American Strategic Investment (NYC) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents American Strategic Investment Co.'s unaudited consolidated financial statements and detailed notes for Q2 2025 and FY 2024 Consolidated Balance Sheets | ASSETS (In thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Total real estate investments, net | $362,030 | $398,759 | | Cash and cash equivalents | $5,313 | $9,776 | | Restricted cash | $7,525 | $9,159 | | Total assets | $463,994 | $507,066 | | LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------- | :------------ | :---------------- | | Mortgage notes payable, net | $348,223 | $347,384 | | Total liabilities | $428,476 | $421,480 | | Total equity | $35,518 | $85,586 | | Total liabilities and equity | $463,994 | $507,066 | - Total assets decreased by $43.072 million from December 31, 2024, to June 30, 2025, primarily driven by a reduction in net real estate investments and cash[10] - Total equity significantly decreased by $50.068 million, from $85.586 million to $35.518 million, indicating substantial losses or distributions exceeding earnings[10] Consolidated Statements of Operations and Comprehensive Loss | Metric (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue from tenants | $12,222 | $15,754 | $24,530 | $31,235 | | Total operating expenses | $46,036 | $102,413 | $62,859 | $120,814 | | Operating loss | $(33,814) | $(86,659) | $(38,329) | $(89,579) | | Interest expense | $(7,850) | $(5,201) | $(11,933) | $(9,898) | | Net loss | $(41,660) | $(91,851) | $(50,252) | $(99,459) | | Net loss per share (Basic and Diluted) | $(16.39) | $(36.48) | $(19.80) | $(41.09) | - Net loss significantly improved for both the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to a substantial decrease in impairment of real estate investments[11] - Revenue from tenants decreased by 22.4% for the three months and 21.5% for the six months ended June 30, 2025, year-over-year[11] - Interest expense increased by 50.9% for the three months and 20.6% for the six months ended June 30, 2025, year-over-year[11] Consolidated Statement of Changes in Equity | Equity Component (In thousands) | Balance, Dec 31, 2024 | Equity-based compensation | Net loss | Balance, Jun 30, 2025 | | :------------------------------ | :-------------------- | :------------------------ | :------- | :-------------------- | | Total Stockholders' Equity | $85,586 | $184 | $(50,252) | $35,518 | | Equity Component (In thousands) | Balance, Dec 31, 2023 | Common stock issued to Advisor | Equity-based compensation | Net loss | Other comprehensive loss | Balance, Jun 30, 2024 | | :------------------------------ | :-------------------- | :----------------------------- | :------------------------ | :------- | :----------------------- | :-------------------- | | Total Stockholders' Equity | $224,794 | $1,610 | $240 | $(99,459) | $(406) | $126,779 | - Total stockholders' equity decreased significantly from $85.586 million at December 31, 2024, to $35.518 million at June 30, 2025, primarily due to the net loss incurred[14] - In the six months ended June 30, 2024, common stock was issued to the Advisor in lieu of cash for $1.610 million, which did not occur in the same period of 2025[17] Consolidated Statements of Cash Flows | Cash Flow Activity (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(5,539) | $739 | | Net cash used in investing activities | $(558) | $(568) | | Net cash (used in) provided by financing activities | $0 | $150 | | Net change in cash, cash equivalents and restricted cash | $(6,097) | $321 | | Cash, cash equivalents and restricted cash, end of period | $12,838 | $13,129 | - The company experienced a significant shift from positive to negative operating cash flow, with net cash used in operating activities totaling $(5.539) million for the six months ended June 30, 2025, compared to $739 thousand provided in the prior year[20] - Cash, cash equivalents, and restricted cash decreased by $6.097 million in the first half of 2025, contrasting with an increase of $321 thousand in the same period of 2024[20] Note 1 — Organization - American Strategic Investment Co. is an externally managed company owning a portfolio of six commercial real estate properties, primarily office and retail spaces, in New York City, totaling 1.0 million rentable square feet as of June 30, 2025[22] - The company's day-to-day operations are managed by New York City Advisors, LLC (the "Advisor") and New York City