The following discussion related to our consolidated financial statements should
be read in conjunction with the financial statements appearing in Item 8 of this
Annual Report on Form 10-K. A detailed discussion of the results of operations
for the year ended December 31, 2021 compared to the year ended December 31,
2020 is not included herein and can be found in the Management's Discussion and
Analysis section in the 2021 Annual Report on Form 10-K/A filed with the SEC on
October 5, 2022.
Overview
We are a real estate holding, investment, development and asset management
company. Our largest asset is a property located at 77 Greenwich Street in Lower
Manhattan ("77 Greenwich"), which is nearing completion as a mixed-use project
consisting of a 90-unit residential condominium tower, retail space and a New
York City elementary school. We also own a 105-unit, 12-story multi-family
property located at 237 11th Street in Brooklyn, New York ("237 11th"), as well
as a property occupied by a retail tenant in Paramus, New Jersey. In February
2023, we sold our 10% interest in a joint venture that owned a multifamily
property at 250 North 10th Street, Brooklyn, New York. See Item 2. Properties
above for a more detailed description of our properties that were owned at
December 31, 2022. In addition to our real estate portfolio, we also control a
variety of intellectual property assets focused on the consumer sector, a legacy
of our predecessor, Syms Corp. ("Syms"). We also had approximately $275.8
million of federal net operating loss carry forwards ("NOLs") at December 31,
2022, which can be used to reduce our future taxable income and capital gains.
Liquidity and Going Concern; Management's Plans; Recent Developments
The COVID-19 pandemic and related matters, including government actions, shifts
in residential consumer sentiment and changes to the broader and local
economies, had a significant adverse impact on our business. More recently, the
economic downturn, increased interest rates and high inflation have also
impacted our business. While we believe many of these trends will reverse or
stabilize, and the New York City economy and residential real estate markets
have generally seen continued improvement in 2022 and to date in 2023, given our
focus on New York City residential real estate, our business has been
particularly impacted. As of December 31, 2022, we had total cash and
restricted cash of $22.1 million, of which approximately $1.6 million was cash
and cash equivalents and approximately $20.5 million was restricted cash. We
also had $2.0 million available under our secured line of credit at December 31,
2022, which has since been drawn. The Company's cash and cash equivalents will
not be sufficient to fund the Company's operations, debt service, amortization
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and maturities and corporate expenses over the next 12 months, unless we are
able to extend or refinance our maturing debt and raise additional capital,
creating substantial doubt about our ability to continue as a going concern.
Management is exploring opportunities to secure additional funding through the
sale of assets, refinancings of outstanding indebtedness, and equity or debt
financings or other sources. The Company also continues to explore a range of
strategic and financing alternatives to maximize stockholder value, and to
engage with parties that have expressed interest in the Company's attributes and
assets and may see the Company as a potential vehicle for growth, with potential
opportunities to recapitalize the Company at a lower cost of capital. The
Company has engaged our Advisors in connection with our strategic review process
and to assist us in identifying and evaluating potential alternatives.
Potential strategic alternatives that may be evaluated include securing an
equity and/or debt financing of the Company, refinancing of existing debt,
and/or a sale or merger or reverse merger of the Company. The Company is also
in discussions with its lenders regarding the deferment of upcoming interest,
amortization and other payment obligations for the period ending March 31, 2023
and going forward. The Company is also exploring a refinancing of the debt in
respect of 237 11th. Given the current environment there can be no assurance
that we will be able to enter into any of the contemplated or future extensions,
amendments or waivers with our lenders, raise additional capital, refinance
indebtedness or enter into other financing arrangements or engage in asset sales
or strategic partnerships sufficient to fund our cash needs, on terms
satisfactory to us, if at all. Further, in the event that market conditions
preclude our ability to consummate such transactions, we will be required to
evaluate additional alternatives in restructuring our business and our capital
structure, including but not limited to filing for bankruptcy protection or
seeking an out-of-court restructuring of our liabilities. See Part I. Item 1A.
Risk Factors and Note 1 to our consolidated financial statements and of this
Annual Report on Form 10-K for further information.
While construction at 77 Greenwich has taken longer than projected due to the
impacts of COVID-19 and supply-chain issues over the past years, and the impact
of the pandemic and broader economic conditions have impeded the sale of
residential condominium units at 77 Greenwich, we continue to sign and close
contracts for our residential condominium units, including five units since
December 31, 2022. The units that remain available to be sold are larger, higher
floor units. The substantial majority of the construction is completed with
amenity spaces and punch-list items anticipated to be completed by April 30,
2023.
Business and Growth Strategies
Historically, our primary business objective has been to maximize the risk
adjusted, time adjusted return on investment in our portfolio of properties and
new acquisitions and investments across all points of the economic cycle. Our
strategies to achieve this objective have recently included (i) the sale and
closing of residential condominium units at 77 Greenwich and the development,
redevelopment, repositioning and potential disposition of our legacy retail
property in Paramus, New Jersey; (ii) identifying additional acquisition and
investment opportunities, including high-quality, multi-family real estate in
New York City; (iii) entering into joint ventures in respect of attractive
properties; and (iv) enhancing our capital structure. We are currently focused
on exploring a range of strategic and financing alternatives to maximize
stockholder value, which may include securing additional equity or debt
financings, refinancings of existing debt, and/or a sale or merger of the
Company.
Impact of COVID-19
Our business, financial condition, results of operations and stock price have
been and may continue to be adversely impacted by the outbreak of COVID-19 and
resulting restrictions and such impact could continue to be material. The
extent to which the COVID-19 pandemic will impact the Company's business,
operations and financial results in the future will depend on numerous evolving
factors that the Company is not able to predict at this time, including, but not
limited to, the impact on sales of residential condominium units at 77
Greenwich, which has been material; the impact on the timing for construction of
77 Greenwich; and the impact on the timing of the 237 11th litigation due to
backlog in the New York City court system and the slowdown in judicial
proceedings. With the implementation of COVID-19 vaccination programs and
companies encouraging employees to return to the office, more potential tenants
are moving back into New York City, which has resulted in an increase in face
rents and a reduction in concessions. Notwithstanding these broader market
trends, signs of distress, including discounted sales prices and debt workouts,
in the New York City investment market have been almost non-existent over the
past several years. Multi-family property sales transaction volumes increased in
2022 and 2021 compared to 2020 and properties have been sold at record prices,
although market conditions continue to fluctuate.
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Development and Other Activities During 2022
As of December 31, 2022, all residential unit finishes at 77 Greenwich were
complete. As of December 31, 2022, we had received our TCOs for the condominium
units on floors 11-35 (except the units noted below), lobby, Cloud Club (lounge,
terrace, game room, dining room, kitchen and kids play room), mechanical rooms,
and portions of the cellar (including the bike and storage rooms.) The project
was approximately 95% complete at December 31, 2022. As of March 1, 2023, we had
received TCOs for 100% of the residential units. As of December 31, 2022, we had
closed on the sale of 28 residential condominium units at 77 Greenwich, at an
aggregate gross sales price of $63.6 million, and as of March 31, 2023 we had
closed on five additional residential condominium units at an aggregate gross
sales price of $13.7 million. Other units are under contract that are expected
to close in the coming months. Units that closed during 2022 and 2021 were
generally lower priced, smaller units on the building's lower floors, many of
which entered into contract during the height of the pandemic. These units were
completed first and were covered by the initial TCOs. Getting these units under
contract allowed us to obtain approval from the New York State Attorney General
and therefore start the closing process on residential units.
