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Item 1. Financial Statements

2022-11-08 compared with 2022-08-10 · 112 added, 130 removed, 751 unchanged (24% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF NET ASSETS

AS OF JUNE 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021

AS OF SEPTEMBER 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021

(Liquidation Basis)

September 30,

Real estate held for sale

$ 42,545,000  

Cash and cash equivalents

4,806,148  

5,670,693  

Rent receivable

78,009  

39,566  

Other receivables

25,706  

28,796  

$ 47,454,863  

$ 48,284,055  

Accounts payable

$ 1,320,584  

$ 1,146,651  

Accrued liabilities

1,083,542  

940,794  

Deferred rent liability

49,493  

36,474  

Tenant security deposits payable

266,835  

258,605  

Loans payable

9,895,073  

10,028,522  

Estimated liquidation and operating costs net of estimated receipts

11,859,317  

12,845,239  

Total Liabilities

24,474,844  

25,256,285  

Net assets in liquidation

$ 22,980,019  

$ 23,027,770  

See notes to consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

FOR THE SIX-MONTHS ENDED JUNE 30, 2022

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2022

(Liquidation Basis)

Net assets in liquidation, as of December 31, 2021

$ 23,027,770  

Changes in assets and liabilities in liquidation:

1 unchanged sentence

Remeasurement of assets and liabilities

( 47,751 )  

Net decrease in liquidation value

Net assets in liquidation, as of June 30, 2022

$ 22,980,019  

Net assets in liquidation, as of September 30, 2022

See notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS) FOR THE SIX-MONTHS ENDED JUNE 30, 2022 (unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (LIQUIDATION BASIS) FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2022 (unaudited)

Strategic Overview

Gyrodyne, LLC’s (including its subsidiaries, “Gyrodyne”, the “Company”

or the “Registrant”) corporate strategy is to pursue entitlements to increase the values of Cortlandt Manor and Flowerfield, its two remaining properties, so that they can be sold to one or more developers at higher prices and maximize value and distributions.

Gyrodyne intends to dissolve after we complete the disposition of our assets, apply the proceeds to settle debts and claims, and then pay liquidating distributions to our shareholders.

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Various other factors will continue to impact the timeline to achieve approvals, including the backlog of land use applications, labor shortages and environmental concerns.

Nevertheless, although there can be no assurances, we anticipate receiving final approval of our subdivision applications for Flowerfield and Cortlandt Manor in late 2022 or early 2023.

Nevertheless, although there can be no assurances, we anticipate receiving final approval of our subdivision applications for Flowerfield and Cortlandt Manor in 2023.

Although Gyrodyne believes that selling individual lots will maximize value, it is also pursuing prospective purchasers who may be willing to pay purchase prices for the entire undivided Flowerfield or Cortlandt Manor property, or for the entire company itself, that Gyrodyne finds more attractive from a timing and value perspective.

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Certain leases provide that the Company is responsible for certain operating expenses.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances other strategies to enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pays distributions to holders of Gyrodyne common shares.

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The accompanying interim quarterly financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).

The consolidated financial statements of the Company included herein have been prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all adjustments which are necessary to present fairly the results for the six -months ended June 30, 2022.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations;

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On March 30, 2022, the Town of Smithtown Planning Board (the “Planning Board”) unanimously granted Gyrodyne’s application for preliminary approval to divide the Flowerfield property into eight lots, subject to certain conditions (the “Flowerfield Subdivision Application”).

On April 26, 2022, the Incorporated Village of Head of the Harbor and certain other parties commenced a special proceeding (the “Article 78 Proceeding”) against the Town of Smithtown and certain other parties, including the Company, seeking to annul the Planning Board’s determinations relating to the Flowerfield Subdivision Application. 

The Article 78 Proceeding was commenced by the filing of a petition (the “Petition”) in the Supreme Court of the State of New York, Suffolk County, pursuant to Article 78 of New York’s Civil Practice Law and Rules (“Article 78" ). 

Specifically, the Petition seeks to annul the Planning Board’s (i) approval of a findings statement, pursuant to the SEQRA, dated September 16, 2021, and adopted by the Planning Board on March 30, 2022, concerning the Flowerfield Subdivision Application, and (ii) preliminary approval on March 30, 2022 of the Flowerfield Subdivision Application.

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Various other factors will continue to impact the timeline to achieve final approvals, including the backlog of land use applications, labor shortages and environmental concerns.

Nevertheless, although there can be no assurances, we anticipate receiving final approval of our subdivision applications for Flowerfield and Cortlandt Manor in late 2022 or early 2023 and that we will generally be able to seek to identify purchasers for such properties after subdivision approval is received.

