TRINITY PLACE HOLDINGS INC. 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 at77 Greenwich Street in Lower Manhattan ("77Greenwich "), which is nearing completion of development as a mixed-use project consisting of a 90-unit residential condominium tower, retail space and aNew York City elementary school. We also own a recently built 105-unit, 12-story multi-family property located at237 11th Street inBrooklyn, New York ("237 11th"), and, through a joint venture, a 10% interest in a recently built 234-unit multi-family property at250 North 10th Street ,Brooklyn, New York ("250 North 10th"), as well as a property occupied by retail tenants inParamus, 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$268.0 million of federal net operating loss carry forwards ("NOLs") atSeptember 30, 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 inNew York City as well as properties in close proximity to public transportation in the greaterNew 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. In addition, we are actively engaging with parties who have expressed interest in several of the Company's attributes and see the Company as a vehicle for growth in more volatile times. These potential partnerships could also present opportunities to recapitalize us at a lower cost of capital, reflecting the significant de-risking of the Company.
Management's Plans and Liquidity
Our financial statements are prepared using accounting principles generally accepted inthe United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Given the impacts of COVID-19 and supply-chain issues, while construction at 77 Greenwich is in the final stage of completion, it has taken longer than projected. As a result, certain items, including punch-list items, the outside dog run and general contractor settlements, were not completed by the Final Completion milestone ofSeptember 28, 2022 as contemplated under our 77 Mortgage Loan and mezzanine loan. Missing this deadline was an event of default under the 77 Mortgage Loan and mezzanine loan facility, creating substantial doubt about our ability to continue as a going concern. Although the impact of the pandemic and broader economic conditions have impeded the sale of residential condominium units at 77 Greenwich, we continue to sign and close contracts for our residential condominium units.
The
majority of the construction is expected to be completed by the end of November, including the remaining residential units, with amenity spaces, punch-list and general contractor settlements to follow. Management has held productive discussions with the 77 Mortgage Lender and is in the process of documenting an amendment to the 77 Mortgage Loan agreement to, among other things, extend the Final Completion milestone. If we are not successful in completing the amendment as contemplated above, and the 77 Mortgage Lender, or the lender under our mezzanine loan facility, accelerated their respective loan, cross-defaults would also exist and we would have insufficient cash and liquidity to service our debt and pay operating expenses and other obligations. The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to our ability to continue as a going concern. As ofSeptember 30, 2022 , we had total cash and restricted cash of$11.7 million , of which approximately$2.2 million was cash and cash equivalents and approximately$9.5 million was restricted cash as well as$3.0 million available under our secured line of credit. At this time, we believe our existing balances of cash and cash equivalents, secured line of credit availability, debt issuances and/or refinancings, including the planned refinancing the property at 237 11th and theParamus line of credit or sale of theParamus property, equity issuances, 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, unless we are unable to reach agreement with our lenders as described above. Facts and circumstances that are outside of managements control could change in the future, such as further outbreaks of COVID-19, as well as, more recently, the war inUkraine , rising interest rates and high inflation rates, and the impact of such matters on residential sentiment inNew York
City
in particular.
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Properties
Below is certain information regarding our real estate properties as of
September 30, 2022 :
Building Size
(estimated Leased at
rentable Number of September 30,Property Location Type of Property square feet) Units 2022
Owned Locations
77Greenwich, New York , New York (1) Residential condominium units for sale - - N/A Paramus, New Jersey (2) Retail 77,000 - 100.0 % 237 11th Street, Brooklyn, New York (3) Multi-family 80,000 105 100.0 % Total 157,000 105 Joint Venture250 North 10th Street , Brooklyn, New York - 10% (4) Multi-family 158,000 234 98.3 % Grand Total 315,000 339
77 Greenwich. We are nearing completion of 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
entrance on Trinity Place. As of
complete through the 35th floor. As of
our temporary certificates of occupancy ("TCOs") for floors 11-23, floors
24-35 (excluding certain hoist units), the lobby, mechanical rooms and
portions of the cellar. We have closed on the sale of 25 residential
condominium units through
since
We entered into an agreement with theNew 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$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 inJanuary 2018 and continued throughOctober 2019 for the land and will continue through completion of the SCA buildout for the construction supervision fee. An aggregate of$46.2 million had been paid to us by the SCA as ofSeptember 30, 2022 with approximately$390,000 remaining to be paid. We have also received an aggregate of$51.7 million in reimbursable construction costs from the SCA throughSeptember 30, 2022 . InApril 2020 , the SCA closed on the purchase of the school condominium unit from us, at which point title transferred to the SCA, and the SCA has recently completed the buildout of the interior space, which is a public elementary school with approximately 476 seats. The school received its final TCO and openedSeptember 2022 .
