Business Context and Reporting Period
This filing is the Form 10-K of New York City REIT, Inc. for the fiscal year ended December 31, 2020. The requested company metadata identifies American Strategic Investment Co., but the supplied filing identifies the registrant as New York City REIT, Inc.; investors should verify the issuer.
The company is an externally managed REIT focused primarily on office properties, with related retail and amenity assets, located exclusively in the five boroughs of New York City. At year-end, it owned eight properties totaling 1,163,061 rentable square feet, acquired for an aggregate purchase price of $790.7 million. Class A common stock began trading on the NYSE on August 18, 2020 under the symbol NYC.
Key Financial Metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue from tenants | $62.9 million | $70.5 million | Down $7.6 million |
| Total operating expenses | $85.5 million | $76.1 million | Up $9.4 million |
| Operating loss | $22.6 million | $5.6 million | Loss increased $17.0 million |
| Net loss | $41.0 million | $21.9 million | Loss increased $19.1 million |
| Net loss per common share | $3.21 | $1.72 | Loss per share increased |
| Cash flow from operations | $(13.6) million | $(1.6) million | Outflow increased $12.0 million |
| Cash flow from investing | $(3.8) million | $(46.0) million | Lower outflow |
| Cash flow from financing | $(1.0) million | $51.1 million | Shifted to outflow |
| Cash and cash equivalents | $31.0 million | $51.2 million | Down $20.2 million |
| Total assets | $861.8 million | $901.4 million | Down $39.5 million |
| Total stockholders’ equity | $377.6 million | $420.5 million | Down $43.0 million |
Revenue declined primarily because the company recorded $8.5 million of reserves against tenant receivables, including $7.5 million related to tenants placed on a cash basis and $1.0 million related to early lease terminations. Operating expenses included $31.7 million of depreciation and amortization, $32.3 million of property operating expenses, $7.6 million of related-party asset and property management fees, $3.9 million of equity-based compensation, $1.3 million of listing expenses and $1.2 million related to vesting and conversion of Class B Units.
Cash NOI, a non-GAAP measure, was $27.3 million in 2020 versus $32.7 million in 2019. NAREIT FFO attributable to common stockholders was negative $9.2 million, compared with positive $9.3 million in 2019. Core FFO was negative $2.9 million, compared with positive $9.4 million in 2019.
Debt, Liquidity and Capital Resources
- Gross mortgage debt was $405.0 million, or $396.6 million net of deferred financing costs, secured by seven properties. The weighted-average effective interest rate was 4.35%.
- All outstanding mortgage debt was interest-only and fixed-rate or effectively fixed-rate through an interest-rate swap. Scheduled principal maturities were $55.0 million in 2024 and $350.0 million thereafter; no principal payments were due in 2021.
- The company had $31.0 million of cash and cash equivalents and $9.0 million of restricted cash at December 31, 2020. A $10.0 million minimum liquid-assets requirement applies under one loan, along with a minimum net-worth requirement exceeding $175.0 million.
- The company had no corporate-level revolving credit facility or other corporate-level debt commitment and had not sold shares under its $250.0 million ATM program as of year-end.
- Cash flow from operations was insufficient to fund operating expenses, capital requirements and dividends. The company funded its $0.6 million 2020 dividend from available cash on hand rather than operating cash flow.
Material Changes Versus the Prior Comparable Period
- Portfolio occupancy fell to 87.0% from 89.6%, while the weighted-average remaining lease term was 7.2 years.
- COVID-19-related tenant defaults, deferrals, abatements and non-renewals materially reduced collections and increased reserves. Fourth-quarter cash rent collections were 82% of amounts due: 86% for office tenants and 64% for retail tenants.
- Knotel, previously a significant tenant, filed for bankruptcy in January 2021 and terminated all leases effective January 31, 2021. Excluding Knotel, year-end occupancy would have been 80.8%, including 57.7% at 9 Times Square and 83.6% at 123 William Street.
- Cash trap or cash management provisions were triggered at 1140 Avenue of the Americas and 9 Times Square. These properties represented approximately 61% of portfolio rentable square feet and $154.0 million of debt at year-end.
- The 1140 Avenue loan had $2.9 million of cash trapped in restricted cash. The 9 Times Square loan, with $55.0 million outstanding, was subject to covenant breaches that could become an event of default after four consecutive quarters if not cured.
- The company completed its NYSE listing, incurred $1.3 million of listing expenses, recorded $1.2 million of non-cash expense for Class B Unit vesting and conversion, and recorded $3.9 million of equity-based compensation, including $3.8 million related to a performance award for the Advisor.
- No properties were acquired or sold in 2020. Capital expenditures were $3.8 million, compared with $7.7 million in 2019.
Guidance, Outlook, Risks and Unusual Items
Management expected to use cash on hand to fund a portion of operating expenses and other capital requirements through at least the first half of 2021. Management stated that it believed available cash would be sufficient for operating cash requirements over the following year, but acknowledged that rent collections could remain at current levels or decline until New York City’s economy recovered.
Management anticipated that vaccine distribution could support increased office usage and leasing activity by late 2021 and through 2022, but provided no quantitative earnings, revenue or occupancy guidance. The company was pursuing replacement tenants for vacant space, including former Knotel space, but stated that leasing outcomes were uncertain.
- COVID-19 remains the principal operating risk, affecting tenant solvency, rent collections, office demand, retail activity, occupancy, leasing costs and property values.
- The company is geographically concentrated in New York City and has significant asset concentration: 123 William Street and 1140 Avenue of the Americas represented approximately 68% of rentable square feet and 66% of annualized straight-line rent.
- Debt covenant breaches may restrict access to property cash flows and could lead to an event of default, acceleration or other lender remedies if not cured.
- Dividends are discretionary and may be reduced or suspended. The $0.04889 per-share 2020 dividend represented a return of capital for U.S. federal income tax purposes; the company declared a $0.10 per-share dividend paid in January 2021.
- The company recorded a $0.7 million gain from retaining a forfeited deposit related to an unsuccessful sale of the unoccupied Hit Factory property.
- A $0.3 million out-of-period depreciation adjustment and a $0.6 million reduction of previously overstated interest expense were recorded in the fourth quarter. Management concluded the underlying errors were not material to current or prior periods.
- The company has no employees and depends on its Advisor and Property Manager, which are related parties, for substantially all management, leasing, administrative and operating services.
Most Important Facts for Investors to Verify
- Confirm the correct issuer: the supplied filing is for New York City REIT, Inc., not American Strategic Investment Co.
- Review the full terms, cure periods and potential remedies associated with the 1140 Avenue of the Americas and 9 Times Square covenant breaches.
- Assess post-Knotel occupancy, leasing progress, rent collections and the estimated $1.3 million deferred leasing-cost write-off expected in the first quarter of 2021.
- Reconcile liquidity after the $1.3 million January 2021 dividend, approximately $0.2 million tender-offer expenditure and any continuing cash traps.
- Evaluate the sustainability of dividends given negative operating cash flow and the fact that 2020 dividends were funded from cash on hand.
- Review the valuation and potential dilution associated with the 4,012,841 LTIP Units awarded to the Advisor and the $25.8 million grant-date fair value.
- Verify upcoming debt maturities, refinancing assumptions, interest-only structures, lender reserves and the company’s ability to fund tenant improvements and leasing commissions.