American Strategic Investment Co. Announces Second Quarter 2024 Results

Rhea-AI Summary

American Strategic Investment Co. (NYSE: NYC) announced its Q2 2024 results, highlighting stable revenue of $15.8 million and a net loss of $91.9 million, primarily due to a non-cash impairment of $84.7 million related to the pending sale of 9 Times Square. The company reported improved portfolio occupancy of 85.9% and a 49% increase in Adjusted EBITDA to $4.5 million. CEO Michael Anderson emphasized the success of their portfolio management strategy and the upcoming sale of 9 Times Square for $63.5 million, aimed at reducing debt and investing in higher-yielding opportunities. The company's portfolio consists of seven properties with 1.2 million rentable square feet, with 81% of annualized straight-line rent from top 10 tenants derived from investment grade or implied investment grade rated tenants.

Positive

• Adjusted EBITDA grew 49% to $4.5 million compared to Q2 2023
• Portfolio occupancy expanded 80 basis points to 85.9%
• 81% of annualized straight-line rent from top 10 tenants is derived from investment grade or implied investment grade rated tenants
• Pending sale of 9 Times Square for $63.5 million to reduce debt and enable investment in higher-yielding opportunities

Negative

• Net loss of $91.9 million, compared to $10.9 million in the prior year
• Non-cash impairment of $84.7 million related to the pending sale of 9 Times Square
• Cash NOI decreased slightly to $7.4 million from $7.5 million in Q2 2023
• Net debt to gross asset value of 55.9%

Insights

Financial Analyst

The Q2 2024 results for American Strategic Investment Co. (ASIC) present a mixed financial picture. While revenue remained stable at $15.8 million, the company reported a significant net loss of $91.9 million, primarily due to a $84.7 million non-cash impairment related to the pending sale of 9 Times Square. This impairment overshadows the 49% growth in Adjusted EBITDA to $4.5 million.

The company's portfolio metrics show some positive trends, with occupancy increasing by 0.8% to 85.9% and 81% of annualized straight-line rent from top 10 tenants derived from investment grade or implied investment grade rated tenants. However, the net debt to gross asset value ratio of 55.9% indicates a relatively high leverage, which could be a concern in the current rising interest rate environment.

Real Estate Expert

ASIC's strategy to monetize Manhattan properties, starting with the sale of 9 Times Square for $63.5 million, is a prudent move in the current market. This decision could help reduce debt and provide capital for higher-yielding opportunities. The portfolio's weighted-average lease term of 6.3 years and the focus on investment-grade tenants provide stability, but the 85.9% occupancy rate suggests room for improvement in a competitive NYC market.

The diversified tenant base across various industries is a positive factor, reducing exposure to sector-specific risks. However, the 12% retail tenant composition might warrant careful monitoring given the ongoing challenges in the retail sector. The company's ability to maintain stable revenue despite market pressures is commendable, but investors should watch for the impact of the 9 Times Square sale on future revenue streams.

Market Research Analyst

ASIC's Q2 results reflect the ongoing challenges in the New York City commercial real estate market. The substantial impairment charge suggests a significant gap between book value and market value for prime Manhattan properties. This aligns with broader market trends of office space devaluation in major urban centers post-pandemic.

The company's focus on investment-grade tenants and long-term leases is a defensive strategy that may provide stability but could limit upside potential in a recovering market. The 49% growth in Adjusted EBITDA is encouraging, indicating improved operational efficiency. However, investors should closely monitor the impact of rising interest rates on the company's 4.9% weighted-average interest rate debt, especially with 55.9% net debt to gross asset value ratio.