Properties, LLC (the "Property Manager"), both under common control with AR Global Investments, LLC, receiving compensation and reimbursements for their services[23] Note 2 — Going Concern - The Company incurred recurring losses and negative operating cash flows, with current liabilities exceeding current assets, and defaulted on loans for three of its six properties, raising substantial doubt about its ability to continue as a going concern[25] - Management's plan to alleviate going concern doubt includes paying related party fees in shares, selling a performing asset within twelve months, and the Advisor's willingness to provide liquidity loans[26] - As of June 30, 2025, cash and cash equivalents and restricted cash totaled $12.8 million, a $6.1 million decrease from December 31, 2024, with $7.5 million being restricted cash related to defaulted loans[27] - The Company faces significant liquidity constraints due to sustained declines in rental income, constrained cash flow, and ongoing debt service obligations, exacerbated by the adverse impact of the COVID-19 pandemic on Manhattan office properties[31] Note 3 — Summary of Significant Accounting Policies - The financial statements are prepared in accordance with GAAP for interim financial information, and the results for the interim periods are not necessarily indicative of the full year[33] - The consolidated financial statements include the accounts of the Company, the OP, and its subsidiaries, with inter-company transactions eliminated[35] - The New York City office market continues to face challenges post-COVID-19, with slowed leasing and occupancy trends, leading to increased unreimbursed property operating expenses and potential long-term negative impacts[38] - Revenue from tenants is recognized on a straight-line basis over the lease term, and collectability is continually assessed based on tenant payment history, financial condition, and economic conditions[40][42] Note 4 — Real Estate Investments - No real estate assets were acquired or disposed of during the six months ended June 30, 2025, or 2024[52] | Amortization/Accretion (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | In-place leases | $341 | $574 | $721 | $1,155 | | Other intangibles | $0 | $177 | $0 | $354 | | Total included in depreciation and amortization | $341 | $751 | $721 | $1,509 | | Above-market lease intangibles | $29 | $142 | $64 | $287 | | Below-market lease liabilities | $(171) | $(213) | $(343) | $(424) | | Total included in revenue from tenants | $(142) | $(71) | $(279) | $(137) | - The Company recorded impairment charges totaling $30.5 million for the three and six months ended June 30, 2025, across its 1140 Avenue, 400 E. 67th Street/200 Riverside, and 196 Orchard Street properties[58][59][60] - In the prior year, the Company recorded a significant impairment charge of $84.7 million on its 9 Times Square property, which was subsequently sold in December 2024[61] Note 5 — Mortgage Notes Payable, Net | Portfolio Property | Outstanding Loan Amount (Jun 30, 2025) (In thousands) | Outstanding Loan Amount (Dec 31, 2024) (In thousands) | Effective Interest Rate | Maturity | | :----------------- | :------------------------------------- | :------------------------------------- | :---------------------- | :------- | | 123 William Street | $140,000 | $140,000 | 4.74% | Mar. 2027 | | 1140 Avenue of the Americas | $99,000 | $99,000 | 9.11% | Jun. 2025 | | 400 E. 67th Street / 200 Riverside Blvd. | $50,000 | $50,000 | 8.52% | May 2028 | | 8713 Fifth Avenue | $10,000 | $10,000 | 5.05% | Nov. 2028 | | 196 Orchard Street | $51,000 | $51,000 | 3.85% | Aug. 2029 | | Mortgage notes payable, gross | $350,000 | $350,000 | 6.39% | | - The loan for 1140 Avenue of the Americas ($99.0 million) was accelerated on April 7, 2025, due to default, and foreclosure proceedings were initiated in June 2025[69][72] - The 400 E. 67th Street/200 Riverside Blvd. property loan ($50.0 million) is in a lease sweep period and has received multiple default notices, with default interest accruing since March 2025[75][78] - The 8713 Fifth Avenue loan ($10.0 million) has breached a debt service coverage ratio covenant for 20 consecutive quarters, triggering an ongoing excess cash flow sweep period, though no cash has been trapped[73] Note 6 — Fair Value of Financial Instruments - The fair value of short-term financial instruments approximates their carrying value due to their short-term nature[84] | Mortgage