Paramus Property. The
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 (2) building is leased to Restoration Hardware Holdings, Inc. (NYSE: RH) pursuant
to a license agreement that began on
months' notice, and currently is scheduled to end on
outparcel building is leased to a long-term tenant whose lease expires on
approximately 292,000 square feet, or approximately 6.7 acres. We are
currently exploring options with respect to the
development or sale, among others.
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built 105-unit, 12-story multi-family apartment building encompassing
approximately 93,000 gross square feet (approximately 80,000 rentable square
feet) located at
purchase price of
health and wellness tenant. Located on the border of the Park Slope and
Gowanus neighborhoods of
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 water damage in apartment units and other property at 237 11th resulting from construction defects which were concealed by the prior ownership team and its contractor, we submitted a notice of claim to our insurance carrier for property damage and business interruption (lost revenue) inSeptember 2018 .
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, from time to time, 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, and we continue to pursue all legal remedies We incurred significant cash outflows for costs associated with these repairs and remediation, which commenced inSeptember 2019 and were completed as ofDecember 31, 2021 .
entity formed to acquire and operate
234-unit apartment building in Williamsburg,
is four blocks from the
the
stainless steel appliances, caesarstone countertops, in-unit washers and (4) 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
years remaining on its 15-year Section 421-a real estate tax exemption.
Although all apartments are market rate units, they are subject to
City's rent stabilization law during the remaining term of the Section 421-a
real estate tax exemption.
Lease Expirations
As ofSeptember 30, 2022 , we have two retail leases at ourParamus property with 77,000 square feet of leased space with annualized rent of$638,000 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 inthe 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 29
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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 endedDecember 31, 2021 .
The following discussion and analysis is intended to assist readers in
understanding our financial condition and results of operations during the three
and nine months ended
Results of Operations for the Three Months Ended
Rental revenues in total increased by approximately$510,000 to$1.5 million for three months endedSeptember 30, 2022 from$967,000 for the three months endedSeptember 30, 2021 . This consisted of an increase in rent revenues of approximately$500,000 to$1.4 million for the three months endedSeptember 30, 2022 from$914,000 for the three months endedSeptember 30, 2021 , as well as an increase in tenant reimbursements of approximately$12,000 to$65,000 for the three months endedSeptember 30, 2022 from$53,000 for the three months endedSeptember 30, 2021 . The increase in total rental revenues and its related components was due to higher occupancy, higher base rents and fewer rent concessions at 237 11th during the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 due to completion of remediation of the construction related defects. Other income, which consisted mainly of the SCA construction supervision fee, decreased by approximately$10,000 to$20,000 for the three months endedSeptember 30, 2022 from$30,000 for the three months endedSeptember 30, 2021 as a result of a reduction in the SCA's construction. Sales of residential condominium units at 77 Greenwich increased by approximately$16.1 million to$17.5 million for the three months endedSeptember 30, 2022 from$1.4 million for the three months endedSeptember 30, 2021 . We closed on six residential condominium units during the three months endedSeptember 30, 2022 as compared to one residential condominium unit during the three months endedSeptember 30, 2021 . Units that we closed during 2021 and 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. Property operating expenses increased by approximately$323,000 to$1.2 million for the three months endedSeptember 30, 2022 from$897,000 for the three months endedSeptember 30, 2021 . The increase was principally due to expensing costs associated with 77 Greenwich, partially offset by approximately$172,000 in lower remediation related costs at 237 11th incurred during the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 , reflecting completion of remediation efforts byDecember 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, general operating expenses at 77 Greenwich, including marketing costs, and to a lesser extent expenses related to theParamus, New Jersey property. Real estate tax expense