Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark
whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
¨
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act:
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of June 30, 2016,
the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $151,304,000.
Indicate by check mark
whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distributions of securities under a plan confirmed by a court.
As of March 15, 2017,
there were 29,343,441 shares of the registrant’s Common Stock outstanding.
Portions of the registrant’s
definitive proxy statement relating to the registrant’s 2017 Annual Meeting of Shareholders to be filed hereafter are incorporated
by reference into Part III of this Annual Report on Form 10-K.
This Annual Report on Form 10-K, including
information included or incorporated by reference in this Annual Report on or any supplement to this Annual Report, may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of 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 “continue,” or the negative thereof or other and similar expressions. In addition, in some cases, you can identify
forward-looking statements by words or phrases such as “trend,” “potential,” “opportunity,”
“believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,”
“estimate,” “position,” “assume,” “outlook,” “continue,” “remain,”
“maintain,” “sustain,” “seek,” “achieve,” and similar expressions. Such statements
reflect our current views with respect to future events, the outcome of which is subject to certain risks, including among others:
In evaluating such statements, you should
specifically consider the risks identified under the section entitled “Risk Factors” in this Annual Report and in any Annual Report supplement, 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 this Annual Report and other reports filed with
the Securities and Exchange Commission (the “SEC”). All forward-looking statements speak only as of the date of this
Annual Report or, in the case of any documents incorporated by reference in this Annual Report, 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.
PART I
Overview
Trinity Place Holdings Inc. (“Trinity,”
“we”, “our”, or “us”) is a real estate holding, investment and asset management company. Our
business is primarily to own, invest in, manage, develop or redevelop real estate assets and/or real estate related securities.
Currently, our largest asset is a property located at 77 Greenwich Street (“77 Greenwich”) in Lower Manhattan. 77 Greenwich
is a vacant building that is being demolished and under development as a residential condominium tower that also includes plans
for retail and a New York City elementary school. We also own a retail strip center located in West Palm Beach, Florida, former
retail properties in Westbury, New York and Paramus, New Jersey, and, through a joint venture, a 50% interest in a newly constructed
95-unit multi-family property, known as The Berkley, located in Brooklyn, New York. In addition, we control a variety of intellectual
property assets focused on the consumer sector, including our on-line marketplace at FilenesBasement.com launched in September
2015, and we had approximately $230.2 million of federal net operating losses (“NOLs”) at December 31, 2016.
Trinity is the successor to Syms Corp.
(“Syms”), which also owned Filene’s Basement. Syms and its subsidiaries filed for relief under the United States
Bankruptcy Code in 2011. In September 2012, the United States Bankruptcy Court for the District of Delaware entered an order confirming the modified Second
Amended Joint Chapter 11 Plan of Reorganization of Syms Corp. and its Subsidiaries (the “Plan”) and consummated
their reorganization through a series of transactions contemplated by the Plan and emerged from bankruptcy. As part of those transactions,
reorganized Syms merged with and into Trinity, with Trinity as the surviving corporation and successor issuer pursuant to Rule
12g-3 under the Exchange Act. See “Chapter 11 Cases and Plan of Reorganization” below.
Business and Growth Strategies
Our primary business objective is to maximize
the risk adjusted return on investment in our legacy Syms assets and new acquisitions and investments across all points of the
economic cycle. Our strategies to achieve this objective include, among others, the following:
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Continue the development, redevelopment
and leasing of our legacy properties, including the development of 77 Greenwich as a residential condominium tower, with plans
also calling for retail and a New York City elementary school;
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target select submarkets for new acquisitions
and investments, particularly in the boroughs of New York City;
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identify additional investment opportunities
in high-quality multi-family real estate designed to meet the demands of today’s tenants who desire newly constructed and
efficiently designed apartment buildings located in close proximity to public transportation, and to manage those facilities so
as to become the landlord of choice for both existing and prospective tenants;
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identify additional retail and office
properties, including our legacy properties, that present redevelopment and repositioning opportunities;
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opportunistically acquire assets which
increase our market share in the markets in which we concentrate, as well as potential new markets, which exhibit an opportunity
to improve or preserve returns through repositioning (through a combination of capital improvements and shift in marketing strategy),
changes in management focus and leasing;
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explore joint venture opportunities with
existing property owners located in desirable locations, who seek to benefit from the depth of market knowledge and management
expertise we are able to provide, and/or to explore joint venture opportunities with strategic institutional partners, leveraging
our skills as owners and operators;
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enhance our capital structure through
our access to a variety of sources of capital and proactively manage our debt expirations; and
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opportunistically acquire assets or interests
in assets that offer strong long-term fundamentals, but which may be out of favor in the short term.
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Transactions, Development and Other
Activities During 2016
Acquisitions
We formed a 50/50 joint venture
between a wholly-owned subsidiary of ours, and an affiliate of Pacolet Milliken Enterprises, Inc., which purchased The
Berkley, a newly constructed 95- unit multi-family property for $68,875,000 on December 5, 2016. The Berkley was 72.6% leased at
December 31, 2016.
Developments/Redevelopments
We completed the environmental
remediation and began interior demolition at 77 Greenwich, awarded the building demolition contract and completed the
architectural drawings. We continue to work with the New York City School Construction Authority to refine the framework for
the proposed construction of a public school on the lower floors of 77 Greenwich. We also received the necessary approvals
from the New York City Landmarks Preservation Commission, the Mayor’s Office and City Council for this project and have
applied for the necessary building permits.
We completed the façade, roofing,
parking lot and landscaping portions of the redevelopment project at our West Palm Beach property. We will incur additional lease-up
costs as the current vacancies are filled.
We have entered into an agreement
with an investment grade tenant pursuant to which we granted the tenant an option to lease our property in Paramus, New
Jersey. The lease option agreement contemplates the construction of a building by the tenant after our demolition of the
existing buildings and completion of minimal site work. The contemplated use and site plan under the lease option agreement
are subject to town approvals.
We entered into short-term
license agreements with a retail tenant at both our Westbury and Paramus properties in order to mitigate our carry costs
while we evaluate a variety of opportunities.
Secured Debt Transactions
We closed on a loan of $12.6 million secured
by our West Palm Beach, Florida property, of which $9.1 million was outstanding at December 31, 2016. This three-year loan bears
interest at the 30-day LIBOR plus 230 basis points.
Together with our joint venture
partner, we closed on a $42.5 million loan in connection with the acquisition of The Berkley. This 10-year loan
bears interest at the 30-day LIBOR plus 216 basis points.
Equity Transactions
We
established an “at-the-market” common stock offering program (the “ATM Program”) for up to $12.0 million of
common shares and raised gross proceeds of approximately $1.2 million at a weighted average price of $9.76 per share.
Claims
Satisfaction
We paid approximately $7.7 million of approved
claims, including the final payment to the former Majority Shareholder following the occurrence of a General Unsecured Claims Satisfaction
under the Plan.
Competition
The markets in which our properties are
located are inherently competitive. With respect to our properties currently located in Paramus, New Jersey; West Palm Beach, Florida;
Westbury, New York; our joint venture property located in Brooklyn, New York, and with respect to any future real estate assets
that we acquire or develop, we will be competing for some of the same tenants, contractors, lenders and potential purchasers or
investors with respect to other properties within the same markets but owned by other investors.
