|
||||||||||||||||||||||||||
| SEC Info℠ | | | Home | | | Search | | | My Interests | | | Help | | | Sign In | | | Please Sign In | |||||||
|
||||||||||||||||||||||||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 10/05/22 Trinity Place Holdings Inc. 10-Q/A 3/31/22 70:13M Toppan Merrill Bridge/FA |
Document/Exhibit Description Pages Size
1: 10-Q/A Amendment to Quarterly Report HTML 2.83M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 25K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 25K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 22K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 22K
11: R1 Document and Entity Information HTML 78K
12: R2 Consolidated Balance Sheets HTML 129K
13: R3 Consolidated Balance Sheets (Parenthetical) HTML 50K
14: R4 Consolidated Statements of Operations and HTML 116K
Comprehensive Loss
15: R5 Consolidated Statements of Stockholders' Equity HTML 54K
16: R6 Consolidated Statements of Cash Flows HTML 118K
17: R7 Business HTML 31K
18: R8 Summary of Significant Accounting Policies HTML 56K
19: R9 Restatement and Revision of Previously Issued HTML 1.09M
Consolidated Financial Statements
20: R10 Real Estate, Net HTML 51K
21: R11 Residential Condominium Units for Sale HTML 22K
22: R12 Prepaid Expenses and Other Assets, Net HTML 41K
23: R13 Loans Payable and Secured Line of Credit HTML 79K
24: R14 Fair Value Measurements HTML 25K
25: R15 Pension Plan HTML 27K
26: R16 Commitments HTML 26K
27: R17 Income Taxes HTML 26K
28: R18 Stockholders' Equity HTML 35K
29: R19 Stock-Based Compensation HTML 85K
30: R20 Investments in Unconsolidated Joint Ventures HTML 124K
31: R21 Subsequent Events HTML 23K
32: R22 Summary of Significant Accounting Policies HTML 105K
(Policies)
33: R23 Summary of Significant Accounting Policies HTML 26K
(Tables)
34: R24 Restatement and Revision of Previously Issued HTML 1.09M
Consolidated Financial Statements (Tables)
35: R25 Real Estate, Net (Tables) HTML 45K
36: R26 Prepaid Expenses and Other Assets, Net (Tables) HTML 40K
37: R27 Loans Payable and Secured Line of Credit (Tables) HTML 52K
38: R28 Stock-Based Compensation (Tables) HTML 82K
39: R29 Investments in Unconsolidated Joint Ventures HTML 122K
(Tables)
40: R30 Business (Details) HTML 45K
41: R31 Summary of Significant Accounting Policies - HTML 34K
Depreciation (Details)
42: R32 Summary of Significant Accounting Policies - HTML 39K
Additional Information (Details)
43: R33 Restatement and Revision of Previously Issued HTML 154K
Consolidated Financial Statements - Balance Sheet
(Details)
44: R34 Restatement and Revision of Previously Issued HTML 54K
Consolidated Financial Statements - Balance Sheet
- Parenthetical (Details)
45: R35 Restatement and Revision of Previously Issued HTML 150K
Consolidated Financial Statements - Income
Statement (Details
46: R36 Restatement and Revision of Previously Issued HTML 100K
Consolidated Financial Statements - Equity
Statement (Details)
47: R37 Restatement and Revision of Previously Issued HTML 158K
Consolidated Financial Statements - Cash Flows
(Details)
48: R38 Real Estate, Net - Properties (Details) HTML 36K
49: R39 Real Estate, Net - Additional Information HTML 58K
(Details)
50: R40 Residential Condominium Units for Sale (Details) HTML 23K
51: R41 Prepaid Expenses and Other Assets, Net (Details) HTML 32K
52: R42 Loans Payable and Secured Line of Credit - HTML 282K
Additional Information (Details)
53: R43 Loans Payable and Secured Line of Credit - HTML 36K
Maturities (Details)
54: R44 Loans Payable and Secured Line of Credit - HTML 26K
Interest (Details)
55: R45 Pension Plan (Details) HTML 31K
56: R46 Commitments - Additional information (Details) HTML 23K
57: R47 Income Taxes - Additional information (Details) HTML 33K
58: R48 Stockholders' Equity - Additional information HTML 101K
(Details)
59: R49 Stock-Based Compensation - Stock Incentive Plan HTML 43K
(Details)
60: R50 Stock-Based Compensation - RSU activity (Details) HTML 36K
61: R51 Stock-Based Compensation - Additional Information HTML 75K
(Details)
62: R52 Investments in Unconsolidated Joint Ventures - HTML 69K
Additional information (Details)
63: R53 Investments in Unconsolidated Joint Ventures - HTML 95K
Balance sheet (Details)
64: R54 Investments in Unconsolidated Joint Ventures - HTML 81K
Statement of operations (Details)
65: R55 Subsequent Events (Details) HTML 25K
68: XML IDEA XML File -- Filing Summary XML 126K
66: XML XBRL Instance -- tphs-20220331x10qa_htm XML 4.51M
67: EXCEL IDEA Workbook of Financial Reports XLSX 168K
7: EX-101.CAL XBRL Calculations -- tphs-20220331_cal XML 144K
8: EX-101.DEF XBRL Definitions -- tphs-20220331_def XML 812K
9: EX-101.LAB XBRL Labels -- tphs-20220331_lab XML 1.02M
10: EX-101.PRE XBRL Presentations -- tphs-20220331_pre XML 1.09M
6: EX-101.SCH XBRL Schema -- tphs-20220331 XSD 174K
69: JSON XBRL Instance as JSON Data -- MetaLinks 364± 579K
70: ZIP XBRL Zipped Folder -- 0001558370-22-014861-xbrl Zip 434K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q/A (Amendment #1)
(Mark One)
i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i March 31, 2022
OR
i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from_____________ to _____________
Commission File Number i 001-08546
i TRINITY PLACE HOLDINGS INC.
(Exact Name of Registrant as Specified in Its Charter)
i Delaware | i 22-2465228 |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
Incorporation or Organization) |
|
|
|
i 340 Madison Avenue, i New York, i New York | i 10173 |
(Address of Principal Executive Offices) | (Zip Code) |
( i 212) i 235-2190
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of each exchange on which registered |
i Common Stock $0.01 Par Value Per Share |
| i TPHS |
| i NYSE American |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | |
Large Accelerated Filer ◻ | Accelerated Filer ☐ | i Non-Accelerated Filer ☒ |
Smaller Reporting Company i ☒ | | Emerging Growth Company i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐
No ⌧
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ⌧ No ◻
As of May 16, 2022, there were i 36,850,373 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
INDEX
|
| PAGE NO. |
4 | ||
| | |
4 | ||
| | |
| Consolidated Balance Sheets as of March 31, 2022 (As Restated) and December 31, 2021 (As Restated) | 4 |
| | |
| 5 | |
| | |
| 6 | |
| | |
| 7 | |
| | |
| Notes to Condensed Consolidated Financial Statements (As Restated) | 8 |
| | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations (As Restated) | 37 | |
| | |
51 | ||
| | |
51 | ||
| | |
52 | ||
| | |
52 | ||
| | |
52 | ||
| | |
53 | ||
| | |
53 | ||
| | |
53 | ||
| | |
53 | ||
| | |
54 |
2
EXPLANATORY NOTE
Trinity Place Holdings Inc. (the “Company,” “we”, “our” or “us”) is filing this Amendment No. 1 to the Quarterly Report on Form 10-Q/A (the “Form 10-Q/A” or “Amended Quarterly Report”) to amend our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2022 and 2021, included in the original filing with the Securities and Exchange Commission (the “SEC”) on May 16, 2022 (the “Original Form 10-Q”), to restate the financial statements as of and for the quarterly periods ended March 31, 2022 and 2021.
In August 2022, the Company determined that it made certain errors in accounting treatment regarding the overcapitalization of internally allocated construction related costs related to the development project at the 77 Greenwich property, as well as the presentation of the 77 Greenwich property on the consolidated balance sheets and in the statements of cash flows. The restatement is based on an error in the application of generally accepted accounting principles ("GAAP") as they relate to the capitalization of construction soft costs and internally allocated costs incurred in connection with a development project, which involves significant judgment. As a result, after consultation with BDO USA LLP (“BDO”), the Company’s independent registered public accounting firm, the Company’s audit committee concluded that the original financial statements included in the Original Form 10-Q should no longer be relied upon and are to be restated in order to correct the error in accounting treatment.
The Company also identified certain immaterial errors during the periods presented and have revised the consolidated financial statements for such errors as discussed in Note 3. This Amended Quarterly Report also amends and restates the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors and other disclosures made in the Original Form 10-Q, as appropriate, to reflect the restatement of the relevant periods.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Company is also including with this Amended Annual Report currently dated certifications of the Company's Chief Executive Officer and Principal Financial Officer (attached as Exhibits 31.1, 31.2, 32.1 and 32.2).
As a result of the restatement, the Company has concluded there was a material weakness in its internal control over financial reporting as of March 31, 2022, and its disclosure controls and procedures were not effective. See additional discussion included in Part I, Item 4 of this Amended Quarterly Report.
Except as discussed above, and as further described in Note 3 – Restatement and Revision of Previously Issued Interim Financial Statements in the Notes to Financial Statements, the Company has not modified or updated disclosures presented in this Amended Quarterly Report. Accordingly, the Amended Quarterly Report does not reflect events occurring after the Original Form 10-Q or modify or update those disclosures affected by subsequent events. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Form 10-Q.
Other financial information that has been previously filed or otherwise reported for these periods is superseded by the information in this Amended Quarterly Report and in the amendment to our Annual Report on Form 10-K for the year ended December 31, 2021 filed on the date hereof, and the financial statements and related financial information contained in such previously filed reports should no longer be relied upon.
The restatement is more fully described in Note 3 of the Notes to Financial Statements included herein.
3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except par value and share amounts)
| | | | | | |
| | March 31, | | |||
|
| 2022 |
| 2021 | ||
| | As Restated (a) | | As Restated (a) | ||
ASSETS |
| |
|
| |
|
| | | | | | |
Real estate, net | | $ | i 66,705 | | $ | i 67,334 |
Residential condominiums for sale | | | i 214,591 | |
| i 216,983 |
Cash and cash equivalents | |
| i 1,381 | |
| i 4,310 |
Restricted cash | |
| i 14,232 | |
| i 20,535 |
Prepaid expenses and other assets, net | |
| i 5,007 | |
| i 4,126 |
Investments in unconsolidated joint ventures | |
| i 18,517 | |
| i 17,938 |
Receivables | |
| i 60 | | | i 84 |
Deferred rents receivable | | | i 118 | |
| i 114 |
Right-of-use asset | |
| i 1,224 | |
| i 1,314 |
Intangible assets, net | |
| i 8,247 | |
| i 8,432 |
Total assets | | $ | i 330,082 | | $ | i 341,170 |
| | | | | | |
LIABILITIES | |
|
| |
|
|
| | | | | | |
Loans payable, net | | $ | i 210,768 | | $ | i 219,249 |
Corporate credit facility, net | | | i 33,090 | | | i 32,844 |
Secured line of credit, net | |
| i 12,750 | |
| i 12,750 |
Note payable | | | i 5,863 | | | i 5,863 |
Accounts payable and accrued expenses | |
| i 19,876 | |
| i 17,864 |
Lease liability | | | i 1,347 | | | i 1,447 |
Warrant liability | | | i 1,515 | | | i 1,146 |
Total liabilities | |
| i 285,209 | |
| i 291,163 |
| | | | | | |
Commitments and Contingencies | |
|
| |
|
|
| | | | | | |
STOCKHOLDERS’ EQUITY | |
|
| |
|
|
| | | | | | |
Preferred stock, $ i i 0.01 / par value; i i 40,000,000 / shares authorized; i i no / shares issued and outstanding | |
| — | |
| — |
Preferred stock, $ i i 0.01 / par value; i i 2 / shares authorized; i i no / shares issued and outstanding at March 31, 2022 and December 31, 2021 | |
| — | |
| — |
Special stock, $ i i 0.01 / par value; i i 1 / share authorized, issued and outstanding at March 31, 2022 and December 31, 2021 | |
| — | |
| — |
Common stock, $ i i 0.01 / par value; i i 79,999,997 / shares authorized; i 43,387,563 and i 43,024,424 shares issued at March 31, 2022 and December 31, 2021, respectively; i 36,836,146 and i 36,626,549 shares outstanding at March 31, 2022 and December 31, 2021, respectively | |
| i 434 | |
| i 430 |
Additional paid-in capital | |
| i 144,451 | |
| i 144,282 |
Treasury stock ( i 6,551,447 and i 6,397,875 shares at March 31, 2022 and December 31, 2021, respectively) | |
| ( i 57,461) | |
| ( i 57,166) |
Accumulated other comprehensive loss | |
| ( i 1,224) | |
| ( i 1,343) |
Accumulated deficit | |
| ( i 41,327) | | | ( i 36,196) |
| | | | | | |
Total stockholders’ equity | |
| i 44,873 | |
| i 50,007 |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | i 330,082 | | $ | i 341,170 |
| | | | | | |
| | | | | | |
(a) Amounts are Restated. See Note 3 for more information. | | | | | | |
See Notes to Consolidated Financial Statements
4
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)
(In thousands, except per share amounts)
| | | | | | | |
| | Three Months Ended | | Three Months Ended | | ||
| | March 31, | | | |||
| | 2022 |
| 2021 | | ||
| | As Restated (a) | | As Revised (b) | | ||
Revenues |
| |
| | |
|
|
Rental revenues | | $ | i 1,260 | | $ | i 447 | |
Other income | | | i 16 | | | i 46 | |
Sale of residential condominium units | | | i 6,069 | | | — | |
| | | | | | | |
Total revenues | |
| i 7,345 | |
| i 493 | |
| | | | | | | |
Operating Expenses | |
|
| |
|
| |
Property operating expenses | |
| i 804 | |
| i 1,907 | |
Real estate taxes | |
| i 390 | |
| i 79 | |
General and administrative | |
| i 1,502 | |
| i 1,243 | |
Pension related costs | | | i 158 | | | i 163 | |
Cost of sale - residential condominium units | | | i 5,721 | | | — | |
Depreciation and amortization | |
| i 1,003 | |
| i 1,000 | |
| | | | | | | |
Total operating expenses | |
| i 9,578 | |
| i 4,392 | |
| | | | | | | |
Operating loss | | | ( i 2,233) | | | ( i 3,899) | |
| | | | | | | |
Equity in net income (loss) from unconsolidated joint ventures | |
| i 746 | |
| ( i 372) | |
Unrealized loss on warrants | | | ( i 369) | | | ( i 1,977) | |
Interest expense, net | |
| ( i 2,769) | |
| ( i 875) | |
Interest expense - amortization of deferred finance costs | |
| ( i 436) | |
| ( i 261) | |
| | | | | | | |
Loss before taxes | |
| ( i 5,061) | |
| ( i 7,384) | |
| | | | | | | |
Tax expense | |
| ( i 70) | |
| ( i 35) | |
| | | | | | | |
Net loss attributable to common stockholders | | $ | ( i 5,131) | | $ | ( i 7,419) | |
| | | | | | | |
Other comprehensive loss: | |
| | |
| | |
| | | | | | | |
Unrealized gain on pension liability | |
| i 119 | |
| i 119 | |
Comprehensive loss attributable to common stockholders | | $ | ( i 5,012) | | $ | ( i 7,300) | |
| | | | | | | |
Loss per share - basic and diluted | | $ | ( i 0.14) | | $ | ( i 0.23) | |
| | | | | | | |
Weighted average number of common shares - basic and diluted | |
| i 37,104 | |
| i 32,591 | |
| | | | | | | |
(a) Amounts are Restated. See Note 3 for more information. | | | | | | | |
(b) Amounts are Revised. See Note 3 for more information. | | | | | | | |
| | | | | | | |
See Notes to Consolidated Financial Statements
5
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | |
FOR THE THREE MONTHS ENDED MARCH 31, 2022 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Accumulated | | | | ||
| | | | | | | Additional | | | | | | | | | Other | | | | |||
| | Common Stock | | Paid-In | | Treasury Stock | | Accumulated | | Comprehensive | | | | |||||||||
|
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2021 | As Restated (a) | i 43,024 | | $ | i 430 | | $ | i 144,282 |
| ( i 6,398) | | $ | ( i 57,166) | | $ | ( i 36,196) | | $ | ( i 1,343) | | $ | i 50,007 |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders |
| — | |
| — | |
| — |
| — | |
| — | |
| ( i 5,131) | |
| — | |
| ( i 5,131) |
Settlement of stock awards |
| i 364 | |
| i 4 | |
| — |
| ( i 153) | |
| ( i 295) | |
| — | |
| — | |
| ( i 291) |
Unrealized gain on pension liability | | — | |
| — | |
| — |
| — | |
| — | |
| — | |
| i 119 | | | i 119 |
Stock-based compensation | | — | |
| — | |
| i 169 |
| — | |
| — | |
| — | |
| — | | | i 169 |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2022 | As Restated (a) | i 43,388 | | $ | i 434 | | $ | i 144,451 |
| ( i 6,551) | | $ | ( i 57,461) | | $ | ( i 41,327) | | $ | ( i 1,224) | | $ | i 44,873 |
| | | | | | | | | | | | | | | | | | | | | | |
(a) Amounts are Restated. See Note 3 for more information. | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
FOR THE THREE MONTHS ENDED MARCH 31, 2021 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Accumulated | | | | ||
| | | | | | | Additional | | | | | | | | | Other | | | | |||
| | Common Stock | | Paid-In | | Treasury Stock | | Accumulated | | Comprehensive | | | | |||||||||
|
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | ||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 | As Revised (b) | i 38,345 | | $ | i 383 | | $ | i 135,978 |
| ( i 6,173) | | $ | ( i 56,791) | | $ | ( i 15,391) | | $ | ( i 2,159) | | $ | i 62,020 |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders |
| — | |
| — | |
| — |
| — | |
| — | |
| ( i 7,419) | |
| — | |
| ( i 7,419) |
Settlement of stock awards |
| i 496 | |
| i 5 | |
| — |
| ( i 225) | |
| ( i 375) | |
| — | |
| — | |
| ( i 370) |
Unrealized gain on pension liability |
| — | |
| — | |
| — |
| — | |
| — | |
| — | |
| i 119 | |
| i 119 |
Stock-based compensation |
| — | |
| — | |
| i 173 |
| — | |
| — | |
| — | |
| — | |
| i 173 |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 | As Revised (b) | i 38,841 | | $ | i 388 | | $ | i 136,151 |
| ( i 6,398) | | $ | ( i 57,166) | | $ | ( i 22,810) | | $ | ( i 2,040) | | $ | i 54,523 |
| | | | | | | | | | | | | | | | | | | | | | |
(b) Amounts are Revised. See Note 3 for more information. | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
See Notes to Consolidated Financial Statements
6
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
| | | | | | |
| | For the | | For the | ||
| | Three Months Ended | | Three Months Ended | ||
| | March 31, | | |||
|
| 2022 |
| 2021 | ||
| | As Restated (a) | | As Restated (a) | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
| |
|
| |
|
Net loss attributable to common stockholders | | $ | ( i 5,131) | | $ | ( i 7,419) |
Adjustments to reconcile net loss attributable to common stockholders to net cash used in operating activities: | |
|
| |
|
|
Depreciation and amortization and amortization of deferred finance costs | |
| i 1,439 | |
| i 1,261 |
Stock-based compensation expense | |
| i 123 | |
| i 133 |
Deferred rents receivable | |
| ( i 4) | |
| ( i 12) |
Other non-cash adjustments - pension expense | |
| i 119 | |
| i 119 |
Unrealized loss on warrants | | | i 369 | |
| i 1,977 |
Equity in net (income) loss from unconsolidated joint ventures | |
| ( i 746) | |
| i 372 |
Distributions from unconsolidated joint ventures | | | i 168 | |
| i 194 |
Decrease (increase) in operating assets: | |
| | | | |
Residential condominium units for sale | | | i 3,548 | | | ( i 11,672) |
Receivables | |
| i 24 | |
| i 47 |
Prepaid expenses and other assets, net | |
| ( i 1,008) | |
| ( i 371) |
Increase in operating liabilities: | |
| | | | |
Accounts payable and accrued expenses | |
| i 1,474 | |
| i 1,294 |
Net cash provided by (used in) operating activities | |
| i 375 | |
| ( i 14,077) |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
|
| |
|
|
Additions to real estate | |
| ( i 64) | |
| ( i 53) |
Net cash used in investing activities | |
| ( i 64) | |
| ( i 53) |
| | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
|
| |
|
|
Proceeds from loans and corporate credit facility | | | i 2,390 | | | i 8,980 |
Proceeds from secured line of credit | |
| — | | | i 1,200 |
Payment of finance costs | | | — | | | ( i 21) |
Repayment of loans | | | ( i 11,642) | | | — |
Settlement of stock awards | |
| ( i 291) | | | ( i 370) |
Net cash (used in) provided by financing activities | |
| ( i 9,543) | |
| i 9,789 |
| | | | | | |
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | |
| ( i 9,232) | |
| ( i 4,341) |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | |
| i 24,845 | |
| i 16,069 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | | $ | i 15,613 | | $ | i 11,728 |
| | | | | | |
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD | | $ | i 4,310 | | $ | i 6,515 |
RESTRICTED CASH, BEGINNING OF PERIOD | |
| i 20,535 | |
| i 9,554 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | | $ | i 24,845 | | $ | i 16,069 |
| | | | | | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | i 1,381 | | $ | i 5,034 |
RESTRICTED CASH, END OF PERIOD | |
| i 14,232 | |
| i 6,694 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | | $ | i 15,613 | | $ | i 11,728 |
| | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | |
| |
Cash paid during the period for: Interest | | $ | i 3,050 | | $ | i 4,130 |
Cash paid during the period for: Taxes | | $ | i 66 | | $ | i 46 |
| | | | | | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | |
| |
Capitalized amortization of deferred financing costs and warrants | | $ | i 583 | | $ | i 692 |
Capitalized stock-based compensation expense | | $ | i 18 | | $ | i 37 |
| | | | | | |
(a) Amounts are Restated. See Note 3 for more information. | | | | | | |
See Notes to Consolidated Financial Statements
7
Trinity Place Holdings Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
March 31, 2022
Note 1 – Business
Overview
Trinity Place Holdings Inc., which we refer to in these financial statements as “Trinity,” “we,” “our,” or “us,” is a real estate holding, investment, development and asset management company. Our largest asset is currently a property located at 77 Greenwich Street in Lower Manhattan (“77 Greenwich”), which is nearing completion of development as a mixed-use project consisting of a 90-unit residential condominium tower, retail space and a New York City elementary school. We also own a recently built 105-unit, 12-story multi-family property located at 237 11th Street in Brooklyn, New York (“237 11th”), and, through joint ventures, a i 50% interest in a recently built 95-unit multi-family property known as The Berkley, located at 223 North 8th Street, Brooklyn, New York (“The Berkley”), see Note 15 – Subsequent Events, and a i 10% interest in a recently built 234-unit multi-family property at 250 North 10th Street (“250 North 10th”), in Brooklyn, New York, and we own a property occupied by retail tenants in Paramus, New Jersey.