In addition, as of December 31, 2022 237 11th was 100.0% leased.
Results of Operations
Results of Operations for the Year Ended December 31, 2022 Compared to the Year
Ended December 31, 2021
Total rental revenues in total increased by approximately $2.3 million to $5.5
million for year ended December 31, 2022 from $3.2 million for the year ended
December 31, 2021. This consisted of an increase in base rent revenues of
approximately $2.3 million to $5.3 million for the year ended December 31, 2022
from $3.0 million for the year ended December 31, 2021, as well as a slight
increase in tenant reimbursement revenue of approximately $36,000 to $224,000
for the year ended December 31, 2022 from $188,000 for the year ended December
31, 2021. The increase in total rental revenues and its related components was
due to higher occupancy, higher base rents and fewer rent concessions at 237
11th during the year ended December 31, 2022 compared to the year ended December
31, 2021 which was due to completion of remediation of the construction related
defects.
Other income, which consisted mainly of the SCA construction supervision fee,
decreased by approximately $173,000 to $182,000 for the year ended December 31,
2022 from $355,000 for the year ended December 31, 2021 as a result of a
reduction in the SCA's construction.
Sales of residential condominium units at 77 Greenwich increased by
approximately $13.6 million to $37.3 million for the year ended December 31,
2022 from $23.7 million for the year ended December 31, 2021. We closed on 14
residential condominium units in each of the years ended December 31, 2022 and
2021. Units that we closed during 2022 and 2021 were generally lower priced,
smaller units on the building's lower floors, many of which entered into
contract during the height of the pandemic.
Property operating expenses decreased by approximately $1.4 million to $4.2
million for the year ended December 31, 2022 from $5.6 million for the year
ended December 31, 2021. The decrease was principally due to expenses associated
with 237 11th, including approximately $2.5 million in lower remediation related
costs incurred during the year ended December 31, 2022 compared to the year
ended December 31, 2021, reflecting completion of remediation efforts by
December 31, 2021, which was partially offset by less capitalized operating
costs at 77 Greenwich. Property operating expenses consisted primarily of
expenses incurred for utilities, payroll, COVID-19 related supplies and general
operating expenses as well as repairs and maintenance and leasing commission at
237 11th and 77 Greenwich, and to a lesser extent expenses related to the
Paramus, New Jersey property.
Real estate tax expense increased by approximately $1.0 million to $1.7 million
for the year ended December 31, 2022 from $724,000 for the year ended December
31, 2021. This increase was mainly due to less capitalized real estate tax
expenses for 77 Greenwich for the year ended December 31, 2022 as compared to
the year ended December 31, 2021.
General and administrative expenses increased by approximately $621,000 to $5.7
million for the year ended December 31, 2022 from $5.1 million for the year
ended December 31, 2021. For the year ended December 31, 2022, approximately
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$463,000 related to stock-based compensation, $2.6 million related to payroll
and payroll related expenses, $1.5 million related to other corporate expenses,
including board fees, corporate office rent and insurance and $1.2 million
related to legal, accounting and other professional fees. For the year ended
December 31, 2021, approximately $477,000 related to stock-based compensation,
$2.7 million related to payroll and payroll related expenses, $1.1 million
related to other corporate expenses, including board fees, corporate office rent
and insurance and $854,000 related to legal, accounting and other professional
fees.
Pension related costs increased by approximately $481,000 to $548,000 for the
year ended December 31, 2022 from $67,000 for the year ended December 31, 2021.
These costs represent other periodic pension costs and professional fees
incurred in connection with the legacy Syms Pension Plan (see Note 9 - Pension
Plan to our consolidated financial statements for further information).
Cost of sales - residential condominium units increased by approximately $12.9
million to $35.2 million for the year ended December 31, 2022 from $22.3 million
for the year ended December 31, 2021. We closed on 14 residential condominium
units for both of the years ended December 31, 2022 and 2021. Cost of sales
consists of construction and capitalized operating costs that are allocated to
the respective condominium units being sold, as well as closing costs of the
residential condominium units. Units that we closed during 2022 and 2021 were
generally lower priced, smaller units on the building's lower floors.
Transaction related costs were $163,000 for the year ended December 31, 2022 and
were not incurred for the year ended December 31, 2021. These costs represent
professional fees and other costs incurred in connection with the underwriting
and evaluation of potential acquisitions and investments for transactions that
were not consummated, as well as costs for potential leases at our retail
properties that were not consummated.
Depreciation and amortization remained consistent at $4.0 million for the years
ended December 31, 2022 and 2021. For the year ended December 31, 2022,
depreciation and amortization expense consisted of depreciation for the Paramus,
New Jersey property of approximately $1.1 million, depreciation for 237 11th of
approximately $1.6 million, the amortization of lease commissions and acquired
in-place leases of approximately $770,000 for 237 11th, and amortization of
warrants of approximately $456,000. For the year ended December 31, 2021,
depreciation and amortization expense consisted of depreciation for the Paramus,
New Jersey property of approximately $1.1 million, depreciation for 237 11th of
approximately $1.6 million, the amortization of lease commissions, acquired
in-place leases of approximately $768,000 for 237 11th, and warrants of
approximately $456,000.
Equity in net income from unconsolidated joint ventures increased by
approximately $1.4 million to $804,000 for the year ended December 31, 2022 from
a net loss of $555,000 for the year ended December 31, 2021. Equity in net
income from unconsolidated joint ventures represented our 50% share in The
Berkley, which was sold in April 2022, and our 10% share in 250 North 10th. For
the year ended December 31, 2022, our share of the net income is primarily
comprised of operating income before depreciation of $1.1 million offset by
depreciation and amortization of $774,000, interest expense of $430,000, gain
from the change in the fair market value of the interest rate swap of $77,000
and a gain on the settlement of the interest rate swap of $1.0 million upon the
sale of The Berkley in April 2022. For the year ended December 31, 2021, our
share of the loss is primarily comprised of operating income before depreciation
of $1.7 million offset by depreciation and amortization of $1.5 million,
interest expense of $745,000 and the change in the fair market value of the
interest rate swap of $77,000.
Equity in net gain on sale of unconsolidated joint venture property represents
the sale of The Berkley in April 2022 for a sale price of $70.8 million. In
connection with the sale of the property, our share of the gain was
approximately $4.5 million.
Unrealized gain on warrants increased by approximately $1.0 million to $1.1
million for the year ended December 31, 2022 from $73,000 for the year ended
December 31, 2021. This represents the change in the fair market valuation of
the warrants due mainly to the change in our stock price on the measurement
date.
