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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, (12:00 pm or 24:00), he will start making a ruckus, which all the Sims at the party will join, and will then transform into Toddler New Year.
Trivia
Unlike most other unplayable NPCs, Sims will have memories of meeting Father Time, although his face will not appear in the relationships panel. Santa Claus is also like this.
If a New Year's Bash is shut down by police at 11 pm, when Father Time arrives, he will immediately leave.