We also control a variety of intellectual property assets focused on the consumer sector, a legacy of our predecessor, Syms Corp. (“Syms”), including FilenesBasement.com, our rights to the Stanley Blacker® brand, as well as the intellectual property associated with the Running of the Brides® event and An Educated Consumer is Our Best Customer® slogan. In addition, we had approximately $ i 260.3 million of federal net operating loss carryforwards (“NOLs”) at March 31, 2022, which can be used to reduce our future taxable income and capital gains.
COVID-19 Pandemic, Management’s Plans and Liquidity
As a result of the COVID-19 pandemic, numerous federal, state, local and foreign governmental authorities issued a range of “stay-at-home orders”, proclamations and directives aimed at minimizing the spread of COVID-19, among other restrictions on businesses and individuals. Additional proclamations and directives have been issued in response to further outbreaks, and may be issued in the future. The outbreak and restrictions have adversely affected our business operations including, among other things, a temporary suspension of construction work at our most significant asset, 77 Greenwich, which resumed in mid-April 2020, initially on a modified basis as certain work was deemed “essential” construction, and the temporary closing of the sales center for the 77 Greenwich residential condominium units as well as the temporary suspension of the remediation work being performed on 237 11th, which resumed in early June 2020 and was completed in the fourth quarter of 2021.
The economic downturn and volatility in financial markets appear to have been primarily driven by uncertainties associated with the pandemic. As it relates to our business, these uncertainties include, but are not limited to, the adverse effect of the pandemic on the New York City and broader economy, residential and potential residential sentiment in New York City, particularly Manhattan, lending institutions, construction and material supply partners, travel and transportation services, our employees, residents and tenants, and traffic to and within geographic areas containing our real estate assets. The pandemic has adversely affected our near-term, and may adversely affect our long-term, liquidity, cash flows and revenues and has required and may continue to require significant actions in response, including, but not limited to, reducing or discounting prices for our residential condominium units more than originally budgeted, seeking loan extensions and covenant modifications, modifying, eliminating or deferring rent payments in the short term for tenants in an effort to mitigate financial hardships and seeking access to federal, state and/or local financing and other programs in 2020 and 2021. We were also subject to a New York State mandate disallowing tenant evictions for non-payment of rent due to COVID-19 related hardships throughout 2021, which was recently lifted on January 15, 2022.
The ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, recurring outbreaks, new information which may emerge concerning the pandemic and any additional preventative and protective actions that governments, lending institutions and other businesses, including us, may direct or institute. These and other developments have resulted in and are expected to result in an extended period of continued business disruption and reduced operations for us as well as for lending and other businesses and governmental entities with which we do business. The ultimate financial impacts cannot be reasonably estimated at this time but the outbreak, restrictions and future developments are anticipated to continue to have an adverse impact on our business, financial condition and results
/8
of operations, which has been and may continue to be material, although in recent months we have seen indications of a recovery in the New York City real estate market and improvements in the financing markets.
The measures taken to date, together with any additional measures and developments including those noted above, impacted and will continue to impact the Company’s business in 2022 and beyond, although the extent of the significance of the impact of the COVID-19 outbreak on our business and the duration for which it may have an impact cannot be determined at this time. Although the impact of the pandemic has impeded the sale of residential condominium units at 77 Greenwich, we have closed on i 17 residential condominium units as of March 31, 2022.
As of March 31, 2022, we had total cash and restricted cash of $ i 15.6 million, of which approximately $ i 1.4 million was cash and cash equivalents and approximately $ i 14.2 million was restricted cash. At this time, we believe our existing balances of cash and cash equivalents, together with net proceeds that were generated from the sale of The Berkley, which closed in April 2022, planned refinancing of the Paramus line of credit or sale of the Paramus property and sales of the larger, higher floor condominium units at 77 Greenwich will be sufficient to satisfy our working capital needs and projected capital and other expenditures associated with our operations over the next 12 months, and the Company has concluded that management’s current plan alleviates the substantial doubt about its ability to continue as a going concern. Additionally, we continue to evaluate opportunities to raise capital through sales of equity, including under our ATM program, debt issuances or refinancings, including refinancing the property located at 237 11th Street, and continue to evaluate dispositions of other properties or other assets and/or sales of partial interests in properties. Facts and circumstances that are outside of management’s control could change in the future, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19, and the impact of such matters on residential sentiment in New York City in particular.
iNote 2 – Summary of Significant Accounting Policies
iBasis of Presentation
The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our financial statements and the financial statements of our wholly-owned subsidiaries.
The accompanying unaudited consolidated interim financial information also conform with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Management believes that the disclosures presented in these unaudited consolidated financial statements are adequate to make the information presented not misleading. In management’s opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited consolidated interim financial information should be read in conjunction with our December 31, 2021 audited consolidated financial statements, as previously filed with the SEC in our 2021 Annual Report on Form 10-K/A (the “2021 Annual Report”).
ia. Principles of Consolidation - The consolidated financial statements include our accounts and those of our subsidiaries which are wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. Accordingly, our share of the earnings or losses of our unconsolidated joint ventures, The Berkley and 250 North 10th, are included in our consolidated statements of operations and comprehensive loss (see Note 14 – Investments in Unconsolidated Joint Ventures for further information). All significant intercompany balances and transactions have been eliminated.
We are required to consolidate a variable interest entity (the “VIE”) in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. As of March 31, 2022, 250 North 10th was determined to be a VIE. Due to our lack of control and no equity at risk, we determined that we are not the primary beneficiary and we account for this investment under the equity method.
/9
We assess the accounting treatment for joint venture investments, which includes a review of the joint venture or limited liability company agreement to determine which party has what rights and whether those rights are protective or participating. For potential VIEs, we review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance. In situations where we and our partner equally share authority, we do not consolidate the joint venture as we consider these to be substantive participation rights that result in shared power of the activities that most significantly impact the performance of the joint venture. Our joint venture agreements may contain certain protective rights such as requiring partner approval to sell, finance or refinance the property and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan.
ib. | Investments in Unconsolidated Joint Ventures - We account for our investments in unconsolidated joint ventures, namely, The Berkley and 250 North 10th, under the equity method of accounting (see Note 14 - Investments in Unconsolidated Joint Ventures for further information). We also assess our investments in our unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of an investment is other than temporary, we write down the investment to its fair value. We evaluate each equity investment for impairment based on each joint ventures' projected cash flows. Management does not believe that the value of our equity investments was impaired at either March 31, 2022 or December 31, 2021. |
c. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
id. Reportable Segments - We operate in i one reportable segment, commercial real estate.
/ ie. Concentrations of Credit Risk - Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. We hold substantially all of our cash and cash equivalents in banks. Such cash balances at times exceed federally insured limits.
if. Real Estate - Real estate assets are stated at historical cost, less accumulated depreciation and amortization. All costs related to the improvement or replacement of real estate properties are capitalized. Additions, renovations and improvements that enhance and/or extend the useful life of a property are also capitalized. Expenditures for ordinary maintenance, repairs and improvements that do not materially prolong the useful life of an asset are charged to operations as incurred. Depreciation and amortization are determined using the straight-line method over the estimated useful lives as described in the table below:
i
| | |
Category |
| Terms |
Buildings and improvements |
| i 10 - i 39 years |
Tenant improvements |
| i Shorter of remaining term of the lease or useful life |
Furniture and fixtures |
| i 5 - i 8 years |
ig. | Residential Condominium Units for Sale - We capitalize certain costs related to the development and redevelopment of real estate including initial project acquisition costs, pre-construction costs and construction costs for each specific property. Additionally, we capitalize operating costs, interest, real estate taxes, insurance and compensation and related costs of personnel directly involved with the specific project related to real estate that is under development. Capitalization of these costs begin when the activities and related expenditures commence, and ceases as the property receives its temporary certificates of occupancy (“TCOs”). |
77 Greenwich is a residential condominium development project currently in the development stage which include condominium units that are ready for sale. Residential condominium units for sale as of March 31, 2022 and December 31, 2021 includes 77 Greenwich, and in all cases, excludes costs of development for the residential condominium units at 77 Greenwich that were sold. The residential condominium units to be sold are stated at the lower of cost or net realizable value. Management considers relevant cash flows relating to budgeted project costs and estimated costs to complete, estimated sales velocity, expected proceeds from the sales of completed condominium units, including any potential declines in market values, and other available information in assessing whether the 77 Greenwich development project is impaired. Residential condominium units that are under contract are evaluated for impairment based on the contracted sales price compared to the total estimated
10
cost to construct. Unsold inventory is evaluated for impairment by analyzing recent comparable sales prices within the applicable project to the costs incurred to date plus the expected costs to complete. Any calculated impairments are recorded immediately in cost of sales.
ih. | Valuation of Long-Lived Assets - We periodically review long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We consider relevant cash flow, management’s strategic plans and significant decreases, if any, in the market value of the asset and other available information in assessing whether the carrying value of the assets can be recovered. When such events occur, we compare the carrying amount of the asset to the undiscounted expected future cash flows, excluding interest charges, from the use and eventual disposition of the asset. If this comparison indicates an impairment, the carrying amount would then be compared to the estimated fair value of the long-lived asset. An impairment loss would be measured as the amount by which the carrying value of the long-lived asset exceeds its estimated fair value. We considered all the aforementioned indicators of impairment for the three months ended March 31, 2022 and 2021, respectively. i i No / provision for impairment was recorded during the three months ended March 31, 2022 or 2021, respectively. |
i. | Fair Value Measurements - We determine fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement,” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. |
Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are defined by ASC 820-10-35, are directly related to the amount of subjectivity associated with the inputs to the fair valuation of these assets and liabilities. Determining which category an asset or liability falls within the hierarchy requires significant judgment and we evaluate our hierarchy disclosures each quarter.
Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Valuations based on unobservable inputs reflecting management’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
ij. Cash and Cash Equivalents - Cash and cash equivalents include securities with original maturities of three months or less when purchased.
ik. Restricted Cash - Restricted cash represents amounts required to be restricted under our loan agreements, letters of credit (see Note 7 - Loans Payable and Secured Line of Credit for further information), deposits on residential condominium sales at 77 Greenwich, condominium sales proceeds that have not yet been transferred to the lender and tenant related security deposits.
il. | Revenue Recognition - Leases with tenants are accounted for as operating leases. Minimum rents are recognized on a straight-line basis over the term of the respective lease, beginning when the tenant takes possession of the space. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable. In addition, retail leases typically provide for the reimbursement of real estate taxes, insurance and other property operating expenses. As lessor, when reporting revenue, we have elected to combine the lease and non-lease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC Topic 842. Lease revenues and reimbursement of real estate |
11
taxes, insurance and other property operating expenses are presented in the consolidated statements of operations and comprehensive loss as “rental revenues.” Also, these reimbursements of expenses are recognized within revenue in the period the expenses are incurred. We assess the collectability of our accounts receivable related to tenant revenues. We applied the guidance under ASC 842 in assessing our lease payments: if collection of rents under specific operating leases is not probable, then we recognize the lesser of that lease’s rental income on a straight-line basis or cash received, plus variable rents as earned. Once this assessment is completed, we apply a general reserve, as provided under ASC 450-20, if applicable.
Revenues on sale of residential condominiums reflects the gross sales price from sales of residential condominium units which are recognized at the time of the closing of a sale, when title to and possession of the units are transferred to the buyer. Our performance obligation, to deliver the agreed-upon condominium, is generally satisfied in less than one year from the original contract date. Cash proceeds from unit closings held in escrow for our benefit are included in restricted cash in the consolidated balance sheets. Customer cash deposits on residential condominiums that are in contract are recorded as restricted cash and the related liability is recorded in accounts payable and accrued expenses in our consolidated balance sheets. Our cost of sales consists of allocated expenses related to the initial acquisition, demolition, construction and development of the condominium complex, including associated building costs, development fees, as well as salaries, benefits, bonuses and share-based compensation expense, including other directly associated overhead costs, in addition to qualifying interest and financing costs.
im. | Stock-Based Compensation – We have granted stock-based compensation, which is described below in Note 13 – Stock-Based Compensation. We account for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation,” which establishes accounting for stock-based awards exchanged for employee services and ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting,” which provides additional guidance related to share-based payment transactions for acquiring goods or services from nonemployees. Under the provisions of ASC 718-10-35, stock-based compensation cost is measured at the grant date, based on the fair value of the award on that date, and is expensed at the grant date (for the portion that vests immediately) or ratably over the related vesting periods. |
n. | Income Taxes - We account for income taxes under the asset and liability method as required by the provisions of ASC 740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not. |
ASC 740-10-65 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-65, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10-65 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and increased other disclosures. As of March 31, 2022 and December 31, 2021, we determined that i i no / liabilities are required in connection with unrecognized tax positions. As of March 31, 2022, our tax returns for the years ended December 31, 2018 through December 31, 2021 are subject to review by the Internal Revenue Service. Our state returns are open to examination for the years December 31, 2017 or 2018, depending on the jurisdiction, through December 31, 2021.
We are subject to certain federal, state and local income and franchise taxes.
/ io. Earnings (loss) Per Share - We present both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower per share amount. Shares issuable at March 31, 2022 and 2021 comprising i 228,060 and i 290,074 restricted stock units, respectively, that
/12
have vested but not yet settled and i 7,179,000 warrants exercisable at $ i 4.31 per share were excluded from the computation of diluted earnings (loss) per share because the awards would have been antidilutive for the three months ended March 31, 2022 and 2021.
ip. Deferred Finance Costs – Capitalized and deferred finance costs represent commitment fees, legal, title and other third party costs associated with obtaining commitments for mortgage financings which result in a closing of such financing. These costs are being offset against loans payable and secured line of credit in the consolidated balance sheets for mortgage financings and had an unamortized balance of $ i 4.3 million and $ i 5.1 million at March 31, 2022 and December 31, 2021, respectively. Costs for our corporate credit facility are being offset against corporate credit facility, net in the consolidated balance sheets and had an unamortized balance of $ i 2.7 million and $ i 2.9 million at March 31, 2022 and December 31, 2021, respectively. Unamortized deferred finance costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period in which it is determined that the financing will not close.
/ iq. Deferred Lease Costs – Deferred lease costs consist of fees and direct costs incurred to initiate and renew retail operating leases and are amortized to depreciation and amortization on a straight-line basis over the related non-cancelable lease term. Lease costs incurred under our residential leases are expensed as incurred.
i r. Underwriting Commissions and Costs – Underwriting commissions and costs incurred in connection with our stock offerings are reflected as a reduction of additional paid-in-capital in stockholders’ equity.
Any references to square footage, property count or occupancy percentages, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review.
iAccounting Standards Updates
Recently Issued Accounting Pronouncements
In January 2021, the FASB issued ASU 2021-01 Reference Rate Reform (Topic 848) which modifies ASC 848, which was intended to provide relief related to “contracts and transactions that reference LIBOR or a reference rate that is expected to be discontinued as a result of reference rate reform.” ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give reporting entities the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. ASU 2021-01 also adds implementation guidance to clarify which optional expedients in ASC 848 may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified as a result of the discounting transition. Currently, we do not anticipate the need to modify any existing debt agreements as a result of reference rate reform in the current year. If any modification is executed as a result of reference rate reform, we will elect the optional practical expedient under ASU 2020-04 and 2021-01, which allows entities to account for the modification as if the modification was not substantial. As a result, the implementation of this guidance is not expected to have any effect on our financial position, results of operations or cash flows.
iNote 3 – Restatement and Revision of Previously Issued Consolidated Financial Statements
The Company identified errors in its previously issued annual and interim financial statements that required restatements, as well as errors that were determined individually, and in the aggregate, quantitatively and qualitatively immaterial that required revisions. As such the Company has restated and revised its (i) consolidated financial statements as of and for the year ended December 31, 2021, 2020 and 2019 as filed in the amendment to our Annual Report on Form 10-K for the year ended December 31, 2021 filed on the date hereof; and (ii) consolidated interim financial statements for the three months ended March 31, 2022 and 2021, collectively referred to as the “Restatement” or “Revision”, as illustrated in this note to the consolidated financial statements.