increased by approximately$215,000 to$486,000 for the three months endedSeptember 30, 2022 from$271,000 for the three months endedSeptember 30, 2021 . This increase was mainly due to increased real estate tax expenses for 77 Greenwich for the three months endedSeptember 30, 2022 as compare to the three months endedSeptember 30, 2021 . General and administrative expenses remained relatively consistent at$1.4 million for the three months endedSeptember 30, 2022 and the three months endedSeptember 30, 2021 . For the three months endedSeptember 30, 2022 , approximately$118,000 related to stock-based compensation,$628,000 related to payroll and payroll related expenses,$441,000 related to other corporate expenses, including board fees, corporate office rent and insurance and$244,000 related to legal, accounting and other professional fees. For the three months endedSeptember 30, 2021 , approximately$124,000 related 30
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to stock-based compensation,$788,000 related to payroll and payroll related expenses,$255,000 related to other corporate expenses, including board fees, corporate office rent and insurance and$273,000 related to legal, accounting and other professional fees. Pension related costs remained flat at$158,000 for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . These costs represent professional fees and other periodic pension costs incurred in connection with the legacy Syms Pension Plan (see Note 8 - Pension Plan to our consolidated financial statements for further information). Cost of sales - residential condominium units increased by approximately$15.3 million to$16.7 million for the three months endedSeptember 30, 2022 from$1.4 million for the three months endedSeptember 30, 2021 . We closed on six residential condominium units during the three months endedSeptember 30, 2022 as compared to one residential condominium unit during the three months endedSeptember 30, 2021 . Cost of sales 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 endedSeptember 30, 2022 and 2021. For the three months endedSeptember 30, 2022 , depreciation and amortization expense consisted of depreciation for theParamus, New Jersey property of approximately$287,000 , depreciation for 237 11th of approximately$412,000 and the amortization of lease commissions, acquired in-place leases and warrants of approximately$309,000 for 237 11th. For the three months endedSeptember 30, 2021 , depreciation and amortization expense consisted of depreciation for theParamus, New Jersey property of approximately$286,000 , 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 loss from unconsolidated joint ventures increased by approximately$14,000 to$14,000 for the three months endedSeptember 30, 2022 from a zero balance for the three months endedSeptember 30, 2021 . Equity in net loss from unconsolidated joint ventures represented our 50% share in The Berkley, which was sold inApril 2022 , and our 10% share in 250 North 10th. For the three months endedSeptember 30, 2022 , our share of the net income is primarily comprised of operating income before depreciation of$171,000 offset by depreciation and amortization of$115,000 and interest expense of$72,000 for 250 North 10th. For the three months endedSeptember 30, 2021 , our share of the loss is primarily comprised of operating income before depreciation of$451,000 offset by depreciation and amortization of$360,000 , interest expense of$188,000 and the income from the change in the fair market value of the interest rate swap of$97,000 . Unrealized gain on warrants decreased by approximately$1.6 million to$64,000 for the three months endedSeptember 30, 2022 from$1.7 million for the three months endedSeptember 30, 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$1.2 million to$3.6 million for the three months endedSeptember 30, 2022 from$2.4 million for the three months endedSeptember 30, 2021 . For the three months endedSeptember 30, 2022 , there was approximately$4.9 million of gross interest expense incurred,$1.3 million of which was capitalized. For the three months endedSeptember 30, 2021 , there was approximately$5.5 million of gross interest expense incurred,$3.1 million of which was capitalized. The decrease in gross interest expense was mainly due to overall lower average borrowings during the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 from the on-going paydown of the 77 Mortgage Loan and repayment of the Berkley Partner Loan, partially offset by higher overall interest rates on our loans afterSeptember 30, 2021 . Interest expense - amortization of deferred finance costs increased approximately$494,000 to$763,000 for the three months endedSeptember 30, 2022 from$269,000 for the three months endedSeptember 30, 2021 . The increase was principally due to less capitalized amortization of finance costs for our loans and secured line of credit as part of residential condominium units for sale.