Interest expense, net increased by approximately $7.8 million to $15.7 million
for the year ended December 31, 2022 from $7.9 million, net for the year ended
December 31, 2021. For the year ended December 31, 2022, there was approximately
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$20.6 million of gross interest expense incurred, $4.9 million of which was
capitalized into residential condominium units for sale. For the year ended
December 31, 2021, there was approximately $21.2 million of gross interest
expense incurred, $13.3 million of which was capitalized into residential
condominium units for sale, and $2,000 of interest income. The decrease in gross
interest expense was mainly due to overall lower average borrowings during the
year ended December 31, 2022 compared to the year ended December 31, 2021 from
the on-going paydown of the 77 Mortgage Loan and repayment of the Berkley
Partner Loan, partially offset by higher overall interest rates on our loans
after December 31, 2021.
Interest expense - amortization of deferred finance costs increased
approximately $932,000 to $2.4 million for the year ended December 31, 2022 from
$1.5 million for the year ended December 31, 2021. The increase was principally
due to less capitalized amortization of finance costs for our loans and secured
line of credit as part of residential condominium units for sale, partially
offset by the write-off of deferred finance costs related to the refinancing of
the 237 11th Loans that we closed on in September 2021.
We recorded a $288,000 tax expense for the year ended December 31, 2022 compared
to $265,000 for the year ended December 31, 2021.
Net loss attributable to common stockholders decreased by approximately $115,000
to $20.7 million for the year ended December 31, 2022 from $20.8 million for the
year ended December 31, 2021. This is a result of the changes discussed above,
principally due to the sale of The Berkley, increased rental revenue and lower
property operating expenses at 237 11th due to the completion of the remediation
work by the end of 2021, 100% occupancy at 237 11th by the end of December 31,
2022, an increase in our equity in net income in our joint ventures, a larger
unrealized gain on warrants and our net profit on the sale of residential
condominium units at 77 Greenwich partially offset by increased operating and
interest expenses at 77 Greenwich.
Liquidity and Capital Resources
The COVID-19 pandemic and related matters, including government actions, shifts
in residential consumer sentiment and changes to the broader and local
economies, had a significant adverse impact on our business. More recently, the
economic downturn, increased interest rates and high inflation have also
impacted our business. While we believe many of these trends will reverse or
stabilize, and the New York City economy and residential real estate markets
have generally seen continued improvement in 2022 and to date in 2023, given our
focus on New York City residential real estate, our business has been
particularly impacted, and may continue to be, as described elsewhere in this
Annual Report on Form 10-K.
We currently expect that our principal sources of funds to meet our short-term
and long-term liquidity requirements for working capital and repayments of
outstanding indebtedness and other costs will include some or all of the
following:
(1) net proceeds from divestitures of properties or interest in properties;
(2) proceeds from new debt financings, increases to existing debt financings
and/or other forms of secured or unsecured debt financing;
proceeds from equity or equity-linked offerings, including rights offerings
(3) or convertible debt or equity or equity-linked securities issued in
connection with debt financings;
(4) cash on hand; and
(5) cash flow from operations.
Cash flow from operations is primarily dependent upon the occupancy level of our
portfolio, the net effective rental rates achieved on our leases, the
collectability of rent, operating escalations and recoveries from our tenants
and the level of operating and other costs which will be affected by inflation
and rising interest rates, among other factors.
As of December 31, 2022, we had total cash and restricted cash of $22.1 million,
of which approximately $1.6 million was cash and cash equivalents and
approximately $20.5 million was restricted cash. We also had $2.0 million
available under our secured line of credit at December 31, 2022, which has since
been drawn. Restricted cash represents amounts required to be restricted under
our loan agreements, letter of credit (see Note 11 - Loans Payable and Secured
Line of Credit to our
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consolidated financial statements for further information), deposits on
residential condominium sales at 77 Greenwich and tenant related security
deposits.
Material Cash Requirements
The Company's material cash requirements include the following contractual and
debt obligations as of December 31, 2022 (dollars in thousands):
Payments Due by Period
Contractual Obligations Total 2023 2024 2025 2026
Operating lease (1) $ 1,056 $ 470 $ 470 $ 116 $ -
Loans payable (2) 210,816 210,816 - - -
Corporate credit facility (3) 35,750 7,000 28,750 - -
Secured line of credit (4) 9,750 9,750 - - -
Note payable (5) 5,863 5,863 - - -
Interest payable on loans
payable, corporate credit
facility, secured line of
credit and note payable (6) 12,233 6,510 5,723 - -
Total contractual obligations $ 275,468 $ 240,409 $ 34,943 $ 116 $ -
This represents the remaining operating lease payments for our corporate
(1) office in New York, New York. See Note 10- Commitments to our consolidated
financial statements for further discussion regarding this lease obligation.
See Note 11 - Loans Payable and Secured Line of Credit to our consolidated
financial statements for further discussion regarding the 77 Mortgage Loan
(2) and the Mezzanine Loan, both relating to 77 Greenwich, and the 237 11th Loans
relating to 237 11th. These loans are subject to extensions, under certain
circumstances, including purchase of interest rate caps. The total excludes
$2.1 million of net deferred finance costs.
See Note 11 - Loans Payable and Secured Line of Credit to our consolidated
financial statements for further discussion regarding the corporate credit
facility. Under the terms of the CCF, the Company is currently obligated to
(3) prepay the outstanding principal balance in an aggregate amount of $7.0
million on or prior to May 1, 2023. The Company is in discussions with the
CCF Lender regarding the extension of this payment obligation. This loan is
subject to extension, under certain circumstances. The total excludes $1.3
million of net deferred finance costs.
See Note 11 - Loans Payable and Secured Line of Credit to our consolidated
(4) financial statements for further discussion regarding the secured line of
credit.
This represents the note payable to our joint venture partner in connection
with the financing of our portion of the equity for the January 2020
acquisition of a property in Brooklyn, New York, which was repaid in February
(5) 2023 in connection with the sale of our joint venture interest in this
property. See Note 11 - Loans Payable and Secured Line of Credit to our
consolidated financial statements for further discussion regarding the note
payable.
(6) This represents the accrued interest payable as of December 31, 2022 for all
loans payable and our secured line of credit.
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Capital Expenditures
We estimate that for the year ending December 31, 2023, we will not require any
funds for capital expenditures and development or redevelopment expenditures
(including tenant improvements and leasing commissions) on existing properties,
other than for 77 Greenwich which will be funded under the 77 Mortgage Loan. We
currently anticipate that the proceeds available under the 77 Mortgage Loan,
together with equity funded by us to date, will be sufficient to close out the
construction project at 77 Greenwich without us making any further cash
contributions.
Cash Position
The Company's cash and cash equivalents will not be sufficient to fund the
Company's operations, debt service, amortization and maturities and corporate
expenses over the next 12 months, unless we are able to extend or refinance our
maturing debt and raise additional capital, creating substantial doubt about our
ability to continue as a going concern. Management is exploring opportunities to
secure additional funding through the sale of assets, refinancings of
outstanding indebtedness, and equity or debt financings or other sources. The
Company also continues to explore a range of strategic and financing
alternatives to maximize stockholder value, and to engage with parties that have
expressed interest in the Company's attributes and assets and may see the
Company as a potential vehicle for growth, with potential opportunities to
recapitalize the Company at a lower cost of capital. The Company has engaged
our Advisors in connection with our strategic review process and to assist us in
identifying and evaluating potential alternatives. Potential strategic
alternatives that may be evaluated include securing an equity and/or debt
financing of the Company, refinancing of existing debt, and/or a sale or merger
or reverse merger of the Company. The Company is also in discussions with its
CCF Lender regarding the deferral of near term payment obligations, and recently
agreed to a 60-day extension of the maturity of its secured line of credit. The
Company is also exploring a refinancing of the debt in respect of 237 11th.
