American Strategic Investment Co. 2022 Form 10-K Summary
Business Context and Reporting Period
The filing covers the fiscal year ended December 31, 2022. The company, formerly New York City REIT, Inc., is externally managed and owns eight office, retail, garage and related commercial properties in New York City, primarily Manhattan, totaling 1.16 million rentable square feet. The portfolio was 82.7% occupied at year-end, with a weighted-average remaining lease term of 7.1 years.
Management announced a broader investment strategy in December 2022, including potential investments in hotels, expanded coworking operations and operating businesses such as hotel or parking management. The REIT election was terminated effective January 1, 2023, and the company became a taxable C corporation. Subsequent actions included a 1-for-8 reverse stock split, the January 2023 name change to American Strategic Investment Co., and a February 2023 rights offering.
Key Financial Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue from tenants | $64.0 million | $70.2 million | Down $6.2 million |
| Operating loss | $26.9 million | $20.4 million | Loss increased $6.6 million |
| Net loss attributable to common stockholders | $45.9 million | $39.5 million | Loss increased $6.4 million |
| Basic and diluted loss per share | $26.59 loss | $24.42 loss | Loss per share increased |
| Cash flow from operating activities | $0.5 million used | $7.9 million used | Improved by $7.4 million |
| Capital expenditures | $5.6 million | $3.4 million | Increased $2.2 million |
| Cash and cash equivalents | $9.2 million | $11.7 million | Down $2.5 million |
| Restricted cash | $6.9 million | $16.8 million | Down $9.9 million |
| Mortgage notes payable, net | $394.2 million | $398.1 million | Down $4.0 million |
| Cash NOI | $26.9 million | $24.5 million | Up $2.4 million |
| Core FFO attributable to common stockholders | $6.0 million loss | $1.5 million | Declined $7.5 million |
Reported revenue declined primarily because 2021 included approximately $7.9 million of accelerated below-market lease liability amortization income. Property operating expenses increased to $33.9 million, while general and administrative expenses rose to $12.5 million, including approximately $2.5 million of costs related to the 2022 proxy contest. Depreciation and amortization declined to $28.7 million from $31.1 million, and interest expense was $18.9 million.
The company had total assets of $790.5 million and total equity of $321.6 million at December 31, 2022. Six mortgage loans secured by seven properties had gross principal outstanding of $399.5 million and a weighted-average effective interest rate of 4.35%. There were no scheduled principal maturities in 2023; $49.5 million matures in 2024.
Material Changes Versus the Prior Comparable Period
- Portfolio occupancy was broadly stable at 82.7%, compared with 82.9% at December 31, 2021, but occupancy improved at 9 Times Square and 123 William Street and declined at 8713 Fifth Avenue.
- Revenue decreased, but Cash NOI improved because 2021 included a significant one-time lease accounting benefit.
- The company paid $5.5 million toward the 9 Times Square mortgage in March 2022 and exited that property’s cash trap in the fourth quarter.
- Two mortgage covenant breaches remained at year-end: the $99.0 million 1140 Avenue of the Americas loan and the $10.0 million 8713 Fifth Avenue loan. Approximately $3.6 million remained trapped for 1140 Avenue of the Americas.
- Dividends were suspended beginning with the dividend that would have been payable for the quarter ended June 30, 2022. The company paid $2.7 million of common stock dividends during the year, funded from available cash rather than operating cash flow.
- The company issued approximately $2.0 million of common stock to Bellevue and approximately $5.0 million of common stock to the Advisor in lieu of certain management fees, increasing share count and preserving cash.
- Previously reported 2022 interim financial statements were restated or revised for unrecorded expenses, including proxy contest costs. Management reported that the related material weakness in internal control was remediated by December 31, 2022.
Guidance, Outlook, Risks and Unusual Items
Management expects 2023 capital expenditures to be broadly similar to 2022 and expects to fund operating and capital requirements with cash on hand, property operating cash flow, potential asset dispositions, equity issuance and other financing sources. The filing states that the company believes it has sufficient liquidity for the next year, but also emphasizes that outside capital may not be available on acceptable terms or at all.
Management is pursuing additional leasing at underoccupied properties, particularly 9 Times Square, 1140 Avenue of the Americas and 123 William Street. A new tenant at 8713 Fifth Avenue was expected to occupy the property in the first quarter of 2023, potentially restoring that property to full occupancy.
- Liquidity is constrained by low cash balances, restricted cash, mortgage covenant cash traps, tenant improvement requirements and the absence of a corporate-level revolving credit facility.
- The company is concentrated in New York City office and retail real estate and remains exposed to hybrid work trends, tenant defaults, vacancies, lower renewal rents and prolonged weakness in the New York City office market.
- Debt covenant breaches could restrict access to property cash flows and could lead to additional lender remedies if not cured.
- Inflation and higher interest rates may increase operating costs, reduce property values and make refinancing more difficult, although outstanding debt was fixed-rate or effectively fixed through interest-rate swaps at year-end.
- The transition from REIT status to C-corporation taxation may create additional federal and state income tax liabilities. The company reported approximately $161.7 million of federal net operating loss carryforwards, but their use may be limited and a full valuation allowance was recorded against deferred tax assets.
- The company has no employees and depends on its Advisor, Property Manager and their affiliates, which creates operational dependency and related-party conflicts.
- The company is evaluating potential sale or leasing of the unoccupied 421 W. 54th Street property; no sale had been completed or classified as held for sale at year-end.
- Unusual 2022 items included approximately $2.5 million of proxy contest costs, a $0.4 million out-of-period amortization adjustment, and a $38,000 charge associated with replacing the 9 Times Square interest-rate swap.
Most Important Facts for Investors to Verify
- Whether occupancy and rent collections improve sufficiently to cure the remaining 1140 Avenue of the Americas and 8713 Fifth Avenue covenant breaches.
- The company’s ability to refinance or repay the $49.5 million debt maturity in 2024 and subsequent maturities of $99.0 million in 2026 and $140.0 million in 2027.
- Whether operating cash flow becomes consistently positive after capital expenditures, tenant improvements, leasing commissions and debt service.
- The sustainability of the dividend suspension and whether dividends will resume under the new C-corporation structure.
- Whether the expanded investment strategy produces profitable non-REIT operating businesses without materially increasing execution and tax risks.
- The impact of the reverse stock split, rights offering and continued issuance of shares for Advisor fees on ownership dilution and per-share value.
- Progress in remediating reporting controls and whether further restatements, regulatory inquiries or litigation arise from the 2022 interim reporting errors.