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When he appears, he will be standing on the sidewalk, so a selectable Sim will need to call him over. The only interactions available for Father Time are talk and call over, which will be available no matter how close a Sim is to him. Around midnight, (12 AM), he will start making a ruckus, which all the Sims at the party will join, and will then transform into Toddler New Year.
Unlike most other NPCs, Sims will have memories of meeting Father Time, although he will not appear in the relationships panel and can't be called due to him being an object, and not an actual Sim. Santa Claus also has this behavior. If a New Year's Bash is shut down by police at 11 PM, when Father Time arrives, he will immediately leave. Despite having the appearance and voice of an elder, he is actually treated as an adult by the game.
Warning
DO NOT attempt to add Father Time to a family, try to turn him into a supernatural creature, such a werewolf or a vampire, make him selectable, or tamper with him in SimPE in any way or form. Doing so will cause game corruption, fixed only by uninstalling and reinstalling the game.