American Strategic Investment Co. current report, 30 December 2022

Full document

Business Context and Reporting Period

This Form 8-K is a current report filed by New York City REIT, Inc. (not American Strategic Investment Co.) on December 30, 2022. The filing details a strategic pivot involving a change in the company's business plan, a reverse stock split, and the termination of its Real Estate Investment Trust (REIT) status.

Key Financial Metrics and Capital Structure

The filing does not provide specific revenue, profit, cash flow, or debt figures for the reporting period. However, it discloses the following capital structure details:

  • Share Count: Approximately 15 million shares of Class A Common Stock were outstanding as of September 30, 2022.
  • Post-Split Share Count: Expected to be approximately 1.9 million shares following the reverse stock split.
  • Dividend Status: The company does not presently pay dividends to stockholders.
  • Capital Raise Target: The company anticipates raising approximately $5.0 million in aggregate gross proceeds through a rights offering.

Material Changes and Strategic Actions

The filing announces three material corporate actions effective in early 2023:

  1. Termination of REIT Status ("deREITing"): The company expects to elect to terminate its REIT status effective January 1, 2023. It will be taxed as a C corporation, subject to federal and state income taxes. This change is driven by a plan to acquire assets (hotels, parking facilities, co-working spaces) that may not qualify for REIT income rules.
  2. Reverse Stock Split: A 1-for-8 reverse stock split of Common Stock and Operating Partnership units is approved. It is expected to take effect at 5:00 p.m. Eastern time on January 11, 2023. Fractional shares will be paid in cash based on the volume-weighted average price on January 11, 2023.
  3. Business Scope Expansion: The company intends to expand beyond its historical portfolio of commercial real estate in New York City to include hotels, parking facilities, and management companies.

Anticipated Rights Offering

Subject to board approval and the completion of necessary documents, the company intends to conduct a rights offering to all holders of Common Stock as of the close of business on January 12, 2023. One non-transferable right will be distributed for each share owned. The subscription price and number of shares per right are to be determined by the board after the reverse split.

Guidance, Risks, and Contingencies

Management Commentary and Outlook:

  • The company plans to change its name to eliminate references to "REIT."
  • Ownership restrictions in the charter will no longer apply once REIT status is terminated.
  • The company may utilize Net Operating Loss (NOL) carryforwards to limit future tax liabilities.
Risk Factors:
  • Liquidity Risk: The reverse stock split may decrease share liquidity and overall market capitalization if the share price does not increase proportionally.
  • Execution Risk: The rights offering is subject to change or cancellation; there is no assurance stockholders will exercise their rights.
  • Internal Controls: The company has identified a material weakness in internal controls and has restated or revised historical financial statements.
  • Market Conditions: Risks include the global pandemic, geopolitical instability (Russia-Ukraine conflict), inflation, and higher interest rates.
Unusual Items:
  • Adjustments to equity and equity-based awards under various incentive plans to reflect the reverse stock split.
  • Waiver of existing ownership limits for Bellevue Capital Partners, LLC regarding the rights offering.

Investor Verification Checklist

  • Verify the final terms of the rights offering, including the subscription price and number of shares per right, once filed with the SEC.
  • Confirm the effective date and mechanics of the 1-for-8 reverse stock split and the cash payment for fractional shares.
  • Review the company's tax implications post-REIT termination, specifically regarding the use of NOLs and C corporation tax rates.
  • Monitor the company's progress in acquiring new asset classes (hotels, parking) and the impact on future revenue streams.
  • Check for updates regarding the material weakness in internal controls and the status of restated financial statements.