SEC Form 10-Q filed by American Strategic Investment Co.
$NYC
Real Estate Investment Trusts
Real Estate
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| OR | |||||
| 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: 001-39448
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
Registrant's telephone number, including area code: (212 ) 415-6500
| Securities registered pursuant to Section 12(b) of the Act: None. | ||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of August 6, 2024, the registrant had 2,642,764 shares of Class A common stock outstanding.
AMERICAN STRATEGIC INVESTMENT CO.
INDEX TO FINANCIAL STATEMENTS
| Page | |||||
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN STRATEGIC INVESTMENT CO.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
| June 30, 2024 | December 31, 2023 | |||||||||||||
| ASSETS | (Unaudited) | |||||||||||||
| Real estate investments, at cost: | ||||||||||||||
Land | $ | $ | ||||||||||||
Buildings and improvements | ||||||||||||||
Acquired intangible assets | ||||||||||||||
Total real estate investments, at cost | ||||||||||||||
Less accumulated depreciation and amortization | ( | ( | ||||||||||||
Total real estate investments, net | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Restricted cash | ||||||||||||||
Operating lease right-of-use asset | ||||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| Derivative asset, at fair value | ||||||||||||||
| Straight-line rent receivable | ||||||||||||||
| Deferred leasing costs, net | ||||||||||||||
Total assets | $ | $ | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Mortgage notes payable, net | $ | $ | ||||||||||||
Accounts payable, accrued expenses and other liabilities (including amounts due to related parties of $ | ||||||||||||||
| Note payable to related parties | ||||||||||||||
| Operating lease liability | ||||||||||||||
| Below-market lease liabilities, net | ||||||||||||||
| Deferred revenue | ||||||||||||||
Total liabilities | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||
| Distributions in excess of accumulated earnings | ( | ( | ||||||||||||
| Total equity | ||||||||||||||
Total liabilities and equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
AMERICAN STRATEGIC INVESTMENT CO.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for share and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenue from tenants | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Asset and property management fees to related parties | ||||||||||||||||||||||||||
| Property operating | ||||||||||||||||||||||||||
| Impairment of real estate investments | ||||||||||||||||||||||||||
| Equity-based compensation | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||
| Total other expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Net loss and Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Change in unrealized (loss) gain on derivative | ( | ( | ( | |||||||||||||||||||||||
| Other comprehensive (loss) income | ( | ( | ( | |||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average shares outstanding — Basic and Diluted | ||||||||||||||||||||||||||
| Net loss per share attributable to common stockholders — Basic and Diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
AMERICAN STRATEGIC INVESTMENT CO.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except for share data)
(Unaudited)
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Distributions in excess of accumulated earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Common stock withheld upon vesting of restricted stock | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Distributions in excess of accumulated earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Common stock withheld upon vesting of restricted stock | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | $ | — | $ | — | $ | — | $ | ( | $ | ( | $ | — | $ | ( | ||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | ( | ||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
AMERICAN STRATEGIC INVESTMENT CO.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except for share data)
(Unaudited)
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares (1) | Par Value (1) | Additional Paid-in Capital (1) | Accumulated Other Comprehensive Loss | Distributions in excess of accumulated earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Common stock issued related to Rights Offering | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Redemption of fractional shares of common stock | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock withheld upon vesting of restricted stock | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
________
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares (1) | Par Value (1) | Additional Paid-in Capital (1) | Accumulated Other Comprehensive Loss | Distributions in excess of accumulated earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock withheld upon vesting of restricted stock | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
_________
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
AMERICAN STRATEGIC INVESTMENT CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Amortization of deferred financing costs | ||||||||||||||
Accretion of below- and amortization of above-market lease liabilities and assets, net | ( | ( | ||||||||||||
Equity-based compensation | ||||||||||||||
| Common stock issued to the Advisor in connection with Advisor related fees (see Note 7) | ||||||||||||||
| Impairments of real estate investments | ||||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
Straight-line rent receivable | ( | |||||||||||||
Straight-line rent payable | ||||||||||||||
Prepaid expenses, other assets and deferred costs | ( | |||||||||||||
Accounts payable, accrued expenses and other liabilities | ( | |||||||||||||
Deferred revenue | ( | ( | ||||||||||||
| Net cash provided by (used in) operating activities | ( | |||||||||||||
| Cash flows from investing activities: | ||||||||||||||
Capital expenditures | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from note payable to related parties | ||||||||||||||
| Redemption of fractional shares of common stock and restricted shares | ( | |||||||||||||
| Common stock shares withheld upon vesting of restricted shares | ( | |||||||||||||
| Net cash provided by (used in) financing activities | ||||||||||||||
| Net change in cash, cash equivalents and restricted cash | ( | |||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
| Supplemental Disclosures: | ||||||||||||||
Cash paid for interest | $ | $ | ||||||||||||
| Non-Cash Investing and Financing Activities: | ||||||||||||||
| Net change in accrued capital expenditures for the period | ||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Note 1 — Organization
American Strategic Investment Co. (including, New York City Operating Partnership L.P., (the “OP”) and its subsidiaries, the “Company”) is an externally managed company that currently owns a portfolio of commercial real estate located within the five boroughs of New York City, primarily Manhattan. The Company’s real estate assets consist of office properties and certain real estate assets that accompany office properties, including retail spaces and amenities. As of June 30, 2024, the Company owned seven properties consisting of 1.2 million rentable square feet.
On December 30, 2022, the Company announced that it was changing its business strategy by expanding the scope of the assets and businesses it may own and operate. The Company may now seek to acquire assets such as hotels, expand its co-working office space business and seek to invest in and operate businesses such as hotel or parking lot management companies. By investing in other asset types, the Company may generate income that does not otherwise constitute income that qualifies for purposes of qualifying as a real estate investment trust for United States (“U.S.”) federal income tax purposes (“REIT”). Excluding hotels, these additional assets do not generate REIT-qualifying income and are operating businesses. As a result, on January 9, 2023, the Company’s board of directors authorized the termination of the Company’s REIT election which became effective on January 1, 2023. Historically, the Company filed an election to be taxed as a REIT commencing with its taxable year ended December 31, 2014, which remained in effect with respect to each taxable year ending on or before December 31, 2022.
As a consequence of the Company’s decision to terminate its election to be taxed as a REIT, the ownership limitations set forth in Section 5.7 of its charter, including, without limitation, the “Aggregate Share Ownership Limit,” as defined therein, no longer apply. The Company filed with the State Department of Assessments and Taxation of Maryland a Certificate of Notice reflecting the board’s determination that it is no longer in its best interest to continue to qualify as a REIT and that therefore the Aggregate Share Ownership Limit will no longer be in effect.
On January 11, 2023 the Company effected a 1-for-8 reverse stock split that was previously approved by the Company’s board of directors, resulting in each outstanding share of Class A common stock. par value $0.01 per share (the “Class A common stock”) being converted into 0.125 shares of common stock, with no fractional shares being issued (the “Reverse Stock Split”). All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the Reverse Stock Split.
Additionally, effective January 19, 2023, the Company amended its charter to change its name to “American Strategic Investment Co.” from “New York City REIT, Inc.” Trading of the Company’s Class A common stock on the New York Stock Exchange under the new name began on January 20, 2023 under the existing trading symbol “NYC.” Shares of the Company’s Class A common stock were first listed on the New York Stock Exchange (“NYSE”) on August 18, 2020. Also, on February 22, 2023, the Company completed a non-transferable rights offering raising gross proceeds of $5.0 million (the “Rights Offering”). As a result, the Company issued 386,100 shares of its Class A common stock subscribed for in the Rights Offering on February 27, 2023.
Substantially all of the Company’s business is conducted through the OP and its wholly-owned subsidiaries. The Company’s advisor, New York City Advisors, LLC (the “Advisor”), manages the Company’s day-to-day business with the assistance of the Company’s property manager, New York City Properties, LLC (the “Property Manager”). The Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to the Company. The Company also reimburses these entities for certain expenses they incur in providing these services. Please see Note 9 — Related Party Transactions and Arrangements for additional information on the Company’s Advisor and affiliates of the Advisor, including ownership percentages.
Note 2 — Summary of Significant Accounting Policies
Basis of Accounting
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 this Quarterly Report on Form 10-Q and Article 8 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 statement of results for the interim periods. The results of operations for the three and six months ended June 30, 2024 and 2023, respectively, are not necessarily indicative of the results for the entire year or any subsequent interim period.
8
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
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, 2023, which are included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on April 1, 2024. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2024.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All inter-company accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. Substantially all the Company’s assets and liabilities are held by the OP. The Company has determined the OP is a VIE of which the Company is the primary beneficiary.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and fair value measurements, as applicable.
Non-controlling Interests
Continuing Adverse Impacts Since the COVID-19 Pandemic
The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. New York City, where all of the Company’s properties are located, was among the hardest hit locations in the country and fully reopened from relevant restrictions and lockdowns in March 2022.
While the Company’s properties remain accessible to all tenants and operating restrictions have now expired, some tenants have vacated, terminated or otherwise did not renew their lease. The Company has incurred increased unreimbursed property operating expenses because the Company’s occupancy has not fully recovered to pre-pandemic levels, and these increased expenses have been compounded by inflation. The pace of recovery in the New York City office market from the COVID-19 pandemic continues to be challenging as leasing and occupancy trends for the broader market have slowed, leading political, community and business leaders to propose repositioning plans for many New York City office assets that are experiencing high vacancy rates. There can be no assurance that the Company will be able to lease all or any portion of the currently vacant space at any property on acceptable or favorable terms, or at all.
9
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Cash Collection and Mortgage Covenant non-compliance
In prior periods, the COVID-19 pandemic caused certain of the Company’s tenants to be unable to make rent payments to the Company timely, or at all. Rent collections from the Company’s tenants have generally been timely in the quarters ended June 30, 2024 and 2023 and no new deferral or abatement agreements were entered into. While leasing activity and occupancy have generally improved in the six months ended June 30, 2024 and the year ended December 31, 2023 as compared to the years ended December 31, 2022 and 2021, the occupancy and operating results at (i) 9 Times Square, (ii) 1140 Avenue of Americas, (iii) Laurel/Riverside and (iv) 8713 Fifth Avenue have not yet fully recovered, which has caused non-compliance of certain mortgage debt covenants or cash trap or cash sweep events under their non-recourse mortgages. See Note 4 — Mortgage Notes Payable, Net for further details regarding the status of the debt covenants under the above mentioned mortgages as of June 30, 2024.
Revenue Recognition
The Company’s revenues, which are derived primarily from lease contracts, 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. As of June 30, 2024, these leases had a weighted-average remaining lease term of 6.3 years. Because many of the Company’s leases provide for rental increases at specified intervals, straight-line basis accounting requires that the Company record a receivable for, and include in revenue from tenants, unbilled rent receivables that the Company will receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation. For new leases after acquisition, the commencement date is considered to be the date the tenant takes control of the space. For lease modifications, the commencement date is considered to be the date the lease modification is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating expenses (recorded in total revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties. To the extent such costs exceed the applicable tenant’s base year, many but not all of the Company’s leases require the tenant to pay its allocable share of increases in operating expenses, which may include common area maintenance costs, real estate taxes and insurance. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.
The Company continually reviews receivables related to rent and unbilled rents receivable and determines 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. Under the leasing standard, the Company is required to assess, based on credit risk, if it is probable that the Company will collect virtually all of the lease payments at the lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable that it will collect virtually all of the lease payments (base rent and additional rent), the lease will continue to be accounted for on an accrual basis (i.e. straight-line). However, if the Company determines it is not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and the straight-line rent receivable accrued will be written off, as well as any accounts receivable, where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in operating revenue from tenants in accordance with current accounting rules, on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.
10
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Accounting for Leases
Lessor Accounting
In accordance with the lease accounting standard, all leases as lessor prior to adoption were accounted for as operating leases. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than major part of remaining economic useful life of the asset (e.g., equal to or greater than 75%), the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or the asset so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases are evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. As of June 30, 2024, the Company did not have any leases as a lessor that would be considered as sales-type leases or financing under sales-leaseback rules.
As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.
Lessee Accounting
We are the lessee under a land lease which was previously classified as an operating lease prior to adoption of lease accounting and will continue to be classified as an operating lease under transition elections unless subsequently modified. This lease is reflected on the Company’s consolidated balance sheets and the rent expense is reflected on a straight-line basis over the lease term.
Recently Issued Accounting Pronouncements
Not Yet Adopted as of June 30, 2024
In November 2023, the FASB issued ASU 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures (Topic 280). The guidance in Topic 280 may be elected beginning December 15, 2023, with interim periods beginning after December 15, 2024, as segment reporting activities occur. The new standard requires a public entity to disclose significant segment expense categories and amounts for each reportable segment. A significant expense is an expense that (i) is significant to the segment, (ii) regularly provided or easily computed from information regularly provided to management and (iii) included in the reported measure of profit or loss. The Company is continuing to evaluate the impact on the Company’s financial statements. The Company does not believe the impact of the adoption of the standard will be material to the financial statements.
Note 3 — Real Estate Investments
There were no real estate assets acquired or liabilities assumed during the six months ended June 30, 2024 or 2023. Also, there were no dispositions of real estate during the six months ended June 30, 2024 or 2023.
11
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangibles and amortization and accretion of above- and below-market lease assets and liabilities, net, for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
In-place leases | $ | $ | $ | $ | ||||||||||||||||||||||
| Other intangibles | ||||||||||||||||||||||||||
| Total included in depreciation and amortization | $ | $ | $ | $ | ||||||||||||||||||||||
| Above-market lease intangibles | $ | $ | $ | $ | ||||||||||||||||||||||
Below-market lease liabilities | ( | ( | ( | ( | ||||||||||||||||||||||
| Total included in revenue from tenants | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Below-market ground lease, included in property operating expenses | $ | $ | $ | $ | ||||||||||||||||||||||
The following table provides the projected amortization expense and adjustments to revenues for the next five years as of June 30, 2024:
| (In thousands) | 2024 (remainder) | 2025 | 2026 | 2027 | 2028 | 2029 | ||||||||||||||||||||||||||||||||
| In-place leases | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Other intangibles | ||||||||||||||||||||||||||||||||||||||
Total to be included in depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Above-market lease assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Below-market lease liabilities | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total to be included in revenue from tenants | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||
Significant Tenants
As of June 30, 2024 and December 31, 2023, there were no tenants whose annualized rental income on a straight-line basis, based on leases commenced, represented greater than 10% of total annualized rental income for all portfolio properties on a straight-line basis.