13
During the three month period ended June 30, 2022, the Company identified areas of restatement errors. Adjustments depicted in the tables below relate to the following:
| (a) | an error in the accounting treatment regarding the overcapitalization of internally allocated construction related costs related to the development project at 77 Greenwich Street; |
| (b) | a disclosure error in the classification on the balance sheets of our 77 Greenwich property which was classified as real estate under development in real estate and is now classified as residential condominium units for sale; and |
| (c) | a disclosure error in the classification on the statements of cash flows of our 77 Greenwich property relating to additions and sales of condominiums where they were reported in the statement of cash flows under cash flows from investing activities when they should have been reported in cash flows from operations. |
During the three month period ended March 31, 2022, the Company identified one revision error. Adjustments depicted in the tables below relate to the following:
| (d) | an error in the accounting treatment of a property that, upon emergence from bankruptcy, was classified as real estate under development, but was not subsequently reported as an operating property when circumstances at the property changed. |
During the year ended December 31, 2021, the Company identified one revision error. Adjustments depicted in the tables below relate to the following:
| (e) | an error in the accounting treatment regarding certain advertising and marketing costs which were capitalized to construction costs at the development project at 77 Greenwich Street and should have been expensed as incurred. |
14
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
i
| | | | | | | | | |
| | As of March 31, 2022 | |||||||
| | As Previously | | Restatement | | | | ||
|
| Reported |
| Impact |
| As Restated | |||
| | | | | | | | | |
ASSETS | | | | | | | | | |
| | | | | | | | | |
Real estate, net | | $ | i 294,108 | | $ | ( i 227,403) | | $ | i 66,705 |
Residential condominium units for sale | | | — | | | i 214,591 | | | i 214,591 |
Cash and cash equivalents | | | i 1,381 | | | — | | | i 1,381 |
Restricted cash | | | i 14,232 | | | — | | | i 14,232 |
Prepaid expenses and other assets, net | | | i 5,007 | | | — | | | i 5,007 |
Investments in unconsolidated joint ventures | | | i 18,517 | | | — | | | i 18,517 |
Receivables | | | i 60 | | | — | | | i 60 |
Deferred rents receivable | | | i 118 | | | — | | | i 118 |
Right-of-use asset | | | i 1,224 | | | — | | | i 1,224 |
Intangible assets, net | | | i 8,247 | | | — | | | i 8,247 |
Total assets | | $ | i 342,894 | | $ | ( i 12,812) | | $ | i 330,082 |
| | | | | | | | | |
LIABILITIES | | | | | | | | | |
| | | | | | | | | |
Loans payable, net | | $ | i 210,768 | | $ | — | | $ | i 210,768 |
Corporate credit facility, net | | | i 33,090 | | | — | | | i 33,090 |
Secured line of credit, net | | | i 12,750 | | | — | | | i 12,750 |
Note payable | | | i 5,863 | | | — | | | i 5,863 |
Accounts payable and accrued expenses | | | i 19,876 | | | — | | | i 19,876 |
Lease liability | | | i 1,347 | | | — | | | i 1,347 |
Warrant liability | | | i 1,515 | | | — | | | i 1,515 |
Total liabilities | | | i 285,209 | | | — | | | i 285,209 |
| | | | | | | | | |
Commitments and Contingencies | | | | | | | | | |
| | | | | | | | | |
STOCKHOLDERS' EQUITY | | | | | | | | | |
| | | | | | | | | |
Preferred stock, $ i 0.01 par value; i 40,000,000 shares authorized; i no shares issued and outstanding | | | — | | | — | | | — |
Preferred stock, $ i 0.01 par value; i 2 shares authorized, i no shares issued and outstanding at March 31, 2022 | | | — | | | — | | | — |
Special stock, $ i 0.01 par value; i 1 share authorized, issued and outstanding at March 31, 2022 | | | — | | | — | | | — |
Common stock, $ i 0.01 par value; i 79,999,997 shares authorized; i 43,387,563 shares issued at March 31, 2022; i 36,836,146 shares outstanding at March 31, 2022 | | | i 434 | | | — | | | i 434 |
Additional paid-in capital | | | i 144,451 | | | — | | | i 144,451 |
Treasury stock ( i 6,551,447 shares at March 31, 2022) | | | ( i 57,461) | | | — | | | ( i 57,461) |
Accumulated other comprehensive loss | | | ( i 1,224) | | | — | | | ( i 1,224) |
Accumulated deficit | | | ( i 28,515) | | | ( i 12,812) | | | ( i 41,327) |
| | | | | | | | | |
Total stockholders' equity | | | i 57,685 | | | ( i 12,812) | | | i 44,873 |
| | | | | | | | | |
Total liabilities and stockholders' equity | | $ | i 342,894 | | $ | ( i 12,812) | | $ | i 330,082 |
| | | | | | | | | |
/15
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
| | | | | | | | | |
| | For the Three Months Ended March 31, 2022 | |||||||
| | As Previously | | Restatement | | | | ||
|
| Reported |
| Impact |
| As Restated | |||
| | | | | | | | | |
Revenues | | | | | | | | | |
Rental revenues | | $ | i 1,260 | | $ | — | | $ | i 1,260 |
Other income | | | i 16 | | | — | | | i 16 |
Sale of residential condominium units | | | i 6,278 | | | ( i 209) | | | i 6,069 |
Total revenues | | | i 7,554 | | | ( i 209) | | | i 7,345 |
| | | | | | | | | |
Operating Expenses | | | | | | | | | |
Property operating expenses | | | i 548 | | | i 256 | | | i 804 |
Real estate taxes | | | i 74 | | | i 316 | | | i 390 |
General and administrative | | | i 1,139 | | | i 363 | | | i 1,502 |
Pension related costs | | | i 158 | | | — | | | i 158 |
Cost of sale - residential condominium units | | | i 6,273 | | | ( i 552) | | | i 5,721 |
Depreciation and amortization | | | i 1,003 | | | — | | | i 1,003 |
| | | | | | | | | |
Total operating expenses | | | i 9,195 | | | i 383 | | | i 9,578 |
| | | | | | | | | |
Operating loss | | | ( i 1,641) | | | ( i 592) | | | ( i 2,233) |
| | | | | | | | | |
Equity in net income from unconsolidated joint ventures | | | i 746 | | | — | | | i 746 |
Unrealized loss on warrants | | | ( i 369) | | | — | | | ( i 369) |
Interest expense, net | | | ( i 802) | | | ( i 1,967) | | | ( i 2,769) |
Interest expense - amortization of deferred finance costs | | | ( i 402) | | | ( i 34) | | | ( i 436) |
| | | | | | | | | |
Loss before taxes | | | ( i 2,468) | | | ( i 2,593) | | | ( i 5,061) |
| | | | | | | | | |
Tax expense | | | ( i 70) | | | — | | | ( i 70) |
| | | | | | | | | |
Net loss attributable to common stockholders | | $ | ( i 2,538) | | $ | ( i 2,593) | | $ | ( i 5,131) |
| | | | | | | | | |
Other comprehensive loss: | | | | | | | | | |
| | | | | | | | | |
Unrealized gain on pension liability | | | i 119 | | | — | | | i 119 |
Comprehensive loss attributable to common stockholders | | $ | ( i 2,419) | | $ | ( i 2,593) | | $ | ( i 5,012) |
| | | | | | | | | |
Loss per share - basic and diluted | | $ | ( i 0.07) | | $ | ( i 0.07) | | $ | ( i 0.14) |
| | | | | | | | | |
Weighted average number of common shares - basic and diluted | | | i 37,104 | | | i 37,104 | | | i 37,104 |
| | | | | | | | | |
16
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | |
FOR THE THREE MONTHS ENDED MARCH 31, 2022 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | Additional | | | | | | | | | | Other | | | | ||
| | Common Stock | | Paid-In | | Treasury Stock | | Accumulated | | Comprehensive | | | | |||||||||
|
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | ||||||
As Previously Reported | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2021 | | i 43,024 | | $ | i 430 | | $ | i 144,282 | | ( i 6,398) | | $ | ( i 57,166) | | $ | ( i 25,977) | | $ | ( i 1,343) | | $ | i 60,226 |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders | | — | | | — | | | — | | — | | | — | | | ( i 2,538) | | | — | | | ( i 2,538) |
Settlement of stock awards | | i 364 | | | i 4 | | | — | | ( i 153) | | | ( i 295) | | | — | | | — | | | ( i 291) |
Unrealized gain on pension liability | | — | | | — | | | — | | — | | | — | | | — | | | i 119 | | | i 119 |
Stock-based compensation expense | | — | | | — | | | i 169 | | — | | | — | | | — | | | — | | | i 169 |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2022 | | i 43,388 | | $ | i 434 | | $ | i 144,451 | | ( i 6,551) | | $ | ( i 57,461) | | $ | ( i 28,515) | | $ | ( i 1,224) | | $ | i 57,685 |
| | | | | | | | | | | | | | | | | | | | | | |
Restatement Impact | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2021 | | — | | $ | — | | $ | — | | — | | $ | — | | $ | ( i 10,219) | | $ | — | | $ | ( i 10,219) |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders | | — | | | — | | | — | | — | | | — | | | ( i 2,593) | | | — | | | ( i 2,593) |
Settlement of stock awards | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
Unrealized gain on pension liability | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
Stock-based compensation expense | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2022 | | — | | $ | — | | $ | — | | — | | $ | — | | $ | ( i 12,812) | | $ | — | | $ | ( i 12,812) |
| | | | | | | | | | | | | | | | | | | | | | |
As Restated | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2021 | | i 43,024 | | $ | i 430 | | $ | i 144,282 | | ( i 6,398) | | $ | ( i 57,166) | | $ | ( i 36,196) | | $ | ( i 1,343) | | $ | i 50,007 |
| | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
Net loss attributable to common stockholders | | — | | | — | | | — | | — | | | — | | | ( i 5,131) | | | — | | | ( i 5,131) |
Settlement of stock awards | | i 364 | | | i 4 | | | — | | ( i 153) | | | ( i 295) | | | — | | | — | | | ( i 291) |
Unrealized gain on pension liability | | — | | | — | | | — | | — | | | — | | | — | | | i 119 | | | i 119 |
Stock-based compensation expense | | — | | | — | | | i 169 | | — | | | — | | | — | | | — | | | i 169 |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2022 | | i 43,388 | | $ | i 434 | | $ | i 144,451 | | ( i 6,551) | | $ | ( i 57,461) | | $ | ( i 41,327) | | $ | ( i 1,224) | | $ | i 44,873 |
17
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | |
| | For the Three Months Ended March 31, 2022 | |||||||
| | As Previously | | Restatement | | | | ||
|
| Reported |
| Impact |
| As Restated | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
Net loss attributable to common stockholders | | $ | ( i 2,538) | | $ | ( i 2,593) | | $ | ( i 5,131) |
Adjustments to reconcile net loss attributable to common stockholders to net cash (used in) provided by operating activities: | | | | | | | | | |
Depreciation and amortization and amortization of deferred finance costs | | | i 1,405 | | | i 34 | | | i 1,439 |
Stock-based compensation expense | | | i 123 | | | — | | | i 123 |
Deferred rents receivable | | | ( i 4) | | | | | | ( i 4) |
Other non-cash adjustments - pension expense | | | i 119 | | | — | | | i 119 |
Unrealized loss on warrants | | | i 369 | | | — | | | i 369 |
Equity in net loss from unconsolidated joint ventures | | | ( i 746) | | | — | | | ( i 746) |
Distributions from unconsolidated joint ventures | | | i 168 | | | — | | | i 168 |
(Increase) decrease in operating assets: | | | | | | | | | |
Residential condominium units for sale | | | ( i 5) | | | i 3,553 | | | i 3,548 |
Receivables | | | i 24 | | | — | | | i 24 |
Prepaid expenses and other assets, net | | | ( i 1,008) | | | — | | | ( i 1,008) |
Increase in operating liabilities: | | | | | | | | | |
Accounts payable and accrued expenses | | | i 1,474 | | | — | | | i 1,474 |
Net cash (used in) provided by operating activities | | | ( i 619) | | | i 994 | | | i 375 |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | |
Additions to real estate | | | ( i 4,704) | | | i 4,640 | | | ( i 64) |
Net proceeds from the sale of residential condominium units | | | i 5,634 | | | ( i 5,634) | | | — |
Net cash provided by (used in) investing activities | | | i 930 | | | ( i 994) | | | ( i 64) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | |
Proceeds from loans and corporate credit facility | | | i 2,390 | | | — | | | i 2,390 |
Repayment of loans | | | ( i 11,642) | | | — | | | ( i 11,642) |
Settlement of stock awards | | | ( i 291) | | | — | | | ( i 291) |
Net cash used in financing activities | | | ( i 9,543) | | | — | | | ( i 9,543) |
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | | ( i 9,232) | | | — | | | ( i 9,232) |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | | | i 24,845 | | | — | | | i 24,845 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | | $ | i 15,613 | | $ | — | | $ | i 15,613 |
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD | | $ | i 4,310 | | $ | — | | $ | i 4,310 |
RESTRICTED CASH, BEGINNING OF PERIOD | | | i 20,535 | | | — | | | i 20,535 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | | $ | i 24,845 | | $ | — | | $ | i 24,845 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | i 1,381 | | $ | — | | $ | i 1,381 |
RESTRICTED CASH, END OF PERIOD | | | i 14,232 | | | — | | | i 14,232 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | | $ | i 15,613 | | $ | — | | $ | i 15,613 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: Interest | | $ | i 3,050 | | $ | — | | $ | i 3,050 |
Cash paid during the period for: Taxes | | $ | i 66 | | $ | — | | $ | i 66 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | | | | |
Accrued development costs included in accounts payable and accrued expenses | | $ | i 9,332 | | $ | ( i 9,332) | | $ | — |
Capitalized amortization of deferred financing costs and warrants | | $ | i 617 | | $ | ( i 34) | | $ | i 583 |
Capitalized stock-based compensation expense | | $ | i 46 | | $ | ( i 28) | | $ | i 18 |
18
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
| | | | | | | | | |
| | As of March 31, 2021 | |||||||
| | As Previously | | Restatement | | | | ||
|
| Reported |
| Impact |
| As Restated | |||
| | | | | | | | | |
ASSETS | | | | | | | | | |
| | | | | | | | | |
Real estate, net | | $ | i 289,294 | | $ | ( i 219,941) | | $ | i 69,353 |
Residential condominium units for sale | | | — | | | i 213,223 | | | i 213,223 |
Cash and cash equivalents | | | i 5,034 | | | — | | | i 5,034 |
Restricted cash | | | i 6,694 | | | — | | | i 6,694 |
Prepaid expenses and other assets, net | | | i 3,343 | | | — | | | i 3,343 |
Investments in unconsolidated joint ventures | | | i 18,814 | | | — | | | i 18,814 |
Receivables | | | i 919 | | | — | | | i 919 |
Deferred rents receivable | | | i 102 | | | — | | | i 102 |
Right-of-use asset | | | i 1,478 | | | — | | | i 1,478 |
Intangible assets, net | | | i 8,987 | | | — | | | i 8,987 |
Total assets | | $ | i 334,665 | | $ | ( i 6,718) | | $ | i 327,947 |
| | | | | | | | | |
LIABILITIES | | | | | | | | | |
| | | | | | | | | |
Loans payable, net | | $ | i 207,317 | | $ | — | | $ | i 207,317 |
Corporate credit facility, net | | | i 32,104 | | | — | | | i 32,104 |
Secured line of credit, net | | | i 8,950 | | | — | | | i 8,950 |
Note payable | | | i 5,863 | | | — | | | i 5,863 |
Accounts payable and accrued expenses | | | i 14,368 | | | — | | | i 14,368 |
Lease liability | | | i 1,626 | | | — | | | i 1,626 |
Warrant liability | | | i 3,196 | | | — | | | i 3,196 |
Total liabilities | | | i 273,424 | | | — | | | i 273,424 |
| | | | | | | | | |
Commitments and Contingencies | | | | | | | | | |
| | | | | | | | | |
STOCKHOLDERS' EQUITY | | | | | | | | | |
| | | | | | | | | |
Preferred stock, $ i 0.01 par value; i 40,000,000 shares authorized; i no shares issued and outstanding | | | — | | | — | | | — |
Preferred stock, $ i 0.01 par value; i 2 shares authorized, no shares issued and outstanding at March 31, 2021 | | | — | | | — | | | — |
Special stock, $ i 0.01 par value; i 1 share authorized, issued and outstanding at March 31, 2021 | | | — | | | — | | | — |
| | | | | | | | | |
Common stock, $ i 0.01 par value; i 79,999,997 shares authorized; i 38,840,508 shares issued at March 31, 2021; i 32,442,633 shares outstanding at March 31, 2021 | | | i 388 | | | — | | | i 388 |
Additional paid-in capital | | | i 136,151 | | | — | | | i 136,151 |
Treasury stock ( i 6,397,875 shares at March 31, 2021) | | | ( i 57,166) | | | — | | | ( i 57,166) |
Accumulated other comprehensive loss | | | ( i 2,040) | | | — | | | ( i 2,040) |
Accumulated deficit | | | ( i 16,092) | | | ( i 6,718) | | | ( i 22,810) |
| | | | | | | | | |
Total stockholders' equity | | | i 61,241 | | | ( i 6,718) | | | i 54,523 |
| | | | | | | | | |
Total liabilities and stockholders' equity | | $ | i 334,665 | | $ | ( i 6,718) | | $ | i 327,947 |
19
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
| | | | | | | | | |
| | For the Three Months Ended March 31, 2021 | |||||||
| | As Previously | | Revision | | | | ||
|
| Reported |
| Impact |
| As Revised | |||
| | | | | | | | | |
Revenues | | | | | | | | | |
Rental revenues | | $ | i 299 | | $ | i 148 | | $ | i 447 |
Other income | | | i 46 | | | — | | | i 46 |
Total revenues | | | i 345 | | | i 148 | | | i 493 |
| | | | | | | | | |
Operating Expenses | | | | | | | | | |
Property operating expenses | | | i 1,655 | | | i 252 | | | i 1,907 |
Real estate taxes | | | i 20 | | | i 59 | | | i 79 |
General and administrative | | | i 1,203 | | | i 40 | | | i 1,243 |
Pension related costs | | | i 163 | | | — | | | i 163 |
Depreciation and amortization | | | i 715 | | | i 285 | | | i 1,000 |
| | | | | | | | | |
Total operating expenses | | | i 3,756 | | | i 636 | | | i 4,392 |
| | | | | | | | | |
Operating loss | | | ( i 3,411) | | | ( i 488) | | | ( i 3,899) |
| | | | | | | | | |
Equity in net loss from unconsolidated joint ventures | | | ( i 372) | | | — | | | ( i 372) |
Unrealized loss on warrants | | | ( i 1,977) | | | — | | | ( i 1,977) |
Interest expense, net | | | ( i 601) | | | ( i 274) | | | ( i 875) |
Interest expense - amortization of deferred finance costs | | | ( i 193) | | | ( i 68) | | | ( i 261) |
| | | | | | | | | |
Loss before taxes | | | ( i 6,554) | | | ( i 830) | | | ( i 7,384) |
| | | | | | | | | |
Tax expense | | | ( i 35) | | | — | | | ( i 35) |
| | | | | | | | | |
Net loss attributable to common stockholders | | $ | ( i 6,589) | | $ | ( i 830) | | $ | ( i 7,419) |
| | | | | | | | | |
Other comprehensive loss: | | | | | | | | | |
| | | | | | | | | |
Unrealized gain on pension liability | | | i 119 | | | — | | | i 119 |
Comprehensive loss attributable to common stockholders | | $ | ( i 6,470) | | $ | ( i 830) | | $ | ( i 7,300) |
| | | | | | | | | |
Loss per share - basic and diluted | | $ | ( i 0.20) | | $ | ( i 0.03) | | $ | ( i 0.23) |
| | | | | | | | | |
Weighted average number of common shares - basic and diluted | | | i 32,591 | | | i 32,591 | | | i 32,591 |
20
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | |
FOR THE THREE MONTHS ENDED MARCH 31, 2021 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | Additional | | | | | | | | | | Other | | | | ||
| | Common Stock | | Paid-In | | Treasury Stock | | Accumulated | | Comprehensive | | | | |||||||||
|
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | ||||||
As Previously Reported | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 | | i 38,345 | | $ | i 383 | | $ | i 135,978 | | ( i 6,173) | | $ | ( i 56,791) | | $ | ( i 9,503) | | $ | ( i 2,159) | | $ | i 67,908 |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders | | — | | | — | | | — | | — | | | — | | | ( i 6,589) | | | — | | | ( i 6,589) |
Settlement of stock awards | | i 496 | | | i 5 | | | — | | ( i 225) | | | ( i 375) | | | — | | | — | | | ( i 370) |
Unrealized gain on pension liability | | — | | | — | | | — | | — | | | — | | | — | | | i 119 | | | i 119 |
Stock-based compensation expense | | — | | | — | | | i 173 | | — | | | — | | | — | | | — | | | i 173 |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 | | i 38,841 | | $ | i 388 | | $ | i 136,151 | | ( i 6,398) | | $ | ( i 57,166) | | $ | ( i 16,092) | | $ | ( i 2,040) | | $ | i 61,241 |
| | | | | | | | | | | | | | | | | | | | | | |
Revision Impact | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 | | — | | $ | — | | $ | — | | — | | $ | — | | $ | ( i 5,888) | | $ | — | | $ | ( i 5,888) |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders | | — | | | — | | | — | | — | | | — | | | ( i 830) | | | — | | | ( i 830) |
Settlement of stock awards | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
Unrealized gain on pension liability | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
Stock-based compensation expense | | — | | | — | | | — | | — | | | — | | | — | | | — | | | — |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 | | — | | $ | — | | $ | — | | — | | $ | — | | $ | ( i 6,718) | | $ | — | | $ | ( i 6,718) |
| | | | | | | | | | | | | | | | | | | | | | |
As Revised | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 | | i 38,345 | | $ | i 383 | | $ | i 135,978 | | ( i 6,173) | | $ | ( i 56,791) | | $ | ( i 15,391) | | $ | ( i 2,159) | | $ | i 62,020 |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss attributable to common stockholders | | — | | | — | | | — | | — | | | — | | | ( i 7,419) | | | — | | | ( i 7,419) |
Settlement of stock awards | | i 496 | | | i 5 | | | — | | ( i 225) | | | ( i 375) | | | — | | | — | | | ( i 370) |
Unrealized gain on pension liability | | — | | | — | | | — | | — | | | — | | | — | | | i 119 | | | i 119 |
Stock-based compensation expense | | — | | | — | | | i 173 | | — | | | — | | | — | | | — | | | i 173 |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 | | i 38,841 | | $ | i 388 | | $ | i 136,151 | | ( i 6,398) | | $ | ( i 57,166) | | $ | ( i 22,810) | | $ | ( i 2,040) | | $ | i 54,523 |
21
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | |
| | For the Three Months Ended March 31, 2021 | |||||||
| | As Previously | | Restatement | | | | ||
|
| Reported |
| Impact |
| As Restated | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
Net loss attributable to common stockholders | | $ | ( i 6,589) | | $ | ( i 830) | | $ | ( i 7,419) |
Adjustments to reconcile net loss attributable to common stockholders to net cash used in operating activities: | | | | | | | | | |
Depreciation and amortization and amortization of deferred finance costs | | | i 908 | | | i 353 | | | i 1,261 |
Stock-based compensation expense | | | i 133 | | | — | | | i 133 |
Deferred rents receivable | | | ( i 12) | | | — | | | ( i 12) |
Other non-cash adjustments - pension expense | | | i 119 | | | — | | | i 119 |
Unrealized loss on warrants | | | i 1,977 | | | — | | | i 1,977 |
Equity in net loss from unconsolidated joint ventures | | | i 372 | | | — | | | i 372 |
Distributions from unconsolidated joint ventures | | | i 194 | | | — | | | i 194 |
(Increase) decrease in operating assets: | | | | | | | | | |
Residential condominium units for sale | | | — | | | ( i 11,672) | | | ( i 11,672) |
Receivables | | | i 47 | | | — | | | i 47 |
Prepaid expenses and other assets, net | | | ( i 371) | | | — | | | ( i 371) |
Increase in operating liabilities: | | | | | | | | | |
Accounts payable and accrued expenses | | | i 1,294 | | | — | | | i 1,294 |
Net cash used in operating activities | | | ( i 1,928) | | | ( i 12,149) | | | ( i 14,077) |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | |
Additions to real estate | | | ( i 12,202) | | | i 12,149 | | | ( i 53) |
Net cash used in investing activities | | | ( i 12,202) | | | i 12,149 | | | ( i 53) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | |
Proceeds from loans and corporate credit facility | | | i 8,980 | | | — | | | i 8,980 |
Proceeds from secured line of credit | | | i 1,200 | | | — | | | i 1,200 |
Payment of finance costs | | | ( i 21) | | | — | | | ( i 21) |
Settlement of stock awards | | | ( i 370) | | | — | | | ( i 370) |
Net cash provided by financing activities | | | i 9,789 | | | — | | | i 9,789 |
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | | | ( i 4,341) | | | — | | | ( i 4,341) |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | | | i 16,069 | | | — | | | i 16,069 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | | $ | i 11,728 | | $ | — | | $ | i 11,728 |
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD | | $ | i 6,515 | | $ | — | | $ | i 6,515 |
RESTRICTED CASH, BEGINNING OF PERIOD | | | i 9,554 | | | — | | | i 9,554 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | | $ | i 16,069 | | $ | — | | $ | i 16,069 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | i 5,034 | | $ | — | | $ | i 5,034 |
RESTRICTED CASH, END OF PERIOD | | | i 6,694 | | | — | | | i 6,694 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | | $ | i 11,728 | | $ | — | | $ | i 11,728 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: Interest | | $ | i 4,130 | | $ | — | | $ | i 4,130 |
Cash paid during the period for: Taxes | | $ | i 46 | | $ | — | | $ | i 46 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | | | | |
Accrued development costs included in accounts payable and accrued expenses | | $ | i 7,496 | | $ | ( i 7,496) | | $ | — |
Capitalized amortization of deferred financing costs and warrants | | $ | i 760 | | $ | ( i 68) | | $ | i 692 |
Capitalized stock-based compensation expense | | $ | i 39 | | $ | ( i 2) | | $ | i 37 |
22
Note 4 – Real Estate, Net
iAs of March 31, 2022 and December 31, 2021, real estate, net, includes the following (dollars in thousands):
| | | | | | |
| | March 31, | | |||
|
| 2022 |
| 2021 | ||
| | As Restated (a) | | As Restated (a) | ||
| | | | | ||
| | | | | | |
Building and building improvements | | $ | i 51,141 | | $ | i 51,141 |
Tenant improvements | |
| i 221 | |
| i 200 |
Furniture and fixtures | |
| i 818 | |
| i 775 |
Land and land improvements | |
| i 28,847 | |
| i 28,847 |
| |
| i 81,027 | |
| i 80,963 |
Less: accumulated depreciation | |
| i 14,322 | |
| i 13,629 |
| | $ | i 66,705 | | $ | i 67,334 |
| | | | | | |
| | | | | | |
Building and building improvements, tenant improvements, furniture and fixtures, and land and land improvements included the 237 11th property and the Paramus, New Jersey property as of March 31, 2022 and December 31, 2021. Depreciation expense amounted to approximately $ i 693,000 for both the three months ended March 31, 2022 and 2021, respectively.