Company to Host Investor Webcast and Conference Call Today at 11:00 AM ET

NEW YORK--(BUSINESS WIRE)-- American Strategic Investment Co. (NYSE: NYC) (“ASIC” or the “Company”), a company that owns a portfolio of commercial real estate located within the five boroughs of New York City, announced today its financial and operating results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights

• Revenue was stable at $15.8 million for the second quarter of 2024 and 2023

• Net loss attributable to common stockholders was $91.9 million, compared to $10.9 million in the prior year primarily due to a non-cash impairment of $84.7 million related to the pending sale of 9 Times Square in Manhattan, New York

• Cash net operating income (“NOI”) was $7.4 million for the second quarter of 2024, compared to $7.5 million for the second quarter of 2023

• Adjusted EBITDA grew 49% to $4.5 million compared to $3.0 million in the second quarter 2023

• Portfolio occupancy expanded 80 basis points to 85.9%, compared to 85.1% for the second quarter 2023, with weighted-average lease term⁽¹⁾ of 6.3 years

• 81% of annualized straight-line rent from top 10 tenants⁽²⁾ is derived from investment grade or implied investment grade⁽³⁾ rated tenants with a weighted-average remaining lease term of 7.9 years as of June 30, 2024

• Portfolio comprised of fixed and variable rate debt at a 4.9% weighted-average interest rate with 2.7 years of weighted-average debt maturity

CEO Comments

“Our second quarter results underscore the success of our ongoing portfolio management strategy,” said Michael Anderson, CEO of American Strategic Investment Co. “We grew our occupancy by 80 basis points and Adjusted EBITDA by nearly 50% compared to the same quarter in 2023. This performance reflects our long-term commitment to strengthening our portfolio and controlling costs. Looking ahead, we believe that monetizing a portion of our Manhattan properties, beginning with 9 Times Square, for which we now have a definitive agreement to sell the property for $63.5 million, will further strengthen our financial position by reducing debt and enabling us to invest in higher-yielding opportunities. The execution of our strategy is designed to create significant value for our shareholders as we move ahead.”

Financial Results

		Three Months Ended June 30,
(In thousands, except per share data)			2024				2023
Revenue from tenants		$	15,754			$	15,782
Net loss attributable to common stockholders		$	(91,851	)		$	(10,899	)
Net loss per common share (1)		$	(36.48	)		$	(4.77	)
EBITDA		$	(81,499	)		$	557
Adjusted EBITDA		$	4,479			$	3,002

⁽¹⁾ All per share data based on 2,518,176 and 2,286,797 diluted weighted-average shares outstanding for the three months ended June 30, 2024 and 2023, respectively.

Real Estate Portfolio

The Company’s portfolio consisted of seven properties comprised of 1.2 million rentable square feet as of June 30, 2024. Portfolio metrics include:

• 85.9% leased

• 6.3 years remaining weighted-average lease term

• 81% of annualized straight-line rent⁽⁴⁾ from top 10 tenants derived from investment grade or implied investment grade tenants with 8 years of weighted-average remaining lease term

• Diversified portfolio, comprised of 24% financial services tenants, 13% government and public administration tenants, 12% retail tenants, 9% non-profit and 42% all other industries, based on annualized straight-line rent

Capital Structure and Liquidity Resources

As of June 30, 2024, the Company had $5.2 million of cash and cash equivalents⁽⁵⁾. The Company’s net debt⁽⁶⁾ to gross asset value⁽⁷⁾ was 55.9%, with net debt of $394.3 million.

All of the Company’s debt was fixed-rate with the exception of one variable rate loan as of June 30, 2024. The Company’s total combined debt had a weighted-average interest rate of 4.9%.⁽⁸⁾