Impairment Charges
The Company recorded $84.7
During the three and six months ended June 30, 2023, we recorded impairment charges of $0.2
12
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Note 4 — Mortgage Notes Payable, Net
The Company’s mortgage notes payable, net as of June 30, 2024 and December 31, 2023 are as follows:
| Outstanding Loan Amount | ||||||||||||||||||||||||||||||||||||||
| Portfolio | Encumbered Properties | June 30, 2024 | December 31, 2023 | Effective Interest Rate | Interest Rate | Maturity | ||||||||||||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||
| 123 William Street | $ | $ | % | Fixed | Mar. 2027 | |||||||||||||||||||||||||||||||||
9 Times Square (1) (2) (4) | % | Variable | Oct. 2024 | |||||||||||||||||||||||||||||||||||
1140 Avenue of the Americas (2) | % | Fixed | Jul. 2026 | |||||||||||||||||||||||||||||||||||
400 E. 67th Street - Laurel Condominium / 200 Riverside Boulevard - ICON Garage (2) | % | Fixed | May 2028 | |||||||||||||||||||||||||||||||||||
8713 Fifth Avenue (2) | % | Fixed | Nov. 2028 | |||||||||||||||||||||||||||||||||||
| 196 Orchard Street | % | Fixed | Aug. 2029 | |||||||||||||||||||||||||||||||||||
| Mortgage notes payable, gross | % | |||||||||||||||||||||||||||||||||||||
Less: deferred financing costs, net (3) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Mortgage notes payable, net | $ | $ | ||||||||||||||||||||||||||||||||||||
_______
(1)Formerly fixed as a result of a “pay-fixed” interest rate swap agreement which matured in April 2024. This interest rate swap effectively fixed the mortgage at an annual rate of 3.73 % when it was active prior to April 2024.
(2)These mortgage notes payable are currently either in breach of a debt covenant that may result in further restrictions as specified by the terms of the covenants or a cash sweep events. These covenant breaches or cash traps do not result in events of default. For more information please see “Debt Covenant Non-Compliance and Cash Sweep Events” section below.
(3)Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.
(4)On April 29, 2024, the Company entered into an amendment to the loan agreement that extends the maturity of the loan to October 31, 2024, (with the option of an additional extension to January 31, 2025, subject to certain conditions) at an effective variable interest rate of one-month SOFR plus a spread of 2.60 % per annum. The Company has determined to market certain of their properties for sale, including 9 Times Square. This amended agreement allows the Company to begin marketing the property for sale, with the option to extend in the event the property is under contract for sale but has not yet closed at the time of maturity. The Company has executed a purchase and sale agreement to sell the property for a contract price of $63.5 million. For additional information please see Note 14 — Subsequent Events.
Collateral and Principal Payments
Real estate assets and intangible assets of $583.8 million, at cost (net of below-market lease liabilities), as of June 30, 2024 have been pledged as collateral to the Company’s mortgage notes payable and are not available to satisfy the Company’s other obligations unless first satisfying the mortgage note payable on the property. The Company is required to make payments of interest on its mortgage notes payable on a monthly basis.
13
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
The following table summarizes the scheduled aggregate principal payments subsequent to June 30, 2024:
| (In thousands) | Future Minimum Principal Payments | |||||||
| 2024 (remainder) | $ | |||||||
2025 (1) | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
(1)On April 29, 2024, the Company entered into an amendment to the loan agreement that extends the maturity of the loan to October 31, 2024, (with the option of an additional extension to January 31, 2025, subject to certain conditions) at an effective variable interest rate of one-month SOFR plus a spread of 2.60 % per annum.
Debt Covenant Non-Compliance and Cash Sweep Events
Debt Covenant Non-Compliance
1140 Avenue of the Americas
The Company has breached both a debt service coverage provision and a reserve fund provision under its non-recourse mortgage secured by the 1140 Avenue of the Americas property in each of the last 16 quarters ended June 30, 2024. The principal amount of the loan was $99.0 million as of June 30, 2024. These breaches are not events of default, rather they require excess cash, if any, generated at the property (after paying operating costs, debt service and capital/tenant replacement reserves) to be held in a segregated account as additional collateral under the loan. The covenants for this loan may be cured if the Company satisfies the required debt service coverage ratio for two consecutive quarters, whereupon the additional collateral will be released. The Company can remain subject to this reserve requirement through maturity of the loan without further penalty or ramifications. As of June 30, 2024 and December 31, 2023 the Company had $1.6 million and $2.5 million, respectively, in cash that is retained by the lender and maintained in restricted cash on the Company’s consolidated balance sheet as of those dates.
8713 Fifth Avenue
The Company has breached a debt service coverage ratio covenant under the non-recourse mortgage secured by 8713 Fifth Avenue in each of the last 16 quarters ended June 30, 2024. The principal amount for the loan was $10.0 million as of June 30, 2024. The breach of this covenant did not result in an event of default but rather triggered an excess cash flow sweep period that has been ongoing. The excess cash flow sweep period will continue until the covenant breaches are cured in accordance with the terms of the loan agreement. This property has not generated any excess cash since the breach occurred, and thus no cash has ever been trapped related to this property.
Additionally, in the event that the debt service coverage ratio covenant remains in breach at or below the current level for two consecutive calendar quarters and the lender reasonably determines that such breach is due to the property being imprudently managed by the current manager, the lender has the right, but not the obligation, to require that the Company replace the current manager with a third party manager chosen by the Company.
14
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Cash Sweep Events
400 E. 67th Street/200 Riverside Blvd.
The Company entered a lease sweep period under the non-recourse mortgage secured by 400 E. 67th Street/200 Riverside Blvd. in the six months ended June 30, 2024, resulting from a near-maturity lease with a major tenant at the property set to expire in the third quarter of 2024. The principal amount for the loan was $50.0 million as of June 30, 2024. Under the loan agreement, a lease sweep period is triggered when (i) the date that is twelve months prior to the end of the term of the major lease, (ii) the date required by the major tenant to give notice of its exercise of a renewal option, (iii) any major tenant lease is surrendered or terminated prior to the expiration date, (iv) if the major tenant discontinues its operations and the major tenants long term debt is not rated lower than investment grade, (v) any material default under the major tenant’s lease, (vi) any major tenant insolvency proceeding.
Under the lease sweep period, any excess cash generated, if any, is to be held in a segregated reserve account controlled by the lender as additional collateral. As of June 30, 2024 the Company had $2.5 million, in cash swept that is retained by the lender and recorded within restricted cash on the Company’s consolidated balance sheet. The Company had no swept cash as of December 31, 2023.
9 Times Square
On April 29, 2024, the Company entered a cash sweep period under the non-recourse mortgage secured by the 9 Times Square asset pursuant to an amendment which, among other things, extends the maturity of the loan from April 2024 to October 2024. The amendment provides that Excess Cash Flow (as defined in the Amendment) shall be deposited to an account maintained by the Administrative Agent within ten (10 ) calendar days of the end of each month. As of June 30, 2024 the Company had $25,000 cash retained by the lender in a restricted cash account on the Company’s consolidated balance sheet.
Other Debt Covenants
The Company was in compliance with the remaining covenants under its other mortgage notes payable as of June 30, 2024 and, it continues to monitor compliance with those provisions. If the Company experiences additional lease terminations, due to tenant bankruptcies or otherwise, or tenants placed on a cash basis continue to not pay rent, it is possible that certain of the covenants on other loans may be breached and the Company may also become restricted from accessing excess cash flows from those properties. Similar to the loans discussed above, the Company’s other mortgages also contain cash management provisions that are not considered events of default, and as such, acceleration of principal would only occur upon an event of default.
Note 5 — 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 instrument, 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.
15
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Financial Instruments Measured at Fair Value on a Recurring Basis
Derivative Instruments
The Company’s derivative instruments are measured at fair value on a recurring basis. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with this derivative utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparty. We did not have any active derivative instruments as of June 30, 2024. However, until the maturity of the derivative instrument in April 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivatives valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, 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.
| (In thousands) | Quoted Prices in Active Markets Level 1 | Significant Other Observable Inputs Level 2 | Significant Unobservable Inputs Level 3 | Total | ||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||
| Interest rate “Pay - Fixed” swaps - assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Financial Instruments That Are Not Reported at Fair Value
The Company is required to disclose at least annually 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, accounts payable and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature.
The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of borrowing arrangements.
16
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
The fair values of the Company’s financial instruments that are not reported at fair value on the consolidated balance sheet are reported below:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||
| (In thousands) | Level | Gross Principal Balance | Fair Value | Gross Principal Balance | Fair Value | |||||||||||||||||||||||||||
Mortgage note payable — 9 Times Square | 3 | $ | $ | $ | $ | |||||||||||||||||||||||||||
Mortgage note payable — 1140 Avenue of the Americas (1) | 3 | |||||||||||||||||||||||||||||||
Mortgage note payable — 123 William Street | 3 | |||||||||||||||||||||||||||||||
Mortgage note payable — 400 E. 67th Street - Laurel Condominium / 200 Riverside Boulevard - ICON Garage | 3 | |||||||||||||||||||||||||||||||
Mortgage note payable — 8713 Fifth Avenue | 3 | |||||||||||||||||||||||||||||||
Mortgage note payable — 196 Orchard Street | 3 | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||
___________
(1)The Company recorded an impairment charge of $66.1 million during the year ended December 31, 2023 for its 1140 Avenues of the Americas property. As a result, the Company adjusted the fair value of the property’s mortgage to the current carrying value of the property as of December 31, 2023. For additional information please see Note 3 — Real Estate Investments.
Note 6 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
As of June 30, 2024 the Company no longer uses derivative financial instruments. For the year ended December 31, 2023 the Company used derivative financial instruments, including an interest rate swap, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements was 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 did not utilize derivatives for speculative or other 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 are not able to perform under the agreements. To mitigate this risk, the Company endeavored to only enter 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.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Company’s consolidated balance sheets as of June 30, 2024 and December 31, 2023.
| (In thousands) | Balance Sheet Location | June 30, 2024 | December 31, 2023 | |||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||
| Interest Rate “Pay-fixed” Swap | Derivative asset, at fair value | $ | $ | |||||||||||||||||
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.
17
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the six months ended June 30, 2024 and 2023, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. In connection with the modification and partial pay down of the Company’s mortgage loan on its 9 Times Square property in March 2022, the Company terminated a $55.0 million notional, LIBOR based “pay-fixed” interest rate swap and replaced it with a $49.5 million notional, SOFR based “pay-fixed” interest rate swap. At the time of the modification a net carrying amount reflecting the amount paid and the off market value rolled into the new swap and remained in Accumulated Other Comprehensive Income. The amount was amortized into interest expense over the term of the hedged item. This interest rate swap expired in April 2024 and as a result, there was no unamortized balance remaining as of June 30, 2024.
The Company did not have any derivatives as of June 30, 2024. As of December 31, 2023, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk.
| December 31, 2023 | ||||||||||||||
| Interest Rate Derivative | Number of Instruments | Notional Amount | ||||||||||||
| (In thousands) | ||||||||||||||
| Interest Rate “Pay-fixed” Swap | $ | |||||||||||||
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Amount of gain (loss) recognized in accumulated other comprehensive loss on interest rate derivatives (effective portion) | $ | $ | $ | $ | ||||||||||||||||||||||
| Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income as interest expense | $ | $ | $ | $ | ||||||||||||||||||||||
Total interest expense recorded in consolidated statements of operations and comprehensive loss | $ | $ | $ | $ | ||||||||||||||||||||||
Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2023. 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 Company’s consolidated balance sheets.
| Gross Amounts Not Offset on the Balance Sheet | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Gross Amounts of Recognized Assets | Gross Amounts of Recognized (Liabilities) | Gross Amounts Offset on the Balance Sheet | Net Amounts of Assets (Liabilities) Presented on the Balance Sheet | Financial Instruments | Cash Collateral Received (Posted) | Net Amount | |||||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
18
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Note 7 — Stockholders’ Equity
As of June 30, 2024 and December 31, 2023, the Company had 2.6 million and 2.3 million shares of common stock outstanding, respectively, including unvested restricted shares. As of June 30, 2024, all of the Company’s shares of common stock outstanding were Class A common stock, including unvested restricted shares.
Rights Offering
In February 2023, the Company raised gross proceeds of $5.0 million ($4.1 million of net proceeds) from its Rights Offering, which entitled holders of rights to purchase 0.20130805 of a share of its Class A common stock for every right held at a subscription price of $12.95 per whole share. As a result, the Company issued 386,100 shares of its Class A common stock subscribed for in the Rights Offering on February 27, 2023. In connection with the Rights Offering, Bellevue Capital Partners, LLC, an entity which controls the Advisor (“Bellevue”), and its affiliates acquired approximately 367,956 shares. For more information please see Note 9 — Related Party Transactions and Arrangements.
Dividends
On July 1, 2022, the Company announced that it suspended paying dividends and has not declared or paid dividends, beginning with the quarter ended June 30, 2022.
Class A Common Stock Issued to the Advisor In Lieu of Cash
Pursuant to the terms of the Advisory Agreement, as amended, and the Property Management Agreement, as amended, the Advisor may elect to receive shares of the Company’s Class A common stock in lieu of cash as payment for the monthly services it provides. For more information on the Advisory Agreement please see Note 9 — Related Party Transactions and Arrangements. The related expenses are reflected as $1.1 million for the three months ended June 30, 2024, and $1.6 million and $0.5 million for the six months ended June 30, 2024 and 2023, respectively. There were no shares issued in lieu of cash for asset management and property management services rendered during the three months ended June 30, 2023.
The following table shows the shares issued in relation to the advisory and property management agreements as of June 30, 2024 and 2023:
| Period of Issuance | Recipient | Agreement | Shares Issued | Closing Share Price | |||||||||||||||||||||||||
| January 2023 | The Advisor | Advisory Agreement | $ | ||||||||||||||||||||||||||
| March 2024 | The Advisor | Advisory Agreement | $ | ||||||||||||||||||||||||||
| April 2024 | The Advisor | Advisory Agreement | $ | ||||||||||||||||||||||||||
| April 2024 | The Advisor | Property Management Agreement | $ | ||||||||||||||||||||||||||
| May 2024 | The Advisor | Advisory Agreement | $ | ||||||||||||||||||||||||||
__________
(1)Retroactively adjusted for the effects of the Reverse Stock Split (see Note 1 — Organization for additional information).