In May 2018, we closed on the acquisition of 237 11th, a recently built 105-unit, 12-story multi-family apartment building located at 237 11th Street, Brooklyn, New York for a purchase price of $ i 81.2 million, excluding transaction costs of approximately $ i 0.7 million. Due to certain construction defects at 237 11th that resulted in water penetration into the building and damage to certain apartment units and other property, which defects would have required significant invasive work of a type not usually required or permitted, especially on a newly-built asset, to be detected, we submitted proofs of loss to our insurance carrier for property damage and business interruption (lost revenue) in March 2019. The insurance carrier subsequently disclaimed coverage for the losses and we filed a complaint against the carrier alleging that it breached the insurance policy by denying coverage. We also filed legal claims against the seller, its parent company, and the general contractor to recover damages arising from the defective construction. In addition, the general contractor impleaded into that litigation several subcontractors who performed work on the property. Management expects to recover some portion of the cost incurred to repair the property through the litigations and/or settlement negotiations with the seller, its parent company, the general contractor, the subcontractors, and the insurance carrier, although the amount of damages that may be recoverable in litigation and/or potential settlement negotiations are uncertain at this time, as is the timing of receipt of any such payments, which has been impacted by the COVID-19 pandemic, including the resulting backlog in the court system and slowdown in judicial proceedings. We have been engaged in mediation with the seller, its parent company, the general contractor, and the third-party defendants impleaded by the general contractor to explore the possibility of settling the case involving those parties, but to date, we have not reached an agreement. We incurred significant cash outflows for costs associated with these repairs and remediation, which commenced in September 2019 and was completed as of December 31, 2021. As of March 31, 2022, the property was i 100% leased.
As of March 31, 2022 and December 31, 2021, intangible assets, net consisted of the real estate tax abatement at its original valuation of $ i i 11.1 / million offset by its related accumulated amortization of approximately $ i 2.9 million and $ i 2.7 million at March 31, 2022 and December 31, 2021, respectively. Amortization expense amounted to $ i i 185,000 / for each of the three months ended March 31, 2022 and 2021, respectively.
77 Greenwich and the New York City School Construction Authority
We entered into an agreement with the New York City School Construction Authority (the “SCA”), whereby we agreed to construct a school to be sold to the SCA as part of our condominium development at 77 Greenwich. Pursuant to the agreement, the SCA agreed to pay us $ i 41.5 million for the purchase of their condominium unit and reimburse us for the costs associated with constructing the school, including a construction supervision fee of approximately $ i 5.0 million. Payments for construction are being made by the SCA to the general contractor in installments as construction on their condominium unit progresses. Payments to us for the land and construction supervision fee commenced in January 2018 and continued through October 2019 for the land and will continue through completion of the SCA buildout for the construction supervision fee, with an aggregate of $ i 46.1 million having been paid to us as of March 31, 2022 from the
/23
SCA, with approximately $ i 430,000 remaining to be paid. We have also received an aggregate of $ i 51.0 million in reimbursable construction costs from the SCA through March 31, 2022. In April 2020, the SCA closed on the purchase of the school condominium unit with us, at which point title transferred to the SCA, and the SCA is now proceeding to complete the buildout of the interior space, which is planned to become an approximately 476 seat public elementary school. The school is currently anticipated to open in September 2022. We have also guaranteed certain obligations with respect to the construction of the school.
iNote 5 – Residential Condominium Units for Sale
Residential condominium units for sale as of March 31, 2022 and December 31, 2021 includes 77 Greenwich, and in all cases, excludes costs of development for the residential condominium units at 77 Greenwich that were sold. Closings on residential condominium units started in September 2021 with i 14 closings through December 31, 2021 and i three closings during the three months ended March 31, 2022. Residents have begun to move into their respective units.
/ iNote 6 – Prepaid Expenses and Other Assets, Net
iAs of March 31, 2022 and December 31, 2021, prepaid expenses and other assets, net, include the following (dollars in thousands):
| | | | | | |
| | March 31, | | |||
|
| 2022 |
| 2021 | ||
| | | | | ||
| | | | | | |
Prepaid expenses | | $ | i 1,659 | | $ | i 673 |
Deferred finance costs | |
| i 2,184 | |
| i 2,184 |
Other | |
| i 2,758 | |
| i 2,736 |
| |
| i 6,601 | |
| i 5,593 |
Less: accumulated amortization | |
| i 1,594 | |
| i 1,467 |
| | $ | i 5,007 | | $ | i 4,126 |
/
iNote 7 – Loans Payable and Secured Line of Credit
Corporate Credit Facility
In December 2019, we entered into a multiple draw credit agreement aggregating $ i 70.0 million (the “Corporate Credit Facility”), which may be increased by $ i 25.0 million subject to satisfaction of certain conditions and the consent of the lender (the “CCF Lender”). Draws under the Corporate Credit Facility may be made during the 32-month period following the closing date of the Corporate Credit Facility (the “Closing Date”). The Corporate Credit Facility matures on December 19, 2024, subject to extensions until December 19, 2025 and June 19, 2026, respectively, under certain circumstances. The Corporate Credit Facility provided for the proceeds of the Corporate Credit Facility to be used for investments in certain multi-family apartment buildings in the greater New York City area and certain non-residential real estate investments approved by the CCF Lender in its reasonable discretion, as well as in connection with certain property recapitalizations and in specified amounts for general corporate purposes and working capital.
In connection with the December 2020 transaction noted below, the Company entered into an amendment to the Corporate Credit Facility, pursuant to which, among other things, (i) we were permitted to enter into the Mezzanine Loan Agreement (as defined below), the amendment to the 77 Greenwich Construction Facility (as defined below) and related documents, (ii) the commitment made by the CCF Lender under the Corporate Credit Facility was reduced by the $ i 7.5 million, and (iii) the MOIC amount was amended to combine the Corporate Credit Facility and the Mezzanine Loan. In addition, the exercise price of the warrants issued in connection with the Corporate Credit Facility was amended from $ i 6.50 per share to $ i 4.50 per share (the “Warrant Agreement Amendment”) (see Note 12 – Stockholders Equity – Warrants to our consolidated financial statements for further discussion regarding the warrants).
In connection with the closing of the 77 Mortgage Loan and amendment to the Mezzanine Loan described below, we entered into amendments to our Corporate Credit Facility, dated as of October 22, 2021 and November 10, 2021, pursuant to which, among other things, the parties agreed that no additional funds will be drawn under the Corporate Credit Facility, the minimum liquidity requirement was made consistent with the 77 Mortgage Loan Agreement until May 1, 2023 and the
/24
multiple on invested capital (the “MOIC”) provisions were revised to provide that (i) the MOIC amount due upon final repayment of the Corporate Credit Facility loan was amended to be consistent with the Mezzanine Loan such that if no event of default exists and is continuing under the Corporate Credit Facility at any time prior to June 22, 2023, the amount due will be combined with the Mezzanine Loan, to the extent not previously paid, if any, and (ii) the amount of the Corporate Credit Facility used to calculate the MOIC was reduced to $ i 35.75 million.
The Corporate Credit Facility had an outstanding balance of $ i i 35.75 / million at both March 31, 2022 and December 31, 2021, excluding deferred finance fees of $ i 2.7 million and $ i 2.9 million, respectively. Accrued interest, which is included in accounts payable and accrued expenses, totaled approximately $ i 3.9 million at March 31, 2022 and $ i 3.8 million at December 31, 2021. As of March 31, 2022, we were in compliance with all covenants of the Corporate Credit Facility.
The Corporate Credit Facility bears interest at i a rate per annum equal to the sum of (i) i 5.25% and (ii) a scheduled interest rate of i 4% (the “Cash Pay Interest Rate”) which increases by i 0.125% every six-month period from the Closing Date, subject to increase during the extension periods. / The effective interest rate at March 31, 2022 and December 31, 2021 was i i 9.5% / , respectively. A $ i 2.45 million commitment fee was payable i 50% on the initial draw and i 50% as amounts under the Corporate Credit Facility are drawn, with any remaining balance due on the last date of the draw period, and a i 1.0% exit fee is payable in respect of Corporate Credit Facility repayments. As of March 31, 2022, we had paid $ i 1.85 million of the commitment fee. The Corporate Credit Facility may be prepaid at any time subject to a prepayment premium on the portion of the Corporate Credit Facility being repaid. The Corporate Credit Facility is subject to certain mandatory prepayment provisions, including that, subject to the terms of the mortgage loan documents applicable to the Company’s 77 Greenwich property, i 90% or i 100% of the net cash proceeds of residential condominium sales, depending on the circumstances, and i 70% of the net cash proceeds of retail condominium sales at the Company’s 77 Greenwich property shall be used to repay the Corporate Credit Facility. Upon final repayment of the Corporate Credit Facility, the MOIC amount equal to i 30% of the initial Corporate Credit Facility amount plus drawn incremental amounts less the sum of all interest payments, commitment fee and exit fee payments and prepayment premiums, if any, shall be due, if such amounts are less than the MOIC amount. The collateral for the Corporate Credit Facility consists of (i) i 100% of the equity interests in our direct subsidiaries, to the extent such a pledge is permitted by the organizational documents of such subsidiary and any financing agreements to which such subsidiary is a party, (ii) our cash and cash equivalents, excluding restricted cash and cash applied toward certain liquidity requirements under existing financing arrangements, and (iii) other non-real estate assets of ours, including intellectual property.
The Corporate Credit Facility provides that we and our subsidiaries must comply with various affirmative and negative covenants including restrictions on debt, liens, business activities, equity repurchases, distributions and dividends, disposition of assets and transactions with affiliates, as well as financial covenants regarding corporate loan to value, net worth and liquidity. Under the Corporate Credit Facility, we are permitted to repurchase up to $ i 2.0 million of our common stock pursuant to board approved programs with Corporate Credit Facility proceeds, $ i 1.5 million with other sources of cash and otherwise subject to the consent of the required lenders. The Corporate Credit Facility also provides for certain events of default, including cross-defaults to our other loans, and for a guaranty of the Corporate Credit Facility obligations by our loan party subsidiaries.
Pursuant to the terms of the Corporate Credit Facility, so long as the Corporate Credit Facility is outstanding and the CCF Lender is owed or holds greater than i 50% of the sum of (x) the aggregate principal amount of the balance outstanding and (y) the aggregate unused commitments, the CCF Lender will have the right to appoint i one member to our and each of our subsidiary’s board of directors or equivalent governing body (the “Designee”). At the election of the CCF Lender, a board observer may be selected in lieu of a board member. The Designee may also sit on up to i three committees of the board of directors or equivalent governing body of ours and each subsidiary of the Designee’s choosing from time to time. The Designee will be entitled to receive customary reimbursement of expenses incurred in connection with his or her service as a member of the board and/or any committee thereof but will not, except in the case of an independent director, receive compensation for such service.
Loans Payable
77 Greenwich Construction Facility
In December 2017, we closed on a $ i 189.5 million construction facility for 77 Greenwich (the “77 Greenwich Construction Facility”). As a result of the refinancing transaction in October 2021, the 77 Greenwich Construction Facility was repaid
25
in full. The 77 Greenwich Construction Facility had an aggregate balance of $ i 159.4 million at the time it was repaid at closing of the 77 Mortgage Loan (see “77 Mortgage Loan” below).
77 Mortgage Loan
In October 2021, a wholly-owned subsidiary of ours (the “Mortgage Borrower”) entered into a loan agreement with Macquarie PF Inc., a part of Macquarie Capital, the advisory, capital markets and principal investment arm of Macquarie Group, as lender and administrative agent (the “77 Mortgage Lender”), pursuant to which 77 Mortgage Lender agreed to extend credit to Mortgage Borrower in the amount of up to $ i 166.7 million (the “77 Mortgage Loan”), subject to the satisfaction of certain conditions (the “77 Mortgage Loan Agreement”). We borrowed $ i 133.1 million on the closing date of the 77 Mortgage Loan and the balance of the funds used to repay the 77 Greenwich Construction Facility were obtained from an increase in the Mezzanine Loan, the Berkley Partner Loan as well as funds raised through the Private Placement. The $ i 33.6 million remaining availability will be used to, among other things, complete construction of 77 Greenwich and fund carry costs while the residential condominium units are being sold.
The 77 Mortgage Loan has a i two-year term with an option to extend for an additional year under certain circumstances and is secured by the Mortgage Borrower’s fee interest in 77 Greenwich. The 77 Mortgage Loan bears interest at a rate per annum equal to the greater of (i) i 7.00% in excess of LIBOR and (ii) i 7.25%; provided that, if, on April 22, 2023, the outstanding principal balance of the 77 Mortgage Loan, together with any accrued and unpaid PIK Interest and unpaid Additional Unused Fee (as those terms are defined below) is equal to or greater than $ i 91.0 million, the rate per annum will be equal to the greater of (i) i 9.00% in excess of LIBOR and (ii) i 9.25%. If cash flow from 77 Greenwich (including proceeds from the sales of residential condominium units) is insufficient to pay interest payments when due, any accrued but unpaid interest will remain unpaid and interest will continue to accrue on such unpaid amounts (“PIK Interest”) until the cumulative PIK Interest and Additional Unused Fee accrues to $ i 4.5 million (the “Threshold Amount”), after which all such amounts in excess of the Threshold Amount shall be paid in cash on a monthly basis until such amounts are less than the Threshold Amount. As advances of the 77 Mortgage Loan are made to Mortgage Borrower and the outstanding principal balance of the 77 Mortgage Loan increases, net proceeds from the sales of condominium units will be paid to 77 Mortgage Lender to reduce the outstanding balance of the 77 Mortgage Loan. A i 1% per annum fee (the “Additional Unused Fee”) on a $ i 3.0 million portion (the “Additional Amount”) of the 77 Mortgage Loan, is payable on a monthly basis on the undrawn portion of such Additional Amount. To the extent the 77 Mortgage Loan is not fully funded by October 22, 2022 (April 22, 2023 in the case of amounts with respect to construction work related to the new handicapped accessible subway entrance on Trinity Place), 77 Mortgage Lender may in its discretion force fund the remaining balance other than the Additional Amount into a reserve account held by 77 Mortgage Lender and disbursed in accordance with the terms of the 77 Mortgage Loan Agreement. The 77 Mortgage Loan is prepayable without penalty, subject to 77 Mortgage Lender receiving a minimum total return of $ i 15.26 million, or if an advance has been made of the Additional Amount, the sum of $ i 15.26 million, plus i 10% of the Additional Amount that has been disbursed, in each case, inclusive of interest and fees, and must be prepaid in part in certain circumstances such as in the event of the sale of residential and retail condominium units. Mortgage Borrower is required to achieve completion of the construction work and the improvements for the Project on or before July 1, 2022, subject to certain exceptions. The 77 Mortgage Loan Agreement also includes additional customary affirmative and negative covenants for loans of this type, with the first sales pace covenant in April 2023.
In connection with the 77 Mortgage Loan Agreement, we entered into guarantees with the 77 Mortgage Lender pursuant to which we guaranteed the completion and payment of costs and expenses related to the construction; the payment of accrued and unpaid interest and other fees, costs, expenses and payments due and payable with respect to the 77 Mortgage Loan or 77 Greenwich; and the payment when due of all amounts due to 77 Mortgage Lender, as a result of “bad-boy” provisions. Mortgage Borrower and the Company also entered into an environmental compliance and indemnification undertaking for the benefit of 77 Mortgage Lender. Additionally, Mortgage Borrower is required to provide a letter of credit in an amount not less than $ i 4.0 million. The letter of credit will be reduced to $ i 3.0 million following, among other things, (x) final completion of the Project, subject to certain exceptions, and (y) paydown of the 77 Mortgage Loan to a basis of $ i 625 per square feet of the unsold residential units.
As of March 31, 2022, the 77 Mortgage Loan had a balance of $ i 116.0 million and we had accrued $ i 2.5 million in PIK interest, which is recorded in accounts payable and accrued expenses in the consolidated balance sheet. Through March 31, 2022, the 77 Mortgage loan was paid down by approximately $ i 20.5 million through closed sales of residential condominium units. As of March 31, 2022, we were in compliance with all covenants under the 77 Mortgage Loan.
26
In early April 2020, New York State required all non-essential construction projects be shut down due to the impact of the COVID-19 pandemic. As a result, the construction of 77 Greenwich was temporarily suspended. Construction recommenced mid-April, initially on a modified basis, as certain work was deemed "essential" construction. Since June 2020, a full crew has been on site and operating in accordance with applicable guidelines in response to the COVID-19 outbreak. Future delays in construction may result in a delay in our ability to complete the construction project on its original timeline and our ability to sell condominium units. We have received our TCOs for floors 11-35, excluding the hoist units, the lobby, mechanical rooms and portions of the cellar and anticipate receiving TCOs for the balance of the development through completion of the project. Upon the granting of our first TCO in March 2021 and having 16 units under contract at that time, our offering plan was declared effective. We submitted our request to create separate tax lots to the department of finance and the tax lots were created.
Mezzanine Loan
In December 2020, we entered into a mezzanine loan agreement with an affiliate of the CCF Lender (the “Mezzanine Loan Agreement”, and the loan thereunder, the “Mezzanine Loan”). The Mezzanine Loan was originally in the amount of $ i 7.5 million and has a term of i three years with i two i one-year extension options, exercisable under certain circumstances. The collateral for the Mezzanine Loan was the borrower’s equity interest in its direct, wholly-owned subsidiary. The blended interest rate for the 77 Mortgage Loan and the Mezzanine Loan, assuming the 77 Mortgage Loan and the Mezzanine Loan are fully drawn, was i 8.3% on an annual basis. Interest on the Mezzanine Loan is not payable on a monthly basis but instead is automatically added to the unpaid principal amount on a monthly basis (and therefore accrues interest) and is payable in full on the maturity date of the Mezzanine Loan. Upon final repayment of the Mezzanine Loan, a MOIC will be due on substantially the same terms as provided for in the CCF. Subject to the prior sentence the Mezzanine Loan may be prepaid in whole or in part, without penalty or premium (other than payment of the MOIC amount, if applicable, as provided above), upon prior written notice to the lender under the Mezzanine Loan. In connection with the Mezzanine Loan, the Company entered into a completion guaranty, carry guaranty, equity funding guaranty, recourse guaranty and environmental indemnification undertaking.
