sale of the
Registrant;

the Registrant’s shares of Common Stock would trade at
the estimated NAV per share on a national securities
exchange;

an independent third-party appraiser or other third-party
valuation firm would agree with the Registrant’s
estimated NAV per share; or

the methodology used to estimate the Registrant’s
estimated NAV per share would be acceptable for
compliance with Employee Retirement Income Security Act
(ERISA) reporting requirements.

Similarly, the amount a stockholder may receive upon repurchase
of his or her shares of Common Stock, if he or she participates
in the SRP, may be greater than or less than the amount a
stockholder paid for the shares of Common Stock, regardless of
any increase in the underlying value of any assets owned by the
Registrant.

In addition, the estimated NAV per share is based on the
estimated value of the Registrant’s assets less the estimated
value of the Registrant’s liabilities divided by the number of
shares of Common Stock outstanding on an as adjusted fully
diluted basis, calculated as of December 31, 2016. The estimated
NAV per share was based upon 20,700,538 shares of Common Stock
outstanding as of December 31, 2016, which was comprised of (i)
13,618,884 outstanding shares of the Common Stock, plus (ii)
7,081,654 shares of Common Stock into which limited partner
interests in GTJ Realty, LP, the Registrant’s operating
partnership, may be converted.

Further, the value of the Registrant’s shares of Common Stock
will fluctuate over time in response to developments related to
individual assets in the Registrant’s portfolio and the
management of those assets and in response to the real estate and
finance markets. The estimated NAV per share does not reflect a
real estate portfolio premium/discount versus the sum of the
individual property values. The estimated NAV per share also does
not take into account estimated disposition costs and fees for
real estate properties that are not held for sale. The Registrant
currently expects to utilize an independent valuation firm to
update the estimated NAV per share in the first half of 2018, in
accordance with IPA Valuation Guidelines.

Share Repurchase Program

to the SRP, stockholders desiring to participate in the SRP may
have their shares of Common Stock redeemed by the Registrant at a
redemption price per share equal to $12.55, which is 90% of the
Registrant’s estimated NAV per share. This redemption price will
be applicable for the period from June 1, 2017 under the SRP.For
a full description of the terms and conditions of the SRP, please
see the Current Report on Form 8-K, as filed with the SEC on
January 23, 2017.

Forward-Looking Statements

The foregoing includes forward-looking statements within the
meaning of the Federal Private Securities Litigation Reform Act
of 1995. The Registrant intends that such forward-looking
statements be subject to the safe harbors created by Section 27A
of the Securities Act and Section 21E of the Exchange Act. These
statements include statements regarding the intent, belief or
current expectations of the Registrant and members of its
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. Further, forward-looking
statements speak only as of the date they are made, and the
Registrant undertakes 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. Actual results may
differ materially from those contemplated by such forward-looking
statements. These statements depend on factors such as: projected
cash flows; expected cash flow discount rates, terminal discount
rates, terminal capitalization rates; future economic,
competitive and market conditions; the Registrant’s ability to
maintain occupancy levels and lease rates at its real estate
properties; and other risk factors as outlined in the
Registrant’s annual report on Form 10-K/A for the year ended
December 31, 2016, and quarterly report on Form 10-Q for the
quarter ended March 31, 2017, each as filed with the SEC. Actual
events may cause the value and returns on the Registrant’s
investments to be less than that used for purposes of the
Registrant’s estimated NAV per share.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

99.1 Letter to Stockholders, dated May 15, 2017

99.2 Consent of Duff Phelps, LLC

(s)


About GTJ REIT, INC. (OTCMKTS:GTTJ)

GTJ REIT, Inc. is a self-administered and self-managed real estate investment trust (REIT), which owns and operates over 45 commercial properties in New York, New Jersey and Connecticut. The Company focuses primarily on the acquisition, ownership, management and operation of commercial real estate located in the New York tri-state area. The Company operates through the commercial real estate segment. The Company’s business objective is to maintain and increase, over time, the cash available for distribution to our stockholders and enhance stockholder value by identifying opportunistic and strategic property acquisitions consistent with its portfolio and acquisition strategies; obtaining mortgage indebtedness on favorable terms and maintaining access to capital to finance property acquisitions and its growth plans, and monitoring its portfolio, including leasing, tenant relations, operational and property management performance and property enhancements.

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