What changed in this filing

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Item 1A. Risk Factors

2025-03-28 compared with 2024-03-29 · 48 added, 12 removed, 331 unchanged (15% of the section changed)

24 unchanged sentences

The Company and the Town of Smithtown are vigorously defending the Planning Board’s determinations against the Petition.

In June 2022, Gyrodyne and the Town of Smithtown filed motions to dismiss the Petition.

During the third quarter of 2023, the Article 78 Proceeding was re-assigned to a different judge for the second time.

On February 6, 2024, the Supreme Court of the State of New York, Suffolk County issued an order (the “Order”), denying the Motions in part and granting them in part.

Specifically, the Order (i) denied the Motions as to three individual Petitioners and the St.

James-Head of the Harbor Neighborhood Preservation Coalition, Inc., (ii) granted the Motions as to the remaining twenty (20) individual Petitioners and the Village of Head of the Harbor, (iii) denied the branch of Gyrodyne’s motion alleging that Petitioners failed to state a claim.

On October 11, 2024, the Supreme Court of the State of New York issued a ruling in favor of the Company dismissing the Article 78 petition in its entirety.

On October 28, 2024, the Company received a notice of appeal filed by the petitioners in this proceeding seeking to appeal the court’s dismissal of the Article 78 petition, citing as grounds for appeal “whether the court erred in denying the petition and dismissed the Article 78 proceeding, and any and all other issues which may arise upon further review of the record on appeal”.

On November 12, 2024, the petitioners filed a notice of motion to renew and reargue, seeking to have the court direct the respondents to undertake a supplemental environmental impact statement to address retaining of storm water at the property being developed in light of a recent storm, and to annul the resolution approving the preliminary site plan.

On March 17, 2025, the Supreme Court of the State of New York, Suffolk County issued an order denying the appellants motion to stay enforcement of the order, pending hearing and determination of appeal.

On March 21, 2025, the Supreme Court of the State of New York, Suffolk County issued an order denying the Petitioners motion to renew and reargue.

Challenging a government decision in an Article 78 proceeding can lead to delay in enforcement of the government action, whether or not the suit is successful, and the government sometimes agrees to delay implementation until legal challenges are resolved.

3 unchanged sentences

We cannot assure you of the exact timing and amount of any further distributions to our shareholders.

Our estimate of net assets on December 31, 2023 is $30.72 million or $19.51 per common share (inclusive of the issuance of shares and net proceeds from the Rights Offering, the December 31, 2023 estimated net assets in liquidation would be $35.46 million or $16.12 per share based on 2,199,308 shares outstanding).

Our estimate of net assets on December 31, 2024 is $30.6 million or $13.91 per common share.

These estimated amounts are based on a number of assumptions and factors outside of our control.

13 unchanged sentences

In addition, transactional fees and expenses, environmental contamination at our properties or unknown liabilities, if any, may adversely impact the net proceeds from those properties.

Distributions to shareholders may be delayed or reduced as a result of sale agreement provisions that allow purchasers to terminate agreements and/or result in purchaser defaults.

Distributions to shareholders may be delayed or reduced as a result of sale agreement provisions that allow purchasers to terminate agreements, that result in purchaser defaults or that make the purchase price contingent upon site plan approval.

Purchase and sale agreements that we have entered into with respect to properties we previously sold contained provisions that gave the purchaser the right to terminate the agreement, for any reason or no reason, prior to the expiration of an evaluation period, and receive a refund of earnest money deposits, and it can be anticipated that agreements for future property sales will have similar provisions.

The consummation of property sales for which we will enter into sale agreements in the future will also be subject to satisfaction of standard closing conditions.

Moreover, we anticipate that purchase and sale agreements may also be contingent upon the purchaser obtaining (at its expense) final site plan approval for a designated number of units within a specified period of time, with the purchaser having a right to terminate the agreement or extend the approval period if it fails to secure such approval within such time period, and with the purchase price for the property being a function of agreed upon price per unit and the number of approved units.

If any property sale contemplated by future sale agreements does not close because a purchaser exercises its termination right or defaults, or because of a failure of a closing condition or for any other reason, we will need to locate a new buyer for the property, which we may be unable to do promptly or at a price or on terms that are as favorable as contained in the original sale agreement.

1 unchanged sentence

These additional costs are not included in our projections.

In the event that we incur these additional costs, distributions to our shareholders would be delayed or reduced.

In the event that we incur these additional costs or if the number of approved units under final site plan approval turns out to be below what we anticipate, distributions to our shareholders would be delayed or reduced.

Illiquidity of real estate and lack of diversification may make it difficult for us to sell properties or achieve satisfactory returns in one or more properties within projected timelines.

17 unchanged sentences

Publicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as governance changes, financial restructurings, sales of assets and changes to executive and director compensation.

The Company received a notice dated April 25, 2023 (the “Nomination Notice”) from Star Equity Fund, LP (“Star Equity”), which allegedly owned approximately 5.4% of our outstanding shares at the time of submission, of its intent to nominate a slate of two candidates for election as directors at the 2023 annual meeting of shareholders (the “Annual Meeting”).