In October 2021, the Mezzanine Loan Agreement was amended and restated to, among other things, (i) increase the amount of the loan thereunder by approximately $ i 22.77 million, of which $ i 0.77 million reflects interest previously accrued under the original Mezzanine Loan, (ii) reflected the pledge of the equity interests in the Mortgage Borrower to the Mezzanine Lender as additional collateral for the Mezzanine Loan and (iii) conform certain of the covenants to those included in the 77 Mortgage Loan Agreement, as applicable. Additionally, the existing completion guaranty, carry guaranty, recourse guaranty and environmental indemnification executed in connection with the original Mezzanine Loan Agreement were amended to conform to the mortgage guarantees and mortgage environmental indemnity made in connection with the 77 Mortgage Loan (and the existing equity funding guaranty was terminated).
As of March 31, 2022 and December 31, 2021, the Mezzanine Loan had a balance of $ i i 30.3 / million for both periods, respectively, and accrued interest totaled approximately $ i 2.1 million and $ i 1.1 million, respectively.
As of March 31, 2022, we were in compliance with the covenants of the Mezzanine Loan.
237 11th Loans
In May 2018, in connection with the acquisition of 237 11th, we entered into two-year interest-only financings with an aggregate principal amount of $ i 67.8 million, which was comprised of a $ i 52.4 million mortgage loan and a $ i 15.4 million mezzanine i loan bearing interest at a blended average rate of 3.72% over the 30-day LIBOR, each with a one-year extension option upon satisfaction of certain conditions. The mezzanine loan was repaid in full in February 2020. In June 2020, the maturity of the mortgage loan was extended to June 2021 and amended to include a delayed draw facility of $ i 4.25 million. In conjunction with the amendment, a LIBOR floor of i 50 basis points was put in place, the spread was increased by i 25 basis points to i 2.25% and the exit fee was increased by i 50 basis points to i 1.0%. In June 2021, we repaid the mortgage loan’s balance of $ i 56.4 million in full and paid an exit fee of $ i 567,000.
In June 2021, in connection with the refinancing of the mortgage loan, we entered into a $ i 50.0 million senior loan (the “237 11th Senior Loan”) and a $ i 10 million mezzanine loan (the “237 11th Mezz Loan” and together with the 237 11th Senior Loan, the “237 11th Loans”), provided by Natixis, bearing interest at a blended rate of i 3.05% per annum. The 237 11th Loans have an initial term of i two years and i three i one-year extension options. The first extension option is not subject to satisfaction of any financial tests. $ i 1.5 million of the 237 11th Senior Loan proceeds were held back by Natixis to cover debt service and operating expense shortfalls, as well as leasing related costs. There is an outstanding balance of $ i 48.8
27
million and $ i 48.7 million from the 237 11th Senior Loan at March 31, 2022 and December 31, 2021, respectively, and $ i i 10.0 / million from the 237 11th Mezz Loan at March 31, 2022 and December 31, 2021, respectively.
In June 2021, we entered into an interest rate cap agreement as required under the New 237 11th Loans. The interest rate cap agreement provided the right to receive cash if the reference interest rate rose above a contractual rate. We paid a premium of approximately $ i 32,500 for the i 2.5% interest rate cap on the 30-day LIBOR rate on a notional amount of $ i 60.0 million. The interest rate cap matures in July 2023. We did not designate this interest rate cap as a hedge and are recognizing the change in estimated fair value in interest expense.
The 237 11th Loans require us to comply with various customary affirmative and negative covenants and provide for certain events of default, the occurrence of which would permit the lender to declare the 237 11th Loans due and payable, among other remedies. As of March 31, 2022, we were in compliance with all covenants of the 237 11th Loans.
The Berkley Partner Loan
In October 2021, we entered into a loan agreement with our partner in The Berkley JV, pursuant to which our partner agreed to lend us up to $ i 10.5 million principal amount, $ i 500,000 of which is available only to be applied to interest payments, secured by our interest in the joint venture entity, maturing in i one year, with i two 12-month extension options subject to satisfaction of certain conditions. The loan bears interest at a rate of i 10% per year, with a portion deferred until maturity. The loan had a balance of $ i 10.1 million and $ i 10.0 million at March 31, 2022 and December 31, 2021, respectively. This loan was repaid in full in April 2022. See Note 15 – Subsequent Events.
Secured Line of Credit
Our $ i 12.75 million secured line of credit is secured by the Paramus, New Jersey property. The secured line of credit matures in March 2023. i The secured line of credit bears interest at the prime rate, currently 3.50%. The secured line of credit is pre-payable at any time without penalty. This secured line of credit had an outstanding balance of $ i i 12.75 / million at March 31, 2022 and December 31, 2021, respectively, and an effective interest rate of i 3.50% and i 3.25% at March 31, 2022 and December 31, 2021, respectively.
Note Payable (250 North 10th Note)
We own a i 10% interest in a joint venture with TF Cornerstone (the “250 North 10th JV”) formed to acquire and operate 250 North 10th, a recently built 234-unit apartment building in Williamsburg, Brooklyn, New York. In January 2020, the 250 North 10th JV closed on the acquisition of the property through a wholly-owned special purpose entity. Our share of the equity totaling approximately $ i 5.9 million was funded through a loan (the “Partner Loan”) from our joint venture partner. The Partner Loan had a balance of $ i i 5.9 / million at March 31, 2022 and December 31, 2021, respectively, bears interest at i 7.0% and is prepayable any time within its i four year term. Our partner has the option of having the Partner Loan repaid in our common stock if the price of our common stock exceeds $ i 6.50 per share at the time of conversion. See also Note 14 – Investments in Unconsolidated Joint Ventures.
Principal Maturities
iCombined aggregate principal maturities of our loans, secured line of credit and note payable as of March 31, 2022, excluding extension options, were as follows (dollars in thousands):
| | | | |
Year of Maturity |
| Principal |
| |
| | Restated | | |
| | | | |
2022 | | $ | i 10,064 | |
2023 | |
| i 223,664 | |
2024 | |
| i 35,750 | |
2025 | | | — | |
2026 | | | — | |
| |
| i 269,478 | |
Less: deferred finance costs, net | |
| ( i 7,007) | |
Total loans, secured line of credit, and note payable, net | | $ | i 262,471 | |
28
Interest
iConsolidated interest expense, net includes the following (dollars in thousands):
| | | | | | | |
|
| Three Months Ended |
| Three Months Ended |
| ||
| | March 31, | | | |||
| | 2022 | | 2021 | | ||
Interest expense | | $ | i 4,287 | | $ | i 4,990 | |
Interest capitalized | |
| ( i 1,518) | |
| ( i 4,115) | |
Interest expense, net | | $ | i 2,769 | | $ | i 875 | |
iNote 8 – Fair Value Measurements
The fair value of our financial instruments are determined based upon applicable accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).
The fair values of cash and cash equivalents, receivables, accounts payable and accrued expenses, and other liabilities approximated their carrying value because of their short-term nature. The fair value of the consolidated loans payable, Corporate Credit Facility, the secured line of credit and note payable approximated their carrying values as they are variable-rate instruments. The warrant liability is recorded at fair value.
iNote 9 – Pension Plan
Syms sponsored a defined benefit pension plan for certain eligible employees not covered under a collective bargaining agreement. The pension plan was frozen effective December 31, 2006. At March 31, 2022 and December 31, 2021, we had recorded an overfunded pension balance of approximately $ i i 1.6 / million, respectively, which is included in prepaid expenses and other assets, net on the accompanying consolidated balance sheets. If we decided to terminate the plan under a standard termination, we would be required to make additional contributions to the plan so that the assets of the plan are sufficient to satisfy all benefit liabilities.
We currently plan to continue to maintain the Syms pension plan and make all contributions required under applicable minimum funding rules; however, we may terminate it at any time. In the event we terminate the plan, we intend that any such termination would be a standard termination. Although we have accrued the liability associated with a standard termination, we have not taken any steps to commence such a termination and currently have no intention of terminating the pension plan. In accordance with minimum funding requirements and court ordered allowed claims distributions, we paid approximately $ i 5.7 million to the Syms sponsored plan from September 17, 2012 through March 31, 2022. Historically, we have funded this plan in the third quarter of the calendar year. We funded $ i 400,000 to the Syms sponsored plan in September 2021.
/ iNote 10 – Commitments
| a. | Leases – The lease for our corporate office located at 340 Madison Avenue, New York, New York expires on March 31, 2025. Rent expense paid for this operating lease was approximately $ i 118,000 and $ i 112,000 for the three months ended March 31, 2022 and 2021, respectively. The remaining lease obligation, excluding any extension options, for our corporate office is approximately $ i 1.4 million through 2025. |
| b. | Legal Proceedings – In the normal course of business, we are party to routine legal proceedings. Based on advice of counsel and available information, including current status or stage of proceeding, and taking into account accruals where they have been established, management currently believes that any liabilities ultimately resulting from litigation we are currently involved in will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity. |
29
Note 11 – Income Taxes
As of March 31, 2022, we had federal NOLs of approximately $ i 260.3 million. NOLs generated prior to tax-year 2018 will expire in years through fiscal 2037 while NOLs generated in 2018 and forward carry-over indefinitely. The gain resulting from the conveyance of the school condominium to the SCA was fully offset by our available NOL carryforward. Since 2009 through March 31, 2022, we have utilized approximately $ i 22.5 million of our federal NOLs. As of March 31, 2022, we also had state NOLs of approximately $ i 171.9 million. These state NOLs have various expiration dates through 2039, if applicable. We also had New York State and New York City prior NOL conversion (“PNOLC”) subtraction pools of approximately $ i 24.3 million and $ i 19.3 million, respectively. The conversion to the PNOLC under the New York State and New York City corporate tax reforms does not have any material tax impact.
Based on management’s assessment, we believe it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategy. In recognition of this risk, we have provided a valuation allowance of $ i 72.0 million as of March 31, 2022. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets would be recognized as a reduction of income tax expense and an increase in stockholders equity.
/ iNote 12 – Stockholders’ Equity
Capital Stock
Our authorized capital stock consists of i 120,000,000 shares consisting of i 79,999,997 shares of common stock, $ i 0.01 par value per share, i two (2) shares of preferred stock, $ i 0.01 par value per share (which have been redeemed in accordance with their terms and may not be reissued), i one (1) share of special stock, $ i 0.01 par value per share, and i 40,000,000 shares of a new class of blank-check preferred stock, $ i 0.01 par value per share. As of March 31, 2022 and December 31, 2021, there were i 43,387,563 shares and i 43,024,424 shares of common stock issued, respectively, and i 36,836,146 shares and i 36,626,549 shares of common stock outstanding, respectively, with the difference being held in treasury stock.
Warrants
In December 2019, we entered into a Warrant Agreement (the “Warrant Agreement”) with the lender under our Corporate Credit Facility (see Note 7 – Loans Payable and Secured Line of Credit – Corporate Credit Facility) (the “Warrant Holder”) pursuant to which we issued i ten-year warrants (the “Warrants”) to the Warrant Holder to purchase up to i 7,179,000 shares of our common stock. On December 22, 2020, the Company entered into the Warrant Agreement Amendment, whereby the exercise price of the warrants issued in connection with the Corporate Credit Facility was amended to be $ i 4.50 per share. In connection with the October 2021 Private Placement, the exercise price of the warrants were further reduced to $ i 4.31 per share (the “Exercise Price”), which is payable in cash or pursuant to a cashless exercise. The Warrant Agreement provides that we will not issue shares of common stock upon exercise of the Warrants if either (1) the Warrant Holder, together with its affiliates, would beneficially hold i 5% or more of the shares of common stock outstanding immediately after giving effect to such exercise, or (2) such exercise would result in the issuance of more than i 19.9% of the shares of issued and outstanding common stock as of the date of the Warrant Agreement, prior to giving effect to the issuance of the Warrants, and such issuance would require shareholder approval under the NYSE American LLC listing requirements. The Warrant Agreement provides for certain adjustments to the Exercise Price and/or the number of shares of common stock issuable upon exercise pursuant to customary anti-dilution provisions. Upon a change of control of the Company, the Warrants will be automatically converted into the right to receive the difference between the consideration the Warrant Holder would have received if it exercised the Warrants immediately prior to the change of control and the aggregate Exercise Price, payable at the election of the Warrant Holder in the consideration payable in the change of control or, if such consideration is other than cash, in cash. The Warrants were valued at approximately $ i 1.5 million and $ i 1.1 million at March 31, 2022 and December 31, 2021, respectively. The $ i 369,000 unrealized gain and $ i 2.0 million unrealized loss from the change in fair value of the Warrants during the three months ended March 31, 2022 and 2021, respectively, was recorded in the consolidated statement of operations and comprehensive loss.
In connection with the issuance of the Warrants, we also entered into a registration rights agreement with the Warrant Holder, pursuant to which we agreed to register for resale the shares of common stock issuable upon exercise of the Warrants (the “Registration Rights Agreement”), and a letter agreement with the Warrant Holder (the “Letter Agreement”) pursuant to which we agreed to provide (i) certain information rights, (ii) the right to appoint i one member of the board of directors of the Company, or in lieu thereof a board observer, and (iii) certain preemptive rights for a period of i five years
/30
following the exercise of any of the Warrants so long as the Warrant Holder continues to hold shares of common stock. With respect to the board appointment right, the Letter Agreement includes a similar right as the Corporate Credit Facility described in Note 7 – Loans Payable and Secured Line of Credit, so long as the Warrant Holder together with its affiliates beneficially holds at least i 5% of the outstanding common stock of the Company, assuming the exercise of all outstanding Warrants; provided that the Warrant Holder does not have such appointment right at any time a Designee or observer may be appointed pursuant to the terms of the Corporate Credit Facility.
At-The-Market Equity Offering Program
In August 2021, we entered into an “at-the-market” equity offering program (the “ATM Program”), to sell up to an aggregate of $ i 10.0 million in shares of our common stock.
We sold i no shares of our common stock during the three months ended March 31, 2022. During the year ended December 31, 2021, we sold i 701,327 shares of our common stock for aggregate gross proceeds of approximately $ i 1.4 million (excluding approximately $ i 169,000 in professional and brokerage fees) at a weighted average price of $ i 1.95 per share. As of March 31, 2022, approximately $ i 8.6 million of our common stock remained available for issuance under the ATM Program.
Share Repurchase Program
In December 2019, our Board of Directors approved a stock repurchase program under which we can purchase up to $ i 5.0 million of shares of our common stock, which is now subject to the terms of our Corporate Credit Facility. Repurchases under the stock repurchase program may be made through open market or privately negotiated transactions at times and on such terms and in such amounts as management deems appropriate, subject to market conditions, regulatory requirements and other factors. The program does not obligate the Company to repurchase any particular amount of common stock, and may be suspended or discontinued at any time without notice.
Since inception of the stock repurchase program through March 31, 2022, the Company has repurchased i 250,197 shares of common stock for approximately $ i 483,361, or an average price per share of $ i 1.93. As of March 31, 2022, approximately $ i 4.5 million of shares remained available for purchase under the stock repurchase program, subject to the terms of our Corporate Credit Facility. There was no stock repurchase activity by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended March 31, 2022 or the year ended December 31, 2021.
Preferred Stock
We are authorized to issue i two shares of preferred stock ( i one share each of Series A and Series B preferred stock, each of which was automatically redeemed in 2016 and may not be reissued), i one share of special stock and i 40,000,000 shares of blank-check preferred stock. The share of special stock was issued and sold to Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund ("Third Avenue"), and enables Third Avenue or its affiliated designee to elect one member of the Board of Directors.
iNote 13 – Stock-Based Compensation
Stock Incentive Plan
We adopted the Trinity Place Holdings Inc. 2015 Stock Incentive Plan (the “SIP”), effective September 9, 2015. Prior to the adoption of the SIP, we granted restricted stock units (“RSUs”) to our executive officers and employees pursuant to individual agreements. The SIP, which has a i ten-year term, authorizes (i) stock options that do not qualify as incentive stock options under Section 422 of the Code, or NQSOs, (ii) stock appreciation rights, (iii) shares of restricted and unrestricted common stock, and (iv) RSUs. The exercise price of stock options will be determined by the compensation committee, but may not be less than i 100% of the fair market value of the shares of common stock on the date of grant. To date, i no stock options have been granted under the SIP. The SIP initially authorized the issuance of up to i 800,000 shares of common stock. In June 2019, our stockholders approved an amendment and restatement of the SIP, including an increase to the number of shares of common stock available for awards under the SIP by i 1,000,000 shares and in June 2021, our
/31
stockholders approved an increase to the number of shares of common stock available for awards under the SIP by i 1,500,000 shares. Our SIP activity as of March 31, 2022 and December 31, 2021 was as follows:
i
| | | | | | | | | | |
| | Three Months Ended | | Year Ended | ||||||
| | | ||||||||
| | | | Weighted | | | | Weighted | ||
| | | | Average Fair | | | | Average Fair | ||
| | Number of | | Value at | | Number of | | Value at | ||
|
| Shares |
| Grant Date |
| Shares |
| Grant Date | ||
Balance available, beginning of period | | i 1,569,449 | | | i - | | i 548,370 | | | i - |
Additional shares approved by stockholders | | i - | | | i - | | i 1,500,000 | | | i - |
Granted to employees |
| ( i 333,500) | | $ | i 1.84 |
| ( i 310,000) | | $ | i 1.25 |
Granted to non-employee directors |
| ( i 14,692) | | $ | i 1.84 |
| ( i 61,167) | | $ | i 1.77 |
Deferred under non-employee director's deferral program |
| ( i 25,882) | | $ | i 1.84 |
| ( i 107,754) | | $ | i 1.77 |
Balance available, end of period |
| i 1,195,375 | |
| i - |
| i 1,569,449 | |
| i - |
Restricted Stock Units
We grant RSUs to certain executive officers and employees as part of compensation. These grants generally have vesting dates ranging from immediate vest at grant date to i three years, with a distribution of shares at various dates ranging from the time of vesting up to i seven years after vesting.
During the three months ended March 31, 2022, we granted i 333,500 RSUs to certain employees. These RSUs vest and settle at various times over a two or i three year period, subject to each employee’s continued employment. Approximately $ i 100,000 in stock-based compensation expense related to these shares was amortized during the three months ended March 31, 2022, of which approximately $ i 15,000 was capitalized into residential condominium units for sale with the remaining net amount recognized in the consolidated statements of operations and comprehensive loss.
Total stock-based compensation expense for the three months ended March 31, 2022 and 2021 was $ i 151,000 and $ i 151,000, respectively, of which approximately $ i 23,000 and $ i 42,000, respectively, was capitalized into residential condominium units for sale with the remaining net amount recognized in the consolidated statements of operations and comprehensive loss.
Our RSU activity was as follows:
i
| | | | | | | | | | | |
| | Three Months Ended | | Year Ended | | ||||||
| | | | ||||||||
| | | | Weighted | | | | Weighted | | ||
| | | | Average Fair | | | | Average Fair | | ||
| | Number of | | Value at Grant | | Number of | | Value at Grant | | ||
|
| Shares |
| Date |
| Shares |
| Date |
| ||
Non-vested at beginning of period |
| i 551,083 | | $ | i 2.14 |
| i 469,000 | | $ | i 3.43 |
|
Granted RSUs |
| i 333,500 | | $ | i 1.84 |
| i 310,000 | | $ | i 1.25 |
|
Vested |
| ( i 286,084) | | $ | i 2.20 |
| ( i 227,917) | | $ | i 3.59 |
|
Non-vested at end of period |
| i 598,499 | | $ | i 1.80 |
| i 551,083 | | $ | i 2.14 |
|
As of March 31, 2022, there was approximately $ i 659,000 of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized through December 2024.
During the three months ended March 31, 2022, we issued i 366,099 shares of common stock to employees and executive officers to settle vested RSUs from previous RSU grants. In connection with those transactions, we repurchased i 171,196 shares to provide for the employees’ withholding tax liabilities.
During the three months ended March 31, 2022, we issued i 14,692 shares of immediately vested common stock to board members as part of their annual compensation.
32
Director Deferral Program
Our Non-Employee Director’s Deferral Program (the “Deferral Program”), as amended in December 2018, allows our non-employee directors to elect to receive the cash portion of their annual compensation in shares of the Company’s common stock, as well as to defer receipt of the portion of their annual board compensation that is paid in equity. Any deferred amounts are paid under the SIP (as is non-employee directors’ annual equity compensation that is not deferred). Compensation deferred under the Deferral Program is reflected by the grant of stock units equal to the number of shares that would have been received absent a deferral election. The stock units, which are fully vested at grant, generally will be settled under the SIP for an equal number of shares of common stock within 10 days after the participant ceases to be a director. In the event that we distribute dividends, each participant shall receive a number of additional stock units (including fractional stock units) equal to the quotient of (i) the aggregate amount of the dividend that the participant would have received had all outstanding stock units been shares of common stock divided by (ii) the closing price of a share of common stock on the date the dividend was issued.