Given the current environment there can be no assurance that we will be able to
enter into extensions, amendments and/or waivers with our lenders, raise
additional capital, refinance indebtedness or enter into other financing
arrangements or engage in asset sales or strategic partnerships sufficient to
fund our cash needs, on terms satisfactory to us, if at all. Further, in the
event that market conditions preclude our ability to consummate such
transactions, we will be required to evaluate additional alternatives in
restructuring our business and our capital structure, including but not limited
to filing for bankruptcy protection or seeking an out-of-court restructuring of
our liabilities. See Part I. Item 1A. Risk Factors and Note 1 to our
consolidated financial statements and of this Annual Report on Form 10-K for
further information.
Corporate Credit Facility
In December 2019, we entered into a credit agreement (the "Corporate Credit
Facility" or "CCF") with an affiliate of a global institutional investment
management firm as initial lender (the "CCF Lender") and Trimont Real Estate
Advisors, LLC, as administrative agent (the "Corporate Facility Administrative
Agent"), pursuant to which the CCF Lender agreed to extend us credit in multiple
draws aggregating $70.0 million, subject to increase by $25.0 million upon
satisfaction of certain conditions and the consent of the CCF Lender. The CCF
matures on December 19, 2024, subject to extensions until December 19, 2025 and
June 19, 2026, respectively, under certain circumstances. The CCF provided for
the proceeds of the Corporate Credit Facility to be used for investments in
certain multi-family apartment buildings in the greater New York City area and
certain non-residential real estate investments approved by the CCF Lender in
its reasonable discretion, as well as in connection with certain property
recapitalizations and in specified amounts for general corporate purposes and
working capital. The CCF bears interest at a rate per annum equal to the sum of
(i) 5.25% and (ii) a scheduled interest rate (the "Cash Pay Interest Rate")
based on six-month periods from the initial closing date, which Cash Pay
Interest Rate, from the Closing Date until the six-month anniversary of the
initial closing date initially equaled 4.0% and increases by 125 basis points in
each succeeding six-month period, subject to increase during the extension
periods. A $2.45 million commitment fee was payable 50% on the initial draw and
50% as amounts under the CCF are drawn, with any remaining balance due on the
last date of the draw period, and a 1.0% exit fee is payable in respect of CCF
repayments. As of December 31, 2022, we had paid $1.85 million of the commitment
fee. The CCF may be prepaid at any time subject to a prepayment premium on the
portion of the CCF being repaid.
At December 31, 2022, the CCF had an outstanding balance of $35.75 million,
excluding deferred finance fees of $1.3 million, and an effective interest rate
of 9.875%. Accrued interest totaled approximately $6.1 million at December 31,
2022, $419,000 of which was paid during the second week of January 2023. We are
in discussions with the CCF Lender
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regarding deferment of upcoming interest payments and a $7.0 million
amortization payment due on May 1, 2023. See Note 11 - Loans Payable and
Secured Line of Credit to our consolidated financial statements for further
discussion.
In connection with the December 2020 transaction described below, the Company
entered into an amendment to the Corporate Credit Facility (the "Corporate
Facility Amendment") pursuant to which, among other things, (i) the CCF Lender
and the Corporate Facility Administrative Agent permitted the Company to enter
into the Mezzanine Loan Agreement (as defined below), the amendment to the 77
Greenwich Construction Facility and related documents, (ii) the commitment made
by the CCF Lender under the Corporate Credit Facility was reduced by the amount
of the Mezzanine Loan (as defined below) from $70.0 million to $62.5 million,
subject to increase by $25.0 million upon satisfaction of certain conditions and
the consent of the CCF Lender, and (iii) the multiple on invested capital, or
MOIC, amount that would be due and payable by the Company upon the final
repayment of the loan pursuant to the CCF if no event of default exists and is
continuing under the CCF at any time prior to December 22, 2022, was amended to
combine the CCF and the Mezzanine Loan for purposes of calculating the MOIC, to
the extent not previously paid, if any. See Note 11 - Loans Payable and Secured
Line of Credit to our consolidated financial statements for further discussion.
In connection with the closing of the 77 Mortgage Loan and amendment to the
Mezzanine Loan described below, we entered into amendments to our CCF in October
2021 and November 2021, pursuant to which, among other things, the parties
agreed that (a) no additional funds will be drawn under the CCF, (b) the minimum
liquidity requirement was made consistent with the 77 Mortgage Loan Agreement
until May 1, 2023, (c) the Company will prepay the outstanding principal balance
of the CCF in an amount no less than $7.0 million on or prior to May 1, 2023 and
(d) the MOIC provisions were revised to provide that (i) the MOIC amount due
upon final repayment of the CCF loan was amended to be consistent with the
Mezzanine Loan such that if no event of default exists and is continuing under
the CCF at any time prior to June 22, 2023, the amount due will be combined with
the Mezzanine Loan, to the extent not previously paid, if any, and (ii) the
amount of the CCF used to calculate the MOIC was reduced to $35.75 million. We
entered into an amendment in November 2022, which eliminated the minimum
liquidity requirement.
In connection with the CCF, we also entered into a warrant agreement with the
CCF Lender pursuant to which we issued to the CCF Lender ten-year warrants (the
"Warrants") to purchase up to 7,179,000 shares of our common stock. In
connection with the Corporate Facility Amendment, the exercise price of the
Warrants was amended from $6.50 per share to $4.31 per share, payable in cash or
pursuant to a cashless exercise. See Note 12 - Stockholders Equity - Warrants
to our consolidated financial statements for further discussion regarding the
warrants.
As of December 31, 2022, the CCF was fully drawn and we were in compliance with
all covenants of the CCF.
77 Mortgage Loan
In October 2021, a wholly-owned subsidiary of ours (the "Mortgage Borrower")
entered into a loan agreement with Macquarie PF Inc., a part of Macquarie
Capital, the advisory, capital markets and principal investment arm of Macquarie
Group, as lender and administrative agent (the "77 Mortgage Lender"), pursuant
to which 77 Mortgage Lender agreed to extend credit to Mortgage Borrower in the
amount of up to $166.7 million (the "77 Mortgage Loan"), subject to the
satisfaction of certain conditions (the "77 Mortgage Loan Agreement"). We
borrowed $133.1 million on the closing date of the 77 Mortgage Loan and the
balance of the funds used to repay the construction facility were obtained from
an increase in the Mezzanine Loan, the Berkley Partner Loan and funds raised
through the Private Placement. At loan closing in October 2021, $33.6 million
was available to be used to, among other things, complete construction of 77
Greenwich and fund carry costs while the residential condominium units are being
sold, $30.6 million of such amount had been drawn by December 31, 2022. The
$3.0 million additional amount remained undrawn at December 31, 2022.