The Company believes that standard market terms for real property transactions in both Cortlandt Manor and the Town of Smithtown would include both final subdivision approval and final unappealable site plan approval as conditions to closing.

Nevertheless, although there can be no assurances, we anticipate receiving final approval of our subdivision applications for Flowerfield and Cortlandt Manor in 2023 and that we will generally be able to seek to identify purchasers for such properties after subdivision approval is received.

The Company believes that standard market terms for real property transactions in both Cortlandt Manor and the Town of Smithtown would include final subdivision approval, final unappealable site plan approval and the resolution of the Article 78 Proceeding as conditions to closing.

Based on the aforementioned factors, the Company believes the process of negotiating purchase agreements, securing final approvals and consummating the sale of our properties will culminate by year-end 2024.

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Estimated Distributions per Share –

Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets in liquidation by the number of shares outstanding.

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of June 30, 2022, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets in liquidation by the number of shares outstanding.  

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of September 30, 2022, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

Statements of Net Assets in Liquidation

Net assets as of June 30, 2022 and December 31, 2021 would result in estimated liquidating distributions of $ 22,980,019 and $ 23,027,770 , or approximately $ 15.50 and $ 15.53 per common share, respectively, based on 1,482,680 shares outstanding.

The decrease of $ 47,751 or $ 0.03 per share is attributable to the change in the estimated liquidation and operating costs net of estimated receipts, mainly due to legal fees the Company will incur to defend the Article 78 Proceeding of approximately $ 500,000 and other additional costs net of savings of approximately $ 30,000 (of which approximately $ 21,000 relates to commissions on new leases or expansions), offset by additional revenue of approximately $ 480,000 of which approximately $ 370,000 relates to new leases or expansions.

Net assets as of September 30, 2022 and December 31, 2021 would result in estimated liquidating distributions of $ 22,869,716 and $ 23,027,770 , or approximately $ 15.42 and $ 15.53 per common share, respectively, based on 1,482,680 shares outstanding.

The decrease of $ 158,054 or $ 0.11 per share is attributable to the change in the estimated liquidation and operating costs net of estimated receipts, mainly due to estimated legal fees the Company will incur to defend the Article 78 Proceeding of approximately $ 500,000 and other additional costs net of savings of approximately $ 146,000 (of which approximately $ 63,000 relates to lease commissions), offset by additional revenue of approximately $ 488,000 .

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2024, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on adjustments for the following items which are estimated through December 31, 2024:

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To the extent the Company underestimates or overestimates forecasted cash outflows (capital improvements, lease commissions and operating costs) or overestimates or underestimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated or understated.

The Company estimates that it will incur approximately $ 1.18 million (included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of estimated receipts, See Note 5 ) in land entitlement costs from July 2022 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2024, in an effort to obtain entitlements, including special permits.

The Company estimates that it will incur approximately $ 1.09 million (included in the consolidated statement of net assets as part of the estimated liquidation and operating costs net of estimated receipts, See Note 5 ) in land entitlement costs from October 2022 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2024, in an effort to obtain entitlements, including special permits.

The Company believes the commitment of these resources will enable the Company to position the properties for sale with all entitlements necessary to maximize the Flowerfield and Cortlandt Manor property values and resulting distributions.

During the six months ended June 30, 2022, the Company incurred approximately $ 186,000 of land entitlement costs (approximately $ 66,000 of which certain of the Company’s service vendors agreed to defer until the first post subdivision property lot is sold), consisting predominantly of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $ 1.18 million (approximately $ 220,000 of which certain of the Company service vendors have agreed to defer until the first post subdivision property lot is sold) will be incurred from July 2022 through the end of the liquidation period.

During the nine months ended September 30, 2022, the Company incurred approximately $ 282,000 of land entitlement costs (approximately $ 87,000 of which certain of the Company’s service vendors agreed to defer until the first post subdivision property lot is sold), consisting predominantly of engineering fees, legal fees and real estate taxes.

The Company believes the remaining balance of $ 1.09 million (inclusive of real estate taxes of $309K and regulatory fees of $376K ) will be incurred from October 2022 through the end of the liquidation period.

Certain of the Company’s service vendors have agreed to defer approximately $ 198,600 of the remaining $ 1.09 million until the first post subdivision property lot is sold.

The Company does not intend to develop the properties but rather to commit resources to position the properties for sale in a timely manner with all entitlements necessary to achieve maximum pre-construction values.

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During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement process itself.

The value of the real estate reported in the statement of net assets as of June 30, 2022 includes some but not all of the potential value impact that may result from the land entitlement efforts.