We recorded an
Net loss attributable to common stockholders increased by approximately$2.8 million to$6.4 million for the three months endedSeptember 30, 2022 from$3.6 million for the three months endedSeptember 30, 2021 . This is a result of the changes discussed above, principally due to the lower unrealized gain on warrants and increased operating and interest 31
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expenses at 77 Greenwich, partially offset by 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 ofSeptember 30, 2022 and our net profit on the sale of residential condominium units at 77Greenwich .
Results of Operations for the Nine Months Ended
Rental revenues in total increased by approximately$2.0 million to$4.0 million for nine months endedSeptember 30, 2022 from$2.0 million for the nine months endedSeptember 30, 2021 . This consisted of an increase in rent revenues of approximately$1.9 million to$3.8 million for the nine months endedSeptember 30, 2022 from$1.9 million for the nine months endedSeptember 30, 2021 , as well as a slight increase in tenant reimbursements of approximately$18,000 to$155,000 for the nine months endedSeptember 30, 2022 from$137,000 for the nine months endedSeptember 30, 2021 . The increase in total rental revenues and its related components was due to higher occupancy, higher base rents and fewer rent concessions at 237 11th during the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 which was due to completion of remediation of the construction related defects. Other income, which consisted mainly of the SCA construction supervision fee, decreased by approximately$286,000 to$46,000 for the nine months endedSeptember 30, 2022 from$332,000 for the nine months endedSeptember 30, 2021 as a result of a reduction in the SCA's construction. Sales of residential condominium units at 77 Greenwich increased by approximately$27.3 million to$28.7 million for the nine months endedSeptember 30, 2022 from$1.4 million for the nine months endedSeptember 30, 2021 . We closed on 11 residential condominium units during the nine months endedSeptember 30, 2022 as compared to one residential condominium unit during the nine months endedSeptember 30 , 202. Units that we closed during 2021 and 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. Property operating expenses decreased by approximately$1.9 million to$2.8 million for the nine months endedSeptember 30, 2022 from$4.7 million for the nine months endedSeptember 30, 2021 . The decrease was principally due to expenses associated with 237 11th, including approximately$2.3 million in lower remediation related costs incurred during the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 , reflecting completion of remediation efforts byDecember 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 77 Greenwich, and to a lesser extent expenses related to theParamus, New Jersey property. Real estate tax expense increased by approximately$863,000 to$1.3 million for the nine months endedSeptember 30, 2022 from$429,000 for the nine months endedSeptember 30, 2021 . This increase was mainly due to increased real estate tax expenses for 77 Greenwich for the nine months endedSeptember 30, 2022 as compare to the nine months endedSeptember 30, 2021 . General and administrative expenses increased by approximately$366,000 to$4.4 million for the nine months endedSeptember 30, 2022 from$4.1 million for the nine months endedSeptember 30, 2021 . For the nine months endedSeptember 30, 2022 , approximately$343,000 related to stock-based compensation,$2.1 million related to payroll and payroll related expenses,$1.1 million related to other corporate expenses, including board fees, corporate office rent and insurance and$924,000 related to legal, accounting and other professional fees. For the nine months endedSeptember 30, 2021 , approximately$350,000 related to stock-based compensation,$2.3 million related to payroll and payroll related expenses,$786,000 related to other corporate expenses, including board fees, corporate office rent and insurance and$650,000 related to legal, accounting and other professional fees. Pension related costs decreased by approximately$10,000 to$473,000 for the nine months endedSeptember 30, 2022 from$483,000 for the nine months endedSeptember 30, 2021 . These costs represent professional fees and other periodic pension costs incurred in connection with the legacy Syms Pension Plan (see Note 8 - Pension Plan to our consolidated financial statements for further information). Cost of sales - residential condominium units increased by approximately$25.8 million to$27.2 million for the nine months endedSeptember 30, 2022 from$1.4 million for the nine months endedSeptember 30, 2021 . We closed on 11 residential condominium units during the nine months endedSeptember 30, 2022 as compared to one residential condominium unit during the nine months endedSeptember 30, 2021 . Cost of sales consists of construction and capitalized 32