The 77 Mortgage Loan has a two-year term with an option to extend for an
additional year, if the loan balance is $70.0 million or less and we purchase a
new interest rate cap. The 77 Mortgage Loan is secured by the Mortgage
Borrower's fee interest in 77 Greenwich. The 77 Mortgage Loan bears interest at
a rate per annum equal to the greater of (i) 7.00% in excess of LIBOR and (ii)
7.25%; provided that, if, on April 22, 2023, the outstanding principal balance
of the 77 Mortgage Loan, together with any accrued and unpaid PIK Interest and
unpaid Additional Unused Fee (as those terms are defined below) is equal to or
greater than $91.0 million, the rate per annum will be equal to the greater of
(i) 9.00% in excess of LIBOR and (ii) 9.25%. If cash flow from 77 Greenwich
(including proceeds from the sales of residential units) is
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insufficient to pay interest payments when due, any accrued but unpaid interest
will remain unpaid and interest will continue to accrue on such unpaid amounts
("PIK Interest") until the cumulative PIK Interest and Additional Unused Fee
accrues to $4.5 million (the "Threshold Amount"), after which all such amounts
in excess of the Threshold Amount shall be paid in cash on a monthly basis until
such amounts are less than the Threshold Amount. As advances of the 77 Mortgage
Loan are made to Mortgage Borrower and the outstanding principal balance of the
77 Mortgage Loan increases, net proceeds from the sales of condominium units
will be paid to 77 Mortgage Lender to reduce the outstanding balance of the 77
Mortgage Loan. A 1% per annum fee (the "Additional Unused Fee") on a $3.0
million portion (the "Additional Amount") of the 77 Mortgage Loan, is payable on
a monthly basis on the undrawn portion of such Additional Amount. To the extent
the 77 Mortgage Loan was not fully funded by October 22, 2022 (April 22, 2023 in
the case of amounts with respect to construction work related to the new
handicapped accessible subway entrance on Trinity Place), 77 Mortgage Lender may
in its discretion force fund the remaining balance other than the Additional
Amount into a reserve account held by 77 Mortgage Lender and disbursed in
accordance with the terms of the 77 Mortgage Loan Agreement. The 77 Mortgage
Lender elected to force fund the 77 Mortgage Loan in October 2022. The 77
Mortgage Loan is prepayable without penalty, subject to 77 Mortgage Lender
receiving a minimum total return of $15.26 million, or if an advance has been
made of the Additional Amount, the sum of $15.26 million, plus 10% of the
Additional Amount that has been disbursed, in each case, inclusive of interest
and fees, and must be prepaid in part in certain circumstances such as in the
event of the sale of residential and retail condominium units. Mortgage Borrower
was required to achieve completion of the construction work and the improvements
for the Project on or before July 1, 2022, subject to certain exceptions. In
November 2022, we amended the 77 Mortgage Loan to, amongst other things, extend
the Final Completion date to September 29, 2023 and eliminate the liquidity
requirement. At that time, we drew down $3.0 million under the letter of credit
to fund an interest reserve and $1.0 million to pay down the PIK balance. The 77
Mortgage Loan Agreement also includes additional customary affirmative and
negative covenants for loans of this type, with the first sales pace covenant in
April 2023. Based on sales closed through March 31, 2023, we met this sales
covenant.
In connection with the 77 Mortgage Loan Agreement, we entered into guarantees
with the 77 Mortgage Lender pursuant to which we guaranteed the completion and
payment of costs and expenses related to the construction; the payment of
accrued and unpaid interest and other fees, costs, expenses and payments due and
payable with respect to the 77 Mortgage Loan or 77 Greenwich; and the payment
when due of all amounts due to 77 Mortgage Lender, as a result of "bad-boy"
provisions. Mortgage Borrower and the Company also entered into an environmental
compliance and indemnification undertaking for the benefit of 77 Mortgage
Lender.
As of December 31, 2022, the 77 Mortgage Loan had been paid down by
approximately $47.8 million of proceeds from closed sales of residential
condominium units to a balance of $120.5 million, which includes $4.7 million in
PIK interest.
As of December 31, 2022, we were in compliance with all covenants of the 77
Mortgage Loan.
Mezzanine Loan
In December 2020, we entered into a mezzanine loan agreement with an affiliate
of the CCF Lender (the "Mezzanine Loan Agreement", and the loan thereunder, the
"Mezzanine Loan"). The Mezzanine Loan was originally in the amount of $7.5
million and has a term of three years with two one-year extension options,
exercisable under certain circumstances. The collateral for the Mezzanine Loan
was the borrower's equity interest in its direct, wholly-owned subsidiary. As of
December 31, 2022, the blended interest rate for the 77 Greenwich Construction
Facility and the Mezzanine Loan was 10.2% on an annual basis. Interest on the
Mezzanine Loan is not payable on a monthly basis but instead is automatically
added to the unpaid principal amount on a monthly basis (and therefore accrues
interest) and is payable in full on the maturity date of the Mezzanine Loan.
Upon final repayment of the Mezzanine Loan, a MOIC will be due on substantially
the same terms as provided for in the CCF. Subject to the prior sentence the
Mezzanine Loan may be prepaid in whole or in part, without penalty or premium
(other than payment of the MOIC amount, if applicable, as provided above), upon
prior written notice to the lender under the Mezzanine Loan. In connection with
the Mezzanine Loan, the Company entered into a completion guaranty, carry
guaranty, equity funding guaranty, recourse guaranty and environmental
indemnification undertaking.
In October 2021, the Mezzanine Loan Agreement was amended and restated to, among
other things, (i) increase the amount of the loan thereunder by approximately
$22.77 million, of which $0.77 million reflected interest previously accrued
under the original Mezzanine Loan, (ii) reflect the pledge of the equity
interests in the Mortgage Borrower to the Mezzanine
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Lender as additional collateral for the Mezzanine Loan and (iii) conform certain
of the covenants to those included in the 77 Mortgage Loan Agreement, as
applicable. Additionally, the existing completion guaranty, carry guaranty,
recourse guaranty and environmental indemnification executed in connection with
the original Mezzanine Loan Agreement were amended to conform to the mortgage
guarantees and mortgage environmental indemnity made in connection with the 77
Mortgage Loan (and the existing equity funding guaranty was terminated). In
November 2022, the Mezzanine Loan was amended to, amongst other things, extend
the Final Completion date to September 29, 2023 and eliminate the liquidity
requirement.
As of December 31, 2022, the Mezzanine Loan had a balance of $30.3 million and
accrued interest totaled approximately $5.8 million. See Note 11 - Loans
Payable and Secured Line of Credit to our consolidated financial statements for
further discussion.
As of December 31, 2022, we were in compliance with the covenants of the
Mezzanine Loan.
237 11th Loans
In June 2021, we entered into a $50.0 million senior loan (the "237 11th Senior
Loan") and a $10 million mezzanine loan (the "237 11th Mezz Loan" and together
with the 237 11th Senior Loan, the "237 11th Loans"), provided by Natixis,
bearing interest at a blended rate of 3.05% per annum. The LIBOR-based floating
rate 237 11th Loans have an initial term of two years and three one-year
extension options. The first extension option is not subject to satisfaction of
any financial tests but requires a new interest rate cap be purchased by the
Company. $1.5 million of the 237 11th Senior Loan proceeds were initially held
back by Natixis to cover debt service and operating expense shortfalls, as well
as leasing related costs, but were drawn down in 2022. There was an outstanding
balance of $50.0 million on the 237 11th Senior Loan and $10.0 million on the
237 11th Mezz Loan at December 31, 2022. We are currently exploring a potential
refinancing of our 237 11th Loans.
