Gyrodyne, LLC — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Gyrodyne is managing and selling its remaining real estate, pursuing entitlements to enhance property values, and intends to distribute remaining proceeds and dissolve. It reports under the liquidation basis of accounting; conventional operating statements and cash-flow statements are therefore not presented.
Financial position and key metrics
| Metric | March 31, 2018 | December 31, 2017 |
|---|---|---|
| Real estate held for sale | $33.02 million | $33.02 million |
| Cash and cash equivalents | $4.64 million | $5.27 million |
| Total assets | $37.89 million | $38.38 million |
| Total liabilities | $11.27 million | $11.74 million |
| Net assets in liquidation | $26.61 million | $26.64 million |
| Estimated distribution per share | $17.95 | $17.97 |
- Net assets declined $22,954 in the quarter, attributed primarily to costs associated with obtaining the new debt facility. Revenue, profit, operating margins, and cash flow for the quarter are not presented in the filing’s liquidation-basis statements; clear comparable values are not provided.
- Gyrodyne drew $1.1 million under a new secured, non-revolving credit line of up to $3 million. The debt is secured by Flowerfield property; the company reported compliance with its 1.35:1 debt-service covenant.
- Estimated liquidation and operating costs, net of receipts, were $9.19 million, down from $10.62 million at year-end. The filing estimates $1.98 million of property selling costs, $4.18 million of general and administrative costs, and approximately $2.29 million of remaining entitlement costs in its liquidation calculations.
Material developments and management outlook
- The company expanded its Stony Brook University Hospital lease to approximately 26,573 square feet, with a stated net lease commitment of about $3.5 million through 2025. Approximately $1.1 million of tenant improvements are planned and will be financed with the credit line.
- Q1 leasing activity included one new lease, seven renewals, and one expansion and one downsizing, for a reported net increase of approximately 10,500 square feet and about $82,000 in annual revenue. The filing also reports approximately $3.2 million in total lease commitments for the activity and about $1 million in tenant allowances.
- Management estimates liquidation could be completed by December 31, 2019. Based on March 31 estimates, it projects approximately $26.6 million of distributable cash, or $17.95 per share, before any interim distributions. This estimate excludes possible incremental sale value from entitlement efforts and is not a guarantee of actual proceeds or timing.
- Management expects current cash to fund the liquidation process over the next 12 months and believes cash, property-sale proceeds, and available financing will cover obligations and permit shareholder distributions. It cautions that distributions could be reduced or eliminated if proceeds are inadequate.
- The company incurred approximately $230,000 in entitlement and rezoning costs during the quarter and expects to spend a further approximately $2.3 million through the end of liquidation. Its plans depend on municipal approvals and market conditions; the filing says favorable value increases are not assured.
- Smithtown’s review of the Flowerfield subdivision requires an Environmental Impact Statement following a SEQRA positive declaration reported in the filing. The Cortlandt Manor plan also remains subject to municipal review. Management cannot predict approval or completion timing.
- Other risks include uncertain property values and sale timing, tenant and healthcare-sector risks, possible costs or claims during liquidation, and reduced share liquidity if the company delists from Nasdaq. The largest tenants represented approximately 18%, 17%, and 6% of rental income, respectively.
Most important facts for investors to verify
- Whether the $33.02 million estimated real estate value and $17.95-per-share liquidation estimate are supported by realized sale prices and updated cost assumptions.
- Progress, costs, timing, and potential value impact of Flowerfield and Cortlandt Manor entitlement and environmental review processes.
- Completion and cost of the Stony Brook tenant improvements, lease performance, and any further draws on the secured credit line.
- Actual liquidation expenses, contingent liabilities, retention bonuses, and the timing and amount of any shareholder distributions.