Gyrodyne, LLC — Q3 2020 Form 10-Q
Reporting period: Quarter ended September 30, 2020; financial statement changes and operating cash-flow information are principally for the nine months ended that date. Gyrodyne is winding down its real-estate business and reports on the liquidation basis of accounting, not as a continuing operating company.
Business context and financial position
The company manages and pursues entitlements for two remaining New York properties: the Flowerfield industrial park and undeveloped land in Suffolk County, and the Cortlandt Manor medical office property in Westchester County. It intends to sell its real estate, settle liabilities, distribute remaining proceeds to shareholders, and dissolve.
| Metric | September 30, 2020 | December 31, 2019 |
|---|---|---|
| Real estate held for sale | $43.34 million | $48.27 million |
| Cash and cash equivalents | $1.32 million | $2.21 million |
| Restricted cash | $169,000 | None reported |
| Total assets | $45.00 million | $50.59 million |
| Loan payable | $4.74 million | $3.78 million |
| Total liabilities | $17.49 million | $19.22 million |
| Net assets in liquidation | $27.50 million | $31.37 million |
| Estimated liquidation value per share | $18.55 | $21.16 |
Management’s liquidation estimates use current asset values and estimated settlement costs. The company does not present conventional revenue, profit, margin, or cash-flow statements under this accounting basis; the filing does not provide a clear quarterly revenue or net-income figure. For the nine months, it reports $1.82 million of rent and reimbursements, $1.13 million of property operating costs, and $1.66 million of corporate expenditures.
Changes and liquidity
- Net assets in liquidation fell $3.86 million, or $2.61 per share, from year-end. The filing attributes the decline mainly to a $4.93 million reduction in estimated real-estate liquidation value, partly offset by a $1.07 million favorable remeasurement of assets and liabilities.
- The Cortlandt plan changed from including residential units to medical-office and limited retail uses; management estimated this change reduced property value by about $2.73 million. A further approximately $2.20 million decline was attributed to pandemic-related market weakness at Flowerfield.
- Loan payable increased by about $962,000. Management reported $961,865 of proceeds from available debt facilities during the nine months. It also reported $2.39 million available under credit facilities, including $800,000 usable only for certain capital improvements, and stated it was in compliance with loan covenants.
- The company received an $82,100 Paycheck Protection Program loan at 1% interest and expected to seek forgiveness in Q4 2020; forgiveness was not assured.
- Management said rental income net of property costs is below combined general and administrative, capital, and entitlement costs, producing a net cash use before property-sale proceeds.
Outlook, transactions, and risks
- Management estimated net assets in liquidation of $27.50 million, or $18.55 per share, based on 1,482,680 shares. Separately, the Board approved a good-faith estimate of entitlement-enhanced distributions of $24.6–$30.0 million, or $16.59–$20.23 per share. This speculative range assumes, among other things, successful entitlements and that disclosed sale agreements close; it does not replace the reported liquidation-basis estimate.
- The company anticipated completing liquidation by December 31, 2021, but disclosed that entitlement or approval delays could extend the process, potentially to the end of 2022. It estimated a further $1.19 million of entitlement costs through the expected liquidation period; about $334,000 was deferred until a qualifying lot sale.
- Sale agreements included $16.8 million for a 9-acre Flowerfield parcel and $5.72 million for a 4.5-acre Cortlandt parcel. A separate 5-acre parcel was under agreement for $500,000, with management anticipating a December 2020 closing. These transactions were subject to contractual conditions and approvals; the filing does not establish that they had closed by September 30.
- COVID-19 could affect tenant collections, property values, sale timing, and government entitlement reviews. The company deferred about $80,750 of rent for affected tenants and expected collection under alternate arrangements. Small businesses and nonprofits represented about 37% of projected 2020 rental revenue; three largest tenants generated approximately 24%, 21%, and 9% of nine-month rental income.
- Key uncertainties include property-sale prices, municipal approvals and permitted uses or density, real-estate market conditions, entitlement and liquidation costs, and potential liabilities. The filing cautions that actual proceeds and distribution timing may differ materially from estimates.
Most important facts for investors to verify
- Progress and final terms of the Flowerfield and Cortlandt sale agreements, including required approvals and actual closing proceeds.
- Entitlement decisions, resulting permitted uses and density, and whether the anticipated approval and liquidation timelines remain achievable.
- Updated real-estate valuations, cash and credit availability, debt repayment needs, and whether the PPP loan was forgiven.
- Actual rent collections, tenant renewals or departures, and the effect of COVID-19 on property cash flows and market values.
- Changes in estimated liquidation costs, contingent liabilities, and the gap between reported net assets per share and eventual shareholder distributions.