Competitive factors with respect to
77 Greenwich may have a more material effect on us as it is currently our most significant real estate asset. Various
municipal entities are making and have indicated an intent to continue to make significant investments in the immediate
vicinity of 77 Greenwich to support the growth of the downtown Manhattan neighborhood as a vibrant 24/7 community to work,
visit and live. Several privately funded commercial and residential developments are being constructed or have been proposed
to take advantage of the increasing desirability of the neighborhood. The impact of these changing supply and demand
characteristics is uncertain, and they could positively or negatively impact our evolving plan to maximize the value of 77
Greenwich.
In addition, we will face competition in identifying and completing new investment and acquisition opportunities, including from larger and more established
real estate firms with greater capital resources and access to financing.
Regulatory Matters
Environmental Compliance
Under various federal, state and
local laws, ordinances and regulations, a current or previous owner or operator of real-estate may be required to investigate
and remediate hazardous or toxic substances at a property, and may be held liable to a governmental entity or to third
parties for property damage or personal injuries and for investigation and clean-up costs incurred by the parties in
connection with the contamination. These laws often impose liability without regard to whether the owner or operator had
knowledge of, or was responsible for, the release of the hazardous or toxic substances. The presence of contamination or the
failure to remediate contamination may adversely affect the owner’s ability to sell or lease real estate or to borrow
using the real estate as collateral.
Other federal, state and local laws, ordinances
and regulations require abatement or removal of asbestos-containing materials in the event of demolition or certain renovations
or remodeling, the cost of which may be substantial for certain redevelopment projects that a potential purchaser would want to
undertake with respect to any particular parcel of real estate we own. Such laws, ordinances and regulations also govern emissions
from and exposure to asbestos fibers in the air. Federal and state laws also regulate the operation and removal of underground storage
tanks. In connection with the ownership and management of certain properties, we could be held liable for the costs of remedial
action with respect to these regulated substances or related claims.
Zoning and Planning
In connection with any development or redevelopment
of our properties, whether currently owned or acquired or invest in the future, we will be required to comply
with applicable zoning, land-use, building, occupancy, and other laws and regulations. In many cases we are and will continue to
be required to obtain governmental permits, site plan approvals and/or other authorizations, or seek variances, prior to proceeding
with planned development, acquisition or other activities.
Chapter 11 Cases and Plan of Reorganization
Under the Plan and prior to the General
Unsecured Claim Satisfaction that occurred in 2016, our business plan was focused on the monetization of our commercial real estate
properties, including the development of 77 Greenwich and related development rights, and the resolution of outstanding claims.
During the period from the effective date of the Plan in 2012 through December 31, 2016, we sold 13 properties and paid
approximately $116.2 million in approved claims, of which $7.7 million was paid in 2016.
On or about March 8, 2016, a General Unsecured
Claim Satisfaction occurred under the Plan. On March 14, 2016, we made the final Majority Shareholder payment (as defined in the
Plan) to the former Majority Shareholder in the amount of approximately $6.9 million. Together these satisfied
our remaining payment and reserve obligations under the Plan. Also, in connection with these events and pursuant to the terms
of our Certificate of Incorporation, the board terms of certain of our directors automatically terminated, following which the
Board reappointed those directors, and shares of preferred stock issued in connection with the Plan, which conveyed
certain governance rights in favor of creditors under the Plan, were automatically redeemed, resulting in the extinguishment of
the governance and other rights associated with the shares of preferred stock.
As noted above, upon the effective date
of the Plan of Reorganization in 2012 and pursuant to its terms, Syms and its subsidiaries were reorganized and, subject to
the obligations under the Plan, discharged of all claims. To effect the reorganization, Syms was reincorporated in Delaware by
way of a merger with and into Trinity. As a result of the merger, each share of Syms was converted into one share of Trinity. Under
the Plan, Trinity was to attempt to monetize its real estate assets over time in a manner intended to maximize their value for
the benefit of creditors and shareholders.
As of December 31, 2016, the amount of
remaining multiemployer pension plan claims was $2.5 million (see Note 8 – Pension and Profit Sharing Plans to the Consolidated
Financial Statements). In addition, we had insured claims (see Note 16 – Subsequent Events to the Consolidated Financial
Statements) and other pension liabilities of $3.4 million.
In January 2017, we received approximately $1.0 million as part of a settlement concerning, among other things,
funds that were being held as collateral by our pre-petition insurance carrier on account of escrows and draws on certain letters
of credit.
Prior to the completion of our payment
obligations under the Plan, the Plan provided for a corporate budget composed of certain operating reserves to fund working capital
and our operations while we operated under the Plan. Following the General Unsecured Claims Satisfaction, these reserve obligations
no longer applied.
The descriptions of certain transactions,
payments and other matters contemplated by the Plan above and elsewhere in this Annual Report are summaries only and
do not purport to be complete and are qualified in all respects by the actual provisions of the Plan and related documents.
Trademarks
Various trademarks are controlled by and/or
owned by us, including “Filene’s Basement”®, “Stanley Blacker”®, “Running of the Brides”®
and “An Educated Consumer is Our Best Customer,”® and have been registered with the United States Patent and Trademark
Office.
Financial Reporting and Fiscal Year
In response to the Chapter 11 filing, we
adopted the liquidation basis of accounting effective October 30, 2011. Under the liquidation basis of accounting, assets are stated
at their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation
are accrued to the extent reasonably determinable. Effective February 9, 2015, the closing date of the loan transaction described
in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources, we ceased reporting on the liquidation basis of accounting in light of our available cash resources, the estimated range
of outstanding payments on unresolved claims, and our ability to operate as a going concern. We resumed reporting on the going
concern basis of accounting on February 10, 2015. The impact of this change in accounting is discussed below in Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Change from Liquidation Accounting to Going Concern
Accounting and Note 1 to our consolidated financial statements (Basis of Presentation).
Our fiscal year and that of our predecessor
was historically a 52-week or 53-week period ending on the Saturday on or nearest to February 28. On November 12, 2015, our Board
of Directors approved a change to a December 31 calendar year end, effective with the year ended December 31, 2015. The 2016 year
is based on a calendar year and Fiscal 2015 is based on the period from March 1, 2015 to December 31, 2015.
Employees
As of December 31, 2016, we had eight full-time
employees staffed in executive, management, finance, accounting, operations and administrative capacities.
General Information about Trinity
Trinity was incorporated in Delaware immediately
prior to the effective date of the Plan. Trinity maintains its headquarters at 717 Fifth Avenue, New York, New York, 10022, and
the telephone number is (212) 235-2190.
Available Information
We are a public company and are subject
to the informational requirements of the Exchange Act. Accordingly, we file periodic reports and other information with the SEC.
Such reports and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Room 1580,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov) that
contains reports, proxy and information statements and other information regarding us and other issuers that file electronically.
Our website address is
www.trinityplaceholdings.com
or
www.tphs.com
. We make available without charge, through our website in the “Financials” section, copies of
our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are filed
with or furnished to the SEC. References in this document to our website are not and should not be considered part of this Annual
Report on Form 10-K, and the information on our website is not incorporated by reference into this Annual Report.
Item 1A. RISK
FACTORS
Our business, operations and financial
condition are subject to various risks. Some of these risks are described below, and stockholders should take such risks into account
in evaluating us or any investment decision involving us. This section does not describe all risks that may be applicable to us,
our industry or our business, and it is intended only as a summary of certain material risk factors. Additional risks and uncertainties
that we do not presently know about or that we currently believe are not material may also adversely affect our business. More
detailed information concerning certain of the risk factors described below is contained in other sections of this Annual Report
on Form 10-K. Stockholders should also refer to the other information contained in our periodic reports, including the Cautionary
Note Regarding Forward-Looking Statements section, our consolidated financial statements and the related notes and Management’s
Discussion and Analysis of Financial Condition and Results of Operations section for a further discussion of the risks, uncertainties
and assumptions relating to our business.