The value of the real estate reported in the statement of net assets as of September 30, 2022 includes some but not all of the potential value impact that may result from the land entitlement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The net assets as of June 30, 2022 ( $ 22,980,019 ) and December 31, 2021 ( $ 23,027,770 ) results in estimated distributions of approximately $ 15.50 and $ 15.53 , respectively, per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated distributions as of June 30, 2022 and December 31, 2021 because the amount of such additional value that may result from such efforts are too difficult to predict with sufficient certainty.

The net assets as of September 30, 2022 ( $ 22,869,716 ) and December 31, 2021 ( $ 23,027,770 ) results in estimated distributions of approximately $ 15.42 and $ 15.53 , respectively, per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated distributions as of September 30, 2022 and December 31, 2021 because the amount of such additional value that may result from such efforts are too difficult to predict with sufficient certainty.

The Company believes the land entitlement efforts will enhance estimated distributions per share through the improved values (some but not all of which has already been included in the reported value for real estate held for sale) from the sales of the Flowerfield and Cortlandt Manor properties net of the costs to achieve the improved values and other expenses.

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Estimated Liquidation and Operating Costs Net of Estimated Receipts

The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation.

The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all estimated costs associated with implementing and completing the plan of liquidation.

The Company currently estimates that it will incur liquidation and operating costs net of estimated receipts during the liquidation period of $ 11,522,844 , excluding the gross proceeds from the real estate sales.

1 unchanged sentence

These costs are estimated and are anticipated to be paid during the liquidation period.

The change in the liability for estimated operating costs in excess of estimated receipts during liquidation from January 1, 2022 through June 30, 2022 has been calculated as follows:

The change in the liability for estimated operating costs in excess of estimated receipts during liquidation from January 1, 2022 through September 30, 2022 has been calculated as follows:

Expenditures/

1 unchanged sentence

Assets and Liabilities

June 30, 2022

September 30,

Estimated rents and reimbursements

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The Company secured a non-revolving credit line for up to $ 3,000,000 (the “Original Line”) with a bank, which closed on March 21, 2018.

The original line included an interest only phase for the first eight months of the loan (as amended the “Interest-Only Phase”).

The Company amended and extended the Original Line which included extending the conversion date of the Interest-Only Phase to the earlier of April 30, 2021 or upon drawing down a total of $ 3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2028 or 84 months after conversion to a permanent loan (the “Permanent Phase”).

The original line included an interest only phase.

On April 30, 2021, the loan converted to the permanent phase with an outstanding principal balance of $ 2,200,000 .

During the permanent phase, the Company is paying interest at a fixed rate of 3.85 %, plus principal based on a 20 -year amortization period.

The loan will mature on April 30, 2028.

To secure access to additional working capital through the final sale date of the Flowerfield industrial buildings, the Company secured a second loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $ 3,000,000 , which closed on January 24, 2019.

This loan included an interest only phase for the first twenty-four months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on January 20, 2028 ( 84 months after conversion to a permanent loan) (the “Permanent Phase”).

The Company amended and extended the line which included extending the conversion date of the Interest-Only Phase to May 20, 2021 after which it automatically converts to a permanent loan maturing on May 20, 2028 ( 84 months after conversion to a permanent loan).

This loan included an interest only phase.

On May 20, 2021, the loan converted to the permanent phase with an outstanding principal balance of $ 3,000,000 .

During the Permanent Phase, the Company pays interest of 3.85 %, plus principal based on a 20 -year amortization period.

During the permanent phase, the Company pays interest at a fixed rate of 3.85 %, plus principal based on a 20 -year amortization period.

The loan will mature on May 20, 2028.

Both lines are secured by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases.

As of June 30, 2022, the Company is in compliance with the loan covenants.

As of September 30, 2022, the Company is in compliance with the loan covenants.

The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain secured by the subdivided industrial park lot only.

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The total debt payable mature as follows:

Twelve Months Ending June 30,

Twelve Months Ending September 30,

$ 281,546  

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Accrued Liabilities

June 30, 2022

September 30,

Current accounts payable

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The director fees and interest accrued under the deferred Compensation Plan where each director elected to defer 100 % of his fees for 2022, 2021 and 2020.

This amount also includes the deferred compensation of a former Board advisor per an agreement to defer payments due.

This amount also includes the deferred compensation of a former Board advisor per an agreement to defer payments due under an advisor agreement.

As a limited liability company, Gyrodyne is not subject to an entity level income tax but rather is treated as a partnership for tax purposes, with its items of income, gain, deduction, loss and credit being reported on the Company’s information return, on Form 1065, and allocated annually on Schedule K- 1 to its members pro rata.