Stockholder Rights Plan
In May 2020, the Company announced that its board of directors had approved a stockholder rights plan, but did not take actions to declare a dividend for the plan to become effective. In August 2020, in connection with the listing of the Company’s shares on the NYSE and the related bifurcation of common stock into Class A and Class B common stock, the Company entered into an amended and restated rights agreement, which amended and restated the stockholders rights plan approved in May 2020 and declared a dividend payable in August 2020, of one Class A right for and on each share of Class A common stock and one Class B right for and on each share of Class B common stock, in each case, outstanding on the close of business on August 28, 2020 to the stockholders of record on that date. Each right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), of the Company at a price of $55.00 per one one-thousandth of a share of Series A Preferred Stock, represented by a right, subject to adjustment. The expiration date of these rights has subsequently been extended to August 18, 2025.
19
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Distribution Reinvestment Plan
An amendment and restatement of the distribution reinvestment plan (the “A&R DRIP”) in connection with the listing of the Company’s shares on the NYSE became effective on August 28, 2020. The A&R DRIP allows stockholders who have elected to participate to have dividends paid with respect to all or a portion of their shares of Class A common stock and Class B common stock reinvested in additional shares of Class A common stock. Shares received by participants in the A&R DRIP will represent shares that are, at the election of the Company, either (i) acquired directly from the Company, which would issue new shares, at a price based on the average of the high and low sales prices of Class A common stock on the NYSE on the date of reinvestment, or (ii) acquired through open market purchases by the plan administrator at a price based on the weighted-average of the actual prices paid for all of the shares of Class A common stock purchased by the plan administrator with proceeds from reinvested dividends to participants for the related quarter, less a per share processing fee.
Shares issued by the Company pursuant to the A&R DRIP, if any, would be recorded within stockholders’ equity in the consolidated balance sheets in the period dividends or other distributions are declared. During the six months ended June 30, 2024 and year ended December 31, 2023, any DRIP transactions were settled through open market transactions and no shares were issued by the Company.
Non-Controlling Interest
Following the end of the performance period, which ended on August 18, 2023, as required under the 2020 OPP the compensation committee of the board of directors of the Company determined that none of the 501,605 of the LTIP Units subject to the 2020 OPP had been earned, and these LTIP Units were thus automatically forfeited effective as of August 18, 2023. On that date, the Company reclassified $25.8 million of amounts reflected in non-controlling interest for these LTIP Units to additional paid in capital on its consolidated balance sheet and consolidated statement of changes in equity. No amounts remain in non-controlling interests after the expiration date. For additional information on the 2020 OPP, please see Note 11 — Equity-Based Compensation.
Tender Offers by an Affiliate of the Advisor
On September 27, 2023, Bellevue announced a tender offer to purchase up to 350,000 shares of the Company’s Class A common stock at a purchase price equal to $10.25 per share. The tender offer expired on October 26, 2023 and, 223,460 shares were tendered and accepted by Bellevue for a purchase price to Bellevue of an aggregate of approximately $2.3 million, less any fees, expenses, or taxes withheld.
On May 7, 2024, Bellevue announced a tender offer to purchase up to 125,000 shares of the Company’s Class A common stock, at a purchase price equal to $11.00 per share. The tender offer expired on July 15, 2024 and 125,000 shares were tendered and accepted by Bellevue for a purchase price to Bellevue of an aggregate of approximately $1.4 million, less any fees, expenses, or taxes withheld. For additional information please see Note 14 — Subsequent Events.
Note 8 — Commitments and Contingencies
Lessee Arrangement - Ground Lease
The Company entered into a ground lease agreement in 2016 related to the acquisition of 1140 Avenue of the Americas under a leasehold interest arrangement and recorded an ROU asset and lease liability related to this lease upon adoption of ASU 2016-02 during the year ended December 31, 2019. The ground lease is considered an operating lease. In computing the lease liabilities, the Company discounts future lease payments at an estimated incremental borrowing rate at adoption or acquisition if later. The term of the Company’s ground lease is significantly longer than the term of borrowings available to the Company on a fully-collateralized basis. The Company’s estimate of the incremental borrowing rate required significant judgment.
As of June 30, 2024, the Company’s ground lease had an average remaining lease term of 42.5 years and a discount rate of 8.6 %. As of June 30, 2024, the Company’s balance sheet includes an ROU asset and liability of $54.6 million and $54.6 million, respectively, which are included in operating lease right-of-use asset and operating lease liability, respectively, on the consolidated balance sheet. For three and six months ended June 30, 2024, the Company paid cash of $1.2 million and $2.4 million, respectively, for amounts included in the measurement of lease liabilities and recorded expense of $1.2 million and $2.4 million, respectively, on a straight-line basis in accordance with the standard. For three and six months ended June 30, 2023, The Company paid cash of $1.2 million and $2.4 million, respectively, for amounts included in the measurement of lease liabilities and recorded expense of $1.2 million and $2.4 million, respectively, on a straight-line basis in accordance with the standard.
20
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss. The Company did not enter into any additional ground leases as lessee during the six months ended June 30, 2024 and 2023.
The following table reflects the ground lease rent payments due from the Company and a reconciliation to the net present value of those payments as of June 30, 2024:
| (In thousands) | Future Base Rent Payments | |||||||
| 2024 (remainder) | $ | |||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: Effects of discounting | ( | |||||||
| Total present value of lease payments | $ | |||||||
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.
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. As of June 30, 2024, 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 results of operations.
Note 9 — Related Party Transactions and Arrangements
As of June 30, 2024 and December 31, 2023, entities wholly owned by AR Global owned 536,252 and 290,937 shares, respectively, of the Company’s outstanding Class A common stock. As of June 30, 2024 and December 31, 2023, Bellevue owned approximately 49.4 % and 45.4 % of outstanding shares of the Company, respectively, which includes shares owned by AR Global.
Subsequent to June 30, 2024, as a result of the tender offer, 125,000 shares were tendered to Bellevue for an aggregate cost of approximately $1.4 million, in cash, less any fees, expenses or applicable withholding taxes relating to the tender offer. For additional information see Note 14 — Subsequent Events.
Fees and Participations Incurred in Connection with the Operations of the Company
Summary of Advisory Agreement
Pursuant to the advisory agreement with the Advisor (as amended and restated from time to time, the “Advisory Agreement”), the Advisor manages the Company’s day-to-day operations. The initial term of the Advisory Agreement ends in July 2030 and will automatically renew for successive five-year terms unless either party gives written notice of its election not to renew at least 180 days prior to the then-applicable expiration date. The Company may only elect not to renew the Advisory Agreement on this basis with the prior approval of at least two-thirds of the Company’s independent directors, and no change of control fee (as defined in the Advisory Agreement) is payable if the Company makes this election.
21
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Asset Management Fees and Variable Management/Incentive Fees
Overview
The Company pays the Advisor a base asset management fee on the first business day of each month equal to (x) $0.5 million plus (y) a variable amount equal to (a) 1.25 % of the equity proceeds received after November 16, 2018, divided by (b) 12. The base asset management fee is payable in cash, shares of common stock, or a combination thereof, at the Advisor’s election. Equity proceeds are defined as, with respect to any period, cumulative net proceeds of all common and preferred equity and equity-linked securities issued by the Company and its subsidiaries during the period, including: (i) any equity issued in exchange or conversion of exchangeable notes based on the stock price at the date of issuance and convertible equity; (ii) any other issuances of equity, including but not limited to units in the OP (excluding equity-based compensation but including issuances related to an acquisition, investment, joint-venture or partnership); and (iii) effective following the time the Company commences paying a dividend of at least $0.05 per share per annum to its stockholders, (which occurred in October 2020), any cumulative Core Earnings (as defined in the Advisory Agreement) in excess of cumulative distributions paid on the Company’s common stock since November 16, 2018, the effective date of the most recent amendment and restatement of the Advisory Agreement.
The Advisory Agreement also entitles the Advisor to an incentive variable management fee. Currently and since the year ended December 31, 2021, the variable management fee is equal to (i) the product of (a) the diluted weighted-average outstanding shares of common stock for the calendar quarter (excluding any equity-based awards that are subject to performance metrics that are not currently achieved) multiplied by (b) 15.0 % multiplied by (c) the excess of Core Earnings Per Adjusted Share for the previous three-month period in excess of $0.1458 (before any adjustment for the Reverse Stock Split), plus (ii) the product of (x) the diluted weighted-average outstanding shares of common stock for the calendar quarter (excluding any equity-based awards that are subject to performance metrics that are not currently achieved) multiplied by (y) 10.0 % multiplied by (z) the excess of Core Earnings Per Adjusted Share for the previous three-month period in excess of $0.1944 (before any adjustment for the Reverse Stock Split). The variable management fee is payable quarterly in arrears in cash, shares of common stock, or a combination thereof, at the Advisor’s election. No incentive variable management fees were earned during the six months ended June 30, 2024 or 2023.
Management Fee Expense
The Company recorded expense of $1.5 million and $3.0 million for the three and six months ended June 30, 2024, respectively and $1.5 million and $3.0 million for base asset management fees during the three and six months ended June 30, 2023, respectively. There were no variable management fees incurred in either of these periods. The management fees for the six months ended June 30, 2024 and 2023 were paid partially with cash and partly with shares of the Company’s Class A common stock. The Advisor may elect to but is not obligated to accept shares in lieu of cash for these management fees and makes this election on a monthly basis.
The base asset management fees for the three and six months ended June 30, 2024 and 2023 were paid in cash, except for such periods discussed in Note 7 — Stockholders’ Equity — Class A Common Stock Issued to the Advisor In Lieu of Cash.
Property Management Fees
Pursuant to the Property Management and Leasing Agreement (the “PMA”), as most recently amended on March 29, 2024 except in certain cases where the Company contracts with a third party, the Company pays the Property Manager a property management fee equal to: (i) for non-hotel properties, 3.25 % of gross revenues from the properties managed, plus market-based leasing commissions; and (ii) for hotel properties, a market-based fee based on a percentage of gross revenues. The term of the PMA is coterminous with the term of the Advisory Agreement.
Pursuant to the PMA, the Company reimburses the Property Manager for property-level expenses. These reimbursements are not limited in amount and may include reasonable salaries, bonuses, and benefits of individuals employed by the Property Manager, except for the salaries, bonuses, and benefits of individuals who also serve as one of the Company’s executive officers or as an executive officer of the Property Manager or any of its affiliates. The Property Manager may also 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.
22
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
On April 13, 2018, in connection with the loan for its 400 E. 67th Street - Laurel Condominium and 200 Riverside Boulevard properties, the Company entered into a new property management agreement with the Property Manager (the “April 2018 PMA”) to manage the properties secured by the loan. With respect to these properties, the substantive terms of the April 2018 PMA are identical to the terms of the PMA, except that the property management fee for non-hotel properties is 4.0 % of gross revenues from the properties managed, plus market-based leasing commissions. The April 2018 PMA has an initial term of one year that is automatically extended for an unlimited number of successive one-year terms at the end of each year unless any party gives 60 days’ written notice to the other parties of its intention to terminate.
In March 2024, the Company and the Property Manager amended the PMA to allow the Property Manager to elect to receive Class A Units or shares of the Company’s common stock in lieu of cash for all fees payable to the Property Manager.
The Company incurred approximately $0.4 million and $0.8 million in property management fees during three and six months ended June 30, 2024, respectively, and $0.5 million and $0.9 million in property management fees during the three and six months ended June 30, 2023, respectively. These property management fees were paid in cash, except for such periods as discussed in Note 7 — Stockholders’ Equity — Class A Common Stock Issued to the Advisor In Lieu of Cash.
Professional Fees and Other Reimbursements
The Company pays directly or reimburses the Advisor monthly in arrears, for all the expenses paid or incurred by the Advisor or its affiliates in connection with the services it provides to the Company under the Advisory Agreement, subject to the following limitations:
•(a) With respect to administrative and overhead expenses of the Advisor, including administrative and overhead expenses of all employees of the Advisor or its affiliates directly or indirectly involved in the performance of services but not including their salaries, wages, and benefits, these costs may not exceed in any fiscal year,
(i) $0.4 million, or
(ii) if the Asset Cost (as defined in the Advisory Agreement) as of the last day of the fiscal quarter immediately preceding the month is equal to or greater than $1.25 billion, (x) the Asset Cost as of the last day of the fiscal quarter multiplied by (y) 0.10 %.
•(b) With respect to the salaries, wages, and benefits of all employees of the Advisor or its affiliates directly or indirectly involved in the performance of services (including the Company’s executive officers), these amounts must be comparable to market rates and reimbursements may not exceed, in any fiscal year,
(i) $3.0 million ($2.6 million before the three months ended March 31, 2024), or
(ii) if the Asset Cost as of the last day of the fiscal year is equal to or greater than $1.25 billion, (x) the Asset Cost as of the last day of the fiscal year multiplied by (y) 0.30 %.
Professional fees and other reimbursement include reimbursements to the Advisor for administrative, overhead and personnel services, which are subject to the limits noted above, as well as costs associated with directors and officers insurance which are not subject to those limits.
Professional fees and other reimbursements for the three and six months ended June 30, 2024 were $1.1 million and $2.5 million, respectively. The amount of expenses included within professional fees and other reimbursements related to administrative, overhead and personnel services provided by and reimbursed to the Advisor for the three months ended June 30, 2024 were $0.9 million ($0.8 million were for salaries, wages, and benefits and $0.1 million related to administrative and overhead expenses). The amount of expenses included within professional fees and other reimbursements related to administrative, overhead and personnel services provided by and reimbursed to the Advisor for the six months ended June 30, 2024 were $2.1 million ($1.7 million were for salaries, wages, and benefits and $0.4 million related to administrative and overhead expenses).