As of March 31, 2022, a total of i 310,795 stock units have been deferred under the Deferral Program.
iNote 14 – Investments in Unconsolidated Joint Ventures
Prior to its sale in April 2022, we owned a i 50% interest in a joint venture (the “Berkley JV”) formed to acquire and operate The Berkley, a recently built 95-unit multi-family property. In December 2016, the Berkley JV closed on the acquisition of The Berkley for a purchase price of $ i 68.885 million. On February 28, 2020, in connection with a refinancing, the Berkley JV repaid the acquisition loan in full and replaced it with a new i 7-year, $ i 33.0 million loan (the “New Berkley Loan”) which bore interest at a fixed rate of i 2.717% and was interest only during the initial i five years. It was pre-payable at any time and could have been increased by up to $ i 6.0 million under certain circumstances. We and our joint venture partner were joint and several recourse carve-out guarantors under the New Berkley Loan. In October 2021, we entered into a loan agreement with our joint venture partner (see Note 7 – Loans Payable and Secured Line of Credit – The Berkley Partner Loan). This property was sold in April 2022. See Note 15 – Subsequent Events for information regarding the sale.
We own a i 10% interest in the 250 North 10th JV formed to acquire and operate 250 North 10th, a recently built 234-unit apartment building in Williamsburg, Brooklyn, New York. In January 2020, the 250 North 10th JV closed on the acquisition of the property for a purchase price of $ i 137.75 million, of which $ i 82.75 million was financed through a i 15-year mortgage loan (the “250 North 10th Note”) secured by 250 North 10th and the balance was paid in cash. Our share of the equity totaling approximately $ i 5.9 million was funded through the Partner Loan from our joint venture partner. The Partner Loan bears interest at i 7.0% which is payable to the extent of available cash flow and is prepayable any time within its i four year term. Our partner has the option of having the Partner Loan repaid in our common stock if the price of our common stock exceeds $ i 6.50 per share at the time of conversion. The non-recourse 250 North 10th Note bears interest at i 3.39% for the duration of the loan term and has covenants, defaults and a non-recourse carve out guaranty executed by us. We earned an acquisition fee at closing and are entitled to ongoing asset management fees and a promote upon the achievement of certain performance hurdles. See Note 7 - Loans Payable and Secured Line of Credit – 250 North 10th Note. As of March 31, 2022, the net carrying amount of our investment in this entity was $ i 4.7 million and our maximum exposure to loss in this entity is limited to the carrying amount of our investment.
As we do not control the 250 North 10th JV (and did not control the Berkley JV), we account for these joint ventures under the equity method of accounting. We entered into an interest rate swap on February 28, 2020 whereby we recognized our share of the fair value of the asset of approximately $ i 840,000 during the three months ended March 31, 2022 and we recognized our share of the fair value liability of approximately $ i 198,000 during the three months ended March 31, 2021.
/33
i The combined balance sheets for our unconsolidated joint ventures at March 31, 2022 and December 31, 2021 are as follows (dollars in thousands):
| | | | | | |
| | March 31, | | |||
| | 2022 |
| 2021 | ||
| | | | | | |
ASSETS | | |
|
| |
|
| | | | | | |
Real estate, net | | $ | i 163,303 | | $ | i 164,143 |
Cash and cash equivalents | |
| i 1,393 | |
| i 1,244 |
Restricted cash | |
| i 929 | |
| i 891 |
Tenant and other receivables, net | |
| i 229 | |
| i 225 |
Prepaid expenses and other assets, net | |
| i 1,055 | |
| i 315 |
Intangible assets, net | |
| i 20,944 | |
| i 21,527 |
Total assets | | $ | i 187,853 | | $ | i 188,345 |
| | | | | | |
LIABILITIES | |
|
| |
|
|
| | | | | | |
Mortgages payable, net | | $ | i 111,326 | | $ | i 112,934 |
Accounts payable and accrued expenses | |
| i 1,821 | |
| i 1,849 |
Total liabilities | |
| i 113,147 | |
| i 114,783 |
| | | | | | |
MEMBERS’ EQUITY | |
|
| |
|
|
| | | | | | |
Members’ equity | |
| i 87,539 | |
| i 87,654 |
Accumulated deficit | |
| ( i 12,833) | |
| ( i 14,092) |
Total members’ equity | |
| i 74,706 | |
| i 73,562 |
| | | | | | |
Total liabilities and members’ equity | | $ | i 187,853 | | $ | i 188,345 |
| | | | | | |
Our investments in unconsolidated joint ventures | | $ | i 18,517 | | $ | i 17,938 |
34
The statements of operations for our unconsolidated joint ventures for the three months ended March 31, 2022 and 2021 are as follows (dollars in thousands):
| | | | | | | |
| | For the Three Months Ended | | For the Three Months Ended | | ||
| | March 31, | | | |||
|
| 2022 |
| 2021 |
| ||
| | | | | | ||
Revenues |
| |
|
| |
|
|
Rental revenues | | $ | i 3,263 | | $ | i 2,979 | |
| | | | | | | |
Total revenues | |
| i 3,263 | |
| i 2,979 | |
| | | | | | | |
Operating Expenses | |
|
| |
|
| |
Property operating expenses | |
| i 1,112 | |
| i 1,065 | |
Real estate taxes | |
| i 25 | |
| i 25 | |
General and administrative | |
| i 2 | |
| i 2 | |
Amortization | |
| i 583 | |
| i 731 | |
Depreciation | |
| i 961 | |
| i 984 | |
| | | | | | | |
Total operating expenses | |
| i 2,683 | |
| i 2,807 | |
| | | | | | | |
Operating income | |
| i 580 | |
| i 172 | |
| | | | | | | |
Interest expense | |
| ( i 930) | |
| ( i 939) | |
Interest expense - amortization of deferred finance costs | |
| ( i 72) | |
| ( i 72) | |
Interest income (expense) - change in fair market value of interest rate swap | |
| i 1,681 | |
| ( i 396) | |
| | | | | | | |
Net income (loss) | | $ | i 1,259 | | $ | ( i 1,235) | |
| | | | | | | |
Our equity in net income (loss) from unconsolidated joint ventures | | $ | i 746 | | $ | ( i 372) | |
35
Note 15 – Subsequent Events
In April 2022, our joint venture with Pacolet Milliken closed on the sale of The Berkley for a sale price of $ i 71,020,000. The net proceeds from the sale, after repayment of the property’s mortgage and partner loan and settlement proceeds from the interest rate swap associated with the property’s mortgage, is expected to be used for working capital and/or new investment opportunities for the Company.
Other than as set forth above, there were no other subsequent events requiring adjustment to, or disclosure in, the condensed consolidated financial statements.
/
36
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Trinity Place Holdings Inc., which we refer to as “Trinity,” “we,” “our,” or “us”, is a real estate holding, investment, development and asset management company. Our largest asset is currently a property located at 77 Greenwich Street in Lower Manhattan (“77 Greenwich”), which is nearing completion of development as a mixed-use project consisting of a 90-unit residential condominium tower, retail space and a New York City elementary school. We also own a recently built 105-unit, 12-story multi-family property located at 237 11th Street in Brooklyn, New York (“237 11th”), and, through joint ventures, a 50% interest in a recently built 95-unit multi-family property known as The Berkley, located at 223 North 8th Street, Brooklyn, New York (“The Berkley”), which was sold in April 2022, and a 10% interest in a recently built 234-unit multi-family property at 250 North 10th Street, Brooklyn, New York (“250 North 10th”) , and we own a property occupied by retail tenants in Paramus, New Jersey. See Item 2. Properties below for a more detailed description of our properties. In addition to our real estate portfolio, we also control a variety of intellectual property assets focused on the consumer sector, a legacy of our predecessor, Syms Corp. (“Syms”). We also had approximately $260.3 million of federal net operating loss carry forwards (“NOLs”) at March 31, 2022, which can be used to reduce our future taxable income and capital gains.
We continue to evaluate new investment opportunities, with a focus on newly constructed multi-family properties in New York City as well as properties in close proximity to public transportation in the greater New York metropolitan area. We consider investment opportunities involving other types of properties and real estate related assets, as well as repurchases of our common stock, taking into account our cash position, liquidity requirements, and our ability to raise capital to finance our growth. In addition, we may selectively consider potential acquisition, development and fee-based opportunities, as well as disposition, sale or consolidation opportunities.
Management’s Plans and Liquidity
As of March 31, 2022, we had total cash and restricted cash of $15.6 million, of which approximately $1.4 million was cash and cash equivalents and approximately $14.2 million was restricted cash. At this time, we believe our existing balances of cash and cash equivalents, together with net proceeds that were generated from the sale of The Berkley, which closed in April 2022, debt issuances and/or refinancings, including refinancing the property at 237 11th and the Paramus line of credit, equity issuances, including under our ATM program, dispositions of other properties or assets, sales of the larger, higher floor condominium units at 77 Greenwich and/or sales of partial interests in properties will be sufficient to satisfy our working capital needs and projected capital and other expenditures associated with our operations over the next 12 months, and the Company has concluded that management’s current plan alleviates the substantial doubt about its ability to continue as a going concern. Facts and circumstances that are outside of managements control could change in the future, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19, and the impact of such matters on residential sentiment in New York City in particular
37
Properties
Below is certain information regarding our real estate properties as of March 31, 2022:
| | | | | | | | | |
|
| |
| Building Size |
| |
| |
|
| | | | (estimated | | | | Leased at |
|
| | | | rentable | | Number of | | March 31, |
|
Property Location | | Type of Property | | square feet) | | Units | | 2022 |
|
Owned Locations | | | | | | | | | |
| | | | | | | | | |
77 Greenwich, New York, New York (1) |
| Property under development |
| — |
| — |
| N/A | |
| | | | | | | | | |
Paramus, New Jersey (2) |
| Retail |
| 77,000 |
| — |
| 100 | % |
| | | | | | | | | |
237 11th Street, Brooklyn, New York (3) |
| Multi-family |
| 80,000 |
| 105 |
| 100 | % |
| | | | | | | | | |
Total |
|
|
| 157,000 |
| 105 |
|
| |
| | | | | | | | | |
Joint Ventures |
|
|
|
|
|
|
|
| |
| | | | | | | | | |
223 North 8th Street, Brooklyn, New York - 50% (4) |
| Multi-family |
| 65,000 |
| 95 |
| 98.9 | % |
| | | | | | | | | |
250 North 10th Street, Brooklyn, New York - 10% (5) | | Multi-family | | 158,000 |
| 234 |
| 99.1 | % |
| | | | | | | | | |
Total | | | | 223,000 | | 329 | | | |
| | | | | | | | | |
Grand Total | | |
| 380,000 |
| 434 |
|
| |
| (1) | 77 Greenwich. We are nearing completion of the development stage for the development of an over 300,000 gross square foot mixed-use building that corresponds to the approximate total of 233,000 zoning square feet. The property consists of 90 luxury residential condominium apartments, 7,500 square feet of retail space, almost all of which is street level, a 476-seat elementary school serving New York City District 2, including the adaptive reuse of the landmarked Robert and Anne Dickey House, and construction of a new handicapped accessible subway entrance on Trinity Place. As of March 31, 2022, all finishes were complete through the 35th floor. As of March 31, 2022, we have received our temporary certificates of occupancy (“TCOs”) for floors 11-35, excluding the hoist units, the lobby, mechanical rooms and portions of the cellar and anticipate receiving TCOs for the balance of the development through completion of the project. We have also completed the build-out and furnishing of the model units and moved the sales gallery to the building. The attorney general’s office approved our condominium offering plan in April 2019. We have closed on the sale of 17 residential condominium units through March 31, 2022. Closings are ongoing and residents have begun to move into their respective units. Although sales activity has begun to increase from 2020 levels, through March 31, 2022 sales activity was adversely impacted by the pandemic, the war in Ukraine, increasing interest rates and the local New York City economy. In December 2017, we closed on a $189.5 million construction facility. The facility had a balance of $157.0 million at the time it was repaid in full as part of the Company’s October 2021 refinancing transaction with Macquarie PF Inc. pursuant to which we were extended credit in the amount of up to $166.7 million. We borrowed $133.1 million on the closing date of the 77 Mortgage Loan (defined below) and the balance of the funds used to repay the facility were obtained from an increase in the Mezzanine Loan, the Berkley Partner Loan as well as funds raised through the Private Placement. The $33.6 million remaining availability on the 77 Mortgage Loan will be used to, among other things, complete construction of 77 Greenwich and fund carry costs while the residential condominium units are being sold. The 77 Mortgage Loan had a balance of $116.0 million at March 31, 2022. |
Prior to the COVID-19 related shutdown of all non-essential construction by New York State in early April 2020, the residential condominium units were scheduled to be completed by the end of 2020. Future delays in construction may result in a delay in our ability to complete the construction project on its anticipated timeline and our ability to sell residential condominium units.
We entered into an agreement with the New York City School Construction Authority (the “SCA”), whereby we agreed to construct a school to be sold to the SCA as part of our condominium development at 77 Greenwich. Pursuant to the agreement, the SCA agreed to pay us $41.5 million for the purchase of their condominium unit and reimburse us for the costs associated with constructing the school, including a construction supervision fee of approximately
38
$5.0 million. Payments for construction are being made by the SCA to the general contractor in installments as construction on their condominium unit progresses. Payments to us for the land and construction supervision fee commenced in January 2018 and continued through October 2019 for the land and will continue through completion of the SCA buildout for the construction supervision fee. An aggregate of $46.1 million had been paid to us by the SCA as of March 31, 2022 with approximately $430,000 remaining to be paid. We have also received an aggregate of $51.0 million in reimbursable construction costs from the SCA through March 31, 2022. The SCA closed on the purchase of the school condominium unit from us in April 2020, at which point title transferred to the SCA, and the SCA is now proceeding to complete the buildout of the interior space, which is planned to become an approximately 476 seat public elementary school. The pace of completion of the buildout by the SCA has been impacted by COVID-19 and the school is currently anticipated to open in September 2022.
| (2) | Paramus Property. The Paramus property consists of a one-story and partial two-story, 73,000 square foot freestanding building and an outparcel building of approximately 4,000 square feet, for approximately 77,000 total square feet of rentable space. The primary building is comprised of approximately 47,000 square feet of ground floor space, and two separate mezzanine levels of approximately 21,000 and 5,000 square feet. The 73,000 square foot building is leased to Restoration Hardware Holdings, Inc. (NYSE: RH) pursuant to a license agreement that began on June 1, 2016, which is terminable upon three months’ notice, and currently is scheduled to end on March 31, 2023. The outparcel building is leased to a long-term tenant whose lease expires on March 31, 2023. The land area of the Paramus property consists of approximately 292,000 square feet, or approximately 6.7 acres. We are currently exploring options with respect to the Paramus property, including development or sale, among others. |
| (3) | 237 11th Street. In May 2018, we closed on the acquisition of a recently built 105-unit, 12-story multi-family apartment building encompassing approximately 93,000 gross square feet (approximately 80,000 rentable square feet) located at 237 11th Street, Park Slope, Brooklyn, New York for a purchase price of $81.2 million, excluding transaction costs of approximately $0.7 million. The property also includes 6,264 square feet of retail space, all of which is leased to Starbucks Inc. (NQGS:SBUX), an oral surgeon and a health and wellness tenant. Located on the border of the Park Slope and Gowanus neighborhoods of Brooklyn, the property is located one block from the 4th Avenue/9th Street subway station. The 237 11th property offers an array of modern amenities that surpass what is available in the neighborhood’s “brownstone” housing stock. The property also benefits from a 15-year Section 421-a real estate tax exemption. |
Due to certain construction defects at 237 11th that resulted in water penetration into the building and damage to certain apartment units and other property, which defects we believe were concealed and which would have required significant invasive work of a type not usually required or permitted, especially on a newly-built asset, to be detected, we submitted proofs of loss to our insurance carrier for property damage and business interruption (lost revenue) in March 2019. The insurance carrier subsequently disclaimed coverage for the losses and we filed a complaint against the carrier alleging that it breached the insurance policy by denying coverage. We also filed legal claims against the seller, its parent company, and the general contractor to recover damages arising from the defective construction. In addition, the general contractor impleaded into that litigation several subcontractors who performed work on the property. Management expects to recover some portion of the cost incurred to repair the property through the litigations and/or settlement negotiations with the seller, its parent company, the general contractor, the subcontractors, and the insurance carrier, although the amount of damages that may be recoverable in litigation and/or potential settlement negotiations are uncertain at this time, as is the timing of receipt of any such payments, which has been impacted by the COVID-19 pandemic, including the resulting backlog in the court system and slowdown in judicial proceedings. We have engaged in mediation with the seller, its parent company, the general contractor, and the third-party defendants impleaded by the general contractor to explore the possibility of settling the case involving those parties, but to date, have not reached an agreement. We incurred significant cash outflows for costs associated with these repairs and remediation, which commenced in September 2019 and was completed as of December 31, 2021.
| (4) | 223 North 8th Street. Prior to its sale in April 2022, through a joint venture, we owned a 50% interest in the entity formed to acquire and operate The Berkley, a recently built 95-unit multi-family property encompassing approximately 99,000 gross square feet (65,000 rentable square feet) at 223 North 8th Street in North Williamsburg, Brooklyn, New York. In April 2022, our joint venture with Pacolet Milliken closed on the sale of The Berkley for $71,020,000. |
39
| (5) | 250 North 10th Street. Through a joint venture, we own a 10% interest in the entity formed to acquire and operate 250 North 10th Street, a recently built 234-unit apartment building in Williamsburg, Brooklyn, New York. The property is four blocks from the Bedford Avenue L subway station and a short walk from the Metropolitan Avenue G subway station as well as the J, M, and Z trains at Marcy Avenue. It is located one block from The Berkley. Apartments feature top-of-the-line unit finishes including GE stainless steel appliances, caesarstone countertops, in-unit washers and dryers, individually zoned climate controls, floor to ceiling windows and oak hardwood floors. In addition, the property offers a full amenity package including a concierge, a resident’s lounge with roof deck, a fitness center, a café lounge and an expansive terrace, tenant storage, parking, and sweeping views of the neighborhood and Manhattan. The property has approximately six years remaining on its 15-year Section 421-a real estate tax exemption. Although all apartments are market rate units, they are subject to New York City’s rent stabilization law during the remaining term of the Section 421-a real estate tax exemption. |
Lease Expirations
As of March 31, 2022, we have one retail lease at our Paramus property with 4,000 square feet of leased space with annualized rent of $140,000 per year that expires in 2023, a retail lease at the 237 11th property with 2,006 square feet of leased space with annualized rent of $130,000 per year that expires in 2027, a second retail lease at the 237 11th property with 1,074 square feet of leased space with average annualized rent of $94,506 per year that expires in 2036, a third retail lease at the 237 11th property with 2,208 square feet of leased space with average annualized rent of $153,366 per year that expires in 2032, and a retail lease at 77 Greenwich with 1,061 square feet of leased space with an average annualized rent of $88,085 per year that expires in 2032. All our other leases are residential leases which expire within twelve or twenty-four months of the commencement date.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts in our consolidated financial statements. Actual results could differ from these estimates. A summary of our significant accounting policies that management believes are critical to the preparation of the consolidated financial statements are included in this report (see Note 2 - Summary of Significant Accounting Policies - Basis of Presentation to our consolidated financial statements for further information). Certain of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in the historical consolidated financial statements included in this report and require the application of significant judgment by management and, as a result, are subject to a degree of uncertainty. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2021 Annual Report on Form 10-K/A (the “2021 Annual Report”) for the year ended December 31, 2021.
The following discussion and analysis is intended to assist readers in understanding our financial condition and results of operations during the three months ended March 31, 2022 and 2021 and should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q/A and our 2021 Annual Report.
The discussion below includes the results of the restated financial statements that were made for the three months ended March 31, 2022 and 2021, where the Company identified an error in the application of generally accepted accounting principles, principally as they relate to the capitalization of construction soft costs and internally allocated costs incurred in connection with the Company’s development project at 77 Greenwich, which involves significant judgment. These adjustments decreased cost of sales arising from the reduction in capitalized costs at 77 Greenwich. The Company also identified and corrected an error related to the reclassification of our Paramus, New Jersey property from under development to an operating property. See additional discussion in Note 3 – Restatement and Revision of Previous Issued Consolidated Financial Statements to this Form 10-Q/A.
40
Results of Operations for the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021 (As Restated and Revised)
Rental revenues in total increased by approximately $813,000 to $1.3 million for three months ended March 31, 2022 from $447,000 for the three months ended March 31, 2021. This consisted of an increase in rent revenues of approximately $784,000 to $1.2 million for the three months ended March 31, 2022 from $434,000 for the three months ended March 31, 2021, as well as an increase in tenant reimbursements of approximately $29,000 to $42,000 for the three months ended March 31, 2022 from $13,000 for the three months ended March 31, 2021. The increase in total revenues and its related components was due to higher occupancy, higher face rents and less rent concessions at 237 11th during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to the progress made in remediating the construction related defects.
Other income, which consisted mainly of the SCA construction supervision fee, decreased by approximately $30,000 to $16,000 for the three months ended March 31, 2022 from $46,000 for the three months ended March 31, 2021 as a result of a reduction in the SCA construction.