On August 11, 2023, Star Equity submitted a shareholder proposal to the Company pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Shareholder Proposal”).

In 2023, the Company was targeted by an activist campaign pursuant to which Star Equity Fund, LP (“Star Equity”) notified the Company (the “Nomination Notice”) of its intent to nominate a slate of two candidates for election as directors at the 2023 annual meeting of shareholders (the “2023 Annual Meeting”), and then submitted a shareholder proposal to the Company pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Shareholder Proposal”).

On September 5, 2023, the Company entered into a letter agreement (“Cooperation Agreement”) with Star Equity, pursuant to which Star Equity agreed to irrevocably withdraw both the Nomination Notice and the Shareholder Proposal.

Through December 31, 2024, the cumulative cost to the Company of responding to and resolving the foregoing shareholder activist campaign, including changes to our incentive compensation arrangements, was approximately $950,000.

We are working with insurance coverage counsel to pursue coverage under our existing directors and officers insurance policy for amounts in excess of the $500,000 insurance deductible under the policy.

The Company values input from all shareholders, including Star Equity, and remains open to ongoing engagement.

A proxy contest or related activities on the part of activist shareholders, including, among others, Star Equity, could adversely affect our business for a number of reasons, including, without limitation, the following:

15 unchanged sentences

Furthermore, the Stipulation’s price floor provision does not factor in land entitlement costs that may be incurred in enhancing the value of any particular property.

The price floor provision may create a perverse incentive for the Company to incur certain land entitlement costs to increase the value of a property beyond its stipulated price floor even if the land entitlement costs incurred exceed the amount of the increase.

Risks incidental to real estate ownership and management.

35 unchanged sentences

Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

Changes in economic and capital markets conditions, including periods of generally deteriorating real estate industry fundamentals, may significantly affect our results of operations and returns to our stockholders.

We are subject to risks generally incident to the ownership of real estate investments, including changes in global, national, regional or local economic, demographic or capital market conditions, including economic impacts resulting from actual or perceived instability in the U.S.

banking system or as a result of the ongoing conflicts between Russia and Ukraine and conflicts in the Middle East, as well as other factors particular to the locations of our properties.

In addition, the threat or imposition of new tariffs may create uncertainty in real estate markets and shift demand for industrial and/or medical office properties.

A recession could adversely impact the value of our properties as a result of, among other items, increased tenant defaults under our leases, lower demand for rentable space, as well as potential oversupply of rentable space, each of which could lead to increased concessions, tenant improvement expenditures or reduced rental rates to maintain occupancies.

These conditions could also adversely impact the financial condition of the tenants that occupy our properties and, as a result, their ability to pay us rents.

To the extent that a general economic slowdown is prolonged or becomes more severe or real estate fundamentals deteriorate, it may have a significant and adverse impact on the values of our properties, revenues, results from operations, financial condition, liquidity, overall business prospects and ultimately our ability to pay distributions to our shareholders.

If we are unable to maintain the occupancy rates of currently leased space and/or to lease currently available space, if tenants default under their leases or other obligations to us or if our cash flow is otherwise less than we expect, distributions to our shareholders may be delayed or reduced.

96 unchanged sentences

The medical office property is subject to various operating risks common to the healthcare industry, many of which are beyond our control, including the following:

adverse trends in healthcare provider operations, such as changes in the demand for and methods of delivering healthcare services, changes in third party reimbursement policies, significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas, increased expense for uninsured patients, increased competition among healthcare providers, increased liability insurance expense, continued pressure by private and governmental payors to reduce payments to providers of services and increased scrutiny of billing, referral and other practices by federal and state authorities and private insurers;

competition from other medical properties in our markets;

2 unchanged sentences

reductions in medical reimbursements from Medicaid and Medicare which directly impact private practitioners;

unknown or unidentified adverse consequences from the recent federal healthcare legislation on private practitioners will adversely affect our medical properties in the form of rent rates and tenant reimbursements;

unknown or unidentified adverse consequences from federal healthcare legislation on private practitioners will adversely affect our medical properties in the form of rent rates and tenant reimbursements;

changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances.

5 unchanged sentences

Our ability to fund capital expenditures may be limited.

Our medical office properties and tenants are subject to competition .

Our medical office properties face competition from nearby hospitals and other medical office buildings that provide comparable services.

Some of those competing facilities are owned by governmental agencies and supported by tax revenues, while others are owned by nonprofit corporations and may be supported to a large extent by endowments and charitable contributions.

These types of financial support are not available to the medical office property we own.

Similarly, our medical office tenants face competition from other medical practices in nearby hospitals and other medical facilities.

Further, referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients.

Competition and loss of referrals could adversely affect our tenants’ ability to make rental payments, which could adversely affect our rental revenues.

Any reduction in rental revenues resulting from the inability of our medical office buildings and our tenants to compete successfully may have an adverse effect on our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Federal health care legislation has affected medical office real estate.