Risk Factors Related to Our Business
We have a limited operating history
and have not generated a profit and consequently our business plan is difficult to evaluate and our long term viability cannot
be assured.
Our prospects for financial success are
difficult to assess because we have a limited operating history since emergence from bankruptcy and, more recently, as a going
concern. Our predecessor filed for Chapter 11 relief on November 2, 2011, and we emerged from bankruptcy on September 14, 2012.
We resumed reporting on the going concern basis of accounting on February 10, 2015. Since emergence from bankruptcy, we have generated
limited revenues and had negative cash flow from operations and the development of our business plan will require substantial capital
expenditures. Our business could be subject to any or all of the problems, expenses, delays and risks inherent in the establishment
of a new business enterprise, including, but not limited to capital resources. There can be no assurance that our business will
be successful, that we will be able to achieve or maintain a profitable operation, or that we will not encounter unforeseen difficulties
that may deplete our capital resources more rapidly than anticipated. There can be no assurance that we will achieve or sustain
profitability or positive cash flows from our operating activities.
Much of our current business plan
is focused on the development of 77 Greenwich, and an inability to execute this business plan could have a material adverse effect
on our results of operations.
Our business plan includes the development
or redevelopment of our remaining commercial real estate properties and in particular the development of 77 Greenwich, which currently
makes up a majority of our assets. As a result, our revenues and future growth are heavily dependent on the success of implementing
our business plan to develop 77 Greenwich, which is currently in pre-development. An inability to successfully execute our business
plan with respect to 77 Greenwich could have a material adverse effect on our results of operations.
Our business plan for 77 Greenwich may be adversely impacted
by trends in the Manhattan condominium market.
Our revenues and future growth are partially
dependent on the success of monetizing 77 Greenwich, which is currently in pre-development. Our plans for 77 Greenwich currently
call for approximately 90 condominium apartments, in addition to retail and a New York City elementary school. There
are a variety of factors that determine Manhattan condominium trends and that will ultimately impact the sales and pricing of condominiums
at 77 Greenwich, including among others, supply, changes in interest rates, the availability of home mortgages, foreign exchange
rates and local employment trends, prices and velocity of sales. Sales of condominiums in general, and in particular in Manhattan,
have historically experienced greater volatility than detached single family houses, which may expose us to more risk. These
and other factors fluctuate over time and their status at the time we actually commence sales, which is itself uncertain, is inherently
uncertain. An inability to successfully execute our business plan with respect to 77 Greenwich could have a material adverse effect
on our financial condition and results of operations.
Our development of 77 Greenwich is
dependent upon our ability to obtain commercially reasonable financing.
Our ability to develop 77 Greenwich depends
on our ability to obtain construction financing, permanent financing and/or letters of credit, on commercially reasonable terms.
There can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all. If we are unable
to obtain sufficient financing on commercially reasonable terms, our ability to develop 77 Greenwich could be materially adversely
affected, which could in turn have a material adverse effect on our financial condition and results of operations.
Our investment in property development
may be more costly than anticipated.
We intend to continue to develop or redevelop
our current and future properties. Our current and future development and construction activities may be exposed to the following
risks:
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we may be unable to proceed with the development of properties because we cannot obtain financing
on favorable terms, or at all;
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we may incur construction costs for a development project that exceed our original estimates due
to increases in interest rates and increased materials, labor, leasing or other costs, which could make completion of the project
less profitable because market rents may not increase sufficiently to compensate for the increase in construction costs;
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we may be unable to obtain, or face delays in obtaining, required zoning, land-use, building, occupancy,
and other governmental permits and authorizations, which could result in increased costs and could require us to abandon our activities
entirely with respect to a project;
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we may abandon development opportunities after we begin to explore them and as a result we may
lose deposits or fail to recover expenses already incurred;
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we may expend funds on and devote management’s time to projects which we do not complete;
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we may be unable to complete construction and/or leasing of our rental properties and sales of
our condominium projects (currently limited to 77 Greenwich) on schedule, or at all; and
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we may suspend development projects after construction has begun due to changes in economic conditions
or other factors, and this may result in the write-off of costs, payment of additional costs or increases in overall costs when
the development project is restarted.
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Investment returns from our properties
planned to be developed may be less than anticipated.
Our properties planned to be developed
may be exposed to the following risks:
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we may sell condominiums at 77 Greenwich and other future developed properties at prices, and/or lease commercial and residential
properties at current or future properties, that are less than the prices projected at the time we decide to undertake the development;
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the velocity of leasing at commercial and residential properties, and/or condominium sales at future developed properties may
fluctuate depending on a number of factors, including market and economic conditions, and may result in our investments being less
profitable than we expected or not profitable at all; and
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operating expenses may be greater than projected at the time of development, resulting in our investment being less profitable
than we expected.
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Competition for new acquisitions
may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions.
We may acquire properties when we are presented
with attractive opportunities. We may face competition for acquisition opportunities from other investors, particularly those investors
who are willing to incur more leverage, and this competition may adversely affect us by subjecting us to the following risks:
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an inability to acquire a desired property because of competition from other well-capitalized real estate investors, including
publicly traded and privately held REITs, private real estate funds, domestic and foreign financial institutions, life insurance
companies, sovereign wealth funds, pension trusts, partnerships and individual investors; and
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an increase in the purchase price for such acquisition property.
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If we are unable to successfully acquire
additional properties, our ability to grow our business could be adversely affected. In addition, increases in the cost of acquisition
opportunities could adversely affect our results of operations.
We face risks associated with acquisitions
of and investments in new properties.
We may acquire interests in properties,
individual properties and portfolios of properties, including large portfolios that could significantly increase our size and alter
our capital structure. Our acquisition and investment activities may be exposed to, and their success may be adversely affected
by, the following risks:
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we may be unable to complete proposed acquisitions or other transactions due to an inability to meet required closing conditions;
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we may expend funds on, and devote management time to, acquisition opportunities which we do not complete, which may include
non-refundable deposits;
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we may be unable to finance acquisitions and developments of properties on favorable terms or at all;
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we may be unable to lease our acquired properties on the same terms as contemplated as part of our underwriting;
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acquired properties may fail to perform as we expected;
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our estimates of the costs we incur in renovating, improving, developing or redeveloping acquired properties may be inaccurate;
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we may not be able to obtain adequate insurance coverage for acquired properties; and
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we may be unable to quickly and efficiently integrate new acquisitions and developments, particularly
acquisitions of portfolios of properties, into our existing operations, and therefore our results of operations and financial condition
could be adversely affected.
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In addition, we may acquire properties
subject to both known and unknown liabilities and without any recourse, or with only limited recourse to the seller. As a result,
if a liability were asserted against us arising from our ownership of such a property, we might have to pay substantial sums to
settle it, which could adversely affect our cash flow. Unknown liabilities with respect to properties acquired might include:
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claims by tenants, vendors or other persons arising from dealing with the former owners of the
properties;
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liabilities incurred in the ordinary course of business;
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claims for indemnification by general partners, directors, officers and others indemnified by the
former owners of the properties; and
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liabilities for clean-up of undisclosed environmental contamination.
