American Strategic Investment (NYC) - 2021 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Q3 and nine months ended September 30, 2021, highlighting a $35.7 million net loss and ongoing debt covenant challenges Consolidated Balance Sheets As of September 30, 2021, total assets decreased to $832.1 million from $861.8 million, with total equity declining to $353.6 million due to the net loss Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $832,143 | $861,846 | | Total real estate investments, net | $700,870 | $720,971 | | Cash and cash equivalents | $23,169 | $30,999 | | Total Liabilities | $478,525 | $480,279 | | Mortgage notes payable, net | $397,731 | $396,574 | | Total Equity | $353,618 | $381,567 | Consolidated Statements of Operations and Comprehensive Loss The company reported a $11.1 million net loss for Q3 2021, with the nine-month net loss widening to $35.7 million due to lower tenant revenue and higher equity compensation Statement of Operations Summary (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue from tenants | $15,848 | $16,997 | $46,011 | $53,035 | | Total operating expenses | $22,160 | $24,215 | $67,473 | $63,261 | | Operating loss | $(6,312) | $(7,218) | $(21,462) | $(10,226) | | Net loss | $(11,110) | $(12,288) | $(35,697) | $(24,362) | | Net loss per share | $(0.85) | $(0.96) | $(2.78) | $(1.91) | Consolidated Statements of Cash Flows Net cash used in operating activities was $4.3 million for the nine months ended September 30, 2021, resulting in a $5.2 million decrease in total cash and equivalents Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,311) | $(6,019) | | Net cash used in investing activities | $(1,998) | $(3,162) | | Net cash provided by (used in) financing activities | $1,095 | $(328) | | Net change in cash, cash equivalents and restricted cash | $(5,214) | $(9,509) | Notes to Consolidated Financial Statements These notes detail accounting policies, real estate portfolio, and debt obligations, highlighting COVID-19's impact on rent collections and significant debt covenant breaches - As of September 30, 2021, the company owned eight properties in New York City totaling 1.2 million rentable square feet[24] - The company experienced rent collection delays due to COVID-19, reducing 2020 revenue by $8.5 million for reserves, with no rental income from these tenants in the first nine months of 2021[42][51] - The company is in breach of debt covenants on mortgages for its 1140 Avenue of Americas, 9 Times Square, Laurel/Riverside, and 8713 Fifth Avenue properties, resulting in cash trap events[43] - A multi-year outperformance award (2020 OPP) granted to the Advisor, consisting of 4,012,841 LTIP Units, has a total fair value of $25.8 million being expensed over 3.07 years, with $6.3 million recognized in the first nine months of 2021[185] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses COVID-19's operational and financial challenges, including rent collection, tenant bankruptcies, liquidity, and mortgage covenant breaches Management Update on the Impacts of the COVID-19 Pandemic The COVID-19 pandemic continues to impact operations, leading to tenant bankruptcies and rent deferral agreements, though cash rent collections improved to 92% for Q3 2021 - The bankruptcy of former tenant Knotel in January 2021 led to the termination of leases at 123 William Street and 9 Times Square[211] Original Cash Rent Collection Rates | Period | Collection Rate | | :--- | :--- | | Q3 2021 | 92% | | Q2 2021 | 91% (as of Oct 31, 2021) | | Q1 2021 | 87% | | Q4 2020 | 82% | - In the first nine months of 2021, the company entered into 12 abatement or deferral agreements, deferring $0.6 million and abating $0.9 million in rent[218] Results of Operations Q3 2021 tenant revenue decreased by $1.1 million to $15.8 million, contributing to a nine-month net loss of $35.7 million due to lower revenue and higher equity compensation - Q3 2021 revenue from tenants decreased by $1.1 million year-over-year to $15.8 million, mainly due to lease terminations and tenants being placed on a cash basis[228] - For the nine months ended September 30, 2021, revenue from tenants decreased by $7.0 million year-over-year to $46.0 million[242] - Equity-based compensation for the nine months ended September 30, 2021, increased by $4.6 million to $6.4 million, primarily due to the amortization of the 2020 OPP award[249] Liquidity and Capital Resources Liquidity is pressured by negative operating cash flow and mortgage debt challenges, with $23.2 million in cash, cash trap events on four properties, and reliance on its ATM equity program - As of September 30, 2021, the company had $23.2 million in cash and cash equivalents and is required to maintain a minimum of $10.0 million in liquid assets under a loan covenant[264] - Cash trap events are in effect for four properties (1140 Avenue of the Americas, 9 Times Square, Laurel/Riverside, and 8713 Fifth Avenue), preventing the company from using excess cash flow from these properties, which represent 47% of the portfolio's rentable square feet[265] - The company believes it breached covenants for the 9 Times Square loan for a fourth consecutive quarter, which would cause an event of default if not cured by a significant principal repayment or providing additional collateral[269][270] - During the nine months ended September 30, 2021, the company sold 466,651 shares through its Common Stock ATM Program for gross proceeds of $5.3 million[277] Non-GAAP Financial Measures The company uses FFO, Core FFO, and Cash NOI, reporting a $11.9 million FFO deficit and a $5.5 million Core FFO deficit for the nine months ended September 30, 2021 FFO and Core FFO Reconciliation (in thousands) | Metric | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Net loss attributable to common stockholders | $(35,711) | $(24,362) | | Depreciation and amortization | $23,400 | $24,070 | | Impairment of real estate investments | $413 | $0 | | FFO (deficit) attributable to common stockholders | $(11,898) | $(292) | | Listing expenses | $0 | $1,299 | | Vesting and conversion of Class B Units | $0 | $1,153 | | Equity-based compensation | $6,356 | $1,758 | | Core FFO (deficit) attributable to common stockholders | $(5,542) | $3,918 | Cash NOI Reconciliation (in thousands) | Metric | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Net loss | $(35,711) | $(24,362) | | Adjustments (G&A, D&A, Interest, etc.) | $50,277 | $51,139 | | Straight-line rent & lease amortization adjustments | $(3,623) | $(6,389) | | Cash NOI | $17,382 | $23,195 | Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk exposure during the nine months ended September 30, 2021, compared to its 2020 Annual Report - There has been no material change in the company's exposure to market risk during the nine months ended September 30, 2021[309] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls were effective as of September 30, 2021, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[310] - No material changes occurred in the company's internal control over financial reporting during the third quarter of 2021[311] PART II - OTHER INFORMATION Legal Proceedings As of the end of the third quarter of 2021, the company reports that it is not a party to any material pending legal proceedings - The company is not a party to any material pending legal proceedings[313] Risk Factors This section highlights new material risks, primarily breaches of $214.0 million in mortgage loan covenants and the company's ability to fund capital requirements - The company is in breach of covenants under four separate mortgage loans aggregating $214.0 million in principal, secured by properties representing 47% of the portfolio's total rentable square feet[315] - An anticipated fourth consecutive quarterly covenant breach on the 9 Times Square loan could trigger an event of default, potentially requiring a significant principal repayment or foreclosure[316][317] - The company's ability to fund capital requirements is at risk, as cash from operations has not been sufficient, necessitating reliance on the Common Stock ATM Program and available cash on hand[318] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities[323] Defaults Upon Senior Securities The company reports no defaults upon its senior securities - There were no defaults upon senior securities[327] Mine Safety Disclosures This item is not applicable to the company - Not applicable[328] Other Information The company reports no other information required to be disclosed under this item - None[329] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files - The report includes required exhibits such as CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[331]