Professional fees and other reimbursements for the three and six months ended June 30, 2023 were $1.2 million and $2.5 million, respectively. The amount of expenses included within professional fees and other reimbursements related to administrative, overhead and personnel services provided by and reimbursed to the Advisor for the three months ended June 30, 2023 was $0.8 million ($0.7 million were for salaries, wages, and benefits and $0.1 million related to administrative and overhead expenses). The amount of expenses included within professional fees and other reimbursements related to administrative, overhead and personnel services provided by and reimbursed to the Advisor for the six months ended June 30, 2023 was $1.9 million ($1.5 million were for salaries, wages, and benefits and $0.4 million related to administrative and overhead expenses).
23
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
In March 2024, the Company and the Advisor amended the Advisory Agreement to increase the limit of incurred costs from the salaries, wages, and benefits of all employees of the Advisor or its affiliates directly or indirectly involved in the performance of services (including the Company’s executive officers) from $2.6 million to $3.0 million, and to allow the Advisor to elect to receive any expense reimbursement amounts pursuant to the Advisory Agreement in cash, OP Units, shares of the Company’s common stock, or any combination thereof. The Company paid its professional fees to the Advisor with cash during the three and six months ended June 30, 2024 and 2023 except such periods as discussed in Note 7 — Stockholders’ Equity — Class A Common Stock Issued to the Advisor In Lieu of Cash.
Note Payable to Related Parties
Pursuant to the terms of a promissory note executed during the three months ended June 30, 2024 between the Company and the Advisor, the Company borrowed $0.15 million from the Advisor for working capital needs. The Company recorded this borrowing as a note payable to related parties as of June 30, 2024 on the Company’s consolidated balance sheet. The promissory note bore interest at an annual rate of 9.39 % and would have been callable on or after September 26, 2024. Subsequent to June 30, 2024, the Company fully repaid the promissory note with cash on hand including interest, which was immaterial (see Note 14 — Subsequent Events for additional information). Amounts repaid under the promissory note may not be reborrowed.
Summary of Fees, Expenses and Related Payables
The following table details amounts incurred in connection with the Company’s 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 | |||||||||||||||||||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Ongoing fees: | |||||||||||||||||||||||||||||||||||||||||
Asset and property management fees to related parties (1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Professional fees and other reimbursements (2) | |||||||||||||||||||||||||||||||||||||||||
Total related party operation fees and reimbursements | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
________
(1)During the six months ended June 30, 2024 and 2023, approximately $1.6 million and $0.5 million, respectively, of this expense was for the asset and property management fees paid in shares of the Company’s Class A common stock (see above) in lieu of cash.
(2)Amounts for the three and six months ended June 30, 2024 and 2023 are included in general and administrative expenses in the unaudited consolidated statements of operations and comprehensive loss.
Termination Fees Payable to the Advisor
The Advisory Agreement requires the Company to pay a termination fee to the Advisor in the event the Advisory Agreement is terminated prior to the expiration of the initial term in certain limited scenarios. The termination fee will be payable to the Advisor if either the Company or the Advisor exercises the right to terminate the Advisory Agreement in connection with the consummation of the first change of control (as defined in the Advisory Agreement). The termination fee is equal to $15 million plus an amount equal to the product of: (i) three (if the termination was effective on or prior to June 30, 2020) or (ii) four (if the termination is effective after June 30, 2020), multiplied by applicable Subject Fees (defined below).
The “Subject Fees” are equal to the product of 12 and the actual base management fee for the month immediately prior to the month in which the Advisory Agreement is terminated, plus the product of four and the actual variable management fee for the quarter immediately prior to the quarter in which the Advisory Agreement is terminated, plus without duplication, the annual increase in the base management fee resulting from the cumulative net proceeds of any equity issued by the Company and its subsidiaries in respect of the fiscal quarter immediately prior to the fiscal quarter in which the Advisory Agreement is terminated.
In connection with the termination or expiration of the Advisory Agreement, the Advisor will be entitled to receive (in addition to any termination fee) all amounts then accrued and owing to the Advisor, including an amount equal to then-present fair market value of its shares of the Company’s Class A common stock and interest in the OP.
24
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Note 10 — 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, as well as other administrative responsibilities for the Company including accounting services, transaction management services and investor relations.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that the Advisor and its affiliates are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 11 — Equity-Based Compensation
Equity Plans
Restricted Share Plan
Prior to the Company listing its shares on the NYSE, the Company had an employee and director incentive restricted share plan (as amended, the “RSP”). The RSP provided for the automatic grant of the number of restricted shares equal to $30,000 divided by the then-current Estimated Per-Share NAV, which were made without any further approval by the Company’s board of directors or the stockholders, after initial election to the board of directors and after each annual stockholder meeting, with such restricted shares vesting annually over a five-year period following the grant date in increments of 20.0
2020 Equity Plan
Effective at the time of the listing, the Company’s independent directors approved an equity plan for the Advisor (the “Advisor Plan”) and an equity plan for individuals (the “Individual Plan” and together with the Advisor Plan, the “2020 Equity Plan”). The Advisor Plan is substantially similar to the Individual Plan, except with respect to the eligible participants. Awards under the Individual Plan are open to the Company’s directors, officers and employees (if the Company ever has employees), employees, officers and directors of the Advisor and as a general matter, employees of affiliates of the Advisor that provide services to the Company. Awards under the Advisor Plan may only be granted to the Advisor and its affiliates (including any person to whom the Advisor subcontracts substantially all of responsibility for directing or performing the day-to-day business affairs of the Company).
The 2020 Equity Plan succeeded and replaced the then existing RSP. Following the effectiveness of the 2020 Equity Plan at the listing of its shares on the NYSE, no further awards have been or will be granted under the RSP; provided, however, any outstanding awards under the RSP, such as unvested restricted shares held by the Company’s independent directors, will remain in effect in accordance with their terms and the terms of the RSP, until all those awards are exercised, settled, forfeited, canceled, expired or otherwise terminated. The Company accounts for forfeitures when they occur. While the RSP provided only for awards of restricted shares, the 2020 Equity Plan has been expanded to also permit awards of restricted stock units, stock options, stock appreciation rights, stock awards, LTIP Units and other equity awards. In addition, the 2020 Equity Plan eliminates the “automatic grant” provisions of the RSP that dictated the terms and amount of the annual award of restricted shares to independent directors. Grants to independent directors are made in accordance with the Company’s new director compensation program, as described below under “—Director Compensation.” The 2020 Equity Plan has a term of 10 years, expiring August 18, 2030. The number of shares of the Company’s capital stock that may be issued or subject to awards under the 2020 Equity Plan, in the aggregate, is equal to 20.0 % of the Company’s outstanding shares of Class A common stock on a fully diluted basis at any time. Shares subject to awards under the Individual Plan reduce the number of shares available for awards under the Advisor Plan on a one -for-one basis and vice versa.
Director Compensation
On August 18, 2020 the Company listed its shares of Class A common stock on the NYSE (the “Listing Date”), and effective on that date, the Company’s independent directors approved a change to the Company’s director compensation program. Starting with the annual award of restricted shares made in connection with the Company’s 2021 annual meeting of stockholders, the amount of the annual award was increased from $30,000 to $65,000 . No other changes have been made to the Company’s director compensation program.
25
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Restricted Shares
Restricted share awards entitle the recipient to receive shares of common stock from the Company under terms that provide for vesting over a specified period of time. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares receive cash dividends on the same basis as dividends paid on shares of common stock, if any, prior to the time that the restrictions on the restricted shares have lapsed and thereafter. Any dividends payable in shares of common stock are subject to the same restrictions as the underlying restricted shares.
In March 2022, the compensation committee delegated authority to the Company’s chief executive officer to award up to 25,000 restricted shares (adjusted for the Reverse Stock Split) to employees of the Advisor or its affiliates who are involved in providing services to the Company, including the Company’s chief financial officer, subject to certain limits and restrictions imposed by the compensation committee. The compensation committee remains responsible for approving and administering all grants of awards to the Company’s chief financial officer or any other executive officer of the Company, including any award of restricted shares recommended by the Company’s chief executive officer. No awards under the 2020 Equity Plan may be made pursuant to this delegation of authority to anyone who is also a partner, member or equity owner of the parent of the Advisor. As of June 30, 2024 there have been no shares awarded to anyone who is also a partner, member or equity owner of the parent of the Advisor.
Restricted share awards that have been granted to the Company’s directors provide for accelerated vesting of the portion of the unvested restricted shares scheduled to vest in the year of the recipient’s voluntary termination or the failure to be re-elected to the Company’s board of directors.
In the quarter ended March 31, 2023, the Company issued 2,038 restricted shares (adjusted for the Reverse Stock Split) to a member of the Company’s board of directors. During the quarter ended June 30, 2023 the Company issued 13 restricted shares to an employee of the advisor and its affiliates. In the quarter ended September 30, 2023, the Company issued 24,042 shares to the Company’s the board of directors as part of the annual award of restricted shares by the Company to the board of directors. These restricted shares issued to the board of directors will vest in 20 2,792 restricted shares. During the quarter ended December 31, 2023, the Company granted 10,139 restricted shares to employees of the Advisor. The restricted shares granted to employees of the Advisor will vest in 25
In the quarter ended March 31, 2024, three former employees of the Advisor terminated their employment, and as defined in the award agreement, forfeited a total of 953 restricted shares.
During the quarter ended June 30, 2024, the Company issued 48,500 restricted shares to employees of the Advisor. The restricted shares granted to employees of the Advisor will vest in 25 10,000 restricted shares to the Company’s CEO and 4,375 restricted shares to the Company’s CFO. The restricted shares granted to the CEO and CFO of the Advisor will vest in 25 1,619 fully vested restricted shares to an employee who previously terminated their employment, as part of a termination agreement.
The following table displays restricted share award activity during the six months ended June 30, 2024:
| Number of Restricted Shares | Weighted-Average Issue Price | |||||||||||||
| Unvested, December 31, 2023 | $ | |||||||||||||
| Granted | ||||||||||||||
| Vested | ( | |||||||||||||
| Forfeitures | ( | |||||||||||||
Unvested, June 30, 2024 | $ | |||||||||||||
26
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
As of June 30, 2024, the Company had $0.7 million of unrecognized compensation cost related to unvested restricted share awards granted and is expected to be recognized over a weighted-average period of 3.6 years. Restricted share awards are expensed in accordance with the service period required. Compensation expense related to restricted share awards was approximately $0.2 million and $0.2 million for the three and six months ended June 30, 2024, respectively, and $0.2 million and $0.3 million for the three and six months ended June 30, 2023, respectively. Compensation expense related to restricted share awards is recorded as equity-based compensation in the accompanying unaudited consolidated statements of operations and comprehensive loss.
Multi-Year Outperformance Award
2020 OPP
On the Listing Date, the Company, the OP and the Advisor entered into the 2020 OPP pursuant to which a performance-based equity award was granted to the Advisor. The award was based on the recommendation of the Company’s compensation consultant, and approved by the Company’s independent directors, acting as a group.
Initially, the award under the 2020 OPP was in the form of a single LTIP Unit. On September 30, 2020, the 30 th trading day following the Listing Date, in accordance with its terms, the single LTIP Unit automatically converted into 501,605 LTIP Units (adjusted for the Reverse Stock Split), the quotient of $50.0 million divided by $99.68 (adjusted for the Reverse Stock Split), representing the average closing price of one share of Class A common stock over the ten consecutive trading days immediately prior to September 30, 2020. This number of LTIP Units represented the maximum number of LTIP Units that could have been earned by the Advisor during a performance period which ended on August 18, 2023. The compensation committee of the board of directors of the Company determined that none of the 501,605 of the LTIP Units subject to the 2020 OPP had been earned under the performance measures.
For accounting purposes, July 19, 2020 was treated as the grant date (the “Grant Date”), because the Company’s independent directors approved the 2020 OPP and the award made thereunder on that date. The Company engaged third party specialists, who used a Monte Carlo simulation, to calculate the fair value as of the date the single LTIP Unit converted (September 30, 2020), on which date the fair value was also fixed. The total fair value of the LTIP Units of $25.8 million was recorded over the requisite service period of 3.07 years beginning on the Grant Date and ending on the third anniversary of the Listing Date (August 18, 2023). As a result, during the six months ended June 30, 2024, the Company did no t record any equity-based compensation expense related to the LTIP Units. For the six months ended June 30, 2023 the Company recorded equity-based compensation expense related to the LTIP Units of $4.2 million. As of August 18, 2023, the total fair value of the LTIP Units has been amortized to expense and no future expense remains. Equity-based compensation expense related to the LTIP Units was recorded in equity-based compensation in the consolidated statements of operations and comprehensive loss.
The LTIP Units issued pursuant to the 2020 OPP could potentially have been earned by the Advisor during a performance period which ended on August 18, 2023. The compensation committee of the board of directors of the Company determined that none of the 501,605 of the LTIP Units subject to the 2020 OPP had been earned under the performance measures. These LTIP Units were thus automatically forfeited effective as of August 18, 2023, without the payment of any consideration by the Company or the OP. On that date, the Company reclassified amounts reflected in non-controlling interest for these LTIP Units to additional paid in capital on its consolidated balance sheet and consolidated statement of equity.
27
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
LTIP Units/Distributions/Redemption
The rights of the Advisor as the holder of the LTIP Units were governed by the terms of the LTIP Units set forth in the agreement of limited partnership of the OP. Holders of LTIP Units were entitled to distributions on the LTIP Units equal to 10 % of the distributions made per Class A Unit (other than distributions of sale proceeds) until if, and when, the LTIP Units were earned. Distributions paid on a Class A Unit were equal to dividends paid on a share of Class A common stock and were not subject to forfeiture, even though the LTIP Units were not earned and have been forfeited. If the LTIP Units had been earned, the Advisor would have been entitled to a priority catch-up distribution on each earned LTIP Unit equal to 90 % of the aggregate distributions paid on Class A Units during the applicable performance period. Any LTIP Units that were earned would have become entitled to receive the same distributions paid on the Class A Units. If the Advisor’s capital account with respect to an earned LTIP Unit had been equal to the capital account balance of a Class A Unit, the Advisor, as the holder of the earned LTIP Unit, in its sole discretion, would have been entitled to convert the LTIP Unit into a Class A Unit, which would have in turn been redeemed on a one -for-one basis for, at the Company’s election, a share of Class A common stock or the cash equivalent thereof. For the six months ended June 30, 2024 and 2023 the Company has not paid any dividends to their common stockholders. Subsequently, the board decided not to declare any further dividends. There is no assurance as to when or if the board will declare future dividends or the amount of any future dividends that may be declared. Because the LTIP Units only receive distributions when the Class A common stock receives dividends, no distributions have been paid since the quarter ended March 31, 2022.
