American Strategic Investment Q3 2024 Earnings Report

American Strategic Investment EPS Results

• Actual EPS: -$2.62
• Consensus EPS: -$2.62
• Beat/Miss: Met Expectations
• One Year Ago EPS: -$0.48

American Strategic Investment Revenue Results

• Actual Revenue: $15.45 million
• Expected Revenue: $15.71 million
• Beat/Miss: Missed by -$260.00 thousand
• YoY Revenue Growth: N/A

American Strategic Investment Announcement Details

• Quarter: Q3 2024
• Date: 11/12/2024
• Time: Before Market Opens
• Conference Call Date: Tuesday, November 12, 2024
• Conference Call Time: 11:00AM ET

American Strategic Investment (NYSE:NYC) Co. (NYSE: NYC) owns a portfolio of high-quality commercial real estate located within the five boroughs of New York City.

American Strategic Investment Q3 2024 Earnings Call Transcript

Key Takeaways

• Occupancy and Cash NOI Growth: Q3 occupancy rose 70 basis points to 85.8% year-over-year, driving cash NOI up by $300,000 to $6.8 million through robust leasing and expense control.
• Asset Sales to Delever and Fund Growth: Entered agreement to sell 9 Times Square for $63.5 million (closing Q4 2024) with net proceeds of ~$13.5 million and is marketing 123 William Street and 196 Orchard for further deleveraging and reinvestment.
• Strategic Reinvestment Initiative: Proceeds will be deployed into higher-yielding opportunities—potentially hospitality and operating businesses in markets like New England—leveraging greater operational flexibility outside REIT constraints.
• Portfolio Strength and Market Momentum: The portfolio has a 5.9-year weighted average remaining lease term, with 81% of top tenants investment grade or implied investment grade, and benefits from positive net absorption and return-to-office trends in the NYC office market.
• Q3 Financial Highlights: Revenue was $15.4 million, GAAP net loss of $34.5 million (driven by non-cash impairments), adjusted EBITDA of $3.1 million, net leverage ~60%, weighted average interest rate of 4.9% and 2.5 years average debt maturity.

Presentation

[Operator]

Good morning and welcome to the American Strategic Investment Company's Q3 Earnings Call. My name is Karen, and I'll be your operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star once again. Thank you. I'd like to turn the conference over to Curtis Parker, Senior Vice President. Please go ahead.

[Curtis Parker, SVP at American Strategic Investment]

Thank you. Good morning, everyone, and thank you for joining us for our Q3 2024 Earnings Call. This event is also being webcast in the investor relations section of our website. Joining me today on the call to discuss the quarter's results are Michael Anderson, American Strategic Investment Company's Chief Executive Officer, and Mike LeSanto, the Chief Financial Officer. The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties.

[Curtis Parker, SVP at American Strategic Investment]

Please review the forward-looking and cautionary statements section at the end of the Q3 2024 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements.

[Curtis Parker, SVP at American Strategic Investment]

We refer all of you to our SEC filings, including the Form 10-K filed for the year ended December 31st, 2023, filed on April 1st, 2024, and all subsequent SEC filings for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are only made as of the date of this call. As stated in our SEC filings, the company disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. Also, during today's call, we will discuss non-GAAP financial measures, which we believe will be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

[Curtis Parker, SVP at American Strategic Investment]

A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release, which is posted on our website at www.americanstrategicinvestment.com. Please also refer to our earnings release for more detailed information about what we consider to be implied investment-grade tenants that will be used throughout today's call. I will now turn the call over to Michael Anderson, Chief Executive Officer. Please go ahead, Michael.

[Michael Anderson, CEO at American Strategic Investment]

Thanks, Curtis. Good morning, and thank you all for joining us. Our positive results for the Q3 included additional incremental Cash NOI growth compared to the Q3 of 2023. We achieved this growth through ongoing leasing success and occupancy gains. Specifically, we delivered a 70 basis point expansion in occupancy to 85.8% compared to the same quarter in 2023. Beyond the strong operating execution, as previously announced, we've entered into a definitive agreement to sell our property at 9 Times Square for $63.5 million, which is expected to close in the Q4 of 2024. The sale of this property would reduce leverage on our balance sheet and generate net proceeds of approximately $13.5 million, strengthening our cash position. We incurred a non-cash impairment of $1.9 million for this property in this quarter's results.

[Michael Anderson, CEO at American Strategic Investment]

Importantly, and as we previously shared, we successfully extended our debt on this asset through year-end as we worked to close this transaction. To further strengthen our balance sheet, we are actively marketing 123 William Street and 196 Orchard for sale. We believe these properties are well-positioned to generate significant returns. Proceeds from any sale will be used to diversify our portfolio into higher-yielding assets, as discussed last year. We are excited about this initiative and its potential to increase long-term value. While we are committed to creating long-term value in our portfolio, our focus remains on our current assets. Our portfolio's weighted average remaining lease term was 5.9 years as of September 30th, 2024, with 45% of our leases extending beyond 2030 based on annualized straight-line rent.

[Michael Anderson, CEO at American Strategic Investment]

We believe that this, coupled with a high-quality tenant base featuring top 10 tenants who are 81% investment-grade or implied investment grade, provides significant portfolio stability. We believe our proactive asset management strategy has enhanced our $490 million, 1.2 million sq ft New York City real estate portfolio. Located primarily in Manhattan, our seven office and retail properties benefit from a strong tenant base, including several large investment-grade firms.

[Michael Anderson, CEO at American Strategic Investment]

By focusing on resilient industries and transit-oriented locations, we believe we've positioned ourselves for long-term success. We are further encouraged by Q3 data showing positive net absorption in the New York City office market, reversing a long-running trend and halting vacancy rates. In our own portfolio, we continue to see strong interest from potential lessees for our remaining available space. Our Q3 results highlight the effectiveness of our consistent portfolio management approach.