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In accordance with generally accepted accounting principles, the Company identifies high risk collectibles, records them on a cash basis and does not include them in revenue or accounts receivable.

As of each June 30, 2022 and December 31, 2021, the Company had a zero balance in its allowance for doubtful accounts.

As of each September 30, 2022 and December 31, 2021, the Company had a zero balance in its allowance for doubtful accounts.

Concentration of Credit Risk

3 unchanged sentences

The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash.

Management does not believe significant credit risk existed on June 30, 2022 and December 31, 2021.

Management does not believe significant credit risk existed on September 30, 2022 and December 31, 2021.

As the Company executes on the sale of its assets, its regional concentration in tenants will increase thereby resulting in the increased credit risk from exposure of the local economies.

For the six months ended June 30, 2022 rental income from the Company’s three largest tenants represented approximately 23 %, 21 % and 8 % of total rental income.

The three largest tenants by revenue as of June 30, 2022 consist of New York Presbyterian Medical Group located in the Cortlandt Manor Medical Center, Stony Brook University Hospital located in the industrial park and an athletic facility in the industrial park.

For the nine months ended September 30, 2022 rental income from the Company’s three largest tenants represented approximately 23 %, 21 % and 9 % of total rental income.

The three largest tenants by revenue as of September 30, 2022 consist of New York Presbyterian Medical Group located in the Cortlandt Manor Medical Center, Stony Brook University Hospital located in the industrial park and an athletic facility in the industrial park.

The current economic challenges facing state and local budgets impacted most of the Company’s largest tenants.

1 unchanged sentence

There can be no assurance that the Company’s leases will renew for the same square footage, at favorable rates net of tenant improvements, if at all.

As of June 30, 2022, other commitments and contingencies are summarized in the below table:

As of September 30, 2022, other commitments and contingencies are summarized in the below table:

Management employment agreements with bonus* and severance commitment contingencies

3 unchanged sentences

$ 439,000  

 *Excludes Retention Bonus Payments

Employment agreements - The Company has an employment agreement with its Chief Executive Officer.

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Board Members(a)

55.000 %  

Discretionary Amount (b)

10.000 %  

Chief Executive Officer

Chief Operations Officer

15.474 %  

Chief Operating Officer

13.926 %  

Officer Discretionary Amount (c)

1.750 %  

Other Employees

3.850 %  

100.000 %  

15 % for the Chairman and 10 % for each of the other four directors.

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4 also clarifies that a director nominated for reelection but failing to get reelected would be treated as if he or she was terminated without cause (and thus eligible for modified benefits post-termination).

There were no payments made under the Plan during the six months ended June 30, 2022.

There were no payments made under the Plan during the nine months ended September 30, 2022.

Deferred Compensation Plan - On December 6, 2019, the Company’s Board of Directors approved the Gyrodyne, LLC Nonqualified Deferred Compensation Plan for Employees and Directors (the “DCP”) effective as of January 1, 2020.

The DCP is a nonqualified deferred compensation plan maintained for officers and directors of the Company. 

Under the DCP, officers and directors may elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of 5 % (per annum).

All DCP benefits will be paid in a single lump sum cash payment on December 15, 2026, unless a Plan of Liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP.

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Under the Settlement, Gyrodyne agreed that any sales of its properties would be effected only in arm's-length transactions at prices at or above their appraised values as of 2014.

As of June 30, 2022 and December 31, 2021, the value of the remaining unsold properties exceeded the respective 2014 appraised values.

As of September 30, 2022 and December 31, 2021, the value of the remaining unsold properties exceeded the respective 2014 appraised values.

Article 78 Proceeding –

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Any space not subleased may be used by the tenant rent-free for certain stated art uses, although the tenant is responsible for certain passthrough expenses such as electric and heat.

Since rent is only due if the space is sublet, the Company believes the fair value of the space to the extent not sublet reflected a below market lease over the three months ending March 31, 2022 of $ 4,543 and total commitments of up to $ 36,340 .

Since rent is only due if the space is sublet, the Company believes the fair value of the space to the extent not sublet reflected a below market lease over the three months ended March 31, 2022 of $ 4,543 and total commitments of up to $ 36,340 .

In March 2022, a Consolidated Lease Agreement was signed between the Company and the not -for-profit organization that extended the lease to December 2027.

It also changed some terms of the original leases including rent on the master lease suite, 3 % escalators and agreements on work to be performed by the Company and by the tenant, respectively.

The signed Consolidated Lease Agreement reflects a below market lease of $ 2,207 for the six months ended June 30, 2022 and $ 44,144 during the extended period.