For the six months ended June 30, 2024 and 2023, the Company did not
Note 12 — Income Taxes
On December 30, 2022, the Company announced that it was changing its business strategy by expanding the scope of the assets and businesses the Company may own and operate. By investing in other asset types, the Company may generate income that does not otherwise constitute income that qualifies for purposes of qualifying as a REIT. As a result, on January 9, 2023, the Company’s board of directors authorized the termination of the Company’s REIT election which became effective as of January 1, 2023. Historically, effective with the taxable year ended December 31, 2014 through December 31, 2022, the Company had elected to be taxed as a REIT.
The Company is subject to U.S. federal, state and local income taxes. For deferred items, the Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. Because of the Company’s recent operating history of taxable losses and the continuing adverse economic impacts since the COVID-19 pandemic on the Company’s results of operations, the Company is not able to conclude that it is more likely than not it will realize the future benefit of its deferred tax assets; thus the Company has provided a 100
The effective tax rate was zero no income tax expense (after considering changes in the valuation allowance) for and six months ended June 30, 2024. The Company remains in a net deferred tax asset position with a full valuation allowance as of both June 30, 2024 and December 31, 2023. As of June 30, 2024, the Company had no material uncertain tax positions.
28
AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Note 13 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computation for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands, except share and per share data) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||
Net loss attributable to common stockholders (in thousands) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Adjustments to net loss attributable to common stockholders | ||||||||||||||||||||||||||||||||
| Adjusted net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Weighted average shares outstanding — Basic and Diluted | (1) | |||||||||||||||||||||||||||||||
| Net loss per share attributable to common stockholders — Basic and Diluted | $ | ( | $ | ( | (1) | $ | ( | $ | ( | |||||||||||||||||||||||
Under current authoritative guidance for determining earnings per share, all unvested share-based payment awards that contain non-forfeitable rights to distributions are considered to be participating securities and therefore are included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s unvested restricted shares, Class A Units and unearned LTIP Units contain rights to receive distributions considered to be non-forfeitable, except in certain limited circumstances, and therefore the Company applies the two-class method of computing earnings per share. The calculation of earnings per share above adjusts net loss to exclude the distributions to the unvested restricted shares, Class A Units and the unearned LTIP Units that were issued under the 2020 OPP from the numerator. On July 1, 2022, the Company announced that it suspended its policy regarding dividends paid on its Class A common stock, beginning with the dividend that would have been payable for the quarter ended June 30, 2022. Accordingly, there is no adjustment for the three month period ended June 30, 2024 or 2023 relating to distributions to LTIP Units which are paid in arrears. Accordingly, since the LTIP Units only receive distributions when the Class A common stock receives dividends there were no distributions to the LTIP Units beginning with the distribution that would have been payable for the quarter ended June 30, 2022 and quarterly periods thereafter.
Diluted net loss per share assumes the conversion of all Class A common stock share equivalents into an equivalent number of shares of Class A common stock, unless the effect is anti-dilutive. The Company considers unvested restricted shares, Class A Units and unvested LTIP Units to be common share equivalents. The following table shows common share equivalents on a weighted average basis that were excluded from the calculation of diluted earnings per share as their effect would have been antidilutive for the periods presented.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
Unvested restricted shares (1) | ||||||||||||||||||||||||||
LTIP Units (2) | ||||||||||||||||||||||||||
| Total weighted-average anti-dilutive common share equivalents | ||||||||||||||||||||||||||
_______
(1)There were 95,347 and 14,268 unvested restricted shares outstanding as of June 30, 2024 and 2023, respectively.
(2)There were no LTIP units outstanding as of June 30, 2024 and there were 501,605 LTIP Units outstanding as of June 30, 2023 (see Note 11 — Equity-Based Compensation for additional information).
If dilutive, conditionally issuable shares relating to the 2020 OPP award would be included, as applicable, in the computation of fully diluted EPS on a weighted-average basis for and six month periods ended June 30, 2024 and 2023, respectively, based on shares that would be issued if the applicable balance sheet date was the end of the measurement period. No LTIP Unit share equivalents were included in the computation for six month periods ended June 30, 2024 because either or both (i) no LTIP Units would have been earned based on the trading price of Class A common stock including any cumulative dividends paid (since inception of the 2020 OPP) at June 30, 2024 and 2023 or (ii) the Company recorded a net loss to common stockholders for all periods presented and any shares conditionally issuable under the LTIPs would be anti-dilutive.
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AMERICAN STRATEGIC INVESTMENT CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
(Unaudited)
Note 14 — 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 other than the following
Tender Offer by Affiliates of the Advisor
On May 7, 2024, Bellevue announced a tender offer to purchase up to 125,000 shares of the Company’s Class A common stock, at a purchase price equal to $11.00 per share. The tender offer expired on July 15, 2024 and 125,000 shares were tendered and accepted by Bellevue for a purchase price to Bellevue of an aggregate of approximately $1.4 million, less any fees, expenses, or taxes withheld.
Purchase and Sale Agreement for 9 Times Square
On August 1, 2024, the Company executed a purchase and sales agreement to sell the Company’s property at 9 Times Square for a contract sales price of $63.5 million, which was consistent with the letter of intent signed in June 2024. There can be no assurance that the sale of this property will close on its contemplated terms, if at all.
Note Payable to Related Parties
In July 2024, the Company repaid all amounts outstanding under its promissory note with the Advisor, totaling $0.15 million. See Note 9 — Related Party Transactions and Arrangements. For additional information on such promissory note.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts may be forward-looking statements including statements regarding the intent, belief or current expectations of American Strategic Investment Co. (including, as required by context, New York City Operating Partnership, L.P. (the “OP”) and its subsidiaries, “we,” “our” or “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,” “projects,” “potential,” “predicts,” “intends,” “would,” “could,” “should” or similar expressions are intended to identify forward looking statements, although not all forward-looking statements contain these identifying words. 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.
These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include anticipated benefits of our election to terminate our status as a real estate investment trust; whether we will be able to successfully acquire new assets or businesses; our ability to execute on our business plan and sell certain of our properties on commercially practicable terms, if at all; the risks associated with the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on us, our tenants and the global economy and financial markets; the potential adverse effects on inflationary conditions and higher interest rate environment; the risk that any potential future acquisition or disposition by us is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all; and the risk that we may not meet the listing requirements of the New York Stock Exchange. 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 are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2023, this and our other Quarterly Reports on Form 10-Q and our other filings with the United States Securities and Exchange Commission (“SEC”).
Overview
We are an externally managed company that owns a portfolio of commercial real estate located within the five boroughs of New York City, primarily Manhattan. Our real estate assets consist of office properties and certain real estate assets that accompany office properties, including retail spaces and amenities and parking garages that do not accompany office spaces. As of June 30, 2024, we owned seven properties consisting of 1.2 million rentable square feet, acquired for an aggregate purchase price of $783.5 million with an overall occupancy of 85.9%.
On December 30, 2022, we announced that we were changing our business strategy by expanding the scope of the assets and businesses we may own and operate. By investing in other asset types, we may generate income that does not otherwise constitute income that qualifies for purposes of qualifying as a REIT. As a result, on January 9, 2023, our board of directors authorized termination of our REIT election which became effective as of January 1, 2023. Historically, we had filed an election to be taxed as a REIT commencing with our taxable year ended December 31, 2014, which remained in effect with respect to each subsequent taxable year ending on or before the year ended December 31, 2022.
On January 11, 2023 we effected a 1-for-8 reverse stock split that was previously approved by our board, resulting in each outstanding share of Class A common stock, par value $0.01 per share, (the “Class A common stock”) being converted into 0.125 shares of common stock, with no fractional shares being issued (the “Reverse Stock Split”). For additional information, see Note 7 — Stockholders’ Equity to our consolidated financial statements included in this Quarterly Report on Form 10-Q. Also, effective January 19, 2023, we amended our charter to change our name to “American Strategic Investment Co.” from “New York City REIT, Inc.” Trading of our Class A common stock on the New York Stock Exchange under the new name began on January 20, 2023 under the existing trading symbol “NYC.” Shares of our Class A common stock were first listed on the New York Stock Exchange (“NYSE”) on August 18, 2020. Also, on February 22, 2023, we completed a non-transferable rights offering raising gross proceeds of $5.0 million (the “Rights Offering”). As a result, we issued 386,100 shares of our Class A common stock subscribed for in the Rights Offering on February 27, 2023.
Substantially all of our business is conducted through the OP and its wholly owned subsidiaries. New York City Advisors, LLC (our “Advisor”) manages our day-to-day business with the assistance of New York City Properties, LLC (our “Property Manager”). Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us.
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Management Update on the Continuing Adverse Economic Impacts Since the COVID-19 Pandemic
New York City, where all of our properties are located, was among the hardest hit locations in the country and fully reopened from relevant restrictions and lockdowns on March 7, 2022. The pace of recovery in the New York City office market from the COVID-19 pandemic continues to be challenged as leasing and occupancy trends for the broader market have slowed, leading political, community, and business leaders to propose repositioning plans for many New York City office assets that are experiencing high vacancy rates.
The adverse economic impacts since the onset of the COVID-19 pandemic have caused us to experience challenges in leasing up available space and maintaining occupancy in our properties. These challenges with leasing activity have negatively impacted, and continue to impact, our results of operations, cash flows, and ability to comply with certain mortgage debt covenants. For additional information on our leasing activity for the three and six months ended June 30, 2024 and 2023, please see Results of Operations — Leasing Activity below.
In addition, beginning in the third and fourth quarters of 2020, the operating results at (i) 1140 Avenue of the Americas, (ii) 9 Times Square, (iii) 400 E. 67th Street - Laurel Condominium/200 Riverside Boulevard Garage and (iv) 8713 Fifth Avenue properties were negatively impacted, causing covenant non-compliance or cash trap events under the respective non-recourse mortgages for those properties to be triggered. Thus, we have not been able to use excess cash flows, if any, from these properties while the cash trap events are active to fund operating expenses at our other properties and other capital requirements. As of June 30, 2024 two of our mortgages aggregating $109.0 million in principal amount remained in a cash trap events, as described in detail further below in the Liquidity and Capital Resources section.
Significant Accounting Estimates and Critical Accounting Policies
For a discussion about our significant accounting estimates and critical accounting policies, see the “Significant Accounting Estimates and Critical Accounting Policies” section of our 2023 Annual Report on Form 10-K. Except for those required by new accounting pronouncements discussed below, there have been no material changes from these significant accounting estimates and critical accounting policies.
Recently Issued Accounting Pronouncements
See Note 2 — Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.
Properties
The following table presents certain information about the investment properties we owned as of June 30, 2024:
| Portfolio | Acquisition Date | Number of Properties | Rentable Square Feet | Occupancy | Remaining Lease Term (1) | |||||||||||||||||||||||||||
| 400 E. 67th Street - Laurel Condominium | Sept. 2014 | 1 | 58,750 | 100.0 | % | 3.0 | ||||||||||||||||||||||||||
| 200 Riverside Boulevard - ICON Garage | Sept. 2014 | 1 | 61,475 | 100.0 | % | 13.0 | ||||||||||||||||||||||||||
| 9 Times Square | Nov. 2014 | 1 | 167,390 | 70.6 | % | 7.8 | ||||||||||||||||||||||||||
| 123 William Street | Mar. 2015 | 1 | 544,610 | 88.8 | % | 4.7 | ||||||||||||||||||||||||||
| 1140 Avenue of the Americas | Jun. 2016 | 1 | 245,821 | 79.3 | % | 5.9 | ||||||||||||||||||||||||||
| 8713 Fifth Avenue | Oct. 2018 | 1 | 17,500 | 88.6 | % | 10.1 | ||||||||||||||||||||||||||
| 196 Orchard Street | Jul. 2019 | 1 | 60,297 | 100.0 | % | 10.6 | ||||||||||||||||||||||||||
| Total portfolio | 7 | 1,155,843 | 85.9 | % | 6.3 | |||||||||||||||||||||||||||
______
(1)Calculated on a weighted-average basis as of June 30, 2024, as applicable.
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Results of Operations
Leasing Activity for the Six Months Ended June 30, 2024
The following table is a summary of our quarterly leasing activity during the six months ended June 30, 2024:
| Q1 2024 | Q2 2024 | |||||||||||||
| Leasing activity: | ||||||||||||||
| New leases: | ||||||||||||||
| New leases commenced | 1 | 1 | ||||||||||||
| Total square feet leased | 8,122 | 5,284 | ||||||||||||
Annualized straight-line rent per square foot (1) | $ | 22.16 | $ | 70.30 | ||||||||||
Weighted-average lease term (years) (2) | 1.2 | 3.2 | ||||||||||||
| Terminated or expired leases: | ||||||||||||||
| Number of leases terminated or expired | — | 1 | ||||||||||||
| Square feet | — | 12,183 | ||||||||||||
Annualized straight-line rent per square foot (1) | $ | — | $ | 5.96 | ||||||||||
______
(1)Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)The weighted-average remaining lease term (years) is based on annualized straight-line rent.
Leasing Activity for the Six Months Ended June 30, 2023
The following table is a summary of our quarterly leasing activity during the six months ended June 30, 2023:
| Q1 2023 | Q2 2023 | |||||||||||||
| Leasing Activity: | ||||||||||||||
| New Leases: | ||||||||||||||
| New leases commenced | 5 | 4 | ||||||||||||
| Total square feet leased | 19,812 | 26,778 | ||||||||||||
Annualized straight-line rent per square foot (1) | $ | 54.18 | $ | 55.14 | ||||||||||
Weighted-average lease term (years) (2) | 12.7 | 5.4 | ||||||||||||
| Terminated or Expired Leases: | ||||||||||||||
| Number of leases terminated or expired | 1 | 2 | ||||||||||||
| Total square feet terminated or expired | 4,548 | 7,908 | ||||||||||||
Annualized straight-line rent per square foot (1) | $ | 44.93 | $ | 60.35 | ||||||||||
______
(1)Represents the GAAP basis annualized straight-line rent that is recognized over the term on the respective leases, which includes free rent, periodic rent increases, and excludes recoveries.