Note Payable (In thousands) | Gross Principal Balance (Jun 30, 2025) | Fair Value (Jun 30, 2025) | Gross Principal Balance (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :----------------------------------- | :------------------------------------- | :------------------------ | :------------------------------------- | :------------------------ | | 1140 Avenue of the Americas | $99,000 | $60,521 | $99,000 | $69,238 | | 123 William Street | $140,000 | $135,086 | $140,000 | $132,474 | | 400 E. 67th Street / 200 Riverside Blvd. | $50,000 | $28,239 | $50,000 | $31,671 | | 8713 Fifth Avenue | $10,000 | $9,446 | $10,000 | $9,181 | | 196 Orchard Street | $51,000 | $46,513 | $51,000 | $44,896 | | Total | $350,000 | $279,805 | $350,000 | $287,460 | - Impairment charges were recognized on 1140 Avenue of the Americas, 400 East 67th Street, 200 Riverside, and 196 Orchard Street properties, reducing their carrying values to estimated fair values using discounted cash flow models (7.0% cap rate, 8.5% discount rate) or a sales comparison approach[89] Note 7 — Stockholders' Equity - As of June 30, 2025, and December 31, 2024, the Company had 2.6 million shares of Class A common stock outstanding, including unvested restricted shares[90] - No shares were issued to the Advisor in lieu of cash for asset and property management services during the three and six months ended June 30, 2025, unlike the $1.6 million issued in the six months ended June 30, 2024[91] - The Stockholder Rights Plan's expiration date has been extended to August 18, 2025, entitling holders to purchase Series A Preferred Stock[93] Note 8 — Commitments and Contingencies - The Company has a ground lease for 1140 Avenue of the Americas with a remaining term of 41.5 years and a discount rate of 8.6%, resulting in an ROU asset and liability of approximately $54.4 million and $54.6 million, respectively, as of June 30, 2025[98] | Future Base Rent Payments (In thousands) | Amount | | :--------------------------------------- | :----- | | 2025 (remainder) | $2,373 | | 2026 | $4,746 | | 2027 | $4,746 | | 2028 | $4,746 | | 2029 | $4,746 | | Thereafter | $183,516 | | Total lease payments | $204,873 | | Less: Effects of discounting | $(150,318) | | Total present value of lease payments | $54,555 | - No material legal or regulatory proceedings are pending or contemplated against the Company as of June 30, 2025, other than the foreclosure litigation related to the 1140 Avenue of Americas property[100] Note 9 — Related Party Transactions and Arrangements - Entities wholly owned by AR Global held 536,252 shares of the Company's Class A common stock, and Bellevue owned approximately 59.0% of outstanding shares as of June 30, 2025[103] - The Advisory Agreement, with an initial term ending July 2030, outlines asset management fees (base fee of $0.5 million plus a variable amount) and incentive variable management fees, payable in cash, shares, or OP units[104][105][106] | Related Party Fees (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Asset and property management fees | $1,681 | $1,927 | $3,550 | $3,830 | | Professional fees and other reimbursements | $995 | $1,078 | $2,629 | $2,470 | | Total related party operation fees and reimbursements | $2,676 | $3,005 | $6,179 | $6,300 | - The Company incurred $0.2 million and $0.5 million in property management fees for the three and six months ended June 30, 2025, respectively, paid in cash[114] - Professional fees and other reimbursements to the Advisor for administrative, overhead, and personnel services were $1.0 million (Q2 2025) and $2.6 million (YTD Q2 2025), subject to annual limits[119] Note 10 — Economic Dependency - The Company is economically dependent on its Advisor and affiliates for essential services, including asset management, property management, acquisitions, dispositions, and administrative responsibilities[127][128] Note 11 — Equity-Based Compensation - The 2020 Equity Plan, which succeeded the RSP, permits awards of restricted stock units, stock options, and other equity awards, with a term of 10 years and a limit of 20.0% of outstanding Class A common stock on a fully diluted basis[132] | Restricted Share Activity | Number of Restricted Shares | Weighted-Average Issue Price | | :------------------------ | :-------------------------- | :--------------------------- | | Unvested, December 31, 2024 | 101,197 | $14.19 | | Granted | — | — | | Vested | (25,995) | $9.04 | | Forfeitures | — | — | | Unvested, June 30, 2025 | 75,202 | $15.97 | - As of June 30, 2025, $0.8 million of unrecognized compensation cost related to unvested restricted share awards is expected to be recognized over a weighted-average period of 2.6 years[139] Note 12 — Income Taxes - The Company has a 100% valuation allowance against its net deferred tax assets as of June 30, 2025, and December 31, 2024, due to a history of taxable losses and continuing adverse economic impacts[140] - The effective tax rate was zero for the six months ended June 30, 2025, and 2024, with no income tax expense or benefit recorded[141] Note 13 — Net Loss Per Share | Metric (In thousands, except share and per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(41,660) | $(91,851) | $(50,252) | $(99,459) | | Weighted average shares outstanding — Basic and Diluted | 2,541,402 | 2,518,176 | 2,537,501 | 2,420,385 | | Net loss per share — Basic and Diluted | $(16.39) | $(36.48) | $(19.80) | $(41.09) | - Net loss per share significantly improved to $(16.39) for Q2 2025 from $(36.48) for Q2 2024, and to $(19.80) for YTD Q2 2025 from $(41.09) for YTD Q2 2024[142] | Anti-Dilutive Common Share Equivalents | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Unvested restricted shares | 90,826 | 56,590 | 95,784 | 45,807 | | Total weighted-average anti-dilutive common share equivalents | 90,826 | 56,590 | 95,784 | 45,807 | Note 14 — Segment Reporting - The Company manages and evaluates its operations as a single reportable segment, based on consolidated financial statements, as its Chief Operating Decision Maker (CEO) does not distinguish operations by geography, size, or type[148] - Key metrics reviewed by the CODM include net earnings (loss), revenue from tenants, total operating expenses, and real estate investments, net, to assess overall financial performance and strategic direction[150] Note 15 — Subsequent Events - Debt service payments for July and August were not fully met by rental income for the 1140 Avenue of the Americas and 400 E. 67th Street/200 Riverside Blvd. properties[152] - Foreclosure litigation for the 1140 Avenue of the Americas property, initiated in June 2025, continued with a motion to appoint a receiver in July 2025, and the Company filed its answer in August 2025[153][72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, condition, and outlook, addressing COVID-19 impacts, liquidity, debt, and non-GAAP measures Overview - The Company is an externally managed entity owning six commercial real estate properties in New York City, primarily Manhattan, totaling 1.0 million rentable square feet with an 82.0% occupancy rate as of June 30, 2025[157] - The New York City office market continues to face challenges post-COVID-19, with slowed leasing and occupancy trends, leading to proposals for repositioning office assets with high vacancy rates[159] - As of June 30, 2025, two mortgages totaling $149.0 million are in default, and three mortgages totaling $159.0 million are in cash trap events, with foreclosure litigation initiated for the 1140 Avenue of Americas property[161] - The Company collected 98% of cash rent due across its portfolio for the six months ended June 30, 2025, and plans to focus on selling performing properties, entering new leases, and divesting underperforming assets to address liquidity constraints[162][163] Properties | Portfolio Property | Acquisition Date | Number of Properties | Rentable Square Feet | Occupancy | Remaining Lease Term (years) | | :----------------- | :--------------- | :------------------- | :------------------- | :-------- | :--------------------------- | | 400 E. 67th Street - Laurel Condominium | Sept. 2014 | 1 | 58,750 | 44.3% | 5.8 | | 200 Riverside Boulevard - ICON Garage | Sept. 2014 | 1 | 61,475 | 100.0% | 12.0 | | 123 William Street | Mar. 2015 | 1 | 544,610 | 84.4% | 4.2 | | 1140 Avenue of the Americas | Jun. 2016 | 1 | 245,821 | 74.1% | 6.3 | | 8713 Fifth Avenue | Oct. 2018 | 1 | 17,500 | 100.0% | 9.4 | | 196 Orchard Street | Jul. 2019 | 1 | 60,297 | 100.0% | 9.6 | | Total portfolio | | 6 | 988,453 | 82.0% | 6.0 | - Overall portfolio occupancy decreased to 82.0% as of June 30, 2025, from 85.9% as of June 30, 2024, primarily due to declines at 1140 Avenue of the Americas and 400 E. 67th Street[172] Results of Operations | Leasing Activity (Q1 2025) | New and replacement leases commenced | Total square feet leased | Annualized straight-line rent per square foot | Weighted-average