It also changed some terms of the original leases including rent on the master lease suite, 3 % escalators and agreements on capital improvements to be performed by the Company (approximately $ 65,000 ) and by the tenant (approximately $ 36,000 ), respectively.

The signed Consolidated Lease Agreement reflects a below market lease of $ 4,414 for the nine months ended September 30, 2022 and $ 44,144 during the extended period.

A summary of the additional rent under the new arrangement is as follows:

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$ 290,752  

During the six -months ended June 30, 2022, the Company received rental revenue of $ 21,664 related to these lease agreements.

During the nine -months ended September 30, 2022, the Company received rental revenue of $ 34,427 related to these lease agreements.

The independent members of the Board of the Company approved all of the leasing transactions described above.

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in this report refer to Gyrodyne, LLC’s common shares representing limited liability company interests.

References herein to our Quarterly Report are to this Quarterly Report on Form 10-Q for the six-months ended June 30, 2022.

References herein to our Quarterly Report are to this Quarterly Report on Form 10-Q for the nine-months ended September 30, 2022.

Cautionary Statements Concerning Forward –

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The Board believes the aforementioned strategy will increase the values for such properties.

The value of the real estate reported in the consolidated statement of net assets as of June 30, 2022 includes some, but not all of the potential value impact that may result from such value enhancement efforts.

The value of the real estate reported in the consolidated statement of net assets as of September 30, 2022 includes some, but not all of the potential value impact that may result from such value enhancement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances various other strategies to enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances various other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pays liquidating distributions to holders of Gyrodyne common shares.

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We remain committed on (1) enhancing the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders, (2) completing the disposition of our assets, (3) making timely distributions to our shareholders, (4) managing capital and liquidity, (5) mitigating risks relating to interest rates and real estate cycles and (6) completing the liquidation of the Company.

After giving effect to the Company’s dispositions of real property through June 30, 2022, the Company owns the following properties:

After giving effect to the Company’s dispositions of real property through September 30, 2022, the Company owns the following properties:

Cortlandt Manor:

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The Company believes the aforementioned dual strategy will increase the values for such properties.

The value of the real estate reported in the consolidated statement of net assets as of June 30, 2022 includes some but not all of the potential value impact that may result from such value enhancement efforts.

The value of the real estate reported in the consolidated statement of net assets as of September 30, 2022 includes some but not all of the potential value impact that may result from such value enhancement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve, in limited circumstances, strategies to maximize the returns for our shareholders.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve, in limited circumstances, strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Sales of properties by Gyrodyne could take the form of individual sales of assets, sales of groups of assets, a single sale of all or substantially all of the assets or some other form of sale.

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Various other factors will continue to impact the timeline to achieve final approvals, including the backlog of land use applications, labor shortages and environmental concerns.

2 unchanged sentences

Such cash would equate to future distributions of $15.42 per share based on Gyrodyne having 1,482,680 common shares outstanding.

These estimated distributions are based on values on June 30, 2022 and include some but not all of the potential value that may be derived from the entitlement efforts to maximize the value of Flowerfield and Cortlandt Manor.

These estimated distributions are based on values on September 30, 2022 and include some but not all of the potential value that may be derived from the entitlement efforts to maximize the value of Flowerfield and Cortlandt Manor.

The Consolidated Statements of Net Assets are based on certain estimates.

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The Company is pursuing entitlements to maximize the value of the Flowerfield and Cortlandt Manor properties.

During the six-months ended June 30, 2022, the Company incurred approximately $186,000 of land entitlement costs (approximately $66,000 of which certain of the Company’s service vendors agreed to defer until the first post subdivision property lot is sold), consisting primarily of engineering costs, legal fees and real estate taxes to support the Company’s respective entitlement efforts.

During the nine-months ended September 30, 2022, the Company incurred approximately $282,000 of land entitlement costs (approximately $87,000 of which certain of the Company’s service vendors agreed to defer until the first post subdivision property lot is sold), consisting primarily of engineering costs, legal fees and real estate taxes to support the Company’s respective entitlement efforts.

We estimate that the Company may incur approximately $1.09 million in additional land entitlement costs (approximately $198,600 of which Company vendors have agreed to defer until the first post subdivision property lot is sold) through December 31, 2024 in pursuit of entitlements (approximately $354,000 in Cortlandt Manor and $732,000 in Flowerfield).

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Medical Office Lot #2

The entitlement costs for the six-months ended June 30, 2022 associated with the ownership and development of this property were approximately $48,000.

The entitlement costs for the nine-months ended September 30, 2022 associated with the ownership and development of this property were approximately $76,000.