(2)The weighted-average remaining lease term (years) is based on annualized straight-line rent.
Our total overall portfolio occupancy improved as of June 30, 2024 to 85.9% from a total portfolio occupancy of 85.1% as of June 30, 2023 from the following:
•Occupancy at 9 Times Square improved to 70.6% for the period ended June 30, 2024 as compared to 68.0% for period ended June 30, 2023. This improvement can be attributed to new leases signed during the year ended December 31, 2023.
•Occupancy at 1140 Avenue of the Americas increased to 79.3% for the period ended June 30, 2024 as compared to 74.6% for period ended June 30, 2023. This improvement can be attributed to new leases signed during the year ended December 31, 2023.
•Occupancy at or properties located at 196 Orchard Street, 400 E. 67th Street/200 Riverside Blvd was at 100% for the periods ended June 30, 2024 and 2023.
33
•Occupancy at 8713 Fifth Avenue remained the same at 88.6% as of June 30, 2024 and June 30, 2023.
•Occupancy at 123 William Street decreased to 88.8% as of June 30, 2024 compared to 92.0% as of June 30, 2023. The decrease in occupancy was due to a lease amendment and a tenant occupying less space and an early termination with a tenant during the six months ended June 30, 2024.
Comparison of Three Months Ended June 30, 2024 and 2023
As of June 30, 2024, we owned seven properties, all of which were acquired prior to January 1, 2023. Our results of operations for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 primarily reflect changes due to leasing activity and occupancy.
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders was $91.9 million for the quarter ended June 30, 2024, as compared to $10.9 million for the quarter ended June 30, 2023. The change in net loss income attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations in the sections that follow.
| Quarter Ended June 30, | Increase (Decrease) | |||||||||||||||||||
| (in thousands) | 2024 | 2023 | $ | |||||||||||||||||
| Revenue from tenants | $ | 15,754 | $ | 15,782 | $ | (28) | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||
Asset and property management fees to related parties | 1,927 | 1,988 | (61) | |||||||||||||||||
| Property operating | 8,461 | 8,353 | 108 | |||||||||||||||||
| Impairment of real estate investments | 84,724 | 151 | 84,573 | |||||||||||||||||
| Equity-based compensation | 186 | 2,304 | (2,118) | |||||||||||||||||
| General and administrative | 1,964 | 2,439 | (475) | |||||||||||||||||
| Depreciation and amortization | 5,151 | 6,749 | (1,598) | |||||||||||||||||
Total operating expenses | 102,413 | 21,984 | 80,429 | |||||||||||||||||
Operating loss | (86,659) | (6,202) | (80,457) | |||||||||||||||||
| Other income (expenses): | ||||||||||||||||||||
| Interest expense | (5,201) | (4,707) | (494) | |||||||||||||||||
| Other income | 9 | 10 | (1) | |||||||||||||||||
Total other expenses | (5,192) | (4,697) | (495) | |||||||||||||||||
| Net loss before income taxes | (91,851) | (10,899) | (80,952) | |||||||||||||||||
| Income tax expense | — | — | — | |||||||||||||||||
| Net loss and Net loss attributable to common shareholders | $ | (91,851) | $ | (10,899) | $ | (80,952) | ||||||||||||||
Revenue from Tenants
Revenue from tenants decreased slightly to $15.8 million for the three months ended June 30, 2024 as compared to $15.8 million for the three months ended June 30, 2023.
Asset and Property Management Fees to Related Parties
We incurred $1.9 million and $2.0 million in fees for asset and property management services paid to our Advisor and Property Manager for both the three months ended June 30, 2024 and 2023. See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on fees incurred from our Advisor and Property Manager. The Advisor was paid in cash for the January, February and June 2024 base management fee, however, the Advisor elected to receive shares in lieu of cash for the March and May 2024 base management fee. Additionally, the Advisor elected to receive shares in lieu of cash for the April property management fee. During the quarter ended June 30, 2023 the Advisor elected to receive shares in lieu of cash for the January 2023 base management fee, however, the management fees for February through June 2023 were paid in cash. The shares issued in lieu of cash for the quarters ended June 30, 2024 and 2023 were valued at $1.0 million and zero, respectively.
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Property Operating Expenses
Property operating expenses increased to $8.5 million for the three months ended June 30, 2024 as compared to $8.4 million for the three months ended June 30, 2023. The increase in expenses is primarily related to a an increase in maintenance expenses for the three months ended June 30, 2024.
Impairments of Real Estate Investments
During the three months ended June 30, 2024, we recorded an impairment charges of $84.7 million related to our 9 Times Square property. This mortgage had a principal balance of $49.5 million that was set to expire in April 2024 but has been extended to October of 2024 with an option to extend to January 2025 if certain conditions are met. The $84.7 million impairment, which represents the reduction of the carrying value of the property to its estimated fair value as determined by a purchase and sale agreement, executed in August 2024, to sell the property pursuant to the terms of the amended mortgage agreement which encumbers the property (as further discussed in Note 4 — Mortgage Notes Payable, Net). We estimate the sale to be consummated no later than January 2025, although there can be no assurance that the sale of this property will occur on its contemplated terms, or at all.
During the three months ended June 30, 2023, we recorded impairment charges of $0.2 million related to our 421 W. 54th Street - Hit Factory property. We recorded impairment charges for this property because we determined that the carrying value exceeded our estimate of the net sale price of the property as of June 30, 2023. This property was sold in October 2023.
We are currently actively marketing certain properties for sale, and as a part of that process, we continue to monitor the properties for potential impairment.
Equity-Based Compensation
Equity-based compensation decreased $2.1 million to $0.2 million for the three months ended June 30, 2024 compared to $2.3 million for the three months ended June 30, 2023. These amounts are comprised of restricted share amortization expense and the amortization of our multi-year outperformance award granted to the Advisor in August 2020 (the “2020 OPP”). The 2020 OPP expired on August 18, 2023. The three months ended June 30, 2023 contained $2.1 million of equity-based compensation expenses related to the 2020 OPP, whereas the three months ended June 30, 2024 did not contain any amortization related to the 2020 OPP. See Note 11 — Equity-Based Compensation to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on the 2020 OPP and restricted shares of common stock.
General and Administrative Expenses
General and administrative expenses decreased to $2.0 million for the three months ended June 30, 2024 from $2.4 million for three months ended June 30, 2023. The decrease in general and administrative expenses was primarily attributable to (i) lower legal fees of approximately $0.3 million, (ii) a decrease in our insurances expenses of $0.1 million and (iii) a decrease of $0.1 million in other miscellaneous general and administrative expenses.
These decreases were partially offset by an increase of $0.1 million of total reimbursement expenses for administrative and personnel services provided by the Advisor, which were $0.9 million ($0.8 million related to salaries, wages, and benefits and $0.1 million related to administrative and overhead expenses) during the three months ended June 30, 2024 and $0.8 million, ($0.7 million related to salaries, wages, and benefits and $0.1 million related to administrative and overhead expenses) during the three months ended June 30, 2023.
Pursuant to our Advisory Agreement, reimbursement for administrative and overhead expenses and reimbursements for salaries, wages, and benefits are subject to annual limits of $3.0 million ($2.6 million before the three months ended March 31, 2024) related to salaries, wages, and benefits and $0.4 million related to administrative and overhead expenses. See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.
Depreciation and Amortization
Depreciation and amortization expense decreased to $5.2 million for the three months ended June 30, 2024 as compared to $6.7 million for the three months ended June 30, 2023. The decrease was primarily due to a lower depreciable asset base between periods primarily relating to the 1140 Avenue of the Americas impairment charge recorded in the three month period ending December 31, 2023. For more information please see our Annual Report on Form 10-K filed with the SEC on April 1, 2024.
35
Interest Expense
Interest expense increased to $5.2 million for the three months ended June 30, 2024, as compared to $4.7 million for the three months ended June 30, 2023. The increase in interest expense can partially be attributed to the maturity of our $49.5 million notional, SOFR based “pay-fixed” interest rate swap in April 2024. During the three months ended June 30, 2024 and 2023, our weighted-average outstanding debt balance was $399.5 million, and had a weighted-average effective interest rate of 4.90% in each period. All of our mortgage debt was either fixed rate or swapped to fixed rate until the maturity of our interest rate swap secured by our 9 Times Square mortgage loan in April 2024. Upon maturity of the interest rate swap in April 2024, the interest rate on the loan secured by that property reverted to a floating variable interest rate.
Comparison of Six Months Ended June 30, 2024 and 2023
As of June 30, 2024, we owned seven properties, all of which were acquired prior to January 1, 2021. Changes in our results of operations for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was primarily due to an increase in occupancy which increased rental revenue for previously vacant spaces. On October 12, 2023 we sold the Hit Factory for a contract sales price of $4.5 million. This property was classified as held-for-sale on our consolidated balance sheet as of September 30, 2023. The sole tenant terminated its lease early and vacated the space during the quarter ended June 30, 2018. The sale of this vacant property eliminated annual carrying costs of approximately $0.3 million associated with owning the property.
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders was $99.5 million for the six months ended June 30, 2024, as compared to $22.7 million for the six months ended June 30, 2023. The change in net loss income attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations in the sections that follow.
| Six Months Ended June 30, | Increase | |||||||||||||||||||
| (in thousands) | 2024 | 2023 | (Decrease) | |||||||||||||||||
| Revenue from tenants | $ | 31,235 | $ | 31,316 | $ | (81) | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Asset and property management fees to related parties | 3,830 | 3,872 | (42) | |||||||||||||||||
| Property operating | 16,843 | 16,774 | 69 | |||||||||||||||||
| Impairment of real estate investments | 84,724 | 151 | 84,573 | |||||||||||||||||
| Acquisition and transaction costs | — | — | — | |||||||||||||||||
| Equity-based compensation | 240 | 4,504 | (4,264) | |||||||||||||||||
| General and administrative | 4,765 | 5,620 | (855) | |||||||||||||||||
| Depreciation and amortization | 10,412 | 13,701 | (3,289) | |||||||||||||||||
| Total operating expenses | 120,814 | 44,622 | 76,192 | |||||||||||||||||
| Operating loss | (89,579) | (13,306) | (76,273) | |||||||||||||||||
| Other income (expenses): | — | |||||||||||||||||||
| Interest expense | (9,898) | (9,370) | (528) | |||||||||||||||||
| Other income | 18 | 19 | (1) | |||||||||||||||||
| Total other expense | (9,880) | (9,351) | (529) | |||||||||||||||||
| Net loss before income taxes | (99,459) | (22,657) | (76,802) | |||||||||||||||||
| Income tax expense | — | — | — | |||||||||||||||||
| Net loss and net loss attributable to common stockholders | (99,459) | (22,657) | (76,802) | |||||||||||||||||
Revenue from Tenants
Revenue from tenants decreased to $31.2 million for the six months ended June 30, 2024, from $31.3 million for the six months ended June 30, 2023. The decrease was primarily the result of lower reimbursable operating expenses in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
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Asset and Property Management Fees to Related Parties
Fees for asset and property management services paid to our Advisor and Property Manager were $3.8 million and $3.9 million for the six months ended June 30, 2024 and 2023, respectively. See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on fees incurred from our Advisor and Property Manager. The Advisor was paid in cash for the January, February and June 2024 base management fee, however, the Advisor elected to receive shares in lieu of cash for the March and May 2024 base management fee. Additionally, the Advisor elected to receive shares in lieu of cash for the April property management fee for the six months ended June 30, 2024. The Advisor elected to receive shares in lieu of cash for the January 2023 base management fee, however the remainder of the management fees in the six months ended June 30, 2023 were paid in cash. For accounting purposes these shares are issued using the closing price on date of issuance and the related expense was $1.6 million and $0.5 million for the six months ended June 30, 2024 and 2023, respectively.
Property Operating Expenses
Property operating expenses remained the same at $16.8 million for the six months ended June 30, 2024 and 2023 for the six months ended June 30, 2023. Property operating expenses for the six months ended June 30, 2024 primarily consisted of utility maintenance, real estate taxes, janitorial services, and other property expense related services.
Impairments of Real Estate Investments
During the six months ended June 30, 2024, we recorded an impairment charges of $84.7 million related to our 9 Times Square property. This mortgage had a principal balance of $49.5 million that was set to expire in April 2024 but has been extended to October of 2024 with an option to extend to January 2025 if certain conditions are met. The $84.7 million impairment, which represents the reduction of the carrying value of the property to its estimated fair value as determined by a purchase and sale agreement, executed in August 2024, to sell the property, pursuant to the terms of the amended mortgage agreement which encumbers the property (as further discussed in Note 4 — Mortgage Notes Payable, Net). We estimate the sale to be consummated no later than January 2025, although there can be no assurance that the sale of this property will occur on its contemplated terms, or at all.
During the six months ended June 30, 2023, we recorded impairment charges of $0.2 million related to our 421 W. 54th Street - Hit Factory property. We recorded impairment charges for this property because we determined that the carrying value exceeded our estimate of the net sale price of the property as of June 30, 2023. This property was sold in October of 2023.
We are currently actively marketing certain properties for sale, and as a part of that process, we continue to monitor the properties for potential impairment.
Equity-Based Compensation
Equity-based compensation decreased to $0.2 million for the six months ended June 30, 2024, as compared to $4.5 million for the six months ended June 30, 2023. These amounts are comprised of restricted share amortization expense and the amortization of our multi-year outperformance award granted under the 2020 OPP. The 2020 OPP expired on August 18, 2023. The six months ended June 30, 2023 contained $4.2 million of equity-based compensation expenses related to the 2020 OPP, whereas the six months ended June 30, 2024 did not contain any amortization related to the 2020 OPP. See Note 11 — Equity-Based Compensation to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on the 2020 OPP and restricted shares of common stock.
General and Administrative Expenses
General and administrative expenses decreased $0.8 million to $4.8 million for the six months ended June 30, 2024 compared to $5.6 million for the six months ended June 30, 2023. The decrease was primarily due to (i) lower legal fees of approximately $0.6 million, (ii) a decrease in other miscellaneous general and administrative expense of $0.3 million and (iii) a decrease of our insurance expense of $0.1 million in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
These decreases were partially offset by an increase of $0.2 million for total reimbursement expenses for administrative and personnel services provided by the Advisor. Such expenses were $2.1 million ($1.7 million were for salaries, wages, and benefits and $0.4 million related to administrative and overhead expenses) during the six months ended June 30, 2024 and were $1.9 million ($1.5 million were for salaries, wages, and benefits and $0.4 million related to administrative and overhead expenses) during the six months ended June 30, 2023.