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Our revenues and the value of our
portfolio are affected by a number of factors that affect investments in leased commercial and residential real estate generally.
We are subject to the general risks of
investing in and owning leased real estate in connection with our existing shopping centers, the residential property owned by
our joint venture and new properties or investments in leased real estate. These risks include the ability to secure leases with
new tenants, the non-performance of lease obligations by tenants, leasehold improvements that will be costly or difficult to remove
or certain upgrades that may be needed should it become necessary to re-rent the leased space for other uses, rights of termination
of leases due to events of casualty or condemnation affecting the leased space or the property or due to interruption of the tenant’s
quiet enjoyment of the leased premises, and obligations of a landlord to restore the leased premises or the property following
events of casualty or condemnation. The occurrence of any of these events, particularly with respect to larger leases at our commercial
real estate properties, could adversely impact our results of operations, liquidity and financial condition.
In addition, if our competitors offer space
at rental rates below our current rates or the market rates, we may lose current or potential tenants to other properties in our
markets. Additionally, we may need to reduce rental rates below our current rates in order to retain tenants upon expiration of
their leases or to attract new tenants. Our results of operations and cash flow may be adversely affected as a result of these
factors.
We may be unable to lease vacant
space, renew our current leases, or re-lease space as our current leases expire.
We cannot assure you that leases at our
properties will be renewed or that such properties will be re-leased at favorable rental rates. If the rental rates for our properties
decrease, our tenants do not renew their leases or we do not re-lease a significant portion of our available space, including vacant
space resulting from tenant defaults or space that is currently unoccupied, and space for which leases are scheduled to expire,
our financial condition, results of operations and cash flows could be materially adversely affected. There are numerous commercial
developers, real estate companies, financial institutions and other investors with greater financial resources than we have that
compete with us in seeking tenants who will lease space in our properties.
The bankruptcy of, or a downturn in the
business of, any of the major tenants at our commercial real estate properties that causes them to reject their leases, or to not
renew their leases as they expire, or renew at lower rental rates, may adversely affect our cash flows and property values. In
addition, retailers at our properties face increasing competition from e-commerce, outlet malls, discount shopping clubs, direct
mail and telemarketing, which could reduce rents payable to us and reduce our ability to attract and retain tenants at our properties
leading to increased vacancy rates at our properties.
In addition, if we are unable to renew
leases or re-lease a property, the resale value of that property could be diminished because the market value of a particular property
will depend in part upon the value of the leases of such property.
Competition may adversely affect
our ability to purchase properties and make other investments.
Our competitors for new acquisitions and
other investments include real estate investment trusts, financial institutions, private funds, insurance companies, pension funds,
private companies, family offices, sovereign wealth funds and individuals. Many of our competitors have greater resources, including
access to equity capital and debt financing, than we do. This competition may result in a higher cost for properties than we wish
to pay.
We are subject to the risks associated
with partnerships and joint ventures.
We formed a joint venture between a wholly-owned
subsidiary of ours and an affiliate of Pacolet Milliken Enterprises, Inc., to acquire and operate The Berkley in Brooklyn, New
York. We may become involved in additional partnerships and/or joint ventures in the future with respect to current or future properties.
Partnerships and joint venture investments may involve risks not otherwise present for investments made or owned solely by us,
including the possibility that our partner or co-venturer might become bankrupt, or may take action contrary to our instructions,
requests, policies or objectives. Other risks of joint venture investments include impasse on decisions, such as a sale, because
neither we nor a joint venture partner would have full control over the joint venture, activities conducted by a partner that have
a negative impact on the joint venture or us, and disputes with our partner. Also, there is no limitation under our organizational
documents as to the amount of our funds that may be invested in joint ventures.
Our ability to develop or redevelop
our properties and enter into new leases with tenants will depend on our obtaining certain permits, site plan approvals and other
governmental approvals from local municipalities, which we may not be able to obtain on a timely basis or at all.
In order to develop or redevelop our properties,
we will be required to obtain certain permits, site plan approvals or other governmental approvals from local municipalities. We
may not be able to secure all the necessary permits or approvals on a timely basis or at all, which may prevent us from developing
or redeveloping our properties according to our business plan. The specific permit and approval requirements are set by the state
and the various local jurisdictions, including but not limited to city, town, county, township and state agencies having control
over the specific properties. Lack of permits and approvals to develop or redevelop our properties could severely and adversely
affect our business.
We have generated minimal revenues
from operations and have limited cash resources, and may be reliant on external sources of financing to fund operations in the
future.
Our revenue generating activities have
not yet produced sufficient funds for profitable operations. In addition, we anticipate that we may be required to set aside specified
minimum levels of liquidity in connection with the development and financing of current and future properties, including 77 Greenwich.
Such amounts could be substantial. As a result, these amounts would not be available for investment or operating activities. Our
continued operation will be dependent upon the success of future operations and will likely require raising additional financing
on acceptable terms. We have relied and may continue to rely substantially upon equity and debt financing to fund our ongoing operations.
There can be no assurance that additional sources of financing would be available to us on commercially favorable terms should
our capital requirements exceed cash available from operations and existing cash and cash equivalents.
The loss of key personnel upon whom
we depend to operate our business or the inability to attract additional qualified personnel could adversely affect our business.
We believe that our future success will
depend in large part on our ability to retain or attract highly qualified management and other personnel, including in particular
our President and Chief Executive Officer, Matthew Messinger. We may not be successful in retaining key personnel or in attracting
other highly qualified personnel. Any inability to retain or attract qualified management and other personnel could have a material
adverse effect on our business, results of operations and financial condition.
The failure of our subsidiaries to
repay or refinance outstanding loans, and any liability we incur as a result of the financing arrangements and our guarantees of
those loans, could have a material adverse impact on our financial condition, results of operations and cash flows.
All of our properties secure loan agreements
that our subsidiaries have entered into. The failure by the borrower subsidiaries to make scheduled repayments under the loan agreements,
or the default of any of the obligations under the loans, would have an adverse impact on our financial condition, results of operations
and cash flows. Upon the occurrence of an event of default, the applicable subsidiary may be required to immediately repay all
amounts outstanding under the respective loan and the lenders may exercise other remedies available to them, including foreclosing
on the respective property securing the loan. See Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources and Note 10 – Loans Payable to our consolidated financial statements,
for further discussion regarding each loan transaction.
Our ability to utilize our NOLs to
reduce future tax payments may be limited as a result of future transactions.
We had approximately $230.2 million of
federal NOLs at December 31, 2016. Section 382 of the Internal Revenue Code, or the Code, contains rules that limit the ability
of a company that undergoes an ownership change, which is generally any change in ownership by certain stockholders of more than
50% of its stock over a three-year period, to utilize its NOLs after the ownership change. These rules generally operate by focusing
on ownership changes involving stockholders who directly or indirectly own 5% or more of the stock of a company and any change
in ownership arising from a new issuance of stock by us. Generally, if an ownership change occurs, the annual taxable income limitation
on the use of NOLs is equal to the product of the applicable long term tax exempt rate and the value of our stock immediately before
the ownership change. If we experience an ownership change, our ability to utilize our NOLs would be subject to significant limitations.
Political and economic uncertainty
could have an adverse effect on us.
We cannot predict how current political
and economic uncertainty, including uncertainty related to taxation, will affect our critical tenants, joint venture partners,
lenders, financial institutions and general economic conditions, including the health and confidence of the consumer and the volatility
of the stock market.