In connection with the sales of residential condominium units at 77 Greenwich for the three months ended March 31, 2022, we recorded gross sales proceeds of approximately $6.1 million. Units that closed during 2022 were generally lower priced, smaller units on the building’s lower floors, many of which entered into contract during the height of the pandemic. These units were completed first and were covered by the initial TCOs. Getting these units under contract allowed us to obtain approval from the New York State Attorney General and therefore start the closing process on residential units.
Property operating expenses decreased by approximately $1.1 million to $804,000 for the three months ended March 31, 2022 from $1.9 million for the three months ended March 31, 2021. The decrease was principally due to expenses associated with 237 11th, including approximately $1.2 million in lower remediation related costs incurred during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, reflecting completion of remediation efforts by December 31, 2021. Property operating expenses consisted primarily of expenses incurred for utilities, payroll, COVID-19 related supplies and general operating expenses as well as repairs and maintenance and leasing commission at 237 11th, and to a lesser extent expenses related to the Paramus, New Jersey property and 77 Greenwich.
Real estate tax expense increased by approximately $311,000 to $390,000 for the three months ended March 31, 2022 from $79,000 for the three months ended March 31, 2021. This increase was mainly due to less capitalized real estate taxes for 77 Greenwich for the three months ended March 31, 2022 as compare to the three months ended March 31, 2021.
General and administrative expenses increased by approximately $259,000 to $1.5 million for the three months ended March 31, 2022 from $1.2 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, approximately $128,000 related to stock-based compensation, $753,000 related to payroll and payroll related expenses, $301,000 related to other corporate expenses, including board fees, corporate office rent and insurance and $320,000 related to legal, accounting and other professional fees. For the three months ended March 31, 2021, approximately $109,000 related to stock-based compensation, $735,000 related to payroll and payroll related expenses, $253,000 related to other corporate expenses, including board fees, corporate office rent and insurance and $146,000 related to legal, accounting and other professional fees.
Pension related costs decreased by approximately $5,000 to $158,000 for the three months ended March 31, 2022 from $163,000 for the three months ended March 31, 2021. These costs represent professional fees and other periodic pension costs incurred in connection with the legacy Syms Pension Plan (see Note 9 – Pension Plan to our consolidated financial statements for further information).
In connection with the commencement of sales of residential condominium units for the three months ended March 31, 2022, we recorded cost of sales of approximately $5.7 million, which mainly consists of construction and capitalized operating costs that are allocated to the respective condominium units being sold, as well as closing costs of the residential condominium units.
Depreciation and amortization remained consistent at $1.0 million for the three months ended March 31, 2022 and 2021. For the three months ended March 31, 2022, depreciation and amortization expense consisted of depreciation for the Paramus, New Jersey property of approximately $283,000, depreciation for 237 11th of approximately $382,000 and the amortization of lease commissions, acquired in-place leases and warrants of approximately $338,000 for 237 11th. For the
41
three months ended March 31, 2021, depreciation and amortization expense consisted of depreciation for the Paramus, New Jersey property of approximately $285,000, depreciation for 237 11th of approximately $381,000 and the amortization of lease commissions, acquired in-place leases and warrants of approximately $334,000 for 237 11th.
Equity in net income from unconsolidated joint ventures increased by approximately $1.1 million to $746,000 for the three months ended March 31, 2022 from a net loss of $372,000 for the three months ended March 31, 2021. Equity in net loss from unconsolidated joint ventures represented our 50% share in The Berkley and our 10% share in 250 North 10th. For the three months ended March 31, 2022, our share of the loss is primarily comprised of operating income before depreciation of $436,000 offset by depreciation and amortization of $348,000, interest expense of $183,000 and income from the change in the fair market value of the interest rate swap of $841,000. For the three months ended March 31, 2021, our share of the loss is primarily comprised of operating income before depreciation of $383,000 offset by depreciation and amortization of $374,000, interest expense of $182,000 and the loss from the change in the fair market value of the interest rate swap of $199,000.
Unrealized loss on warrants increased by approximately $1.6 million to $369,000 for the three months ended March 31, 2022 from a loss of $2.0 million for the three months ended March 31, 2021. This represents the change in the fair market valuation of the warrants due mainly to the change in our stock price on the measurement date.
Interest expense, net increased by approximately $1.9 million to $2.8 million for the three months ended March 31, 2022 from $875,000 net for the three months ended March 31, 2021. For the three months ended March 31, 2022, there was approximately $4.3 million of gross interest expense incurred, $1.5 million of which was capitalized. For the three months ended March 31, 2021, there was approximately $5.0 million of gross interest expense incurred, $4.1 million of which was capitalized. The decrease in gross interest expense was mainly due to lower overall interest rates on our loans from various refinancing’s after March 31, 2021, partially offset by an overall higher average of borrowings during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.
Interest expense - amortization of deferred finance costs increased approximately $175,000 to $436,000 for the three months ended March 31, 2022 from $261,000 for the three months ended March 31, 2021. The increase was principally due to deferred finance costs related to the refinancing of the 237 11th Loans that we closed on in June 2021 as well as the amortization of finance costs for our loans and secured line of credit that were not capitalized as part of residential condominium units for sale.
We recorded a $70,000 tax expense for the three months ended March 31, 2022 compared to $35,000 for the three months ended March 31, 2021.
Net loss attributable to common stockholders decreased by approximately $2.3 million to $5.1 million for the three months ended March 31, 2022 from $7.4 million for the three months ended March 31, 2021 as a result of the changes discussed above, principally due to increased rental revenue and lower property operating expenses at 237 11th due to the completion of the remediation work by the end of 2021, 100% occupancy at 237 11th by the end of March 31, 2022, as well an increase in our equity in net income in our joint ventures and lower unrealized loss on warrants.
Liquidity and Capital Resources
COVID-19 Pandemic, Management’s Plans and Liquidity
The COVID-19 pandemic and related matters, including government actions, shifts in residential consumer sentiment and changes to the broader and local economies, have had a significant adverse impact on our business. While we believe many of these trends will reverse and the New York City economy and residential real estate markets will continue the improvement seen to date in 2022, given our focus on New York City residential real estate, our business has been particularly impacted, and may continue to be, as described elsewhere in this Quarterly Report on Form 10-Q/A. Although the impact of the pandemic has impeded the sale of residential condominium units at 77 Greenwich, the pace of signing contracts has increased in 2021 through March 31, 2022, and we closed on 17 residential condominium units in through March 31, 2022, and residents are moving into their respective units. Units sold to date were smaller, lower floor units that went under contract and closed during the height of the pandemic. These units were completed first and were covered by the initial TCOs obtained. Getting these units under contract allowed us to obtain AG approval of our condominium plan and start closing on residential unit sales. However, we have a limited amount of unrestricted cash and liquidity available for working capital and our cash needs are variable under different circumstances. Although there are no assurances that
42
any transactions will be completed on acceptable terms or at all, we are currently exploring pursuing a variety of capital raising and other transactions, including the sale of certain assets or interests in assets, capital raises through equity offerings, including our ATM Program, debt borrowings, refinancings, including refinancing the Paramus line of credit and property at 237 11th, and/or strategic transactions, in each case, with the goal of maximizing the value of the assets and attributes of the Company while balancing short-term liquidity constraints. In addition, the sale of The Berkley closed in April 2022 for a price of $71,020,000. The net proceeds from the sale, after repayment of the property’s mortgage and partner loan and settlement proceeds from the interest rate swap associated with the property’s mortgage, is expected to be used for working capital and/or new investment opportunities for the Company.
We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital and funds for acquisition and development or redevelopment of properties, tenant improvements, leasing costs, and repayments of outstanding indebtedness will include some or all of the following:
| (1) | cash on hand; |
| (2) | proceeds from new debt financings, increases to existing debt financings and/or other forms of secured or unsecured debt financing; |
| (3) | proceeds from equity or equity-linked offerings, including rights offerings or convertible debt or equity or equity-linked securities issued in connection with debt financings; |
| (4) | cash flow from operations; and |
| (5) | net proceeds from divestitures of properties or interests in properties, including the sale of The Berkley by our joint venture. |
Cash flow from operations is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants and the level of operating and other costs.
As of March 31, 2022, we had total cash and restricted cash of $15.6 million, of which approximately $1.4 million was cash and cash equivalents and approximately $14.2 million was restricted cash. As of December 31, 2021, we had total cash and restricted cash of $24.8 million, of which approximately $4.3 million was cash and cash equivalents and approximately $20.5 million was restricted cash. Restricted cash represents amounts required to be restricted under our loan agreements, letters of credit (see Note 7 – Loans Payable and Secured Line of Credit to our consolidated financial statements for further information), deposits on residential condominium sales at 77 Greenwich and tenant related security deposits. As of April 30, 2022, we had approximately $7.8 million of cash and cash equivalents.
At this time, we believe our existing balances of cash and cash equivalents, together with proceeds generated from the sale of The Berkley, which closed in April 2022, planned refinancing of the Paramus line of credit, or sale of the Paramus, New Jersey property and sales of the larger, higher floor condominium units at 77 Greenwich will be sufficient to satisfy our working capital needs and projected capital and other expenditures associated with our operations over the next 12 months, and the Company has concluded that management’s current plan alleviates the substantial doubt about its ability to continue as a going concern. Additionally, we continue to evaluate opportunities to raise capital through sales of equity, including under our ATM program, debt issuances or refinancings, including refinancing the property located at 237 11th Street, and continue to evaluate dispositions of other properties or other assets and/or sales of partial interests in properties. Facts and circumstances could change in the future that are outside of management’s control, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19, and the impact of such matters on residential sentiment in New York City in particular.
Corporate Credit Facility
In December 2019, we entered into a credit agreement (the “Corporate Credit Facility” or “CCF”) with an affiliate of a global institutional investment management firm as initial lender (the “CCF Lender”) and Trimont Real Estate Advisors, LLC, as administrative agent (the “Corporate Facility Administrative Agent”), pursuant to which the CCF Lender agreed to extend us credit in multiple draws aggregating $70.0 million, which provided for an increase by $25.0 million subject to satisfaction of certain conditions and the consent of the CCF Lender. Draws under the Corporate Credit Facility were originally permitted to be made during the 32-month period following the closing date of the CCF (the “Closing Date”). The CCF matures on December 19, 2024, subject to extensions until December 19, 2025 and June 19, 2026, respectively, under certain circumstances. The CCF provided for the proceeds of the Corporate Credit Facility to be used for investments in certain multi-family apartment buildings in the greater New York City area and certain non-residential real estate
43
investments approved by the CCF Lender in its reasonable discretion, as well as in connection with certain property recapitalizations and in specified amounts for general corporate purposes and working capital. The CCF bears interest at a rate per annum equal to the sum of (i) 5.25% and (ii) a scheduled interest rate (the “Cash Pay Interest Rate”) based on six-month periods from the Closing Date, which Cash Pay Interest Rate, from the Closing Date until the six-month anniversary of the Closing Date initially equaled 4.0% and increases by 125 basis points in each succeeding six-month period, subject to increase during the extension periods. A $2.45 million commitment fee was payable 50% on the initial draw and 50% as amounts under the CCF are drawn, with any remaining balance due on the last date of the draw period, and a 1.0% exit fee is payable in respect of CCF repayments. As of March 31, 2022, we had paid $1.85 million of the commitment fee. The CCF may be prepaid at any time subject to a prepayment premium on the portion of the CCF being repaid.
At March 31, 2022, the Corporate Credit Facility had an outstanding balance of $35.75 million, excluding deferred finance fees of $2.7 million, and an effective interest rate of 9.63%. Accrued interest totaled approximately $3.9 million at March 31, 2022. See Note 7 – Loans Payable and Secured Line of Credit to our consolidated financial statements for further discussion.
In connection with the December 2020 transaction noted below, the Company entered into an amendment to the Corporate Credit Facility (the “Corporate Facility Amendment”) pursuant to which, among other things, (i) the CCF Lender and the Corporate Facility Administrative Agent permitted the Company to enter into the Mezzanine Loan Agreement (as defined below), the amendment to the 77 Greenwich Construction Facility and related documents, (ii) the commitment made by the CCF Lender under the Corporate Credit Facility was reduced by the amount of the Mezzanine Loan (as defined below) from $70.0 million to $62.5 million, subject to increase by $25.0 million upon satisfaction of certain conditions and the consent of the CCF Lender, and (iii) the multiple on invested capital, or MOIC, amount that would be due and payable by the Company upon the final repayment of the loan pursuant to the Corporate Credit Facility if no event of default exists and is continuing under the Corporate Credit Facility at any time prior to December 22, 2022, was amended to combine the Corporate Credit Facility and the Mezzanine Loan for purposes of calculating the MOIC, to the extent not previously paid, if any. See Note 7 – Loans Payable and Secured Line of Credit to our consolidated financial statements for further discussion.
In connection with the closing of the 77 Mortgage Loan and amendment to the Mezzanine Loan described below, we entered into amendments to our CCF, dated as of October 22, 2021 and November 10, 2021, pursuant to which, among other things, the parties agreed that no additional funds will be drawn under the CCF, the minimum liquidity requirement was made consistent with the 77 Mortgage Loan Agreement until May 1, 2023 and the MOIC provisions were revised to provide that (i) the MOIC amount due upon final repayment of the CCF loan was amended to be consistent with the Mezzanine Loan such that if no event of default exists and is continuing under the CCF at any time prior to June 22, 2023, the amount due will be combined with the Mezzanine Loan, to the extent not previously paid, if any, and (ii) the amount of the CCF used to calculate the MOIC was reduced to $35.75 million.
In connection with the Corporate Credit Facility, we also entered into a warrant agreement with the CCF Lender pursuant to which we issued to the CCF Lender ten-year warrants (the “Warrants”) to purchase up to 7,179,000 shares of our common stock. In connection with the Corporate Facility Amendment, the exercise price of the Warrants was amended from $6.50 per share to $4.31 per share, payable in cash or pursuant to a cashless exercise. See Note 12 – Stockholders Equity – Warrants to our consolidated financial statements for further discussion regarding the warrants.
As of March 31, 2022, we were in compliance with all covenants of the CCF.
77 Mortgage Loan
In October 2021, a wholly-owned subsidiary of ours (the “Mortgage Borrower”) entered into a loan agreement with Macquarie PF Inc., a part of Macquarie Capital, the advisory, capital markets and principal investment arm of Macquarie Group, as lender and administrative agent (the “77 Mortgage Lender”), pursuant to which 77 Mortgage Lender agreed to extend credit to Mortgage Borrower in the amount of up to $166.7 million (the “77 Mortgage Loan”), subject to the satisfaction of certain conditions (the “77 Mortgage Loan Agreement”). We borrowed $133.1 million on the closing date of the 77 Mortgage Loan and the balance of the funds used to repay the facility were obtained from an increase in the Mezzanine Loan, the Berkley Partner Loan as well as funds raised through the Private Placement. The $33.6 million remaining availability will be used to, among other things, complete construction of 77 Greenwich and fund carry costs while the residential condominium units are being sold.
44
The 77 Mortgage Loan has a two-year term with an option to extend for an additional year under certain circumstances and is secured by the Mortgage Borrower’s fee interest in 77 Greenwich. The 77 Mortgage Loan bears interest at a rate per annum equal to the greater of (i) 7.00% in excess of LIBOR and (ii) 7.25%; provided that, if, on April 22, 2023, the outstanding principal balance of the 77 Mortgage Loan, together with any accrued and unpaid PIK Interest and unpaid Additional Unused Fee (as those terms are defined below) is equal to or greater than $91.0 million, the rate per annum will be equal to the greater of (i) 9.00% in excess of LIBOR and (ii) 9.25%. If cash flow from 77 Greenwich (including proceeds from the sales of residential units) is insufficient to pay interest payments when due, any accrued but unpaid interest will remain unpaid and interest will continue to accrue on such unpaid amounts (“PIK Interest”) until the cumulative PIK Interest and Additional Unused Fee accrues to $4.5 million (the “Threshold Amount”), after which all such amounts in excess of the Threshold Amount shall be paid in cash on a monthly basis until such amounts are less than the Threshold Amount. As advances of the 77 Mortgage Loan are made to Mortgage Borrower and the outstanding principle balance of the 77 Mortgage Loan increases, net proceeds from the sales of condominium units will be paid to 77 Mortgage Lender to reduce the outstanding balance of the 77 Mortgage Loan. A 1% per annum fee (the “Additional Unused Fee”) on a $3.0 million portion (the “Additional Amount”) of the 77 Mortgage Loan, is payable on a monthly basis on the undrawn portion of such Additional Amount. To the extent the 77 Mortgage Loan is not fully funded by October 22, 2022 (April 22, 2023 in the case of amounts with respect to construction work related to the new handicapped accessible subway entrance on Trinity Place), 77 Mortgage Lender may in its discretion force fund the remaining balance other than the Additional Amount into a reserve account held by 77 Mortgage Lender and disbursed in accordance with the terms of the 77 Mortgage Loan Agreement. The 77 Mortgage Loan is prepayable without penalty, subject to 77 Mortgage Lender receiving a minimum total return of $15.26 million, or if an advance has been made of the Additional Amount, the sum of $15.26 million, plus 10% of the Additional Amount that has been disbursed, in each case, inclusive of interest and fees, and must be prepaid in part in certain circumstances such as in the event of the sale of residential and retail condominium units. Mortgage Borrower is required to achieve completion of the construction work and the improvements for the Project on or before July 1, 2022, subject to certain exceptions. The 77 Mortgage Loan Agreement also includes additional customary affirmative and negative covenants for loans of this type, with the first sales pace covenant in April 2023.
In connection with the 77 Mortgage Loan Agreement, we entered into guarantees with the 77 Mortgage Lender pursuant to which we guaranteed the completion and payment of costs and expenses related to the construction; the payment of accrued and unpaid interest and other fees, costs, expenses and payments due and payable with respect to the 77 Mortgage Loan or 77 Greenwich; and the payment when due of all amounts due to 77 Mortgage Lender, as a result of “bad-boy” provisions. Mortgage Borrower and the Company also entered into an environmental compliance and indemnification undertaking for the benefit of 77 Mortgage Lender. Additionally, Mortgage Borrower is required to provide a letter of credit in an amount not less than $4.0 million. The letter of credit will be reduced to $3.0 million following, among other things, (x) final completion of the Project, subject to certain exceptions, and (y) paydown of the 77 Mortgage Loan to a basis of $625 per square feet of the unsold residential units.
As of March 31, 2022, the 77 Mortgage Loan had been paid down by approximately $20.5 million through closed sales of residential condominium units to a balance of $115.9 million and we had accrued $2.5 million in PIK interest, which is recorded in accounts payable and accrued expenses in the consolidated balance sheet. As of March 31, 2022, we were in compliance with all covenants under the 77 Mortgage Loan.
Mezzanine Loan
In December 2020, we entered into a mezzanine loan agreement with an affiliate of the CCF Lender (the “Mezzanine Loan Agreement”, and the loan thereunder, the “Mezzanine Loan”). The Mezzanine Loan was originally in the amount of $7.5 million and has a term of three years with two one-year extension options, exercisable under certain circumstances. The collateral for the Mezzanine Loan was the borrower’s equity interest in its direct, wholly-owned subsidiary. The blended interest rate for the 77 Greenwich Construction Facility and the Mezzanine Loan, assuming the 77 Greenwich Construction Facility and the Mezzanine Loan are fully drawn, was 8.26% on an annual basis. Interest on the Mezzanine Loan is not payable on a monthly basis but instead is automatically added to the unpaid principal amount on a monthly basis (and therefore accrues interest) and is payable in full on the maturity date of the Mezzanine Loan. Upon final repayment of the Mezzanine Loan, a MOIC will be due on substantially the same terms as provided for in the CCF. Subject to the prior sentence the Mezzanine Loan may be prepaid in whole or in part, without penalty or premium (other than payment of the MOIC amount, if applicable, as provided above), upon prior written notice to the lender under the Mezzanine Loan. In connection with the Mezzanine Loan, the Company entered into a completion guaranty, carry guaranty, equity funding guaranty, recourse guaranty and environmental indemnification undertaking.
45
In October 2021, the Mezzanine Loan Agreement was amended and restated to, among other things, (i) increase the amount of the loan thereunder by approximately $22.77 million, of which $0.77 million reflects interest previously accrued under the original Mezzanine Loan, (ii) reflected the pledge of the equity interests in the Mortgage Borrower to the Mezzanine Lender as additional collateral for the Mezzanine Loan and (iii) conform certain of the covenants to those included in the 77 Mortgage Loan Agreement, as applicable. Additionally, the existing completion guaranty, carry guaranty, recourse guaranty and environmental indemnification executed in connection with the original Mezzanine Loan Agreement were amended to conform to the mortgage guarantees and mortgage environmental indemnity made in connection with the 77 Mortgage Loan (and the existing equity funding guaranty was terminated).
As of March 31, 2022, the Mezzanine Loan had a balance of $30.3 million and accrued interest totaled approximately $2.1 million. See Note 7 – Loans Payable and Secured Line of Credit to our consolidated financial statements for further discussion.
As of March 31, 2022, we were in compliance with the covenants of the Mezzanine Loan.