Footnotes/Definitions

(1)		The weighted-average remaining lease term (years) is weighted by annualized straight-line rent as of June 30, 2024.
(2)		Top 10 tenants based on annualized straight-line rent as of June 30, 2024.
(3)		As used herein, investment grade includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied investment grade may include actual ratings of tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant’s obligation under the lease) or by using a proprietary Moody’s analytical tool, which generates an implied rating by measuring a company’s probability of default. The term “parent" for these purposes includes any entity, including any governmental entity, owning more than 50% of the voting stock in a tenant. Ratings information is as of June 30, 2024. Based on annualized straight-line rent, top 10 tenants are 61% actual investment grade rated and 20% implied investment grade rated.
(4)		Annualized straight-line rent is calculated using the most recent available lease terms as of June 30, 2024.
(5)		Under one of our mortgage loans, we are required to maintain minimum liquid assets (i.e. cash and cash equivalents and restricted cash) of $10.0 million.
(6)		Total debt of $399.5 million less cash and cash equivalents of $5.2 million as of June 30, 2024. Excludes the effect of deferred financing costs, net, mortgage premiums, net and includes the effect of cash and cash equivalents.
(7)		Defined as the carrying value of total assets of $598.9 million plus accumulated depreciation and amortization of $106.6 million as of June 30, 2024.
(8)		Weighted based on the outstanding principal balance of the debt.

Webcast and Conference Call

ASIC will host a webcast and call on August 9, 2024 at 11:00 a.m. ET to discuss its financial and operating results. This webcast will be broadcast live over the Internet and can be accessed by all interested parties through the ASIC website, www.americanstrategicinvestment.com, in the “Investor Relations” section.

Dial-in instructions for the conference call and the replay are outlined below.

To listen to the live call, please go to ASIC’s “Investor Relations” section of the website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the ASIC website at www.americanstrategicinvestment.com.

Live Call

Dial-In (Toll Free): 1-888-330-3127

International Dial-In: 1-646-960-0855

Conference ID: 5954637

Conference Replay*

Domestic Dial-In (Toll Free): 1-800-770-2030

International Dial-In: 1-647-362-9199

Conference Number: 5954637

*Available from August 9, 2024 through November 7, 2024.

About American Strategic Investment Co.

American Strategic Investment Co. (NYSE: NYC) owns a portfolio of commercial real estate located within the five boroughs of New York City. Additional information about ASIC can be found on its website at www.americanstrategicinvestment.com.

Supplemental Schedules

The Company will file supplemental information packages with the Securities and Exchange Commission (the “SEC”) to provide additional disclosure and financial information. Once posted, the supplemental package can be found under the “Presentations” tab in the Investor Relations section of ASIC’s website at www.americanstrategicinvestment.com and on the SEC website at www.sec.gov.

Important Notice

The statements in this press release that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. The words “may,” “will,” “seeks,” “anticipates,” “believes,” “expects,” “estimates,” “projects,” “plans,” “intends,” “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include (a) the anticipated benefits of the Company’s election to terminate its status as a real estate investment trust, (b) whether the Company will be able to successfully acquire new assets or businesses, (c) the ability of the Company to consummate the sale of 9 Times Square; (d) the ability of the Company to execute its business plan and sell certain of its properties on commercially practicable terms, if at all; (e) the potential adverse effects of the geopolitical instability due to the ongoing military conflict between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on the Company, the Company’s tenants, and the global economy and financial markets, (f) the potential adverse effects of inflationary conditions and higher interest rate environment, (g) that any potential future acquisition or disposition is subject to market conditions and capital availability and may not be completed on favorable terms, or at all, and (h) the Company may not be able to continue to meet the New York Stock Exchange’s (“NYSE”) continued listing requirements and rules, and the NYSE may delist the Company's common stock, which could negatively affect the Company, the price of the Company's common stock and the Company shareholders’ ability to sell the Company's common stock, as well as those risks and uncertainties set forth in the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed on April 1, 2024 and all other filings with the Securities and Exchange Commission after that date including but not limited to the subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as such risks, uncertainties and other important factors may be updated from time to time in the Company’s subsequent reports. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, unless required to do so by law.