From time to time, properties that we own, acquire or develop may experience
defects, including concealed defects, or damage due to natural causes, defective
workmanship or other reasons. In these situations, we pursue our rights and
remedies as appropriate with insurers, contractors, sellers and others. Due to
water damage in apartment units and other property at 237 11th resulting from
construction defects which we believe were concealed by the prior ownership team
and its contractor, we submitted a notice of claim to our insurance carrier for
property damage and business interruption (lost revenue) in September 2018. The
insurance carrier subsequently disclaimed coverage for the losses and we filed a
complaint against the carrier alleging that it breached the insurance policy by
denying coverage. We also filed legal claims against the seller, its parent
company, and the general contractor to recover damages arising from defective
construction of the building, including defects that resulted in water damage as
well as other defects. In addition, the general contractor has impleaded into
that litigation several subcontractors who performed work on the property.
Management expects to recover some portion of the cost incurred to repair the
property through the litigations and/or settlement negotiations with the seller,
its parent company, the general contractor, the subcontractors, and the
insurance carrier, although the amount of damages that may be recoverable in
litigation and/or potential settlement negotiations are uncertain at this time,
as is the timing of receipt of any such payments. We continue to pursue all
legal remedies. We incurred significant cash outflows for costs associated with
these repairs and remediation, which commenced in September 2019 and was
completed by December 31, 2021.
As of December 31, 2022, we were in compliance with the covenants of the 237
11th Loans, except for the minimum liquidity requirement. The lender has agreed
in principle to waive this requirement through the initial maturity date of the
loan of July 9, 2023 and the parties are working on documentation.
The Berkley Loan
We owned a 50% interest in a joint venture formed to acquire and operate The
Berkley. On February 28, 2020, in connection with a refinancing, The Berkley
acquisition loan was repaid in full and was replaced with a new 7-year, $33.0
million loan (the "New Berkley Loan") which bore interest at a fixed rate of
2.717% and was interest only during the initial five years. In connection with
the sale of The Berkley in April 2022, the New Berkley Loan was repaid in full
and retired.
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The Berkley Partner Loan
In October 2021, we entered into a loan agreement with our partner in the
Berkley JV, pursuant to which our partner agreed to lend us up to $10.5 million
principal amount, $500,000 of which was available only to be applied to interest
payments, secured by our interest in the joint venture entity, maturing in one
year. The loan bore interest at a rate of 10% per year, with a portion deferred
until maturity. This loan had a balance of $10.1 million when it was repaid in
full in April 2022 in connection with the sale of The Berkley.
Secured Line of Credit
Our $11.75 million line of credit with Webster Bank (formerly known as Sterling
National Bank) is secured by the Paramus, New Jersey property, and guaranteed by
Trinity Place Holdings Inc. The secured line of credit, which was scheduled to
mature on March 23, 2023, was extended to May 22, 2023. The Paramus property
had been under contract for sale pursuant to a purchase and sale agreement,
which was subject to site plan approval. The agreement was terminated by the
buyer in January 2023. The Company is in discussions with the lender regarding
a further extension. The secured line of credit bears interest at the prime
rate. The secured line of credit is pre-payable at any time without penalty. As
of December 31, 2022, the secured line of credit had an outstanding balance of
$9.75 million and an effective interest rate of 7.5%.
250 North 10th Note
We owned a 10% interest in a joint venture with TF Cornerstone (the "250 North
10th JV") formed to acquire and operate 250 North 10th, a 234-unit apartment
building in Williamsburg, Brooklyn, New York. In January 2020, the 250 North
10th JV closed on the acquisition of the property through a wholly-owned special
purpose entity for a purchase price of $137.75 million, of which $82.75 million
was financed through a 15-year mortgage loan (the "250 North 10th Note") secured
by 250 North 10th and the balance was paid in cash. Our share of the equity
totaling approximately $5.9 million was funded through a loan (the "Partner
Loan") from our joint venture partner. The Partner Loan bore interest at 7.0%
and was prepayable any time within its four year term. We sold our interest in
250 N 10th Avenue to our joint venture partner in February 2023 resulting in net
proceeds of approximately $1.2 million after repayment of our Partner Loan and
release from the mortgage guaranty.
Private Placement Transaction and Rights Offering
In October 2021, we entered into a private placement agreement with certain
existing shareholders ("Investors"), pursuant to which we issued to the
Investors an aggregate of 2,539,473 shares of our common stock at a price of
$1.90 per share, and we received gross proceeds of $4.8 million, which closed on
the same day.
In December 2021, we closed on a common stock rights offering to existing
shareholders at a price of $1.90 per share, which resulted in the issuance of
903,576 shares of our common stock and we received gross proceeds of $1.7
million.
At-The-Market Equity Offering Program
In August 2021, we entered into an "at-the-market" equity offering program (the
"ATM Program"), to sell up to an aggregate of $10.0 million in shares of our
common stock.
We sold no shares of our common stock during the year ended December 31, 2022.
During the year ended December 31, 2021, we sold 701,327 shares of our common
stock for aggregate gross proceeds of approximately $1.4 million (excluding
approximately $169,000 in professional and brokerage fees) at a weighted average
price of $1.95 per share.
The ATM Program is currently unavailable as a result of the late filing of the
Company's Quarterly Report on Form 10-Q for the second quarter of 2022. The
Company currently anticipates it will become available again later in 2023.
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Cash Flows
Cash Flows for the Year Ended December 31, 2022 Compared to the Year Ended
December 31, 2021
Net cash provided by operating activities increased by approximately $22.6
million to $1.4 million for the year ended December 31, 2022 from net cash used
of $21.2 million for the year ended December 31, 2021. This increase was mainly
due to the less capitalized costs at 77 Greenwich this year compared to last
year, and an increase in accounts payable and accrued expenses of $1.3 million
over the same period last year, partially offset by a larger decrease in prepaid
expenses and other assets, net and receivables of approximately $2.6 million
compared to the same period last year.
Net cash provided by investing activities increased by approximately $17.5
million to $17.3 million for the year ended December 31, 2022 from net cash used
of $140,000 for the year ended December 31, 2021. The increase in net cash
provided by investing activities was due to $17.4 million in net proceeds from
the closing on the sale of The Berkley in April 2022.
Net cash used in financing activities increased by approximately $51.6 million
to $21.5 million for the year ended December 31, 2022 from net cash provided of
$30.2 million for the year ended December 31, 2021. The increase in net cash
used in financing activities primarily relates to the approximate $38.3 million
of loan paydowns from the 77 Greenwich Mortgage Loan from the proceeds of
residential condominium sales, the $10.1 million payoff of the Berkley Partner
Loan after the sale of The Berkley, and a $3.0 million net paydown of the
Secured Line of Credit, partially offset by $2.3 million less in net borrowings
from the loans and secured line of credit this period compared to the same
period last year as well as $7.6 million from the sale of common stock in 2021.