237 11th Loans
In May 2018, in connection with the acquisition of 237 11th, we entered into two-year interest-only financings with an aggregate principal amount of $67.8 million, which was comprised of a $52.4 million mortgage loan and a $15.4 million mezzanine loan bearing interest at a blended average rate of 3.72% over the 30-day LIBOR, each with a one-year extension option upon satisfaction of certain conditions. The mezzanine loan was repaid in full in February 2020. In June 2020, the maturity of the 237 11th mortgage loan was extended to June 2021 and amended to include a delayed draw facility of $4.25 million. In conjunction with the amendment, a LIBOR floor of 50 basis points was put in place, the spread was increased by 25 basis points to 2.25% and the exit fee was increased by 50 basis points to 1.0%. In June 2021, we repaid the 237 11th mortgage loan’s balance of $56.4 million in full and paid an exit fee of $567,000.
Simultaneously, in June 2021, in connection with the refinancing of the 237 11th mortgage loan, we entered into a $50.0 million senior loan (the “237 11th Senior Loan”) and a $10 million mezzanine loan (the “237 11th Mezz Loan” and together with the 237 11th Senior Loan, the “237 11th Loans”), provided by Natixis, bearing interest at a blended rate of 3.05% per annum. The 237 11th Loans have an initial term of two years and three one-year extension options. The first extension option is not subject to satisfaction of any financial tests. $1.5 million of the 237 11th Senior Loan proceeds were held back by Natixis to cover debt service and operating expense shortfalls, as well as leasing related costs. There was an outstanding balance of $48.8 million from the 237 11th Senior Loan and $10.0 million from the 237 11th Mezz Loan at March 31, 2022.
From time to time, properties that we own, acquire or develop may experience defects, including concealed defects, or damage due to natural causes, defective workmanship or other reasons. In these situations, we pursue our rights and remedies as appropriate with insurers, contractors, sellers and others. Due to certain construction defects at 237 11th that resulted in water penetration into the building and damage to certain apartment units and other property, which defects we believe were concealed and which would have required significant invasive work of a type not usually required or permitted, especially on a newly-built asset, to be detected, we submitted proofs of loss to our insurance carrier for property damage and business interruption (lost revenue) in March 2019. The insurance carrier subsequently disclaimed coverage for the losses and we filed a complaint against the carrier alleging that it breached the insurance policy by denying coverage. We also filed legal claims against the seller, its parent company, and the general contractor to recover damages arising from the defective construction. In addition, the general contractor has impleaded into that litigation several subcontractors who performed work on the property. Management expects to recover some portion of the cost incurred to repair the property through the litigations and/or settlement negotiations with the seller, its parent company, the general contractor, the subcontractors, and the insurance carrier, although the amount of damages that may be recoverable in litigation and/or potential settlement negotiations are uncertain at this time, as is the timing of receipt of any such payments, which has been impacted by the COVID-19 pandemic, including the resulting backlog in the court system and slowdown in judicial proceedings. We have engaged in mediation with the seller, its parent company, the general contractor, and the third-party defendants impleaded by the general contractor to explore the possibility of settling the case involving those parties, but to date, have not reached an agreement. We incurred significant cash outflows for costs associated with these repairs and remediation, which commenced in September 2019 and was completed by December 31, 2021. As of March 31, 2022, the property was 100% leased.
46
The Berkley Loan
Prior to its sales in April 2022, we owned a 50% interest in a joint venture formed to acquire and operate The Berkley. On February 28, 2020, in connection with a refinancing, The Berkley acquisition loan was repaid in full and was replaced with a new 7-year, $33.0 million loan (the “New Berkley Loan”) which bore interest at a fixed rate of 2.717% and was interest only during the initial five years. In connection with the sale of The Berkley in April 2022, the New Berkley Loan was repaid in full and retired.
The Berkley Partner Loan
In October 2021, we entered into a loan agreement with our partner in The Berkley JV, pursuant to which our partner agreed to lend us up to $10.5 million principal amount, $500,000 of which is available only to be applied to interest payments, secured by our interest in the joint venture entity, maturing in one year, with two 12-month extension options subject to satisfaction of certain conditions. The loan bore interest at a rate of 10% per year, with a portion deferred until maturity. As of March 31, 2022, the loan had an outstanding balance of $10.1 million. In connection with the sale of The Berkley in April 2022, the Berkley Partner Loan was repaid in full and retired.
Secured Line of Credit
Our $12.75 million secured line of credit with Webster Bank (formerly known as Sterling National Bank) is secured by the Paramus, New Jersey property. The maturity date of the secured line of credit is March 2023. The secured line of credit bears interest at the prime rate, currently 3.50%. The secured line of credit is pre-payable at any time without penalty. As of March 31, 2022, the secured line of credit had an outstanding balance of $12.75 million and an effective interest rate of 3.50%.
250 North 10th Note
We own a 10% interest in a joint venture with TF Cornerstone (the “250 North 10th JV”) formed to acquire and operate 250 North 10th, a recently built 234-unit apartment building in Williamsburg, Brooklyn, New York. In January 2020, the 250 North 10th JV closed on the acquisition of the property through a wholly-owned special purpose entity for a purchase price of $137.75 million, of which $82.75 million was financed through a 15-year mortgage loan (the “250 North 10th Note”) secured by 250 North 10th and the balance was paid in cash. Our share of the equity totaling approximately $5.9 million was funded through a loan (the “Partner Loan”) from our joint venture partner. The Partner Loan bears interest at 7.0% and is prepayable any time within its four year term. Our partner has the option of having the Partner Loan repaid in our common stock if the price of our common stock exceeds $6.50 per share at the time of conversion. The non-recourse 250 North 10th Note bears interest at 3.39% for the duration of the loan term and has covenants, defaults, and a non-recourse carve out guaranty executed by us. We earned an acquisition fee at closing and are entitled to ongoing asset management fees and a promote upon the achievement of certain performance hurdles.
Private Placement Transaction and Rights Offering
In October 2021, we entered into a private placement agreement with certain existing shareholders (“Investors”), pursuant to which we issued to the Investors an aggregate of 2,539,473 shares of our common stock at a price of $1.90 per share, and we received gross proceeds of $4.8 million, which closed on the same day.
In December 2021, we closed on a common stock rights offering to existing shareholders at a price of $1.90 per share, which resulted in the issuance of 903,576 shares of our common stock and we received gross proceeds of $1.7 million.
At-The-Market Equity Offering Program
In August 2021, we entered into an "at-the-market" equity offering program (the “ATM Program”), to sell up to an aggregate of $10.0 million in shares of our common stock.
We sold no shares of our common stock during the three months ended March 31, 2022. During the year ended December 31, 2021, we sold 701,327 shares of our common stock for aggregate gross proceeds of approximately $1.4 million (excluding approximately $169,000 in professional and brokerage fees) at a weighted average price of $1.95 per share.
47
As of March 31, 2022, approximately $8.6 million of our common stock remained available for issuance under the ATM Program.
Cash Flows
Cash Flows for the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021 (As Restated. See additional discussion in Note 3 – Restatement and Revision of Previous Issued Consolidated Financial Statements to this Form 10-Q/A)
Net cash provided by operating activities increased by approximately $14.5 million to $375,000 for the three months ended March 31, 2022 from net cash used in operating activities of $14.1 million for the three months ended March 31, 2021. This increase was mainly due to less asset additions at 77 Greenwich offset by the sale of three residential condominiums, totaling approximately $6.1 million, partially offset by an increase in prepaid expenses and other assets, net of $660,000 over the same period last year.
Net cash used in investing activities increased by approximately $11,000 to $64,000 for the three months ended March 31, 2022 from $53,000 for the three months ended March 31, 2021. The slight increase in cash used by investing activities was due to asset additions at 237 11th .
Net cash used in financing activities increased by approximately $19.3 million to $9.5 million for the three months ended March 31, 2022 from net cash provided by financing activities of $9.8 million for the three months ended March 31, 2021. The increase in net cash used in financing activities primarily relates to the $11.6 million of loan paydowns from the 77 Greenwich Mortgage Loan from the proceeds of residential condominium sales, partially offset by $7.8 million less in borrowings from the loans and secured line of credit this period compared to the same period last year.
Net Operating Losses (As Restated)
We believe that our U.S. federal NOLs as of the emergence date of the Syms bankruptcy were approximately $162.8 million and believe our U.S. federal NOLs as of March 31, 2022 were approximately $260.3 million. In connection with the conveyance of the school condominium to the SCA, we applied approximately $11.6 million of federal NOLs against taxable capital gains of approximately $18.5 million. Since 2009 through March 31, 2022, we have utilized approximately $22.5 million of the federal NOLs. Pursuant to the TCJA, corporate alternative minimum tax (“AMT”) credit carryforwards are eligible for a 50% refund in tax years 2018 through 2020, and beginning in tax year 2021, any remaining AMT credit carryforwards are 100% refundable. As a result of these new rules, we had recorded a tax benefit and refund receivable of $3.1 million in 2017 in connection with our valuation allowance release. We received approximately $1.6 million of the refund receivable in October 2019, and the balance of approximately $1.5 million in July 2020.
Based on management’s assessment, it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategies. Accordingly, a valuation allowance of $72.0 million was recorded as of March 31, 2022.
We believe that certain of the transactions that occurred in connection with our emergence from bankruptcy in September 2012, including the rights offering and the redemption of the Syms shares owned by the former majority shareholder of Syms in accordance with the Plan, resulted in us undergoing an “ownership change,” as that term is used in Section 382 of the Code. However, while the analysis is complex and subject to subjective determinations and uncertainties, we believe that we should qualify for treatment under Section 382(l)(5) of the Code. As a result, we believe that our NOLs are not subject to an annual limitation under Section 382. However, if we were to undergo a subsequent ownership change in the future, our ability to utilize our NOLs could be subject to limitation under Section 382. In addition, the TCJA limited the deductibility of NOLs arising in tax years beginning after December 31, 2017 to 80 percent of taxable income (computed without regard to the net operating loss deduction) for the taxable year. However, the CARES Act suspended the 80% limitation on the use of NOLs for tax years beginning before January 1, 2021, and allowed losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back up to five years.
Even if all of our regular U.S. federal income tax liability for a given year is reduced to zero by virtue of utilizing our NOLs, we may still be subject to state, local or other non-federal income taxes.
48
Our certificate of incorporation includes a provision intended to help preserve certain tax benefits primarily associated with our NOLs. This provision generally prohibits transfers of stock that would result in a person or group of persons becoming a 4.75% stockholder, or that would result in an increase or decrease in stock ownership by a person or group of persons that is an existing 4.75% stockholder.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q/A, including information included or incorporated by reference in this Quarterly Report on or any supplement to this Quarterly Report, may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information relating to us that are based on the beliefs of management as well as assumptions made by and information currently available to management. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as “may,” “will,” “expects,” “believes,” “plans,” “estimates,” “potential,” or “continues,” or the negative thereof or other and similar expressions. In addition, in some cases, you can identify forward-looking statements by words or phrases such as “trend,” “potential,” “opportunity,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions. Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including among others:
| ● | the impact of COVID-19; |
| ● | risks and uncertainties as to the terms, timing, structure, benefits and costs of any capital raising or strategic transaction and whether one will be consummated on terms acceptable to us or at all; |
| ● | our limited cash resources, generation of minimal revenues from operations, and our reliance on external sources of financing to fund operations in the future; |
| ● | our ability to execute our business plan, including as it relates to the development of and sale of residential condominium units at our largest asset, 77 Greenwich; |
| ● | risks associated with our debt, including the risk of defaults on our obligations and debt service requirements; |
| ● | risks associated with covenant restrictions in our loan documents that could limit our flexibility to execute our business plan; |
| ● | adverse trends in the New York City residential condominium market; |
| ● | general economic and business conditions, including with respect to real estate, and their effect on the New York City real estate market in particular; |
| ● | our ability to obtain additional financing and refinance existing loans and on favorable terms; |
| ● | our investment in property development may be more costly than anticipated and investment returns from our properties planned to be developed may be less than anticipated; |
| ● | our ability to enter into new leases and renew existing leases with tenants at our commercial and residential properties; |
| ● | we may acquire properties subject to unknown or known liabilities, with limited or no recourse to the seller; |
| ● | risks associated with the effect that rent stabilization regulations may have on our ability to raise and collect rents; |
| ● | competition for new acquisitions and investments; |
| ● | risks associated with acquisitions and investments in owned and leased real estate; |
49
| ● | risks associated with joint ventures; |
| ● | our ability to maintain certain state tax benefits with respect to certain of our properties; |
| ● | our ability to obtain required permits, site plan approvals and/or other governmental approvals in connection with the development or redevelopment of our properties; |
| ● | costs associated with complying with environmental laws and environmental contamination, as well as the Americans with Disabilities Act or other safety regulations and requirements; |
| ● | loss of key personnel; |
| ● | the effects of new tax laws; |
| ● | our ability to utilize our NOLs to offset future taxable income and capital gains for U.S. Federal, state and local income tax purposes; |
| ● | risks associated with current political and economic uncertainty, and developments related to the outbreak of contagious diseases; |
| ● | risks associated with breaches of information technology systems; |
| ● | stock price volatility and other risks associated with a lightly traded stock; |
| ● | stockholders may be diluted by the issuance of additional shares of common stock or securities convertible into common stock in the future; |
| ● | a declining stock price may make it more difficult to raise capital in the future; |
| ● | the influence of certain significant stockholders; |
| ● | limitations in our charter on transactions in our common stock by substantial stockholders, designed to protect our ability to utilize our NOLs and certain other tax attributes, may not succeed and/or may limit the liquidity of our common stock; |
| ● | certain provisions in our charter documents and Delaware law may have the effect of making more difficult or otherwise discouraging, delaying or deterring a takeover or other change of control of us; |
| ● | certain provisions in our charter documents may have the effect of limiting our stockholders’ ability to obtain a favorable judicial forum for certain disputes; |
| ● | the impact of the revision of our financial statements and management’s recently identified material weakness in our internal control over financial reporting; and |
| ● | unanticipated difficulties which may arise and other factors which may be outside our control or that are not currently known to us or which we believe are not material. |
In evaluating such statements, you should specifically consider the risks identified under the section entitled “Risk Factors” in our 2021 Annual Report for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on October 5, 2022, and under the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q/A, any of which could cause actual results to differ materially from the anticipated results. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those contemplated by any forward looking statements. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere described in our 2021 Annual Report, this Form 10-Q/A and other reports filed with the SEC. All forward-looking statements speak only as of the date of this Form 10-Q/A or, in the case of any documents incorporated by reference in this Form 10-Q/A, the date of such document, in each case based on information available to us as of such date, and we assume no obligation to update any forward-looking statements, except as required by law.
50
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the disclosure required by this Item.
Item 4. Controls and Procedures
| a) | Evaluation of Disclosure Controls and Procedures |
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this Quarterly Report on for 10-Q/A. Based on this evaluation, at the time our Original Quarterly Report on Form 10-Q for the period ended March 31, 2022 was filed on May 16, 2022, the CEO and CFO concluded that as of March 31, 2022, our disclosure controls and procedures were not effective at a reasonable assurance level as a result of a material weekness in our internal control over financial reporting as discussed below relating to classification of a property as real estate under development rather than an operating property. Subsequent to that evaluation, management identified two other material weaknesses described below.
| b) | Internal Control Over Financial Reporting |
Other than the material weakness described below, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q/A that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Material Weaknesses and Previously Reported Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of our consolidated financial statements as of and for the quarter ended March 31, 2022, our management identified two material weaknesses in our internal control over financial reporting related to errors identified in connection with the accounting treatment regarding the overcapitalization of internally allocated construction related costs related to the development project at 77 Greenwich and a disclosure error in the classification on the balance sheets of our 77 Greenwich property which was classified as real estate under development in real estate and is now classified as residential condominium units for sale. There was also a restatement on the statement of cash flows from investing activities to operating activities related to this error. Our management communicated the results of its assessment to the Audit Committee of the Board of Directors of the Company.
We previously identified a material weakness in our internal control over financial reporting related to an error identified in connection with the classification of a property as real estate under development which was not subsequently reported as an operating property when circumstances at the property changed, resulting in the incorrect capitalization of certain costs.
During the year ended December 31, 2021, Management identified an error in connection with the capitalization of certain advertising and marketing costs where these costs were not recorded appropriately in the consolidated financial statements as they were incorrectly capitalized when they should have been expensed.
51
Based on our evaluation under the COSO criteria, our management concluded that our internal control over financial reporting was not effective as of March 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Management is in the process of remediating the material weakness and believes that the consolidated financial statements, and related notes thereto included in this Quarterly Report on Form 10-Q/A fairly present, in all material aspects, the Company’s financial condition, results of operations and cash flows for the periods presented.
Remediation
We have commenced measures to remediate the identified material weaknesses. We performed additional procedures to ensure the properties we own are properly classified as either an operating property, property under development or residential condominium units for sale, and that we are capitalizing the appropriate amount of internally allocated construction related costs related to the development project at 77 Greenwich Street. Until the material weaknesses are remediated, we will continue to perform additional analysis and other post-closing procedures to ensure that our consolidated financial statements are prepared in accordance with U.S. GAAP. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, we are party to routine legal proceedings. Based on advice of counsel and available information, including current status or stage of proceedings, and taking into account accruals where they have been established, management currently believes that any liabilities ultimately resulting from litigation we are currently involved in will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity.
Item 1A. Risk Factors
Numerous factors affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this Quarterly Report, you should carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our Annual Report on Form 10-K/A for the year ended December 31, 2021, which describe significant risks that may cause our actual results of operations in future periods to differ materially from those currently anticipated or expected.
We identified a material weakness in our internal control over financial reporting related to the Restatement and Revision described in the Note 3 - Restatement and Revision of Previously Issued Consolidated Financial Statements to this Quarterly Report on Form 10-Q/A. If we do not effectively remediate the material weakness or if we otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results.
Effective internal controls over financial reporting are necessary for us to provide reliable and accurate financial reports. Management identified deficiencies in internal control over financial reporting as of March 31, 2022 and June 30, 2022 and determined that the Company did not maintain effective internal control over financial reporting because of the overcapitalization of internally allocated construction related costs related to the development project at 77 Greenwich and a disclosure error in the classification on the balance sheets of our 77 Greenwich property which was classified as real estate under development in real estate and is now classified as residential condominium units for sale. There was also a restatement on the statement of cash flows from investing activities to operating activities related to this error. See Note 3 to the consolidated financial statements. See Item 4, “Controls and Procedures”, in this Quarterly Report on Form 10-Q/A for additional information regarding the identified material weakness and our actions to date to remediate the material weakness.
52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
53
Item 6. Exhibits
3.1 | |
| |
3.2 | |
| |
31.1* | |
| |
31.2* | |
| |
32.1** | |
| |
32.2** | |
| |
101* | The following materials from our Quarterly Report on Form 10-Q/A for the period ended March 31, 2022 formatted as inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2022 (As Restated) and December 31, 2021 (As Restated), (ii) Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 (As Restated) and March 31, 2021 (As Revised), (iii) Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 (As Restated) and March 31, 2021 (As Revised), (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2022 (As Restated) and March 31, 2021 (As Restated), (v) Notes to Consolidated Financial Statements (As Restated) and (vi) Cover Page Interactive Data File. |
| |
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* |
** | Furnished herewith |
54
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TRINITY PLACE HOLDINGS INC. | |
|
|
|
Date: October 5, 2022 | By | |
|
| |
|
| PRESIDENT and CHIEF EXECUTIVE OFFICER |
|
| (Principal Executive Officer) |
|
|
|
Date: October 5, 2022 | By | /s/ Steven Kahn |
|
| |
|
| CHIEF FINANCIAL OFFICER |
|
| (Principal Financial Officer) |
55
| This ‘10-Q/A’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 6/19/26 | ||||
| 12/19/25 | ||||
| 3/31/25 | ||||
| 12/19/24 | ||||
| 6/22/23 | ||||
| 5/1/23 | ||||
| 4/22/23 | ||||
| 3/31/23 | ||||
| 12/31/22 | ||||
| 12/22/22 | ||||
| 10/22/22 | ||||
| Filed on: | 10/5/22 | 10-K/A | ||
| 7/1/22 | 4 | |||
| 6/30/22 | 10-Q, NT 10-Q | |||
| 5/16/22 | 10-Q, SC 13D/A | |||
| 4/30/22 | ||||
| For Period end: | 3/31/22 | 10-K, 10-Q | ||
| 1/15/22 | ||||
| 12/31/21 | 10-K, 10-K/A, 4 | |||
| 11/10/21 | ||||
| 10/22/21 | 4, 8-K | |||
| 3/31/21 | 10-K, 10-Q | |||
| 1/1/21 | ||||
| 12/31/20 | 10-K | |||
| 12/22/20 | 8-K | |||
| 2/28/20 | CORRESP | |||
| 12/31/19 | 10-K, 4 | |||
| 12/31/18 | 10-K, 4 | |||
| 12/31/17 | 10-K | |||
| 6/1/16 | ||||
| 9/9/15 | 8-K | |||
| 9/17/12 | ||||
| 12/31/06 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/13/15 Trinity Place Holdings Inc. 8-K:1,2,3,5 2/09/15 5:1M Toppan Merrill/FA 9/19/12 Trinity Place Holdings Inc. 8-K12G3:1,3 9/14/12 4:241K Toppan Merrill/FA |