Political and economic uncertainty poses
a risk to us in that it may cause consumers to postpone discretionary spending in response to tighter credit, reduced consumer
confidence and other macroeconomic factors affecting consumer spending behavior, resulting in a downturn in the business of our
tenants. In the event current political and economic uncertainty results in financial turmoil affecting the banking system and
financial markets or significant financial service institution failures, there could be a new or incremental tightening in the
credit markets, low liquidity, and extreme volatility in fixed income, credit, currency and equity markets. Each of these could
have an adverse effect on our business, financial condition and operating results.
We may incur significant costs to
comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.
Our operations and properties are subject
to various federal, state and local laws and regulations concerning the protection of the environment, including air and water
quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator
of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator
may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation
and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to
whether the owner or operator knew of the release of the substances or caused the release. The presence of contamination or the
failure to remediate contamination may impair our ability to sell or lease real estate or to borrow using the real estate as collateral.
Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing
materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers
in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs)
are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological
contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic
or other health effects and symptoms in susceptible individuals. We could incur fines for environmental compliance and be
held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of
environmental contamination or human exposure to contamination at or from our properties.
Each of our properties has been subject
to varying degrees of environmental assessment. To date, these environmental assessments have not revealed any environmental condition
material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in
the extent or known scope of contamination, human exposure to contamination or changes in clean-up or compliance requirements could
result in significant costs to us.
Breaches of information technology
systems could materially harm our business and reputation.
We collect and retain on information technology
systems certain financial, personal and other sensitive information provided by third parties, including tenants, vendors and employees.
We also rely on information technology systems for the collection and distribution of funds.
There can be no assurance that we will
be able to prevent unauthorized access to sensitive information or the unauthorized distribution of funds. Any loss of this information
or unauthorized distribution of funds as a result of a breach of information technology systems may result in loss of funds to
which we are entitled, legal liability and costs (including damages and penalties), as well as damage to our reputation, that could
materially and adversely affect our business and financial performance.
Compliance or failure to comply with
the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs.
The Americans with Disabilities Act (“ADA”)
generally requires that public buildings, including our properties, meet certain federal requirements related to access and use
by disabled persons. These rules are subject to interpretation and change. Noncompliance could result in the imposition of
fines by the federal government or the award of damages to private litigants and/or legal fees to their counsel. If, under the
ADA, we are required to make substantial alterations and capital expenditures in one or more of our operating properties, including
the removal of access barriers, it could adversely affect our financial condition and results of operations.
Our properties are subject to various federal,
state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply
with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will
change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our
cash flow and results of operations.
Risks Related to Our Common Stock
Our common stock is thinly traded
and the price of our common stock may fluctuate significantly.
Our common stock is listed on the NYSE
MKT. Our common stock is thinly traded. We cannot assure stockholders that an active market for our common stock will develop in
the foreseeable future or, if developed, that it will be sustained. As a result stockholders may not be able to resell their common
stock. Because our common stock is thinly traded, even small trades can have a significant impact on the market price of our common
stock. Volatility in the market price of our common stock may prevent stockholders from being able to sell their shares at or above
the price paid for such shares. The market price could fluctuate significantly for various reasons, many of which are beyond our
control, including:
|
·
|
volatility in global and/or U.S. equities markets;
|
|
·
|
changes in the real estate markets in which we operate;
|
|
·
|
our ability to develop or re-develop 77 Greenwich and our other properties;
|
|
·
|
our ability to identify new acquisition and investment opportunities and/or close on previously
announced acquisitions or investments;
|
|
·
|
our financial results or those of other companies in our industry;
|
|
·
|
the public’s reaction to our press releases and other public announcements and our filings
with the SEC;
|
|
·
|
new laws or regulations or new interpretations of laws or regulations applicable to our business;
|
|
·
|
changes in general conditions in the United States and global economies or financial markets, including
those resulting from war, incidents of terrorism or responses to such events;
|
|
·
|
the potential issuance of additional shares of common stock;
|
|
·
|
sales of common stock by our executive officers, directors and significant stockholders;
|
|
·
|
changes in generally accepted accounting principles, policies, guidance, or interpretations; and
|
|
·
|
other factors described in our filings with the SEC, including among others in connection with
the risks noted herein.
|
A sale of a substantial number of
shares of our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the
future.
Finance transactions resulting in a large
amount of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares, could
place downward pressure on the trading price of our stock. In addition, the lack of a robust resale market may require a stockholder
who desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse
impact of the sales on the market price of our stock.
If our stockholders sell, or the market
perceives that our stockholders intend to sell for various reasons, including the ending of restrictions on resale of substantial
amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options, the market
price of our common stock could fall. A significant amount of restricted shares previously issued by us have been registered for
resale on registration statements filed with the SEC, and we agreed to file a resale registration statement with the SEC with respect
to the shares purchased from us and certain selling shareholders in connection with the private placement in February 2017.
In addition, sales of a substantial number
of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem reasonable or appropriate. In addition, until our common stock is more widely held and actively traded,
small sales or purchases will likely cause the price of our common stock to fluctuate dramatically up or down without regard to
our financial health or business prospects.
Stockholders may experience dilution
of their ownership interests because of the future issuance of additional shares of our common stock.
In the future, we may issue additional
equity securities in capital raising transactions or otherwise, resulting in the dilution of the ownership interests of our present
stockholders. We are currently authorized to issue an aggregate of 120,000,000 shares of capital stock consisting of 79,999,997
shares of common stock, two shares of a class of preferred stock (which have been redeemed in accordance with their terms and may
not be reissued), one share of a class of special stock and 40,000,000 shares of blank-check preferred stock. As of December 31,
2016, there were 25,663,820 shares of our common stock and one share of special stock outstanding and, subsequent to year-end,
we issued an additional 3,585,000 shares of common stock in a private placement that closed in February 2017.
Any future issuance of our equity securities
may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value
of our equity securities, because our assets would be owned by a larger pool of outstanding equity. We may need to raise additional
capital through public or private offerings of our common stock or other securities that are convertible into or exercisable for
our common stock. We may also issue such securities in connection with hiring or retaining employees and consultants, as payment
to providers of goods and services, in connection with future acquisitions and investments, development, redevelopment and repositioning
of assets, or for other business purposes. Our board of directors may at any time authorize the issuance of additional common stock
without stockholder approval, unless the approval of our common stockholders is required by applicable law, rule or regulation,
including NYSE MKT regulations, or our certificate of incorporation. The terms of preferred equity securities we may issue in future
transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights
and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance
of any such additional shares of common stock or other securities may create downward pressure on the trading price of our common
stock. There can be no assurance that any such future issuances will not be at a price or have exercise prices below the price
at which shares of the common stock are then traded.
Over 50% of our shares of common
stock are currently controlled by four of our stockholders who may have the ability to influence the election of directors and
the outcome of matters submitted to our stockholders.
Over 50% of our shares of common stock
are controlled by four of our stockholders. As a result, these stockholders may have the ability to significantly influence the
outcome of issues submitted to our stockholders. The interests of these stockholders may not always coincide with our interests
or the interests of other stockholders, and they may act in a manner that advances their best interests and not necessarily those
of other stockholders. The concentration of ownership could also deter unsolicited takeovers, including transactions in which stockholders
might otherwise receive a premium for their shares over then current market prices.
The holder of our special stock has
the right to appoint a member to our board of directors and, consequently, the ability to exert influence over us.