Net Operating Losses
We believe that our U.S. federal NOLs as of the emergence date of the Syms
bankruptcy were approximately $162.8 million and believe our U.S. federal NOLs
as of December 31, 2022 were approximately $275.8 million. In connection with
the conveyance of the school condominium to the SCA, we applied approximately
$11.6 million of federal NOLs against taxable capital gains of approximately
$18.5 million. Since 2009 through December 31, 2022, we have utilized
approximately $20.1 million of the federal NOLs.
Based on management's assessment, it is more likely than not that the entire
deferred tax assets will not be realized by future taxable income or tax
planning strategies. Accordingly, a valuation allowance of $78.3 million was
recorded as of December 31, 2022.
We believe that certain of the transactions that occurred in connection with our
emergence from bankruptcy in September 2012, including the rights offering and
the redemption of the Syms shares owned by the former majority shareholder of
Syms in accordance with the Plan, resulted in us undergoing an "ownership
change," as that term is used in Section 382 of the Code. However, while the
analysis is complex and subject to subjective determinations and uncertainties,
we believe that we should qualify for treatment under Section 382(l)(5) of the
Code. As a result, we believe that our NOLs are not subject to an annual
limitation under Section 382. However, if we were to undergo a subsequent
ownership change in the future, our ability to utilize our NOLs could be subject
to limitation under Section 382. In addition, the TCJA limited the deductibility
of NOLs arising in tax years beginning after December 31, 2017 to 80 percent of
taxable income (computed without regard to the net operating loss deduction) for
the taxable year. However, the CARES Act suspended the 80% limitation on the use
of NOLs for tax years beginning before January 1, 2021, and allowed losses
arising in taxable years beginning after December 31, 2017 and before January 1,
2021 to be carried back up to five years.
Even if all of our regular U.S. federal income tax liability for a given year is
reduced to zero by virtue of utilizing our NOLs, we may still be subject to
state, local or other non-federal income taxes.
Our certificate of incorporation includes a provision intended to help preserve
certain tax benefits primarily associated with our NOLs. This provision
generally prohibits transfers of stock that would result in a person or group of
persons becoming a 4.75% stockholder, or that would result in an increase or
decrease in stock ownership by a person or group of persons that is an existing
4.75% stockholder.
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Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States of America ("GAAP"). The preparation of financial statements in
conformity with GAAP requires the use of estimates and assumptions that could
affect the reported amounts in our consolidated financial statements. Actual
results could differ from these estimates. A summary of our significant
accounting policies is presented in Note 2 - Summary of Significant Accounting
Policies in our consolidated financial statements. Set forth below is a summary
of the accounting policies that management believes are critical to the
preparation of the consolidated financial statements included in this report.
Certain of the accounting policies used in the preparation of these consolidated
financial statements are particularly important for an understanding of the
financial position and results of operations presented in the historical
consolidated financial statements included in this report and require the
application of significant judgment by management and, as a result, are subject
to a degree of uncertainty.
Critical Accounting Policies
Real Estate - Real estate assets are stated at historical cost, less
accumulated depreciation and amortization. All costs related to the
improvement or replacement of real estate properties are capitalized.
Additions, renovations and improvements that enhance and/or extend the useful
a. life of a property are also capitalized. Expenditures for ordinary
maintenance, repairs and improvements that do not materially prolong the
useful life of an asset are charged to operations as incurred. Depreciation
and amortization are determined using the straight-line method over the
estimated useful lives as described in the table below:
Category Terms
Buildings and improvements 10 - 39 years
Tenant improvements Shorter of remaining term of the lease or useful life
Furniture and fixtures 5 - 8 years
Residential Condominium Units for Sale - We capitalize certain costs related
to the development and redevelopment of real estate including initial project
acquisition costs, pre-construction costs and construction costs for each
specific property. Additionally, we capitalize operating costs, interest, real
b. estate taxes, insurance and compensation and related costs of personnel
directly involved with the specific project related to real estate that is
under development. Capitalization of these costs begin when the activities and
related expenditures commence, and cease as the condominium units receives its
temporary certificates of occupancy ("TCOs").
77 Greenwich is a condominium development project which includes residential
condominium units that are ready for sale. Residential condominium units for
sale as of December 31, 2022 and 2021 includes 77 Greenwich, and in all cases,
excludes costs of development for the residential condominium units at 77
Greenwich that were sold. The residential condominium units for sale are stated
at the lower of cost or net realizable value. Management considers relevant
cash flows relating to budgeted project costs and estimated costs to complete,
estimated sales velocity, expected proceeds from the sales of completed
condominium units, including any potential declines in market values, and other
available information in assessing whether the 77 Greenwich development project
is impaired. Residential condominium units are evaluated for impairment based
on the contracted and projected sales prices compared to the total estimated
cost to construct. Any calculated impairments are recorded immediately in cost
of sales. No provision for impairment was recorded for our unsold residential
condominium units at either December 31, 2022 or 2021, respectively.
Valuation of Long-Lived Assets - We periodically review long-lived assets for
impairment whenever changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable. We consider relevant cash flow,
management's strategic plans and significant decreases, if any, in the market
value of the asset and other available information in assessing whether the
c. carrying value of the assets can be recovered. When such events occur, we
compare the carrying amount of the asset to the undiscounted expected future
cash flows, excluding interest charges, from the use and eventual disposition
of the asset. If this comparison indicates an impairment, the carrying amount
would then be compared to the estimated fair value of the long-lived asset. An
impairment loss would be measured as the amount by which the carrying value of
the long-lived asset exceeds its estimated fair value. We
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considered all the aforementioned indicators of impairment for our real estate
and residential condominium units for sale for the years ended December 31, 2022
and 2021, respectively, and no provision for impairment was recorded during the
years ended December 31, 2022 or 2021, respectively.
Income Taxes - We account for income taxes under the asset and liability
method as required by the provisions of ASC 740, "Income Taxes." Under this
method, deferred tax assets and liabilities are determined based on
d. differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. We provide a valuation
allowance for deferred tax assets for which we do not consider realization of
such assets to be more likely than not.
ASC 740-10-65 addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under ASC 740-10-65, we may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than fifty percent likelihood of being realized upon ultimate
settlement. ASC 740-10-65 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, accounting in interim
periods and increased other disclosures. As of both December 31, 2022 and 2021,
we had determined that no liabilities are required in connection with
unrecognized tax positions. As of December 31, 2022, our tax returns for the
years ended December 31, 2018 through December 31, 2021 are subject to review by
the Internal Revenue Service. Our state returns are open to examination for the
years December 31, 2017 or 2018 through December 31, 2021, depending on the
jurisdiction.
Revenue Recognition - Leases with tenants are accounted for as operating
leases. Minimum rents are recognized on a straight-line basis over the term of
the respective lease, beginning when the tenant takes possession of the space.