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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$3.0 million for the nine months endedSeptember 30, 2022 and 2021. For the nine months endedSeptember 30, 2022 , depreciation and amortization expense consisted of depreciation for theParamus, New Jersey property of approximately$850,000 , depreciation for 237 11th of approximately$1.2 million and the amortization of lease commissions, acquired in-place leases and warrants of approximately$922,000 for 237 11th. For the nine months endedSeptember 30, 2021 , depreciation and amortization expense consisted of depreciation for theParamus, New Jersey property of approximately$854,000 , depreciation for 237 11th of approximately$1.3 million and the amortization of lease commissions, acquired in-place leases and warrants of approximately$848,000 for 237 11th. Equity in net income from unconsolidated joint ventures increased by approximately$1.4 million to$802,000 for the nine months endedSeptember 30, 2022 from a net loss of$636,000 for the nine months endedSeptember 30, 2021 . Equity in net income from unconsolidated joint ventures represented our 50% share in The Berkley, which was sold inApril 2022 , and our 10% share in 250 North 10th. For the nine months endedSeptember 30, 2022 , our share of the net income is primarily comprised of operating income before depreciation of$779,000 offset by depreciation and amortization of$658,000 , interest expense of$359,000 , gain from the change in the fair market value of the interest rate swap of$37,000 and a gain on the settlement of the interest rate swap of$1.0 million upon the sale of The Berkley inApril 2022 . For the nine months endedSeptember 30, 2021 , our share of the loss is primarily comprised of operating income before depreciation of$1.3 million offset by depreciation and amortization of$1.1 million , interest expense of$558,000 and the loss from the change in the fair market value of the interest rate swap of$272,000 .
Equity in net gain on sale of unconsolidated joint venture property represents
the sale of The Berkley in
Unrealized gain on warrants increased by approximately$1.2 million to$995,000 for the nine months endedSeptember 30, 2022 from a loss of$192,000 for the nine months endedSeptember 30, 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$4.6 million to$9.6 million for the nine months endedSeptember 30, 2022 from$5.0 million , net for the nine months endedSeptember 30, 2021 . For the nine months endedSeptember 30, 2022 , there was approximately$13.8 million of gross interest expense incurred,$4.2 million of which was capitalized. For the nine months endedSeptember 30, 2021 , there was approximately$15.7 million of gross interest expense incurred,$10.7 million of which was capitalized, and$1,000 of interest income. The decrease in gross interest expense was mainly due to overall lower average borrowings during the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 from the on-going paydown of the 77 Mortgage Loan and repayment of the Berkley Partner Loan, partially offset by higher overall interest rates on our loans afterSeptember 30, 2021 . Interest expense - amortization of deferred finance costs increased approximately$364,000 to$1.6 million for the nine months endedSeptember 30, 2022 from$1.2 million for the nine months endedSeptember 30, 2021 . The increase was principally due to less capitalized amortization of finance costs for our loans and secured line of credit as part of residential condominium units for sale, partially offset by the write-off of deferred finance costs related to the refinancing of the 237 11th Loans that we closed on inSeptember 2021 .
We recorded a
Net loss attributable to common stockholders decreased by approximately$5.8 million to$11.7 million for the nine months endedSeptember 30, 2022 from$17.5 million for the nine months endedSeptember 30, 2021 . This is a result of the changes discussed above, principally due to the sale of The Berkley, 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 ofSeptember 30, 2022 , an increase in our equity in net income in our joint ventures, a larger unrealized gain on warrants and our net profit on the sale of residential condominium units at 77 Greenwich partially offset by increased operating and interest expenses at 77 Greenwich. 33
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Liquidity and Capital Resources
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, had a significant adverse impact on our business. More recently, the economic downturn, increased interest rates and high inflation have also impacted our business. While we believe many of these trends will reverse or stabilize, and theNew York City economy and residential real estate markets have seen continued improvement to date in 2022, given our focus onNew 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. Although the impact of the pandemic and economic conditions have impeded the sale of residential condominium units at 77 Greenwich, the pace of signing contracts has increased in 2021 throughSeptember 30, 2022 , and we closed on 25 residential condominium units as ofSeptember 30, 2022 and three additional units sinceSeptember 30, 2022 . 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 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 theParamus 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. Our financial statements are prepared using accounting principles generally accepted inthe United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Given the impacts of COVID-19 and supply-chain issues, while construction at 77 Greenwich is in the final stage of completion, it has taken longer than projected. As a result, certain items, including punch-list items, the outside dog run and general contractor settlements, were not completed by the Final Completion milestone ofSeptember 28, 2022 as contemplated under our 77 Mortgage Loan and mezzanine loan. Missing this deadline was an event of default under the 77 Mortgage Loan and mezzanine loan facility, creating substantial doubt about our ability to continue as a going concern. Although the impact of the pandemic and economic conditions have impeded the sale of residential condominium units at 77 Greenwich, we continue to sign and close contracts for our residential condominium units. The majority of the construction is expected to be completed by the end of November, including the remaining residential units, with amenity spaces, punch-list and general contractor settlements to follow. Management has held productive discussions with our 77 Mortgage Lender and currently expects to enter into an amendment to the 77 Mortgage Loan agreement and the mezzanine loan to extend the Final Completion milestone within the next several weeks. If we are not successful in completing the amendment as contemplated above, and the 77 Mortgage Lender or the lender under our mezzanine loan facility accelerated their respective loan, cross-defaults would also exist and we would have insufficient cash and liquidity to service our debt and pay operating expenses and other obligations. The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to our ability to continue as a going concern. 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;
proceeds from equity or equity-linked offerings, including rights offerings (3) 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.
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 which will be affected by inflation
and rising interest rates, among other factors.
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As ofSeptember 30, 2022 , we had total cash and restricted cash of$11.7 million , of which approximately$2.2 million was cash and cash equivalents and approximately$9.5 million was restricted cash. We also have$3.0 million available under our secured line of credit atSeptember 30, 2022 . As ofDecember 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 6 - 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. At this time, we believe our existing balances of cash and cash equivalents, availability under our secured line of credit, planned refinancing of theParamus line of credit, or sale of theParamus, 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, unless we are unable to reach agreement with our lenders as described above. Additionally, we continue to evaluate opportunities to raise capital through sales of equity, debt issuances or refinancings, including refinancing the property located at237 11th Street , and continue to evaluate dispositions of other properties or other assets and/or sales of partial interests in properties. In addition, management is actively engaging with parties who have expressed interest in several of the Company's attributes and see the company as a vehicle for growth in more volatile times. These potential partnerships could also present opportunities to recapitalize us at a lower cost of capital, reflecting the significant de-risking of the Company. However, facts and circumstances could change in the future that are outside of management's control, such as further outbreaks of COVID-19, as well as, more recently, the war inUkraine , rising interest rates and high inflation, and the impact of such matters on residential sentiment
inNew York City in particular. Corporate Credit Facility
InDecember 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") andTrimont 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 , subject to increase by$25.0 million upon satisfaction of certain conditions and the consent of the CCF Lender. The CCF matures onDecember 19, 2024 , subject to extensions untilDecember 19, 2025 andJune 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 greaterNew 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. 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 initial closing date, which Cash Pay Interest Rate, from the Closing Date until the six-month anniversary of the initial 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 ofSeptember 30, 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. AtSeptember 30, 2022 , the Corporate Credit Facility had an outstanding balance of$35.75 million , excluding deferred finance fees of$2.2 million , and an effective interest rate of 9.875%. Accrued interest totaled approximately$4.9 million atSeptember 30, 2022 . See Note 6 - Loans Payable and Secured Line of Credit to our consolidated financial statements for further discussion. In connection with theDecember 2020 transaction described 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 toDecember 22, 2022 , was amended to combine the Corporate Credit Facility and the Mezzanine Loan for purposes of calculating the MOIC, to 35
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the extent not previously paid, if any. See Note 6 - 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 ofOctober 2021 andNovember 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 untilMay 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 toJune 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 11 - Stockholders Equity - Warrants to our consolidated financial statements for further discussion regarding the warrants.