In connection with the investment in us
by Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund (“Third Avenue”), a beneficial holder of 16.3%
of our common stock, Third Avenue was issued one share of a class of special stock and our certificate of incorporation was amended
to provide that, subject to the other terms and conditions of our certificate of incorporation, from the issuance of the one share
of special stock and until the “Special Stock Ownership Threshold” of 2,345,000 shares of common stock is no longer
satisfied, Third Avenue has the right to elect one director to the board of directors. As a result, this stockholder may be able
to exert influence over our policies and management, potentially in a manner which may not be in our best interests or the best
interests of the other stockholders, until such time as the Special Stock Ownership Threshold is no longer satisfied.
In order to protect our ability to
utilize our NOLs and certain other tax attributes, our certificate of incorporation includes certain transfer restrictions with
respect to our stock, which may limit the liquidity of our common stock.
To reduce the risk of a potential adverse
effect on our ability to use our NOLs and certain other tax attributes for U.S. Federal income tax purposes, our certificate of
incorporation contains certain transfer restrictions with respect to our stock by substantial stockholders. These restrictions
may adversely affect the ability of certain holders of our common stock to dispose of or acquire shares of our common stock and
may have an adverse impact on the liquidity of our stock generally.
We have not paid dividends on our
common stock in the past and do not expect to pay dividends on our common stock for the foreseeable future. Any return on investment
may be limited to the value of our common stock.
No cash dividends have been paid on our
common stock. We expect that any income received from operations will be devoted to our future operations and growth. We do not
expect to pay cash dividends on our common stock in the near future. Payment of dividends in the future will depend upon our profitability
at the time, cash available for those dividends, and such other factors as our board of directors may consider relevant. If we
do not pay dividends, our common stock may be less valuable because a return on an investor’s investment will only occur
if our stock price appreciates.
Our charter documents and Delaware
law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.
Our certificate of incorporation and bylaws
and Delaware law contain provisions that could delay or prevent a change in control of us. These provisions could also make it
more difficult for stockholders to elect directors and take other corporate actions. In addition to the matters identified in the
risk factors above relating to the provisions of our certificate of incorporation, these provisions include:
|
·
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a classified board of directors with two-year staggered terms;
|
|
·
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limitations in our certificate of incorporation on acquisitions and dispositions of our common
stock designed to protect our NOLs and certain other tax attributes; and
|
|
·
|
authorization for blank check preferred stock, which could be issued with voting, liquidation,
dividend and other rights superior to our common stock.
|
These and other provisions in our certificate
of incorporation and bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors
might be willing to pay in the future for shares of common stock and result in the market price of the common stock being lower
than it would be without these provisions.
|
Item 1B.
|
UNRESOLVED STAFF COMMENTS
|
None.
Below is certain information regarding
our commercial real estate properties, as of December 31, 2016:
Property Location
|
|
Type of Property
|
|
Building Size
(estimated
rentable
square feet)
|
|
|
Number
of Units
|
|
|
Leased at
December
31, 2016
|
|
|
Occupancy at
December
31, 2016
|
|
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|
Owned Locations
|
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|
New York, New York (77 Greenwich)
|
|
Property under development
|
|
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57,000
|
|
|
|
-
|
|
|
|
N/A
|
(1)
|
|
|
N/A
|
|
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|
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|
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|
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|
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Paramus, New Jersey
|
|
Property under development
|
|
|
77,000
|
|
|
|
-
|
|
|
|
-
|
(2)
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Palm Beach, Florida
|
|
Operating property
|
|
|
112,000
|
|
|
|
-
|
|
|
|
67.8
|
%
(3)
|
|
|
67.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westbury, New York
|
|
Property under development
|
|
|
92,000
|
|
|
|
-
|
|
|
|
-
|
(4)
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Owned Square Feet
|
|
|
|
|
338,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
|
|
|
|
|
|
|
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|
|
223 North 8th Street, Brooklyn, New York - 50%
|
|
Multi-family
|
|
|
65,000
|
|
|
|
95
|
|
|
|
72.6
|
%
(5)
|
|
|
72.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total Square Feet
|
|
|
|
|
403,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
77 Greenwich.
The 77 Greenwich property consists of a vacant six-story commercial
building of approximately 57,000 square feet, yielding approximately 173,000 square feet of zoning floor area as-of-right.
We also have ownership of approximately 60,000
square feet of development rights from adjacent tax lots, one of which is owned
in fee by us and has a 4-story landmark building. We are currently in the pre-development stage for the development of an
over 300,000 gross square foot mixed-use building that corresponds to the approximate total of 233,000 zoning square feet as
described above. The plans call for approximately 90 luxury residential condominiums and 7,600 square feet of retail space
on Greenwich Street, as well as a 476-seat
elementary school serving New York City District 2. The school project has obtained city council
and mayoral approval. Environmental remediation was completed and demolition has started. Demolition is expected to be
completed in the second quarter of 2017 after which foundation work is expected to begin.
|
|
(2)
|
Paramus Property
. The Paramus property consists of a one-story and partial two-story,
73,000 square foot freestanding building and an outparcel building of approximately 4,000 square feet, for approximately
77,000 total square feet of rentable space. The primary building is comprised of approximately 47,000 square feet of ground
floor space, and two separate mezzanine levels of approximately 21,000 and 5,000 square feet. The 73,000 square foot
building was leased pursuant to a short-term
license agreement to Restoration Hardware Holdings, Inc. (NYSE: RH) (“Restoration
Hardware”) from October 15, 2015 to February 29, 2016 when the tenant vacated the property. Subsequently, we entered
into a new
twelve month license agreement with Restoration
Hardware that began on June 1, 2016, which is terminable upon one
month’s notice to the other party. The outparcel building is leased to a tenant whose lease expires on March 31, 2018.
The tenant has been in the space since 1996. The land area of the Paramus property consists of approximately 292,000 square
feet, or approximately 6.7 acres. We have entered into an option agreement with an investment grade tenant who will construct
a new building after we obtain approvals and demolish the existing buildings. The option agreement includes a fully
negotiated lease agreement. This transaction is subject
to town approvals.
|
|
(3)
|
West Palm Beach Property.
The West Palm Beach property consists of a one-story
neighborhood retail strip center that is comprised of approximately 112,000 square feet of rentable area, which includes
three outparcel locations with approximately 11,000 combined square feet. The land area of the West Palm Beach property
consists of approximately 515,000 square feet, or approximately 11.8 acres. Our redevelopment and repositioning of the
center is complete.
We will incur
additional lease-up costs as the current
vacancies are filled. Our two largest tenants, Walmart Marketplace, with
41,662 square feet of space and Tire Kingdom, a national credit tenant who took possession of a 5,400 square feet outparcel, opened for business in June, 2016.
|
|
(4)
|
Westbury Property.
The Westbury property consists of a one-story building and lower
level that in the aggregate contains approximately 92,000 square feet of rentable space. The land area of the Westbury
property consists of approximately 256,000 square feet, or approximately 6.0 acres. As of March 28, 2016, we entered into a
short term license agreement with New York Community Bank to lease a portion of the parking lot of the Westbury property.
This agreement ended on October 31, 2016. We also entered into a twelve month license agreement with Restoration Hardware
that began on June 1, 2016.
|
|
(5)
|
223 North 8
th
Street.