[Michael Anderson, CEO at American Strategic Investment]

By prioritizing tenant retention, property enhancements, and cost control, we believe we've built a solid foundation for maximizing shareholder value. As we divest certain Manhattan assets to reduce leverage and pursue higher-yielding opportunities, we are confident in our ability to deliver on this strategy and unlock additional value. With that, I'll turn it over to Mike LeSanto to go over the Q3 results. Mike.

[Michael LeSanto, CFO at American Strategic Investment Co.]

Thank you, Michael. Q3 2024 revenue was $15.4 million compared to $16 million in the Q3 of 2023. The company's GAAP net loss attributable to common stockholders was $34.5 million in the Q3 of 2024, compared to a net loss of $9.4 million in the Q3 of 2023, due primarily to non-cash impairments, one of which Michael discussed earlier. For the Q3 of 2024, Adjusted EBITDA was $3.1 million compared to $3.4 million in the Q3 of 2023. Cash net operating income grew by $0.3 million to $6.8 million from $6.5 million in the Q3 of 2023.

[Michael LeSanto, CFO at American Strategic Investment Co.]

The growth was achieved through ongoing leasing success, along with a reduction in G&A and operating expenses. As always, a reconciliation of GAAP net income to Non-GAAP measures can be found in our earnings release and quarterly supplemental on our website.

[Michael LeSanto, CFO at American Strategic Investment Co.]

At quarter end, our balance sheet included net leverage of approximately 60%, a weighted average interest rate of 4.9%, and 2.5 years of weighted average debt maturity. I'll now turn the call back to Michael for some closing remarks.

[Michael Anderson, CEO at American Strategic Investment]

Thank you, Mike, and thank you all for joining us today. Our strong quarterly performance, driven by increased occupancy and growing Cash NOI, is a direct result of our strategic portfolio management. As we begin divesting certain Manhattan assets, we anticipate generating significant cash proceeds and reducing our leverage. These funds will be crucial in expanding our portfolio into new higher-yielding opportunities. We believe this is a strategic move to enhance shareholder value and are committed to keeping you updated on our progress. Operator, please open the lines for questions.

[Operator]

At this time, I'd like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A. Our first question comes from the line of Bryan Maher from B. Riley Securities. Your line is open.

[Curtis Parker, SVP at American Strategic Investment]

Hi, Bryan. Good morning.

[Bryan Maher, Analyst at B Riley Securities]

On the properties that you're marketing for sale, can you tell me kind of how you're going about doing that? Do you have brokers engaged? What type of buyers are looking at these properties, and how would you gauge the level of interest in 123 and Orchard?

[Curtis Parker, SVP at American Strategic Investment]

Sure. Thanks, Bryan. Nice to speak with you this morning. We do have brokers engaged on both of those properties. We're seeing different types of buyers on those two properties. 196 is attracting interest from more family office-type investors. It's a fully occupied retail condo, whereas 123 is attracting more institutional interest. We are seeing some traction. We think interest rates will help, particularly with 196 Orchard, and we've got some interesting leasing that we're optimistic will be executed in the coming months on 123 that we think will drive value there and remain confident that we'll transact on both of those assets.

[Bryan Maher, Analyst at B Riley Securities]

Okay. And to date, you've been a little coy on how you plan to redeploy those dollars. Are you in a position to give us any more color on where those proceeds might be reinvested?

[Curtis Parker, SVP at American Strategic Investment]

Yeah. We're still beginning, I would say, to look at opportunities, given that we've got the transaction on 9 Times Square closing in this quarter, but we see a lot of interesting opportunities in kind of core iconic real estate outside of the New York City market, really looking in kind of New England area with kind of hospitality operating business mix where we would control the real estate and also the operations of the businesses and think that we can drive value there. Given that we've let go of the REIT status, it gives us some more flexibility in how we own and operate those assets and the underlying operations of the businesses, whereas we were hamstrung by REIT restrictions and what we could do with the operations of those sorts of assets previously.

[Bryan Maher, Analyst at B Riley Securities]

Okay. And then just lastly, I mean, I think you touched upon improvements in leasing trends in New York City. Can you give us a little more detail there? What are the types of tenants? What's their motivation? Is it return to office? Is it something else? Anything would be helpful. Thanks.

[Curtis Parker, SVP at American Strategic Investment]

Sure. Yeah. We're certainly seeing return to office being the norm. I think foot traffic in the markets where we own office properties has increased markedly year-over-year. I think we're also seeing a lot of groups that may have taken smaller space on a shorter-term basis during COVID, given opportunistic leasing and work-from-home, that are now returning to office with a full workforce, and so they're looking to expand their footprint. So we're seeing a lot of subtenants looking to convert into direct leases and a lot of new tenants looking into the markets that we're operating and owning assets in, and it's largely driven by that return to office mandate.

[Bryan Maher, Analyst at B Riley Securities]

Okay. Thank you. That's all for me.

[Curtis Parker, SVP at American Strategic Investment]

Thanks, Brian.

[Operator]

I do not see any further questions in the queue. I'm going to turn the call back over to Curtis for closing remarks.

[Curtis Parker, SVP at American Strategic Investment]

Thanks, Operator. I'll actually take this. Thank you all for joining us this morning. We're excited about the quarter and excited about the closing of 9 Times Square this quarter and look forward to sharing updates as we consummate that transaction and begin to deploy those proceeds elsewhere and look forward to sharing those updates.

[Operator]

Thank you all for joining. This concludes today's call. You may now disconnect.

Participants

Executives

• Curtis Parker, SVP
• Michael LeSanto, CFO
• Michael Anderson, CEO

Analysts

• Bryan Maher, Analyst at B Riley Securities