The excess of rents recognized over amounts contractually due pursuant to the
underlying leases are included in deferred rents receivable. In addition,
retail leases typically provide for the reimbursement of real estate taxes,
insurance and other property operating expenses. As lessor, when reporting
revenue, we have elected to combine the lease and non-lease components of our
operating lease agreements and account for the components as a single lease
component in accordance with ASC Topic 842. Lease revenues and reimbursement
e. of real estate taxes, insurance and other property operating expenses are
presented in the consolidated statements of operations and comprehensive
(loss) income as "rental revenues." Also, these reimbursements of expenses
are recognized within revenue in the period the expenses are incurred. We
assess the collectability of our accounts receivable related to tenant
revenues. We applied the guidance under ASC 842 in assessing our lease
payments: if collection of rents under specific operating leases is not
probable, then we recognize the lesser of that lease's rental income on a
straight-line basis or cash received, plus variable rents as earned. Once this
assessment is completed, we apply a general reserve, as provided under ASC
450-20, if applicable.
Revenues on sale of residential condominiums reflects the gross sales price from
sales of residential condominium units which are recognized at the time of the
closing of a sale, when title to and possession of the units are transferred to
the buyer. Our performance obligation, to deliver the agreed-upon condominium,
is generally satisfied in less than one year from the original contract date.
Cash proceeds from unit closings held in escrow for our benefit are included in
restricted cash in the consolidated balance sheets. Customer cash deposits on
residential condominiums that are in contract are recorded as restricted cash
and the related liability is recorded in accounts payable and accrued expenses
in our consolidated balance sheets. Our cost of sales consists of allocated
expenses related to the initial acquisition, demolition, construction and
development of the condominium complex, including associated building costs,
development fees, as well as salaries, benefits, bonuses and share-based
compensation expense, including other directly associated overhead costs, in
addition to qualifying interest and financing costs. See b. Residential
Condominium Units for Sale above.
Stock-Based Compensation - We have granted stock-based compensation, which is
described below in Note 13 - Stock-Based Compensation. We account for
stock-based compensation in accordance with ASC 718, "Compensation-Stock
f. Compensation," which establishes accounting for stock-based awards exchanged
for employee services and ASU No. 2018-07, "Compensation - Stock Compensation
(Topic 718), Improvements to Nonemployee Share-Based Payment Accounting,"
which provides additional guidance related to share-based payment transactions
for acquiring
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goods or services from non-employees. Under the provisions of ASC 718-10-35,
stock-based compensation cost is measured at the grant date, based on the fair
value of the award on that date, and is expensed at the grant date (for the
portion that vests immediately) or ratably over the related vesting periods.
Accounting Standards Updates
See Note 2 - Summary of Significant Accounting Policies to our consolidated
financial statements.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, including information included or incorporated
by reference in this Annual Report on or any supplement to this Annual Report,
may include forward-looking statements within the meaning of Section 27A of the
Securities Act and the Exchange Act, and information relating to us that are
based on the beliefs of management as well as assumptions made by and
information currently available to management. These forward-looking statements
include, but are not limited to, statements about our plans, objectives,
expectations and intentions that are not historical facts, and other statements
identified by words such as "may," "will," "expects," "believes," "plans,"
"estimates," "potential," or "continues," or the negative thereof or other and
similar expressions. In addition, in some cases, you can identify
forward-looking statements by words or phrases such as "trend," "potential,"
"opportunity," "believe," "comfortable," "expect," "anticipate," "current,"
"intention," "estimate," "position," "assume," "outlook," "continue," "remain,"
"maintain," "sustain," "seek," "achieve," and similar expressions. Such
statements reflect our current views with respect to future events, the outcome
of which is subject to certain risks, including among others:
our expectation that our existing capital resources will not be sufficient to
? fund our operations for at least the next 12 months if we are not successful in
consummating a strategic transaction and/or raising additional capital;
risks and uncertainties as to the terms, timing, structure, benefits and costs
? of any capital raising or strategic transaction and whether one will be
consummated on terms acceptable to us or at all;
? our limited cash resources, generation of minimal revenues from operations, and
our reliance on external sources of financing to fund operations in the future;
risks associated with our debt and upcoming debt maturities and other payment
? obligations and the risk of defaults on our obligations, debt service
requirements and covenant compliance;
? our ability to obtain additional financing and refinance existing loans and on
favorable terms;
? risks associated with covenant restrictions in our loan documents that could
limit our flexibility to execute our business plan;
our ability to execute our business plan, including as it relates to the
? development of and sale of residential condominium units at our largest asset,
77 Greenwich;
risks associated with the Company evaluating and potentially consummating a
? strategic transaction, including the risk that the Company may fail to realize
the anticipated benefits of any such transaction;
our investment in property development may be more costly than anticipated and
? investment returns from our properties planned to be developed may be less than
anticipated;
? adverse trends in the New York City residential condominium market;
general economic and business conditions, including with respect to real
? estate, and their effect on the New York City residential real estate market in
particular;
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? our ability to enter into new leases and renew existing leases with tenants at
our commercial and residential properties;
? we may acquire properties subject to unknown or known liabilities, with limited
or no recourse to the seller;
? risks associated with the effect that rent stabilization regulations may have
on our ability to raise and collect rents;
? competition for new acquisitions and investments;
? risks associated with acquisitions and investments in owned and leased real
estate;
? risks associated with joint ventures;
? our ability to maintain certain state tax benefits with respect to certain of
our properties;
our ability to obtain required permits, site plan approvals and/or other
? governmental approvals in connection with the development or redevelopment of
our properties;
costs associated with complying with environmental laws and environmental
? contamination, as well as the Americans with Disabilities Act or other safety
regulations and requirements;
? loss of key personnel;
? the effects of new tax laws;
? our ability to utilize our NOLs to offset future taxable income and capital
gains for U.S. Federal, state and local income tax purposes;
? risks associated with current political and economic uncertainty, and
developments related to the outbreak of contagious diseases;
? risks associated with breaches of information technology systems;
? stock price volatility and other risks associated with a lightly traded stock;
? stockholders may be diluted by the issuance of additional shares of common
stock or securities convertible into common stock in the future;
? a declining stock price may make it more difficult to raise capital in the
future;
? the influence of certain significant stockholders;
limitations in our charter on transactions in our common stock by substantial
? stockholders, designed to protect our ability to utilize our NOLs and certain
other tax attributes, may not succeed and/or may limit the liquidity of our
common stock;
certain provisions in our charter documents and Delaware law may have the
? effect of making more difficult or otherwise discouraging, delaying or
deterring a takeover or other change of control of us;
certain provisions in our charter documents may have the effect of limiting our
? stockholders' ability to obtain a favorable judicial forum for certain
disputes; and
unanticipated difficulties which may arise and other factors which may be
? outside our control or that are not currently known to us or which we believe
are not material.
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In evaluating such statements, you should specifically consider the risks
identified under the section entitled "Risk Factors" in this Annual Report on
Form 10-K, any of which could cause actual results to differ materially from the
anticipated results. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those contemplated by any forward looking
statements. Subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety
by the cautionary statements in this paragraph and elsewhere described in this
Annual Report on Form 10-K and other reports filed with the SEC. All
forward-looking statements speak only as of the date of this Annual Report on
Form 10-K or, in the case of any documents incorporated by reference in this
Annual Report on Form 10-K, the date of such document, in each case based on
information available to us as of such date, and we assume no obligation to
update any forward-looking statements, except as required by law.
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