We, through a joint venture with Pacolet Milliken
Enterprises, Inc., indirectly own a 50% interest in the entity formed to acquire and operate The Berkley, a newly
constructed 95-unit multi-family property
encompassing approximately 99,000 gross square feet (65,000 rentable square feet) on 223 North 8
th
Street in North
Williamsburg, Brooklyn, New York. The Berkley is in close proximity to public transportation and offers a full amenity
package. Apartments feature top-of-the-line unit finishes,
central air conditioning and heating and most units have private outdoor space. The property benefits from a 25-year 421a
real estate tax abatement.
|
Lease Expirations
The following chart shows the tenancy,
by year of lease expiration, of our retail properties for all tenants in place as of December 31, 2016, excluding the license agreements
with Restoration Hardware ($ in 000’s):
|
|
Number of Tenants
|
|
|
Leased Square
Feet by Year of
Expiration
|
|
|
Annualized
Rent in Year of
Expiration (A)
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
(B)
|
|
2
|
|
|
|
2,400
|
|
|
$
|
29
|
|
2018
|
|
|
1
|
|
|
|
4,000
|
|
|
|
140
|
|
2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
2020
|
|
|
8
|
|
|
|
12,488
|
|
|
|
245
|
|
2021
|
|
|
2
|
|
|
|
7,063
|
|
|
|
119
|
|
Thereafter
|
|
|
5
|
|
|
|
54,262
|
|
|
|
1,092
|
|
|
|
|
18
|
|
|
|
80,213
|
|
|
$
|
1,625
|
|
|
(A)
|
This is calculated by multiplying the rent in the final month of the lease by 12.
|
|
(B)
|
Reflects tenants with a month to month tenancy.
|
Corporate Headquarters
We lease our corporate headquarters in
New York, New York (approximately 3,500 square feet). The lease expires in September 2017.
|
Item 3.
|
LEGAL PROCEEDINGS
|
We are a party to routine legal proceedings,
which are primarily incidental to our former business. Some of the actions to which we are a party are covered by insurance and
are being defended or reimbursed by our insurance carriers. Based on an analysis performed by our actuary and available information
and taking into account accruals where they have been established, management currently believes that any liabilities ultimately
resulting from this routine litigation will not, individually or in the aggregate, have a material adverse effect on our consolidated
financial position or results of operations. Additionally, as discussed in Item 1. Business, we currently operate under the Plan
that was approved in connection with the resolution of the Chapter 11 cases involving Syms and its subsidiaries.
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Not applicable.
PART II
|
Item 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
On December 21, 2015 our common stock began
trading on the NYSE MKT. Prior to this, our common stock was quoted in the OTCQB. The trading symbol of our common stock is “TPHS”.
The following table summarizes the quarterly
high and low sales prices per share of the common stock as reported in the NYSE MKT for the quarterly periods for the year ended
December 31, 2016. For the period from March 1, 2015 through December 31, 2015, the table summarizes the quarterly high and low
bid quotations prices per share of the common stock as reported in the OTCQB for the period from March 1, 2015 until December 18,
2015 and the high and low sales prices as reported by the NYSE MKT for the period from December 21, 2015 through December 31, 2015.
The OTCQB quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.
|
|
For the Period
January 1, 2016 to
December 31, 2016
|
|
|
For the Period
March 1, 2015 to
December 31, 2015
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
7.18
|
|
|
$
|
5.25
|
|
|
$
|
8.40
|
|
|
$
|
6.50
|
|
Second Quarter
|
|
$
|
8.05
|
|
|
$
|
6.36
|
|
|
$
|
8.01
|
|
|
$
|
6.00
|
|
Third Quarter
|
|
$
|
10.37
|
|
|
$
|
6.91
|
|
|
$
|
6.70
|
|
|
$
|
5.60
|
|
Fourth Quarter
|
|
$
|
10.13
|
|
|
$
|
8.77
|
|
|
$
|
6.30
|
|
|
$
|
5.11
|
|
Outstanding Common Stock and Holders
As of March 15, 2017, we had
34,444,923 shares issued and 29,343,441 shares outstanding and there were approximately 212 record holders of our
common stock.
Dividends
No dividends were paid during
either the year ended December 31, 2016 or the periods from February 10, 2015 to February 28, 2015 and March 1, 2015 to
December 31, 2015.
Recent Sales of Unregistered Securities
In accordance with the terms of the employment
agreement between us and Matthew Messinger, our President and Chief Executive Officer, on December 29, 2016, Mr. Messinger was
granted 30,000 restricted stock unit awards (the “RSU Awards”). The issuance of the RSU Awards was exempt from registration
pursuant to Section 4(a)(2) of the Securities Act.
Issuer Purchases of Equity Securities
We made no stock repurchases during the
year ended December 31, 2016.
Performance Graph
The following graph is a comparison of
the cumulative return of our shares of common stock from October 2, 2012 (the first date following our emergence from bankruptcy
that our common stock was quoted) through December 31, 2016, the Standard & Poor’s 500 Index (the “S&P 500
Index”) and the FTSE National Association of Real Estate Investment Trusts’ (“NAREIT”) All Equity Index,
a peer group index. The graph assumes that $100 was invested on September 14, 2012 in our shares of common stock, the S&P 500
Index and the NAREIT All Equity Index and assumes the reinvestment of all dividends (if applicable), and that no commissions were
paid. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted
in the graph below.
|
Item 6.
|
SELECTED FINANCIAL DATA
|
The following table sets forth our selected
financial data and should be read in conjunction with our Financial Statements and notes thereto included in Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary
Data” in this Annual Report on Form 10-K.
The below selected financial data does
not include any information prior to February 10, 2015 as we were reporting on the liquidation basis of accounting during the periods
prior to February 10, 2015. Under the liquidation basis of accounting, assets are stated at their net realizable value, liabilities
are stated at their net settlement amount and estimated costs over the period of liquidation are accrued to the extent reasonably
determinable. Our accounting basis reverted to the going concern basis of accounting on February 10, 2015, resulting in all remaining
assets and liabilities at that date being adjusted to their net book value less an adjustment for depreciation and/or amortization
calculated from the date we entered liquidation through the date we emerged from liquidation. Accordingly, this change in accounting
basis resulted in a decrease in the reporting basis of the respective assets and liabilities. Also on November 12, 2015, our Board
of Directors approved a change to our fiscal year end from the Saturday closest to the last day of February to a December 31 calendar
year end, effective with the year ended December 31, 2015. The period that resulted from this change is March 1, 2015 to December
31, 2015. Because the bases of accounting are non-comparable to each other as well as due to the change in our fiscal year, we
are not reporting selected financial data for the periods prior to February 10, 2015.