As a property owner with eligible parcels in this district, Gyrodyne submitted an Environmental Assessment Form to the Town of Cortlandt Planning Department in December 2017 to support its application to receive a MOD campus designation.

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Retail (Lot #1)

 1,500 sft

Multi-Family Residential Lot #2

 160 Units

The alternate is being reviewed for all categories of impacts in the SEQRA documentation similar to the primary proposal, and if approved as anticipated, will allow Gyrodyne the option to proceed with either program following MOD designation and subdivision.

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The public hearing was then held on June 16, 2020 on a virtual platform.

The Town closed the public comment period on June 30, 2020 and proceeded to review the public comments and prepare the Final GEIS.

The Final GEIS reflects the Cortlandt Manor property’s proposed uses comprising 184,600 square feet of medical office space and 4,000 square feet of retail space (together with an Alternate Mixed-Use Plan).

A Town Board work session was conducted Monday March 7, 2022 for the primary purpose of the stakeholders describing their current development programs for the benefit of the new Town Board members voted in this past November.

Although not required by SEQRA, the Town Board conducted another public hearing on Monday, May 2, 2022 and closed the hearing that evening while leaving the public comment period open for twenty days.

The Town closed the public comment period on June 30, 2020 and proceeded to review the public comments and prepare the Final GEIS (“FGEIS”).

The FGEIS reflects the Cortlandt Manor property’s proposed uses comprising 184,600 square feet of medical office space and 4,000 square feet of retail space (together with an Alternate Mixed-Use Plan).

A Town Board work session was conducted March 7, 2022 for the primary purpose of the stakeholders describing their current development programs for the benefit of the new Town Board members elected this past November.

Although not required by SEQRA, the Town Board conducted another public hearing on May 2, 2022 and closed the hearing that evening while leaving the public comment period open for twenty days.

The additional public comments are being reviewed and will require formal written responses by stakeholders including Gyrodyne.

The Cortlandt Manor Town Board will be scheduling a public work session before scheduling a vote to accept the GEIS.

We anticipate that the final GEIS will be accepted by the Town Board with SEQRA completed in the fourth quarter of 2022.

The Town Board is anticipated to adopt a MOD designation for the property at the same time.

We also anticipate subdivision and conceptual site plan approvals within the first quarter of 2023. The Company does not plan on developing the property but rather positioning the property to be sold with all entitlements necessary to achieve maximum pre-construction value for the Company in the shortest period of time with the least amount of risk to the Company.

The Cortlandt Manor Town Board held a public work session on October 24, 2022.

We anticipate that the final FGEIS will be accepted by the Town Board with SEQRA completed in the fourth quarter of 2022.

The Town Board is anticipated to adopt a MOD designation for the property in the first quarter of 2023.

We also anticipate subdivision and conceptual site plan approvals in 2023.

The Company does not plan on developing the property but rather positioning the property to be sold with all entitlements necessary to achieve maximum pre-construction value for the Company in the shortest period of time with the least amount of risk to the Company.

Flowerfield .

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Approval of the Preliminary Subdivision was granted at that meeting.

Final Subdivision approval is expected in late 2022 or early 2023.

Final Subdivision approval is expected in 2023.

The entitlement costs for the six-months ended June 30, 2022 associated with the ownership and development of this property consisted of architectural and engineering costs, legal expenses, economic analysis, soil management and surveys were approximately $138,000.

The entitlement costs for the nine-months ended September 30, 2022 associated with the ownership and development of this property were approximately $206,000, consisting of architectural and engineering costs, legal expenses, economic analysis, soil management and surveys.

While we cannot predict the outcome of the subdivision application, we have undertaken to subdivide the Flowerfield property in a manner that we believe will result in maximum pre-construction values in the shortest amount of time and limited risk.

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Unless otherwise specified, the statistical and other information regarding the Company’s properties and tenants are estimates based on information available to the Company.

As a result of the rapid development, fluidity and uncertainty surrounding this situation, the Company expects that such statistical and other information will change, potentially significantly, going forward, and may not be indicative of the actual impact of the COVID-19 pandemic on the Company’s business, operations, cash flows and financial condition for the first and second quarters of 2022 and future periods.

The spread of COVID-19 has had a significant impact on the global economy, the U.S.

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Both of the Company’s properties feature tenants designated as “essential”.

Approximately 41% of the Company’s tenants (based on 2022 projected annual rental revenues) are from tenants that are not part of or affiliated with a major hospital.

Approximately 41% of the Company’s 2022 projected annual rental revenues are from tenants that are not part of or affiliated with a major hospital.

The COVID-19 pandemic may adversely impact the timeliness of local government in granting required approvals.