2 unchanged sentences

These factors may adversely affect the economic performance of some or all of our medical office tenants and, in turn, our performance.

Our tenants are also subject to extensive federal, state, and local licensure laws, regulations and industry standards governing business operations, the physical plant and structure, patient rights and privacy and security of health information.

Our healthcare tenants are also subject to extensive federal, state, and local licensure laws, regulations and industry standards governing business operations, the physical plant and structure, patient rights and privacy and security of health information.

Our tenants’ failure to comply with any of these laws could result in loss of licensure, denial of reimbursement, imposition of fines or other penalties, suspension or exclusion from the government sponsored Medicare and Medicaid programs, loss of accreditation or certification, or closure of the facility.

1 unchanged sentence

Our tenants may also face significant limits on the scope of services reimbursed and on reimbursement rates and fees, all of which could impact their ability to pay rent or other obligations to us.

Referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians to which they refer patients.

Competition and loss of referrals could adversely affect our tenants’ ability to make rental payments, which could adversely affect our rental revenues.

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition.

56 unchanged sentences

The lender has the right, but not the obligation, to decline to extend the term of the 2021 Mortgage Loan if the loan to value ratio of the property is greater than seventy percent (70%), or the property does not support a debt service coverage ratio (as calculated by the lender) of at least 1.3 to 1, in each case on the date the extension is exercised.

GSD Cortlandt also is responsible for all fees and expenses associated with the extension including, but not limited to, the lender’s reasonable legal fees, an inspection fee in the amount of $150, and a tax service fee.

The 2021 Mortgage Loan may be prepaid in whole or in part, at any time, provided the borrower (GSD Cortlandt) pays the bank with each prepayment a prepayment fee equal to (i) during the first loan year and, if applicable, the first loan year of the Extension Period, five percent of the amount of such prepayment;

13 unchanged sentences

Federal Reserve and the FDIC that all depositors of Signature Bank would have access to all of their deposits and the fact that the amount on deposit is below the $250,000 cap on FDIC deposit insurance, the Company expects to have access to all of its cash on deposit at Signature Bank.

On December 14, 2023, the FDIC transferred the Mortgage Loan to SIG CRE 2023 Venture LLC, which is now the holder of the Mortgage Loan.

On December 14, 2023, the FDIC transferred the 2021 Mortgage Loan to SIG CRE 2023 Venture LLC, which continues to be the holder of the Mortgage Loan.

There are no undrawn amounts under the 2021 Mortgage Loan.

6 unchanged sentences

The 2023 Mortgage Loan is secured by a first mortgage in the amount of $1,500,000 on the interests of GSD Cortlandt in 1989 Crompond Road and 1987 Crompond Road in Cortlandt Manor, New York, and the interests of Buttonwood in 206 Buttonwood Avenue and certain vacant land off of Buttonwood Road in Cortlandt Manor, New York.

On February 1, 2024, an agreement was signed with one vendor who had previously agreed to defer 50% of payment until the closing of the first property lot sale that is the subject of either the Flowerfield or Cortlandt Manor subdivision.

The agreement called for a $200,000 payment on outstanding invoices, plus an interest payment on such invoices, interest to be accrued on the outstanding balance, agreement to pay all future invoices in full, and conversion of the remaining outstanding balance of $477,829 (balance after the $200,000 payment) to a loan payable within 15 days of the sale of one of the Company’s properties.

The loan accrued interest at 0.75% per month through 2024 and will accrue interest at 1.0% per month starting January 2025.

The Company intends to seek to modify any of its existing loan facilities to strengthen its financial position through the end of 2026, the forecasted completion of the liquidation process.

The Company’s goal with respect to any such modification is for its current cash and cash equivalent position post-loan modification to be adequate to fund our process of seeking entitlements and selling assets through the end of 2026, the forecasted date for the completion of the liquidation and subsequent dissolution.

There can be no assurance, however, that the Company will be successful in securing any such loan modification on terms that are satisfactory to the Company or on any terms at all.

Changes in federal tax law could adversely affect the tax treatment of distributions to our shareholders.

7 unchanged sentences

Nevertheless, the loss or unavailability of either of our executive officers due to retirement, resignation, COVID-19 or otherwise could have a material adverse effect on our business, financial condition and results of operations in general, and our efforts to position our properties to maximize values and distributions to shareholders in particular, if we are unable to retain our executive officers.

In addition, the Company’s controller resigned as a full-time employee as of February 28, 2025.

The former controller continues to provide certain services to the Company under the terms of a consulting agreement dated as of March 1, 2025 (the “Consulting Agreement”).

Nevertheless, the Company may find it necessary to hire another person to perform certain functions not covered by the Consulting Agreement and be prepared to assume such functions that are covered by the Consulting Agreement in the event the Consulting Agreement is terminated.

If the Company is required to hire such additional person, the cost of doing so could have a material adverse effect on our business, financial condition and results of operations in general.

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-K

Item 1A. Risk Factors