Pursuant to our Advisory Agreement, reimbursement for administrative and overhead expenses and reimbursements for salaries, wages, and benefits are subject to annual limits of $3.0 million ($2.6 million before the three months ended March 31, 2024) related to salaries, wages, and benefits and $0.4 million related to administrative and overhead expenses. See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.
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Depreciation and Amortization
Depreciation and amortization expense decreased to $10.4 million for the six months ended June 30, 2024, compared to $13.7 million for the six months ended June 30, 2023. The decrease was primarily due to a lower depreciable asset base between periods primarily relating to the 1140 Avenue of the Americas impairment charge recorded in the three month period ending December 31, 2023. For more information please see our Annual Report on Form 10-K filed with the SEC on April 1, 2024.
Interest Expense
Interest expense increased to $9.9 million for the six months ended June 30, 2024 as compared to $9.4 million for the six months ended June 30, 2023. The increase in interest expense can partially be attributed to the maturity of our $49.5 million notional, SOFR based “pay-fixed” interest rate swap in April 2024. During the six months ended June 30, 2024 and 2023, our weighted average outstanding debt balance was $399.5 million, respectively, and had a weighted-average effective interest rate of 4.90% in each period. All of our mortgage debt was either fixed rate or swapped to fixed rate until the maturity of our interest rate swap secured by our 9 Times Square mortgage loan in April 2024. Upon maturity of the interest rate swap in April 2024, the interest rate on the loan secured by that property reverted to a floating variable interest rate.
Cash Flows from Operating Activities
The following table represents a reconciliation of our net cash provided by (used in) operations from our net loss for the three months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | Increase | |||||||||||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net loss | $ | (99,459) | $ | (22,657) | $ | (76,802) | ||||||||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||||||
| Depreciation and amortization | 10,412 | 13,701 | (3,289) | |||||||||||||||||
| Amortization of deferred financing costs | 763 | 771 | (8) | |||||||||||||||||
| Accretion of below- and amortization of above-market lease liabilities and assets, net | (112) | (9) | (103) | |||||||||||||||||
| Equity-based compensation | 240 | 4,504 | (4,264) | |||||||||||||||||
| Management fees paid/reinvested in common stock by the Advisor | 1,610 | 485 | 1,125 | |||||||||||||||||
| Impairments of real estate investments | 84,724 | 151 | 84,573 | |||||||||||||||||
| Changes in assets and liabilities: | — | |||||||||||||||||||
| Straight-line rent receivable | 123 | (84) | 207 | |||||||||||||||||
| Straight-line rent payable | 54 | 54 | — | |||||||||||||||||
| Prepaid expenses, other assets and deferred costs | 260 | (471) | 731 | |||||||||||||||||
| Accounts payable, accrued expenses and other liabilities | 2,657 | (246) | 2,903 | |||||||||||||||||
| Deferred revenue | (533) | (376) | (157) | |||||||||||||||||
| Net cash provided by (used in) operating activities | 739 | (4,177) | $ | 4,916 | ||||||||||||||||
The level of cash flows used in or provided by operating activities is affected by the volume of the restricted cash we are required to maintain, the timing of interest payments, the receipt of scheduled rent payments and the level of property operating expenses.
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Cash Flows from Investing Activities
The following table represents a reconciliation of our net cash provided by (used in) investing activities for the three months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | Increase | |||||||||||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Capital expenditures | (568) | (2,801) | $ | 2,233 | ||||||||||||||||
| Net cash provided by (used in) investing activities | (568) | (2,801) | $ | 2,233 | ||||||||||||||||
Cash Flows from Financing Activities
The following table represents a reconciliation of our net cash provided by (used in) financing activities for the three months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | Increase | |||||||||||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds from note payable to related parties | 150 | — | 150 | |||||||||||||||||
| Proceeds from Rights Offering, net (see Note 7) | — | 4,059 | (4,059) | |||||||||||||||||
| Redemption of fractional shares of common stock and restricted shares | — | (24) | 24 | |||||||||||||||||
| Common stock shares withheld upon vesting of restricted shares | — | (10) | 10 | |||||||||||||||||
| Net cash provided by (used in) financing activities | 150 | 4,025 | (3,875) | |||||||||||||||||
Liquidity and Capital Resources
Our principal demands for cash are to fund operating and administrative expenses, capital expenditures, tenant improvement and leasing commission costs related to our properties, our debt service obligations and, subject to capital availability, acquisitions. We did not make any new acquisitions or investments in the quarter ended June 30, 2024.
Cash, Cash Equivalents and Restricted Cash
As of June 30, 2024, we had cash and cash equivalents of $5.2 million as compared to $5.3 million as of December 31, 2023. Under the guarantee of certain enumerated recourse liabilities of the borrower under one of our mortgage loans, we are required to maintain a minimum net worth in excess of $175.0 million and minimum liquid assets (i.e. cash and cash equivalents) of $10.0 million, which includes cash and cash equivalents and restricted cash, which totaled $13.1 million as of June 30, 2024.
We had restricted cash of $7.9 million as of June 30, 2024 as compared to $7.5 million as of December 31, 2023. Our restricted cash balance includes cash sweeps for 1140 Avenue of the Americas of $1.6 million and $2.5 million, as of June 30, 2024 and December 31, 2023, respectively, and the remaining balance of restricted cash is comprised of various escrow accounts and other cash accounts with restricted uses. We are able to use a portion of our restricted cash for certain property operating expenses and capital expenditures. For certain property operating expenses and capital expenditures specifically related to our 1140 Avenue of the Americas property, lender approval is required to use any of the cash that is held in restricted cash accounts resulting from the breach of covenants on the loan secured by that property (see below). As a result, some of the property operating expenses and capital expenditures that will be paid with restricted cash may reside in accounts payable and accrued expenses on our consolidated balance sheet as of June 30, 2024.
Segregated Cash Accounts - Loan Covenant Breaches
The continuing adverse economic impacts since the COVID-19 pandemic have caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all, and could continue to have, an adverse effect on the amount of cash we receive from our operations and therefore our ability to fund operating expenses and other capital requirements. Beginning in the third and fourth quarters of 2020, the operating results at some of our properties, including our 1140 Avenue of the Americas and 8713 Fifth Avenue properties, were negatively impacted by the COVID-19 pandemic causing cash trap events under the non-recourse mortgages, where excess operating cash flow from the property, if any, after debt service was held in restricted cash as additional collateral for the loan, for those properties to be triggered. Thus, we were not able to use excess cash flow, if any, from these properties to fund operating expenses at our other properties and other capital requirements during the quarter ended June 30, 2024.
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As of June 30, 2024, we are operating under two cash traps at both 1140 Avenue of the Americas and 8713 Fifth Avenue, which together, represent 23% of the rentable square feet in our portfolio as of June 30, 2024. As of June 30, 2024 and December 31, 2023, there was $1.6 million and $2.5 million, respectively, of cash maintained in a segregated and restricted cash account resulting from the breach of covenants on the loan secured by our 1140 Avenue of the Americas property. The remaining cash that is classified as restricted cash on the consolidated balance sheet are held in escrow accounts. As of June 30, 2024 our 8713 Fifth Avenue property has not generated excess cash after debt service and there is no related cash maintained in a segregated and restricted cash account for that property. We may not access the cash from the 1140 Avenue of the Americas property without lender approval unless and until the various breaches have been cured. Excess cash generated by the 1140 Avenue of the Americas property continues to be deposited in a separate cash management account until the borrower under the loan is able to comply with all of the applicable covenants.
Additionally, as of June 30, 2024, we are operating under two cash sweeps at our 9 Times Square and 400 E. 67th Street/200 Riverside Blvd. properties. Under these lease sweep periods, any excess cash generated, if any, is to be held in a segregated reserve account controlled by the lender as additional collateral. This swept cash is classified as restricted cash on our consolidated balance sheet. As of June 30, 2024 we had $2.5 million retained by the lender in a restricted cash account for our 400 E. 67th Street/200 Riverside Blvd. property. For additional information please see Note 4 — Mortgage Notes Payable to our consolidated financials statements included in this Quarterly Report on Form 10-Q.
Financings
We define our leverage as the ratio between our net debt, which is calculated as our gross debt of $399.5 million less cash and cash equivalents of $5.2 million divided by our gross asset value, which is calculated as the carrying value of our total assets of $598.9 million plus our accumulated depreciation and amortization of $106.6 million. As of June 30, 2024, our net debt was $394.3 million, our gross asset value was $705.5 million and our leverage was 55.9%.
As of June 30, 2024 our gross borrowings totaled $399.5 million, which bore interest at a weighted-average annual rate of 4.90% and had a weighted-average maturity of 2.7 years. All of our properties are encumbered under mortgage notes payable, and are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable, unless the existing indebtedness associated with the property is satisfied.
We do not currently have a commitment for a corporate-level revolving credit facility or any other corporate-level indebtedness, and there can be no assurance we would be able to obtain corporate-level financing on favorable terms, or at all.
Mortgage Notes Payable
We had six mortgage loans secured by our seven properties with an aggregate balance of $399.5 million as of June 30, 2024 with a weighted-average effective interest rate of 4.90%. All our mortgage loans bear interest at a fixed rate, except for our 9 Times Square mortgage note payable which bears interest at an annual variable interest rate of 30-day SOFR plus 2.60%. The 9 Times Square mortgage note was effectively fixed at 3.73% by an interest rate swap derivative instrument prior to its maturity in April 2024.
Future scheduled principal payments on our mortgage notes payable for the remainder of 2024 total $49.5 million, which represents the balance of our 9 Times Square mortgage note. The 9 Times Square mortgage note contains the option by us to extend the maturity of this mortgage note payable to January 2025, subject to certain conditions. Unless the 9 Times Square mortgage note payable is extended, we would not have any future scheduled principal payments for the year ended December 31, 2025.
Debt Covenant Non-Compliance
1140 Avenue of the Americas
We have breached both a debt service coverage provision and a reserve fund provision under our non-recourse mortgage secured by the 1140 Avenue of the Americas property in each of the last 16 quarters ended June 30, 2024. The principal amount of the loan was $99.0 million as of June 30, 2024. These breaches are not events of default, rather they require excess cash, if any, generated at the property (after paying operating costs, debt service and capital/tenant replacement reserves) to be held in a segregated account as additional collateral under the loan. The covenants for this loan may be cured if we satisfy the required debt service coverage ratio for two consecutive quarters, whereupon the additional collateral will be released. We can remain subject to this reserve requirement through maturity of the loan without further penalty or ramifications. As of June 30, 2024 and December 31, 2023 we had $1.6 million and $2.5 million in cash that is retained by the lender and maintained in restricted cash on our consolidated balance sheet as of those dates.
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8713 Fifth Avenue
We have breached a debt service coverage ratio covenant under the non-recourse mortgage secured by 8713 Fifth Avenue in each of the last 16 quarters ended June 30, 2024. The principal amount for the loan was $10.0 million as of June 30, 2024. The breach of this covenant did not result in an event of default but rather triggered an excess cash flow sweep period. The excess cash flow sweep period will continue until the covenant breaches are cured in accordance with the terms of the loan agreement. This property has not generated any excess cash since the breach occurred and thus no cash has ever been trapped related to this property.
Additionally, in the event that the debt service coverage ratio covenant remains in breach at or below the current level for two consecutive calendar quarters and the lender reasonably determines that such breach is due to the property being imprudently managed by the current manager, the lender has the right, but not the obligation, to require that we replace the current manager with a third party manager chosen by us.
Cash Sweep Events
400 E. 67th Street/200 Riverside Blvd.
We entered a lease sweep period under the non-recourse mortgage secured by 400 E. 67th Street/200 Riverside Blvd. in the six months ended June 30, 2024, resulting from a near-maturity lease with a major tenant at the property set to expire in the third quarter of 2024. The principal amount for the loan was $50.0 million as of June 30, 2024. Under the loan agreement, a lease sweep period is triggered when (i) the date that is twelve months prior to the end of the term of the major lease, (ii) the date required by the major tenant to give notice of its exercise of a renewal option, (iii) any major tenant lease is surrendered or terminated prior to the expiration date, (iv) if the major tenant discontinues its operations and the major tenants long term debt is not rated lower than investment grade, (v) any material default under the major tenant’s lease, (vi) any major tenant insolvency proceeding. Under the lease sweep period, any excess cash generated, if any, is to be held in a segregated reserve account controlled by the lender as additional collateral.
As of June 30, 2024 we had $2.5 million retained by the lender in a restricted cash account on our consolidated balance sheet. We may exit the lease sweep period when the major tenant executes a renewal or extension option beyond the terms described above.
9 Times Square
On April 29, 2024, we entered a cash sweep period under the non-recourse mortgage secured by the 9 Times Square asset pursuant to an amendment which, among other things, extends the maturity of the loan from April 2024 to October 2024. The amendment provides that Excess Cash Flow (as defined in the Amendment) shall be deposited to an account maintained by the Administrative Agent within ten (10) calendar days of the end of each month. As of June 30, 2024, we had $25,000 cash retained by the lender in a restricted cash account on our consolidated balance sheet.
Other Debt Covenants
We were in compliance with the remaining covenants under our other mortgage notes payable as of June 30, 2024, and we continue to monitor compliance with those provisions. If we experience additional lease terminations, due to tenant bankruptcies or otherwise, or tenants placed on a cash basis revenue recognition continue to not pay rent, it is possible that certain of the covenants on other loans may be breached and we may also become restricted from accessing excess cash flows from those properties. Similar to the loans discussed above, our other mortgages also contain cash management provisions that are not considered events of default, and as such, acceleration of principal would only occur upon an event of default.
Note Payable to Related Parties
Pursuant to the terms of a promissory note executed during the three months ended June 30, 2024 between us and the Advisor, we borrowed $0.15 million from the Advisor for working capital needs, which was recorded as a note payable to related parties as of June 30, 2024 on our consolidated balance sheet. The promissory note bore interest at an annual rate of 9.39% and would have been callable on or after September 26, 2024. Subsequent to June 30, 2024, we fully repaid all amounts outstanding under the promissory note (see Note 14 — Subsequent Events for additional information). Amounts repaid under the promissory note may not be reborrowed.