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The Company adopted a Deferred Compensation Plan effective as of January 1, 2020 pursuant to which officers and directors may elect to defer a portion of their compensation until the earlier of December 15, 2026 or adoption of a Plan of Liquidation, together with interest on such deferred payments at a fixed rate of 5% (per annum).

As of June 30, 2022, directors have deferred $897,252 (inclusive of interest) and have committed to an additional $144,000, plus interest through 2022.

As of September 30, 2022, directors have deferred $981,070 (inclusive of interest) and have committed to an additional $72,000, plus interest through 2022.

The pandemic has resulted in a significant shift toward commercial acceptance of remote working and telemedicine which may adversely impact our occupancy rate and average rate per square foot.

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and Part I, Item 1A, “Risk Factors”, of our Annual Report for the year ended December 31, 2021.

Transaction Summary for the Six-Months Ended June 30, 2022

The following summarizes our significant transactions and other activity during the six-months ended June 30, 2022.

Transaction Summary for the Nine-Months Ended September 30, 2022

The following summarizes our significant transactions and other activity during the nine-months ended September 30, 2022.

Small businesses are expected to be adversely affected disproportionately by the economic ramifications of COVID-19.

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Leasing Activity.

During the six-months ended June 30, 2022, the Company executed one new lease and eight renewals comprising approximately 1,100 and 11,000 square feet, annual revenue of approximately $10,000 and $147,000 and total commitments of approximately $11,000 and $431,000 respectively.

During the nine-months ended September 30, 2022, the Company executed two new leases and 15 renewals comprising approximately 4,200 and 24,500 square feet, annual revenue of approximately $61,600 and $410,400 and total commitments of approximately $281,000 and $1,032,000 respectively.

The Company incurred commission fees of approximately $27,300 relating to the new and extended leases.

There was also one termination and one expansion resulting in a net increase of approximately 1,600 square feet, $70,000 in annual revenue and approximately $354.000 in total commitment.

There were also two terminations and two expansions resulting in a net increase of approximately 2,600 square feet, $73,800 in annual revenue and approximately $486,500 in total commitment.

The Company incurred commission fees of approximately $11,200 on the expansion.

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Various other factors will continue to impact the timeline to achieve final approvals, including the backlog of land use applications, labor shortages and environmental concerns.

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Estimated Distributions per Share  – Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets by the number of shares outstanding.  

New accounting pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of June 30, 2022, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

New accounting pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of September 30, 2022, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

Discussion of the Statements of Net Assets

Net assets in liquidation on June 30, 2022 and December 31, 2021 would result in estimated liquidating distributions of $22,980,019 and $23,027,770, or approximately $15.50 and $15.53 per common share, respectively, based on 1,482,680 shares outstanding.

The decrease of $47,751 or $0.03 per share is attributable to the change in the estimated liquidation and operating costs net of estimated receipts, mainly due to legal fees the Company will incur to defend the Article 78 Proceeding of approximately $500,000 and other additional costs net of savings of approximately $30,000 (of which approximately $21,000 relates to commissions on new leases or expansions), offset by additional revenue of approximately $480,000 of which approximately $370,000 relates to new leases or expansions.

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2024, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the June 30, 2022 cash balance of $4.8 million plus adjustments for the following items which are estimated through December 31, 2024:

Net assets in liquidation on September 30, 2022 and December 31, 2021 would result in estimated liquidating distributions of $22,869,716 and $23,027,770, or approximately $15.42 and $15.53 per common share, respectively, based on 1,482,680 shares outstanding.

The decrease of $158,054 or $0.11 per share is attributable to the change in the estimated liquidation and operating costs net of estimated receipts, mainly due to estimated legal fees the Company will incur to defend the Article 78 Proceeding of approximately $500,000 and other additional costs net of savings of approximately $146,000 (of which approximately $63,000 relates to lease commissions), offset by additional revenue of approximately $488,000.

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2024, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the September 30, 2022 cash balance of $4.4 million plus adjustments for the following items which are estimated through December 31, 2024:

The estimated cash receipts from the operation of the properties net of rental property related expenditures as well as costs expected to be incurred to preserve or improve the net realizable value of the properties at their estimated gross sales proceeds.

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The Company estimates that it will incur approximately $1.18 million (included in the statements of net assets as part of the estimated liquidation and operating costs net of estimated receipts) in land entitlement costs from July 2022 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2024, in an effort to obtain entitlements, including special permits.

The Company estimates that it will incur approximately $1.09 million (included in the statements of net assets as part of the estimated liquidation and operating costs net of estimated receipts) in land entitlement costs from October 2022 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2024, in an effort to obtain entitlements, including special permits.