lease term (years) | | :------------------------- | :----------------------------------- | :----------------------- | :-------------------------------------------- | :---------------------------------- | | New and replacement leases | 1 | 11,521 | $9.5 | 0.1 | | Terminated or expired leases | — | — | $— | — | | Leasing Activity (Q2 2025) | New and replacement leases commenced | Total square feet leased | Annualized straight-line rent per square foot | Weighted-average lease term (years) | | :------------------------- | :----------------------------------- | :----------------------- | :-------------------------------------------- | :---------------------------------- | | New and replacement leases | 6 | 72,016 | $252.93 | 13.85 | | Terminated or expired leases | 2 | 32,356 | $6.51 | | | Financial Performance (in thousands) | Q2 2025 | Q2 2024 | Change ($) | | :----------------------------------- | :----------- | :----------- | :----------- | | Revenue from tenants | $12,222 | $15,754 | $(3,532) | | Total operating expenses | $46,036 | $102,413 | $(56,377) | | Operating loss | $(33,814) | $(86,659) | $52,845 | | Interest expense | $(7,850) | $(5,201) | $(2,649) | | Net loss | $(41,660) | $(91,851) | $50,191 | | Financial Performance (in thousands) | YTD Q2 2025 | YTD Q2 2024 | Change ($) | | :----------------------------------- | :----------- | :----------- | :----------- | | Revenue from tenants | $24,530 | $31,235 | $(6,705) | | Total operating expenses | $62,859 | $120,814 | $(57,955) | | Operating loss | $(38,329) | $(89,579) | $51,250 | | Interest expense | $(11,933) | $(9,898) | $(2,035) | | Net loss | $(50,252) | $(99,459) | $49,207 | - Net loss significantly decreased by $50.191 million for Q2 2025 and $49.207 million for YTD Q2 2025 compared to the prior year, primarily due to a substantial reduction in real estate impairment charges[175][190] - Revenue from tenants decreased by $3.5 million for Q2 2025 and $6.7 million for YTD Q2 2025, mainly due to the sale of the 9 Times Square property in Q4 2024[178][192] - Interest expense increased by $2.6 million for Q2 2025 and $2.0 million for YTD Q2 2025, primarily due to the accrual of default interest on the 1140 Avenue of the Americas and 400 E. 67th Street/200 Riverside properties[188][202] Cash Flows from Operating Activities | Cash Flow Item (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Increase (Decrease) | | :---------------------------- | :----------------------------- | :----------------------------- | :------------------ | | Net loss | $(50,252) | $(99,459) | $49,207 | | Depreciation and amortization | $7,136 | $10,412 | $(3,276) | | Impairments of real estate investments | $30,558 | $84,724 | $(54,166) | | Net cash provided by (used in) operating activities | $(5,539) | $739 | $(6,278) | - Net cash used in operating activities was $(5.539) million for the six months ended June 30, 2025, a significant decrease from $739 thousand provided in the same period of 2024, primarily due to changes in working capital and lower non-cash adjustments[204] Cash Flows from Investing Activities | Cash Flow Item (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Increase (Decrease) | | :---------------------------- | :----------------------------- | :----------------------------- | :------------------ | | Capital expenditures | $(558) | $(568) | $10 | | Net cash used in investing activities | $(558) | $(568) | $10 | - Net cash used in investing activities remained consistent at approximately $(0.6) million for both periods, primarily for capital expenditures[205] Cash Flows from Financing Activities | Cash Flow Item (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Increase (Decrease) | | :---------------------------- | :----------------------------- | :----------------------------- | :------------------ | | Proceeds from notes payable to related parties | — | $150 | $(150) | | Net cash provided by (used in) financing activities | — | $150 | $(150) | - No cash was provided by or used in financing activities for the six months ended June 30, 2025, compared to $150 thousand provided in the prior year from notes payable to related parties[206][207] Liquidity and Capital Resources - As of June 30, 2025, cash and cash equivalents were $5.3 million, down from $9.8 million at December 31, 2024, while restricted cash was $7.5 million, down from $9.2 million[209][210] - The Company's leverage ratio was 63.6% as of June 30, 2025, calculated as net debt ($344.7 million) divided by gross asset value ($542.1 million)[213] - All six properties are encumbered by mortgage notes payable totaling $350.0 million, with a weighted-average effective interest rate of 6.39% and a weighted-average maturity of 1.8 years as of June 30, 2025[214][216] - Three properties (1140 Avenue of the Americas, 400 E. 67th Street, 8713 Fifth Avenue), representing 33% of rentable square feet, are under cash trap events due to loan covenant breaches, restricting access to excess cash flow[212] - The Company suspended its dividend policy for Class A common stock beginning Q2 2022, with no assurance of future dividends[227] - Capital expenditures for the six months ended June 30, 2025, totaled $0.6 million, primarily for tenant and building improvements at 123 William Street and 1140 Avenue of the Americas[228] Non-GAAP Financial Measures - EBITDA and adjusted EBITDA are non-GAAP metrics used to evaluate performance, excluding factors like depreciation, interest expense, and impairment charges to facilitate comparisons[233] | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(41,660) | $(91,851) | $(50,252) | $(99,459) | | EBITDA | $(30,265) | $(81,499) | $(31,183) | $(79,149) | | Adjusted EBITDA | $381 | $4,479 | $(451) | $7,407 | - Adjusted EBITDA decreased significantly from $4.479 million to $381 thousand for the three months ended June 30, 2025, and from $7.407 million to $(451) thousand for the six months ended June 30, 2025, year-over-year[236] Previous Election as a REIT - The Company terminated its REIT election effective January 1, 2023, having qualified as a REIT from 2014 through 2022[237] - As a REIT, the Company was generally not subject to U.S. federal corporate income tax on distributed REIT taxable income, and a tax loss in 2022 eliminated the distribution requirement for that year[237] Inflation - Approximately 80% of the Company's leases include rent escalation provisions, increasing cash rent by an average cumulative of 0.4% per year, mitigating adverse impacts from inflation[238] - The 12-month CPI for all items was 2.7% as of June 30, 2025, and while inflation has had an immaterial impact on operating costs, rising general goods and services costs could increase general and administrative expenses[238][239] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material change in market risk exposure occurred during the six months ended June 30, 2025, referring to the 2024 Annual Report - No material change in market risk exposure occurred during the six months ended June 30, 2025[242] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[243] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[244] PART II - OTHER INFORMATION Item 1. Legal Proceedings As of June 30, 2025, the Company is not a party to any material pending legal proceedings - No material legal proceedings are pending against the Company as of June 30, 2025[245] Item 1A. Risk Factors New material risk factors include litigation and potential foreclosure for 1140 Avenue of the Americas, risking taxable income without cash and OP recourse obligations - The 1140 Avenue of the Americas property faces litigation and potential foreclosure, which could lead to taxable income without cash proceeds and significant management attention and expenses[247] - There is a risk that the OP could be held liable for any deficit between foreclosure sale proceeds and outstanding debt, which would materially adversely affect the Company's financial position[247] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchase of Equity Securities No unregistered sales of equity securities, use of proceeds, or issuer purchases occurred during the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred[249] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities occurred[249] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[250] Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 trading plans during Q2 2025 - No officers or directors adopted or terminated Rule 10b5-1 trading plans during Q2 2025[251] Item 6. Exhibits This section lists exhibits for the Form 10-Q, including certifications, XBRL documents, and corporate governance filings - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32)[253] - XBRL interactive data files (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are furnished[253] - Composite Articles of Amendment and Restatement and Second Amended and Restated Bylaws are incorporated by reference[253]