American Strategic Investment Co. Consolidated Balance Sheets (In thousands. except share and per share data)
		June 30, 2024				December 31, 2023
ASSETS		(Unaudited)
Real estate investments, at cost:
Land		$	156,109			$	188,935
Buildings and improvements			399,794				479,265
Acquired intangible assets			37,056				56,929
Total real estate investments, at cost			592,959				725,129
Less accumulated depreciation and amortization			(106,583	)			(144,956	)
Total real estate investments, net			486,376				580,173
Cash and cash equivalents			5,222				5,292
Restricted cash			7,907				7,516
Operating lease right-of-use asset			54,626				54,737
Prepaid expenses and other assets			5,642				6,150
Derivative asset, at fair value			—				400
Straight-line rent receivable			30,631				30,752
Deferred leasing costs, net			8,512				9,152
Total assets		$	598,916			$	694,172
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgage notes payable, net		$	396,465			$	395,702
Accounts payable, accrued expenses and other liabilities (including amounts due to related parties of $136 and $20 at June 30, 2024 and December 31, 2023, respectively)			15,811				12,975
Notes payable to related parties			150				—
Operating lease liability			54,625				54,657
Below-market lease liabilities, net			1,636				2,061
Deferred revenue			3,450				3,983
Total liabilities			472,137				469,378
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding at June 30, 2024 and December 31, 2023			—				—
Common stock, $0.01 par value, 300,000,000 shares authorized, 2,642,764 and 2,334,340 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively			26				23
Additional paid-in capital			731,491				729,644
Accumulated other comprehensive income			—				406
Distributions in excess of accumulated earnings			(604,738	)			(505,279	)
Total stockholders’ equity			126,779				224,794
Total liabilities and equity		$	598,916			$	694,172

American Strategic Investment Co. Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data)
		Three Months Ended June 30,
			2024				2023
Revenue from tenants		$	15,754			$	15,782
Operating expenses:
Asset and property management fees to related parties			1,927				1,988
Property operating			8,461				8,353
Equity-based compensation			186				2,304
General and administrative			1,964				2,439
Depreciation and amortization			5,151				6,749
Total operating expenses			102,413				21,984
Operating loss			(86,659	)			(6,202	)
Other income (expense):
Interest expense			(5,201	)			(4,707	)
Other income			9				10
Total other expense			(5,192	)			(4,697	)
Net loss and Net loss attributable to common stockholders		$	(91,851	)		$	(10,899	)
Net loss per share attributable to common stockholders — Basic and Diluted		$	(36.48	)		$	(4.77	)
Weighted-average shares outstanding — Basic and Diluted			2,518,176				2,286,797

American Strategic Investment Co. Quarterly Reconciliation of Non-GAAP Measures (Unaudited) (In thousands)
		Three Months Ended
		June 30, 2024				June 30, 2023
Net loss and Net loss attributable to common stockholders		$	(91,851	)		$	(10,899	)
Interest expense			5,201				6,749
Depreciation and amortization			5,151				4,707
EBITDA			(81,499	)			557
Impairment of real estate investments			84,724				151
Equity-based compensation			186				2,304
Other (income) loss			(9	)			(10	)
Asset and property management fees paid in common stock to related parties in lieu of cash			1,077				—
Adjusted EBITDA			4,479				3,002
Asset and property management fees to related parties payable in cash			850				1,988
General and administrative			1,964				2,439
NOI			7,293				7,429
Accretion of below- and amortization of above-market lease liabilities and assets, net			(57	)			(45	)
Straight-line rent (revenue as a lessor)			153				120
Straight-line ground rent (expense as lessee)			27				27
Cash NOI			7,416				7,531
Cash Paid for Interest:
Interest expense			5,201				4,707
Amortization of deferred financing costs			(377	)			(385	)
Total cash paid for interest		$	4,824			$	4,322

Non-GAAP Financial Measures

This release discusses the non-GAAP financial measures we use to evaluate our performance, including Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), Net Operating Income (“NOI”) and Cash Net Operating Income (“Cash NOI”) and Cash Paid for Interest. A description of these non-GAAP measures and reconciliations to the most directly comparable GAAP measure, which is net loss, is provided above.