The Company believes the remaining balance of $1.18 million (approximately $220,000 of which the Company’s service vendors have agreed to defer until the first post subdivision property lot is sold) will be incurred from July 2022 through the end of the liquidation period.

The Company believes the remaining balance of $1.09 million (inclusive of real estate taxes of $309K and regulatory fees of $376K) will be incurred from October 2022 through the end of the liquidation period.

Certain of the Company’s service vendors have agreed to defer approximately $198,600 of the remaining $1.09 million until the first post subdivision property lot is sold.

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The value of the real estate reported in the statement of net assets as of June 30, 2022 includes some but not all of the potential value impact that may result from the land entitlement efforts.

There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The net assets in liquidation on June 30, 2022 ($22,980,019) results in estimated liquidating distributions of approximately $15.50 per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value which includes some but not all of the actual potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated liquidating distributions as of June 30, 2022 because the amount of such additional value is too difficult to predict with sufficient certainty.

The net assets in liquidation on September 30, 2022 ($22,869,716) results in estimated liquidating distributions of approximately $15.42 per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value which includes some but not all of the actual potential sales proceeds that may result directly or indirectly from our land entitlement efforts.

Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated liquidating distributions as of September 30, 2022 because the amount of such additional value is too difficult to predict with sufficient certainty.

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There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, changes in values of the Cortlandt Manor and/or Flowerfield properties (whether market driven or resulting from the land entitlement efforts) net of any bonuses (if such values exceed the minimum values required to pay bonuses under the retention bonus plan), favorable or unfavorable changes in the land entitlement costs, the performance of the underlying assets, the market for commercial real estate properties generally and any changes in the underlying assumptions of the projected cash flows.

The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of June 30, 2022 (dollars are in millions).

June 30, 2022 cash and cash equivalents balance

The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of September 30, 2022 (dollars are in millions).

September 30, 2022 cash and cash equivalents balance

Principal payments on loan

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Gyrodyne’s strategy is to enhance the value of Flowerfield and Cortlandt Manor, by pursuing various entitlement opportunities, which the Gyrodyne Board believes will improve the potential of obtaining better values for such properties.

The pursuit of the highest and best use of Flowerfield and Cortlandt Manor may involve other strategies to maximize the returns for our shareholders.

The pursuit of the highest and best use of Flowerfield and Cortlandt Manor may involve other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pays liquidating distributions to holders of Gyrodyne common shares.

Therefore, the Company includes in its financial statements the Consolidated Statement of Changes in Net Assets for the six-months ended June 30, 2022, which is discussed below:

Therefore, the Company includes in its financial statements the Consolidated Statement of Changes in Net Assets for the nine-months ended September 30, 2022, which is discussed below:

Net assets in liquidation on January 1, 2022

Changes in net assets in liquidation from January 1 through June 30, 2022:

Changes in net assets in liquidation from January 1 through September 30, 2022:

Change in liquidation value of real estate

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Total decrease in net assets in liquidation

Net assets in liquidation on June 30, 2022

Net assets in liquidation on September 30, 2022

Liquidity and Capital Resources

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The plan is a nonqualified deferred compensation plan maintained for officers and directors of the Company. 

Under the DCP, officers and directors may elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of 5% (per annum).

As of June 30, 2022, the Company had cash and cash equivalents totaling approximately $4.8 million.

As of September 30, 2022, the Company had cash and cash equivalents totaling approximately $4.4 million.

The Company anticipates that its current cash and cash equivalent balance will be adequate to fund its process of seeking entitlements and selling assets and subsequent dissolution.

The $4.4 million of cash will be partially used to fund our efforts to generate the highest values for the Flowerfield and Cortlandt Manor properties while simultaneously pursuing the strategic sale of these properties.

The pursuit of the highest values of Flowerfield and Cortlandt Manor may involve the other investments and or other strategies to maximize the returns for our shareholders.

The pursuit of the highest values of Flowerfield and Cortlandt Manor may involve the other investments and or other strategies to manage risk and or enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders.

The Company is estimating and reporting in the consolidated statements of net assets total gross cash proceeds from the sale of its assets of approximately $42.5 million.

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In addition, the Company has and will continue to review operating activities for possible cost reductions throughout the liquidation process.

Major elements of the Company’s cashflows for the six-months ended June 30, 2022 were as follows:

Major elements of the Company’s cashflows for the nine-months ended September 30, 2022 were as follows:

Operating cashflows

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($106,679) of capital expenditures on the real estate portfolio excluding those costs incurred for land entitlement.

($185,607) of land entitlement costs.

($194,804) of land entitlement costs net of service vendor deferrals of $86,962.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements