Gyrodyne, LLC — Q2 2020 Form 10-Q
Reporting period: Quarter ended June 30, 2020; financial statements and operating activity are principally reported for the six months ended June 30, 2020. Gyrodyne owns medical-office and industrial properties in Cortlandt Manor and Flowerfield, New York, and is pursuing property entitlements and sales before liquidating and dissolving.
Financial position and operating metrics
- Net assets in liquidation: $31.38 million at June 30, 2020, or an estimated $21.16 per common share. Net assets increased $10,044 from December 31, 2019.
- Assets: $50.09 million, including $48.27 million of real estate held for sale and $1.70 million of cash and cash equivalents. Cash was $2.21 million at year-end 2019.
- Liabilities: $18.71 million, including $4.36 million of loan payable and $12.99 million of estimated liquidation and operating costs net of estimated receipts. The loan balance was $3.78 million at year-end 2019.
- Cash activity: Six-month cash receipts from rents and reimbursements were $1.20 million; operating costs were $741,839, corporate expenditures $1.03 million, and land-entitlement costs approximately $613,000. The filing presents no conventional income statement or cash flow statement because Gyrodyne uses liquidation-basis accounting; profit and margins are therefore not reported in a comparable format.
- Leasing: Two new leases and nine renewals covered approximately 1,100 and 14,800 square feet, respectively, with annual revenue of about $13,800 and $254,000. Four terminations represented approximately 5,300 square feet and $50,600 of annual revenue.
Changes, liquidity and debt
- Compared with December 31, 2019, total assets decreased approximately $501,000, cash decreased approximately $514,000, and loan payable increased approximately $582,000. Real estate carrying value was unchanged.
- The company reported approximately $2.39 million available under credit facilities, including $800,000 restricted to certain capital improvements. It said cash and credit access were expected to fund operations and liquidation, while noting rental income net of property costs is below combined corporate, entitlement and capital costs.
- Flowerfield credit facilities are secured by 31.8 acres and related buildings and leases. The company reported covenant compliance. A $2.5 million Cortlandt line closed July 16, 2020; draw availability depends on signed property-sale contracts and it is secured by the Cortlandt property and cross-collateralized by Flowerfield assets.
- The $82,100 Paycheck Protection Program loan bears 1% interest. Management expected full or substantial forgiveness, but the loan remains recorded until formally forgiven.
Outlook, risks and unusual items
- Management estimated liquidation completion by December 31, 2021 and projected net assets available for distribution of about $31.38 million, equivalent to $21.16 per share based on current estimates. These are not guaranteed proceeds or a promised distribution; timing and amount depend on sales, liabilities, costs and Board decisions.
- The company estimated $1.25 million of additional entitlement costs through the expected liquidation date. It believes entitlements could improve sale values but cautions that costs or delays may exceed benefits and that estimates rely substantially on management assumptions and Level 3 valuation inputs.
- Conditional property sale agreements include Flowerfield land for $16.8 million, a separate five-acre parcel for $500,000, and a Cortlandt medical-office parcel for $5.72 million. Closings depend on buyer rights and required approvals; the filing does not report these sales as completed.
- COVID-19 could impair tenant collections, property values, entitlement approvals and sale timing. Small businesses and not-for-profits accounted for approximately 38% of projected 2020 rental revenue. Management described tenants and properties as operating under applicable guidelines and employees as working remotely.
- Estimated retention-bonus payments total $4.68 million; no payments were made under the plan in the first half. The historical class-action settlement was approved and paid; management said other proceedings were not expected to have a material financial impact.
Important facts for investors to verify
- Whether the conditional property sales close, and whether required subdivision, zoning, environmental and other approvals are obtained on schedule.
- Whether the $48.27 million real-estate valuation and estimated $21.16-per-share liquidation value remain supportable as market conditions and sale timing evolve.
- Actual tenant collections, COVID-19 effects, available borrowing capacity, debt repayment requirements and any PPP loan forgiveness.
- Actual entitlement, operating, retention-bonus and final liquidation costs, and their effect on distributable proceeds.
- Whether liquidation can be completed by December 31, 2021; the filing emphasizes that the schedule and ultimate distributions are uncertain.