Gyrodyne, LLC — Q2 2019 Form 10-Q
Reporting period: Quarter ended June 30, 2019. The financial statements and management discussion primarily report the six months ended June 30, 2019. Gyrodyne is liquidating and uses liquidation-basis accounting; it manages medical-office and industrial properties while pursuing entitlements and property sales.
Financial position and key metrics
| Metric | June 30, 2019 | December 31, 2018 |
|---|---|---|
| Total assets | $38.47 million | $39.38 million |
| Total liabilities | $12.04 million | $12.53 million |
| Net assets in liquidation | $26.43 million | $26.85 million |
| Cash and cash equivalents | $1.99 million | $3.05 million |
| Loan payable | $2.28 million | $1.10 million |
| Real estate held for sale | $36.20 million | $36.20 million |
- Estimated liquidation distribution was $17.82 per share, down $0.29 from $18.11 at year-end 2018. Net assets decreased $419,750 during the six months, entirely reported as remeasurement of assets and liabilities.
- The filing does not provide conventional revenue, profit, margin, or cash-flow-statement figures; under liquidation accounting, those statements are not presented. It estimates $0.16 million of net rental operating cash flow over the remaining liquidation period.
- Estimated gross real-estate sale proceeds are $36.20 million; estimated selling costs are $2.44 million. The liquidation estimate also includes $1.96 million of retention bonuses, $1.48 million of final liquidation costs, and $1.18 million of remaining entitlement costs.
Material changes and operating activity
- Cash fell by approximately $1.06 million from year-end, while debt increased by $1.18 million, reflecting a further draw on the tenant-improvement credit line.
- For the six months, the company reported approximately $794,000 of entitlement costs, $494,732 of real-estate capital expenditures excluding entitlement costs, and $92,926 of costs to secure credit lines.
- Leasing activity included three new leases and seven renewals. Five lease terminations represented approximately 7,700 square feet and $173,800 in annual revenue; one termination was part of the plan to prepare Cortlandt Manor for development-oriented sale.
- The three largest tenants generated approximately 23%, 21%, and 6% of rental income, respectively.
Outlook, risks and contingencies
- Management anticipates completing liquidation by June 30, 2020, but the timing and amount of distributions are uncertain and depend on property sales, entitlement approvals, costs, and settlement of liabilities. Management says available cash and credit facilities are expected to fund the process over the next twelve months.
- The company expects to spend approximately $1.18 million on further entitlements, including about $930,000 at Flowerfield and $250,000 at Cortlandt Manor. It intends to sell the properties rather than develop them and may consider offers before completing entitlement work.
- Flowerfield’s subdivision and Cortlandt Manor’s proposed Medical Oriented District remain subject to municipal review and environmental processes. Delays, unfavorable decisions, market conditions, or entitlement costs exceeding resulting value increases could reduce or delay distributions.
- Two secured, non-revolving facilities are described, each with a maximum commitment of $3 million. Interest-only rates have a 6.5% floor; the filing states a 4.50% rate would currently apply in the permanent phase. Both are secured by approximately 31.8 acres at Flowerfield. The company reported covenant compliance and anticipates revisiting loan terms after subdivision completion.
- A court-approved settlement requires property sales to be arm’s-length and at or above December 2014 appraised values. Remaining unsold properties’ aggregate appraised value was reported as $8.40 million above those values at June 30, 2019. Management considers other ordinary-course legal proceedings immaterial.
- Property valuations rely substantially on management estimates and Level 3 inputs; actual sale proceeds, costs, and distributions may differ materially. The filing reports disclosure controls and internal control over financial reporting as effective.
Important facts for investors to verify
- Whether the $17.82-per-share liquidation estimate remains supported by realizable sale values and the assumptions underlying estimated costs and timing.
- Progress and outcomes of Flowerfield and Cortlandt Manor entitlement, subdivision, and environmental-review processes.
- Actual property-sale terms, including compliance with the settlement’s appraisal-price requirement, and the remaining balance and repayment terms of secured borrowings.
- Changes in tenant occupancy, rental receipts, tenant concentration, and retention-bonus or other contingent obligations.