As of
77 Mortgage Loan
InOctober 2021 , a wholly-owned subsidiary of ours (the "Mortgage Borrower") entered into a loan agreement withMacquarie PF Inc. , a part ofMacquarie 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 construction facility were obtained from an increase in the Mezzanine Loan, the Berkley Partner Loan and 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,$9.4 million of such amount had been drawn bySeptember 30, 2022 . 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, onApril 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 byOctober 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 was required to achieve completion of the construction work and the improvements for the Project on or beforeJuly 1, 2022 , subject to certain exceptions. Due to the occurrence of certain force majeure related circumstances, 36
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the completion date had been extended to the end ofSeptember 2022 . We did not achieve final completion by then, and therefore need to request a further extension from the 77 Mortgage Lender. We have made such a request of the 77 Mortgage Lender. We anticipate being able to obtain an extension of the completion date. However, if we are not successful in receiving such an extension, the 77 Mortgage Lender or the lender under our mezzanine loan facility could accelerate their respective loan, and cross-defaults would also exist. The 77 Mortgage Loan Agreement also includes additional customary affirmative and negative covenants for loans of this type, with the first sales pace covenant inApril 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
As ofSeptember 30, 2022 , we were in default under the 77 Mortgage Loan because certain items, including punch-list items, the outside dog run and general contractor settlements, were not fully completed by the Final Completion milestone ofSeptember 28, 2022 . Management has held discussions with the 77 Mortgage Lender and is in the process of documenting an amendment to the 77 Mortgage Loan agreement to, among other things, extend the Final Completion milestone.
Mezzanine Loan
InDecember 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 was 10.5% 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. InOctober 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 reflected interest previously accrued under the original Mezzanine Loan, (ii) reflect 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 ofSeptember 30, 2022 , the Mezzanine Loan had a balance of$30.3 million and accrued interest totaled approximately$4.5 million . See Note 6 - Loans Payable and Secured Line of Credit to our consolidated financial statements for further discussion.
As of
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milestone of
237 11th Loans
InMay 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 inFebruary 2020 . InJune 2020 , the maturity of the mortgage loan was extended toJune 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%. InJune 2021 , we repaid the mortgage loan's balance of$56.4 million in full and paid an exit fee of$567,000 . Simultaneously, inJune 2021 , in connection with the refinancing of the 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 LIBOR-based floating rate 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 atSeptember 30, 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 water damage in apartment units and other property at 237 11th resulting from construction defects which were concealed by the prior ownership team and its contractor, we submitted a notice of claim to our insurance carrier for property damage and business interruption (lost revenue) inSeptember 2018 . 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, from time to time, 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, and we continue to pursue all legal remedies. We incurred significant cash outflows for costs associated with these repairs and remediation, which commenced inSeptember 2019 and was completed byDecember 31, 2021 . As ofSeptember 30, 2022 , the property was 100% leased.
