Gyrodyne, LLC — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Gyrodyne is liquidating and reports under the liquidation basis of accounting; its principal assets are Flowerfield, a 63-acre property that includes an industrial park, and the 13.8-acre Cortlandt Manor property.
Financial position and key metrics
| Metric | March 31, 2024 | December 31, 2023 |
|---|---|---|
| Real estate held for sale | $53.78 million | $53.78 million |
| Cash and cash equivalents | $7.53 million | $3.49 million |
| Total assets | $61.48 million | $57.40 million |
| Total liabilities | $26.09 million | $26.68 million |
| Loans payable | $11.39 million | $10.98 million |
| Net assets in liquidation | $35.39 million | $30.72 million |
| Estimated net assets per common share | $16.09 | $19.51 |
Traditional revenue, operating income, net income, and margin figures are not presented in the filing’s liquidation-basis financial statements. For the quarter, the filing reports $778,447 of rents and tenant reimbursements, $504,358 of property operating costs, and $274,089 of net operating income. It does not provide a conventional cash-flow statement.
Cash increased by approximately $4.03 million from year-end, primarily reflecting the rights offering. The statement of changes in net assets shows a $4.67 million increase, comprising $4.42 million of net share issuance and $247,297 of asset and liability remeasurement; reported real estate value did not change.
Material changes and financing
- The March rights offering issued 625,000 shares at $8 per share, raising $5.0 million gross and approximately $4.4 million net after about $600,000 of expenses. Subscriptions exceeded the offered shares. Shares outstanding were 2,199,308 as of May 10, 2024, versus 1,574,308 at December 31, 2023.
- The offering increased total net assets but reduced estimated net assets per share. The company attributes approximately $3.39 per share of the decline to issuing shares at a discount to pro forma year-end net assets.
- Total debt was $11.39 million. The company reported compliance with covenants on its two Flowerfield credit lines. Debt includes loans secured by Flowerfield and Cortlandt Manor, a $1.5 million loan bearing interest at Prime plus 1.5%, and a vendor balance converted to a sale-contingent loan. Reported maturities extend through 2029.
- Accounts payable declined to $2.08 million from $2.64 million; accrued liabilities rose to $1.74 million from $1.70 million. The estimated liquidation and operating costs liability, net of estimated receipts, declined to $10.62 million from $11.11 million.
- Leasing activity included three renewals covering approximately 1,700 square feet and about $25,000 in annual revenue, and four terminations covering approximately 5,300 square feet and about $46,000 in annual revenue.
Outlook, risks, and unusual items
- Management’s plan is to pursue entitlements, market the properties, sell them, settle obligations, distribute remaining proceeds, and dissolve the company. JLL Capital Markets was retained on January 5, 2024 to market both properties.
- Management estimates liquidation could be completed by year-end 2025. It anticipates Flowerfield subdivision approval in the second half of 2024 and Cortlandt Manor subdivision and site-plan approvals around mid-2025, subject to contract timing and regulatory processes. These are estimates, not assured deadlines.
- Flowerfield’s preliminary eight-lot subdivision approval is challenged in an Article 78 proceeding. A February 6, 2024 court order dismissed claims brought by some petitioners but allowed claims by three individuals and a neighborhood organization to proceed; merits briefing remains. The proceeding could delay approvals and sales, and an appeal could extend the timetable.
- Cortlandt Manor received Medical Oriented Zoning District designation for 154,000 square feet of total density, including 150,000 square feet of medical use and 4,000 square feet of retail use. Final subdivision and site-plan approvals remain outstanding.
- The company estimates approximately $1.16 million of additional entitlement costs through the anticipated liquidation date. Estimated liquidation and operating costs net of receipts total $10.62 million; these estimates depend on sale timing, operating performance, legal costs, and other assumptions.
- Management estimates net assets of $35.39 million, or $16.09 per share, and an approximately equivalent cash amount available for future distribution after asset sales and obligations, before any interim distributions. This estimate is not a guaranteed distribution; the company warns actual property proceeds, costs, liabilities, timing, and shareholder distributions may differ materially.
- Property values use estimates and valuation inputs that include significant unobservable assumptions. The company cautions that entitlement spending may not increase sale values enough to offset its costs. Other risks include commercial real estate conditions, higher interest rates and inflation, regulatory delays, remote work and telemedicine effects on occupancy and rents, and concentration among major tenants. The three largest tenants accounted for approximately 25%, 22%, and 9% of Q1 rental income.
- The company remains subject to a 2015 settlement requiring arm’s-length property sales at or above 2014 appraised values. Management stated that the remaining properties’ values exceeded those thresholds at quarter-end.
Important facts for investors to verify
- Progress and outcome of the remaining Article 78 claims, including any appeal, and the effect on Flowerfield approvals and sale timing.
- Whether expected Flowerfield and Cortlandt Manor approvals and property sales can be achieved within the year-end 2025 liquidation estimate.
- Realized sale proceeds versus the $53.78 million estimated real estate value, and how valuation assumptions and entitlement costs affect proceeds.
- Cash needs, debt repayment and other liabilities, including deferred vendor balances, litigation expenses, and retention bonuses, before any shareholder distributions.
- Actual distributions per share versus the current $16.09 estimate, which is materially below the $19.51 year-end estimate following the rights offering and is not assured.