Rights Offering
In February 2023, we raised gross proceeds of $5.0 million ($4.1 million of net proceeds) from our Rights Offering, which entitled holders of rights to purchase 0.20130805 of a share of our Class A common stock for every right held at a subscription price of $12.95 per whole share. As a result, we issued 386,100 shares of our Class A common stock subscribed for in our Rights Offering on February 27, 2023. The net proceeds were used for general corporate purposes.
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Related Party Payments Made with Common Stock Issuances in Lieu of Cash
During the year ended December 31, 2023 and the six months ended June 30, 2024, we were also able to preserve cash through an arrangement with our Advisor. Pursuant to the Advisory Agreement, the Advisor has the option to elect to receive shares of our common stock in lieu of cash for the asset management, property management, and administrative services it provides us with. For the months described below, the Company paid related party fees in shares in lieu of cash. For more information see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.
A summary of amounts invested by the Advisor or Bellevue during the months ended June 30, 2024 and the year ended December 31, 2023 is as follows:
| Period of Issuance | Recipient | Agreement | Shares Issued | Closing Share Price | |||||||||||||||||||||||||
| January 2023 | The Advisor | Advisory Agreement | 31,407 (1) | $ | 15.44 (1) | ||||||||||||||||||||||||
| March 2024 | The Advisor | Advisory Agreement | 70,607 | $ | 7.54 | ||||||||||||||||||||||||
| April 2024 | The Advisor | Advisory Agreement | 68,308 | $ | 6.58 | ||||||||||||||||||||||||
| April 2024 | The Advisor | Property Management Agreement | 22,857 | $ | 6.58 | ||||||||||||||||||||||||
| May 2024 | The Advisor | Advisory Agreement | 83,543 | $ | 5.72 | ||||||||||||||||||||||||
__________
(1)Retroactively adjusted for the effects of the Reverse Stock Split (see Note 1 for additional information to our consolidated financials statements included in this Quarterly Report on Form 10-Q).
Dividend Policy
Through the six months ended June 30, 2022, we paid dividends to our common stockholders at our current annual rate of $3.20 per share of Class A common stock (adjusted for the Reverse Stock Split), or $0.80 per share (adjusted for the Reverse Stock Split) on a quarterly basis. The board subsequently decided not to declare any further dividends for the subsequent periods through June 30, 2024. There is no assurance as to when or if the board will declare future dividends or the amount of any future dividends that may be declared.
Leasing Activity and Occupancy
We had an increase in occupancy level to 85.9% across our portfolio as of June 30, 2024, as compared to 86.7% as of December 31, 2023. The changes in occupancy were as follows:
•Occupancy at 9 Times Square decreased to 70.6% as of June 30, 2024 as compared to 71.2% as of December 31, 2023. The decrease was primarily due to a lease amendment and relocation of a tenant to a smaller suite.
•Occupancy at 123 William Street decreased to 88.8% as of June 30, 2024 compared to 91.4% as of December 31, 2023. The decrease in occupancy was due to a lease amendment and a tenant occupying less space during the six months ended June 30, 2024.
•Occupancy at 1140 Avenue of the Americas increased to 79.3% as of June 30, 2024 as compared to 77.1% as of December 31, 2023. The increase in occupancy was the result of a new lease signed in the six months ended June 30, 2024
•Occupancy at our properties located at 196 Orchard Street, 400 E. 67th Street/200 Riverside Blvd. was at 100% as of June 30, 2024 and December 31, 2023.
•Occupancy at 8713 Fifth Avenue remained the same at 88.6% as of June 30, 2024 and December 31, 2023.
We continue to focus on increasing occupancy of the portfolio by seeking new and replacement tenants for leases that expired or otherwise have been terminated. We believe that certain market tenant incentives we have used and expect to continue to use, including free rent periods and tenant improvements, will support our occupancy rate and extend the average duration of our leases upon commencement of executed leases. These incentives have delayed, and may delay or reduce cash flow in the future for some period. Our ability to generate net cash from our property operations depends, in part on the amount of additional cash we can generate through new or renewal leases, which is not assured, and on our ability to access any excess cash we are able to generate from properties that are encumbered by mortgages where a cash trap event has occurred (see below for more details), which also is not assured.
Capital Expenditures
For the six months ended June 30, 2024, we funded an aggregate of $0.6 million of capital expenditures primarily for tenant and building improvements at 123 William Street, 9 Times Square, 1140 Avenue of the Americas, and 8713 Fifth Avenue. We may invest in additional capital expenditures to further enhance the value of our properties. Additionally, many of our lease agreements with tenants include provisions for tenant improvement allowances.
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We expect the amount we invest in capital expenditures during the full year ending December 31, 2024, including amounts we expect to fund under new or replacement leases, will be lower when compared to the amount invested during the year ended December 31, 2023. However, this could change if management deems necessary. We funded our capital expenditures during the three months ended June 30, 2024 with cash on hand consisting of proceeds from previous offerings/financings and, cash retained from the Advisor by electing to receive shares of our Class A common stock in lieu of cash for its base management fee for March 2024.
Acquisitions and Dispositions
To further augment our liquidity, we may also further dispose of properties. We had no acquisitions or dispositions during the three or six months ended June 30, 2024 or 2023.
We have executed one purchase and sale agreement, pursuant to the terms of an amendment to the mortgage note payable which encumbers the property, to dispose of our 9 Times Square property for a contract purchase price of $63.5 million, which we expect to occur no later than January 2025. There can be no assurance that the sale of this property will be completed on its contemplated terms, or at all.
Non-GAAP Financial Measures
This section discusses the non-GAAP financial measures we use to evaluate our performance, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) as well as adjusted EBITDA.
EBITDA and adjusted EBITDA are both non-GAAP metrics and should not be construed to be more relevant or accurate than other metrics calculated and presented in accordance with GAAP, including net loss, in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than non-GAAP metrics.
We consider EBITDA and adjusted EBITDA useful indicators of our performance. Because these metrics’ calculations exclude such factors as depreciation and amortization of real estate assets, interest expense, impairment charges, equity-based compensation, 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), these metrics’ presentations facilitate comparisons of operating performance between periods and between other companies that use these measures.
As a result, we believe that the use of these non-GAAP metrics together with the required GAAP presentations, provide a more complete understanding of our performance, including relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. However, these non-GAAP metrics are not indicative of cash available to fund ongoing cash needs, including the ability to pay cash dividends and capital expenditures. Investors are cautioned that these non-GAAP metrics should only be used to assess the sustainability of our operating performance excluding these activities, as they exclude certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
We define adjusted EBITDA as net loss excluding (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization expense, (iv) impairment charges, (v) interest income and other income or expense, (vi) gains or losses on debt extinguishment, (vii) equity-based compensation expense, (vii) acquisition and transaction costs, (viii) gain or loss on asset sales and (ix) and expenses paid with issuances of our common stock in lieu of cash.
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The below table presents a reconciliation of our EBITDA and our adjusted EBITDA from net loss for the three months ended June 30, 2024 and 2023:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| (in thousands) | June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||||
| Net loss and net loss attributable to common stockholders (in accordance with GAAP) | $ | (91,851) | $ | (10,899) | $ | (99,459) | $ | (22,657) | ||||||||||||||||||
| Interest expense | 5,201 | 4,707 | 9,898 | 9,370 | ||||||||||||||||||||||
| Tax expense (benefit) | — | — | — | — | ||||||||||||||||||||||
| Depreciation and amortization | 5,151 | 6,749 | 10,412 | 13,701 | ||||||||||||||||||||||
| EBITDA | (81,499) | 557 | (79,149) | 414 | ||||||||||||||||||||||
| Impairment of real estate investments | 84,724 | 151 | 84,724 | 151 | ||||||||||||||||||||||
| Equity-based compensation | 186 | 2,304 | 240 | 4,504 | ||||||||||||||||||||||
| Other income | (9) | (10) | (18) | (19) | ||||||||||||||||||||||
| Management fees paid in common stock to the Advisor in lieu of cash | 1,077 | — | 1,610 | 485 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 4,479 | $ | 3,002 | $ | 7,407 | $ | 5,535 | ||||||||||||||||||
Dividends
As noted above, we have not paid dividends to stockholders since those that were declared and paid through the six months ended June 30, 2022.
Decisions regarding the frequency and amount of any future dividends we pay on our Class A common stock are entirely at the discretion of our board of directors. Our ability to pay dividends in the future will depend on our ability to operate profitably and to generate sufficient cash flows from the operations. We cannot guarantee that we will be able to pay dividends on a regular basis on our Class A common stock or any other class or series of stock we may issue in the future. There is no assurance we will reinstitute the payment dividends at the previous rate, or at all. The amount of dividends we may pay to our stockholders is determined by our board of directors based on several factors, including funds available for dividends, our financial condition, provisions in our loans and any agreement we are party to that may restrict our ability to pay dividends or repurchase shares, capital expenditure requirements, as applicable, and requirements of Maryland law.
Previous Election as a REIT
We elected to be taxed as a REIT, effective commencing with our taxable year ended December 31, 2014. Our board subsequently authorized the termination of our REIT election which became effective on January 1, 2023. We believe that during the taxable year ended December 31, 2014 through December 31, 2022, we were organized and operated in a manner so that we qualified as a REIT. To qualify as a REIT during that period, we were required to 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 comply with several other organizational and operational requirements. As a REIT, we were generally not be subject to U.S. federal corporate income tax on the portion of our REIT taxable income that we distributed to our stockholders. A tax loss for a particular year eliminated the need to distribute REIT taxable income to meet the 90% distribution requirement for that year and minimized or eliminated the need to pay distributions to meet the distribution requirement in one or more subsequent years. We had a loss for tax purposes in the year ending December 31, 2022 and therefore there was no REIT taxable income requiring distribution to maintain our qualification as a REIT for the year ended December 31, 2022.
Inflation
We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of June 30, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.0%. To help mitigate the adverse impact of inflation, approximately 83% of our leases with our tenants contain rent escalation provisions which increase the cash rent that is due under these leases over time by an average cumulative increase of 2.2% per year. These provisions generally increase rental rates during the terms of the leases either at fixed rates or other measures. As of June 30, 2024, based on straight-line rent, approximately 83% are fixed rate, scheduled escalation increases recorded on a straight-line basis, and 17% do not contain any escalation provisions.
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In addition, we may be required to pay costs for maintenance and operation of properties which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation. Currently, the impact of inflation has had an immaterial impact to operating costs. However, to the extent such costs exceed the tenants base year, certain but not all of our 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. As the costs of general goods and services continue to rise, we may be adversely impacted by increases in general and administrative costs due to overall inflation.
Related-Party Transactions and Agreements
Please see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have had 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.
There has been no material change in our exposure to market risk during the six months ended June 30, 2024. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Item 4. Controls and Procedures.
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of June 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2024, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
As of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to any material pending legal proceedings.
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Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, as amended and, we direct your attention to those risk factors:
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Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchase of Equity Securities.
Recent Sales of Unregistered Securities
None.
Use of Proceeds from Sales of Registered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Trading Plans
During our last fiscal quarter, no director or officer, as defined in Rule 16a-1(f), adopted terminated
Item 6. Exhibits.
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the six months ended June 30, 2024 (and are numbered in accordance with Item 601 of Regulation S-K).
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EXHIBITS INDEX
| Exhibit No. | Description | |||||||
| Articles of Amendment and Restatement, dated July 17, 2018 | ||||||||
3.2 (2) | Articles of Amendment relating to corporate name change, dated March 13, 2019 | |||||||
| Articles of Amendment relating to reverse stock split, dated August 5, 2020 | ||||||||
| Articles of Amendment relating to par value decrease and common stock name change, dated August 5, 2020 | ||||||||
| Articles Supplementary classifying and designating Class B common stock, dated March 16, 2022 | ||||||||
| Articles Supplementary classifying and designating Series A Preferred Stock, dated August 17, 2020 | ||||||||
Articles Supplementary reclassifying Class B common stock into Class A common stock, dated March 16, 2022 | ||||||||
| Articles of Amendment relating to Reverse Stock Split (2023), dated January 10, 2023 | ||||||||
| Articles of Amendment relating to par value decrease (2023), dated January 10, 2023 | ||||||||
| Articles of Amendment relating to name change (2023), dated January 18, 2023 | ||||||||
| Second Amended and Restated Bylaws of American Strategic Investment Co. | ||||||||
| Third Amendment, dated as of January 23, 2023, to the Amended and Restated Rights Agreement, as amended by Amendment No. 1, dated August 12, 2021, and Amendment No. 2, dated August 10, 2022, between American Strategic Investment Co. and Computershare Trust Company, N.A. as Rights Agent | ||||||||
| Certificate of Notice of American Strategic Investment Co., dated January 18, 2023 | ||||||||
| Second Agreement to Term Loan Agreement, dated as of April 29, 2024 between ARC NYC 570SEVENTH, LLC,as borrower, the Company, Capital One, National Association, as administrative agent, and the lenders party thereto. | ||||||||
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.INS * | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH * | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL * | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF * | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB * | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE * | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 * | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
_______
* Filed herewith
+ Furnished herewith
(1)Filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on August 14, 2018.
(2)Filed as an exhibit to our Annual Report on Form 10-K filed with the SEC on March 15, 2019.
(3)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on August 5, 2020.
(4) Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on August 18, 2020.
(5)Filed as an exhibit to our Annual Report on Form 10-K filed with the SEC on March 18, 2022.
(6)Filed as an exhibit to our Form 8-K filed with the SEC on January 12, 2023.
(7)Filed as an exhibit to our Form 8-K filed with the SEC on January 24, 2023.
(8)Filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on August 11, 2023.
(9)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on April 30, 2024.
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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.
| AMERICAN STRATEGIC INVESTMENT CO. | ||||||||
| By: | /s/ Michael Anderson | |||||||
| Michael Anderson | ||||||||
| Chief Executive Officer (Principal Executive Officer) | ||||||||
| By: | /s/ Michael LeSanto | |||||||
| Michael LeSanto | ||||||||
| Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||||||
Dated: August 9, 2024
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