The Berkley Loan
We owned a 50% interest in a joint venture formed to acquire and operate The Berkley. OnFebruary 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 "NewBerkley 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 inApril 2022 , the NewBerkley Loan was repaid in full and retired. The Berkley Partner Loan InOctober 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 was available only to be applied to interest payments, secured by our interest in the joint venture entity, maturing in one year. The loan bore interest at a rate of 10% per year, 38
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with a portion deferred until maturity. This loan had a balance of
Secured Line of Credit Our$12.75 million secured line of credit withWebster Bank (formerly known asSterling National Bank ) is secured by theParamus, New Jersey property. The secured line of credit matures inMarch 2023 . The secured line of credit bears interest at the prime rate. The secured line of credit is pre-payable at any time without penalty. As ofSeptember 30, 2022 , the secured line of credit had an outstanding balance of$9.75 million and an effective interest rate of 6.25%. 250 North 10th Note We own a 10% interest in a joint venture withTF Cornerstone (the "250 North 10th JV") formed to acquire and operate 250 North 10th, a 234-unit apartment building in Williamsburg,Brooklyn, New York . InJanuary 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
InOctober 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
At-The-Market Equity Offering Program
InAugust 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 nine months endedSeptember 30, 2022 . During the year endedDecember 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.
Cash Flows
Cash Flows for the Nine Months Ended
Net cash provided by operating activities increased by approximately$37.6 million to$6.8 million for the nine months endedSeptember 30, 2022 from net cash used of$30.8 million for the nine months endedSeptember 30, 2021 . This increase was mainly due to the sale of 11 residential condominium units at 77Greenwich for the nine months endedSeptember 30, 2022 as compared to the sale of one residential condominium unit for the nine months endedSeptember 30, 2021 , less asset additions at 77 Greenwich this year compared to last year, and an increase in accounts payable and accrued expenses of$4.0 million over the same period last year, partially offset by a larger decrease in prepaid expenses and other assets, net and receivables of approximately$1.6 million compared to the same period last year. 39 Table of Contents
Net cash provided by investing activities increased by approximately$17.4 million to$17.3 million for the nine months endedSeptember 30, 2022 from net cash used of$84,000 for the nine months endedSeptember 30, 2021 . The increase in cash provided by investing activities was due to$17.4 million in net proceeds from the closing on the sale of The Berkley inApril 2022 . Net cash used in financing activities increased by approximately$64.8 million to$37.3 million for the nine months endedSeptember 30, 2022 from net cash provided of$27.5 million for the nine months endedSeptember 30, 2021 . The increase in net cash used in financing activities primarily relates to the approximate$31.8 million of loan paydowns from the 77 Greenwich Mortgage Loan from the proceeds of residential condominium sales and the$10.1 million payoff of the Pacolet Partner Loan after the sale of The Berkley, and a$3.5 million paydown of the Secured Line of Credit, partially offset by$78.2 million less in borrowings from the loans and secured line of credit this period compared to the same period last year. Net Operating Losses
We believe that ourU.S. federal NOLs as of the emergence date of the Syms bankruptcy were approximately$162.8 million and believe ourU.S. federal NOLs as ofSeptember 30, 2022 were approximately$268.0 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 throughSeptember 30, 2022 , we have utilized approximately$20.1 million of the federal NOLs. 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$74.8 million was recorded as ofSeptember 30, 2022 . We believe that certain of the transactions that occurred in connection with our emergence from bankruptcy inSeptember 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 afterDecember 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 beforeJanuary 1, 2021 , and allowed losses arising in taxable years beginning afterDecember 31, 2017 and beforeJanuary 1, 2021 to be carried back up to five years.
Even if all of our regular
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, 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,"
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"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 events of default with respect to
? the 77 Mortgage Loan and Mezzanine Loan, and the risk of additional 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
general economic and business conditions, including with respect to real
? estate, and their effect on the
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;
? 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
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? 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
? 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 restatement and 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 endedDecember 31, 2021 , as amended and filed with theSecurities and Exchange Commission (the "SEC") onOctober 5, 2022 , and under the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q, 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 and other reports filed with theSEC . All forward-looking statements speak only as of the date of this Form 10-Q or, in the case of any documents incorporated by reference in this Form 10-Q, 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.
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