In December 2022 we announced that we changed our business strategy and terminated our election to be taxed as a REIT effective January 1, 2023, however, our business and operations have not materially changed in the first quarter of 2023. Therefore, we did not change any of the non-GAAP metrics that we have historically used to evaluate performance.

Caution on Use of Non-GAAP Measures

EBITDA, Adjusted EBITDA, NOI, Cash NOI and Cash Paid for Interest should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP metrics.

As a result, we believe that the use of these non-GAAP metrics, together with the required GAAP presentations, provide a more complete understanding of our performance, including relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. However, these non-GAAP metrics are not indicative of cash available to fund ongoing cash needs, including the ability to pay cash dividends. Investors are cautioned that these non-GAAP metrics should only be used to assess the sustainability of our operating performance excluding these activities, as they exclude certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, Net Operating Income, Cash Net Operating Income and Cash Paid for Interest.

We believe that EBITDA and Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization adjusted for (i) impairment charges, (ii) interest income or other income or expense, (iii) gains or losses on debt extinguishment, (iv) equity-based compensation expense, (v) acquisition and transaction costs, (vi) gains or losses from the sale of real estate investments and (vii) expenses paid with issuances of common stock in lieu of cash is an appropriate measure of our ability to incur and service debt. We consider EBITDA and Adjusted EBITDA useful indicators of our performance. Because these metrics’ calculations exclude such factors as depreciation and amortization of real estate assets, interest expense, and equity-based compensation (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), these metrics; presentations facilitate comparisons of operating performance between periods and between other companies that use these measures. Adjusted EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities. Other companies may calculate Adjusted EBITDA differently and our calculation should not be compared to that of other companies.

NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate. NOI is equal to total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss). We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unleveraged basis. We use NOI to assess and compare property level performance and to make decisions concerning the operations of the properties. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss). NOI excludes certain items included in calculating net income (loss) in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other companies that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or our ability to pay dividends.

Cash NOI, is a non-GAAP financial measure that is intended to reflect the performance of our properties. We define Cash NOI as NOI excluding amortization of above/below market lease intangibles and straight-line adjustments that are included in GAAP lease revenues. We believe that Cash NOI is a helpful measure that both investors and management can use to evaluate the current financial performance of our properties and it allows for comparison of our operating performance between periods and to other companies. Cash NOI should not be considered as an alternative to net income, as an indication of our financial performance, or to cash flows as a measure of liquidity or our ability to fund all needs. The method by which we calculate and present Cash NOI may not be directly comparable to the way other companies present Cash NOI.

Cash Paid for Interest is calculated based on the interest expense less non-cash portion of interest expense and amortization of mortgage (discount) premium, net. Management believes that Cash Paid for Interest provides useful information to investors to assess our overall solvency and financial flexibility. Cash Paid for Interest should not be considered as an alternative to interest expense as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808331402/en/

Investors and Media:

Email: investorrelations@americanstrategicinvestment.com

Phone: (866) 902-0063

Source: American Strategic Investment Co.

FAQ

What was American Strategic Investment Co's (NYSE: NYC) revenue for Q2 2024?

American Strategic Investment Co's revenue for Q2 2024 was $15.8 million, remaining stable compared to the same period in 2023.

How much did American Strategic Investment Co's (NYSE: NYC) Adjusted EBITDA grow in Q2 2024?

American Strategic Investment Co's Adjusted EBITDA grew 49% to $4.5 million in Q2 2024, compared to $3.0 million in Q2 2023.

What is the occupancy rate of American Strategic Investment Co's (NYSE: NYC) portfolio as of Q2 2024?

The portfolio occupancy of American Strategic Investment Co expanded to 85.9% in Q2 2024, an increase of 80 basis points from 85.1% in Q2 2023.

What is the pending sale price of 9 Times Square for American Strategic Investment Co (NYSE: NYC)?

American Strategic Investment Co has a definitive agreement to sell 9 Times Square for $63.5 million.