|
|
January 1, 2016 to
December 31, 2016
|
|
|
March 1, 2015 to
December 31, 2015
|
|
|
February 10, 2015 to
February 28, 2015
|
|
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,856
|
|
|
$
|
841
|
|
|
$
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
9,034
|
|
|
|
7,583
|
|
|
|
346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(7,178
|
)
|
|
|
(6,742
|
)
|
|
|
(303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net loss from unconsolidated joint venture
|
|
|
(308
|
)
|
|
|
-
|
|
|
|
-
|
|
Interest income (expense), net
|
|
|
42
|
|
|
|
(246
|
)
|
|
|
(40
|
)
|
Amortization of deferred finance costs
|
|
|
(98
|
)
|
|
|
(63
|
)
|
|
|
(17
|
)
|
Reduction of claims liability
|
|
|
132
|
|
|
|
557
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(7,410
|
)
|
|
|
(6,494
|
)
|
|
|
(360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
|
26
|
|
|
|
67
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders
|
|
$
|
(7,436
|
)
|
|
$
|
(6,561
|
)
|
|
$
|
(362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.29
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic and diluted
|
|
|
25,439
|
|
|
|
20,518
|
|
|
|
20,016
|
|
Balance Sheet Data (in thousands)
|
|
|
December 31, 2016
|
|
|
|
December 31, 2015
|
|
|
|
February 28, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
|
$
|
60,384
|
|
|
$
|
42,638
|
|
|
$
|
31,121
|
|
Investment in unconsolidated joint venture
|
|
|
13,939
|
|
|
|
-
|
|
|
|
-
|
|
Total assets
|
|
|
85,601
|
|
|
|
86,571
|
|
|
|
78,258
|
|
Loans payable, net
|
|
|
48,705
|
|
|
|
39,615
|
|
|
|
39,323
|
|
Total stockholders' equity
|
|
|
28,025
|
|
|
|
24,966
|
|
|
|
5,201
|
|
Cash Flow Data (in thousands)
|
|
|
January 1, 2016 to
December 31, 2016
|
|
|
|
March 1, 2015 to
December 31, 2015
|
|
|
|
February 10, 2015 to
February 28, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows (used in) provided by:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(14,842
|
)
|
|
$
|
(7,034
|
)
|
|
$
|
(114
|
)
|
Investing activities
|
|
|
(26,214
|
)
|
|
|
(6,278
|
)
|
|
|
(511
|
)
|
Financing activities
|
|
|
7,561
|
|
|
|
27,615
|
|
|
|
-
|
|
|
Item 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
Overview
Trinity Place Holdings Inc. (referred to
in this Annual Report on Form 10-K as “Trinity,” “we,” “our,” or “us”) is a real
estate holding, investment and asset management company. Our business is primarily to own, invest in, manage, develop or redevelop
real estate assets and/or real estate related securities. Currently, our largest asset is a property located at 77 Greenwich Street
(“77 Greenwich”) in Lower Manhattan. We also own a retail strip center located in West Palm Beach, Florida and former
retail properties in Westbury, New York and Paramus, New Jersey. Through a joint venture, we own a 50% interest in a newly constructed
95-unit multi-family property, known as The Berkley, located in Brooklyn, New York (see Item 2. Properties for a more detailed
description of our properties). We also continue to evaluate new investment opportunities.
We also control a variety of intellectual
property assets focused on the consumer sector, including our on-line marketplace at FilenesBasement.com, our rights to the Stanley
Blacker® brand, as well as the intellectual property associated with the Running of the Brides® event and An Educated Consumer
is Our Best Customer® slogan. We also had approximately $230.2 million of federal net operating losses (“NOLs”)
at December 31, 2016.
As described in greater detail in Item
1. Business, the predecessor to Trinity is Syms Corp. (“Syms”). Syms and its subsidiaries filed voluntary petitions
for relief under Chapter 11 in the United States Bankruptcy Court for the District of Delaware (the “Court”) in 2011.
In August 2012, the Court entered an order confirming the Syms Plan of Reorganization. In September 2012, the Plan became effective
and the Debtors consummated their reorganization under Chapter 11 through a series of transactions contemplated by the Plan and
emerged from bankruptcy. As part of those transactions, reorganized Syms merged with and into Trinity, with Trinity as the surviving
corporation and successor issuer pursuant to Rule 12g-3 under the Exchange Act.
From the effective date of the Plan in 2012 through the date the General Unsecured Claims Satisfaction
occurred, our business plan was historically focused on the monetization of our commercial real estate properties, including the
development of 77 Greenwich, and the payment of approved claims in accordance with the terms of the Plan. During the period from
the effective date of the Plan through December 31, 2016, we sold 14 properties, including one condominium, and paid approximately
$116.2 million in respect of approved claims, including the final payment to the former Majority Shareholder on March 14, 2016
in the amount of approximately $6.9 million, which followed the occurrence of a General Unsecured Claims Satisfaction on or about
March 8, 2016. As of December 31, 2016, the amount of remaining multiemployer pension plan claims was $2.5 million (see Note 8
– Pension and Profit Sharing Plans to the Consolidated Financial Statements). In addition, we had insured claims (see Note
16 – Subsequent Events to the Consolidated Financial Statements) and other pension liabilities of $3.4 million.
On November 12, 2015, our Board of Directors
approved a change to our fiscal year end from the Saturday closest to the last day of February to a December 31 calendar year end,
effective with the year ending December 31, 2015. The transition period that resulted from this change was March 1, 2015 to December
31, 2015. Because the bases of accounting are non-comparable to each other as well as due to the change in our fiscal year, we
are excluding all information from the period prior to February 10, 2015 from any disclosure or discussion.
Change from Liquidation Accounting to
Going Concern Accounting
In response to the Chapter 11 filing we
adopted the liquidation basis of accounting on October 30, 2011. Under the liquidation basis of accounting, assets are stated at
their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation
are accrued to the extent reasonably determinable. On February 10, 2015, we changed our basis of accounting from the liquidation
basis to the going concern basis of accounting. Accordingly, our accounting basis for real estate and trademark assets were adjusted
to their net book values at the date we changed back to the going concern basis of accounting, adjusted for depreciation and amortization
calculated from the date we entered liquidation through the date we emerged from liquidation. This change in accounting basis resulted
in a decrease in the reporting basis of the respective assets and liabilities.
Critical Accounting Policies and Estimates
Management’s discussion
and analysis of financial condition and results of operations is based upon our consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles in the United States of
America (“GAAP”). The preparation of financial statements in conformity with GAAP requires the use of estimates
and assumptions that could affect the reported amounts in our consolidated financial statements. Actual results could differ
from these estimates. A summary of our significant accounting policies is presented in Note 2 – Summary of Significant Accounting Policies in our consolidated financial statements. Set forth below is
a summary of the accounting policies that management believes are critical to the preparation of the consolidated
financial statements included in this report. 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.
Critical Accounting Policies
As noted above, we resumed reporting on
the going concern basis of accounting on February 10, 2015 and adjusted our assets and liabilities back to their historical cost,
adjusted for a catchup of depreciation and amortization during the liquidation period.
|
a.
|
Real Estate
- Real estate assets are stated at historical cost, less accumulated depreciation
and amortization. All costs related to the improvement or replacement of real estate properties are capitalized. Additions, renovations
and improvements that enhance and/or extend the useful life of a property are also capitalized. Expenditures for ordinary maintenance,
repairs and improvements that do not materially prolong the normal useful life of an asset are charged to operations as incurred.
Depreciation and amortization are determined using the straight-line method over their estimated useful lives, as described in
the table below:
|
Category
|
Terms
|
|
|
Buildings and improvements
|
10 - 39 years
|
Tenant improvements
|
Shorter of remaining term of the lease or useful life
|
|
b.
|
Real Estate Under Development -
We capitalize certain costs related to the development and
redevelopment of real estate including initial project acquisition costs, pre-construction costs and construction costs for each
specific property. Additionally we capitalize operating costs, interest, real estate taxes, insurance, salaries and related costs
of personnel directly involved with the specific project related to real estate under development. Capitalization of these costs begin when
the activities and related expenditures commence, and cease when the property is held available for occupancy upon substantial
completion of tenant improvements, but no later than one year from the completion of major construction activity at which time
the project is placed in service and depreciation commences. Revenue earned under short-term license agreements at properties under
development is offset against these capitalized costs.
|
|
c.
|
Valuation of Long-Lived Assets
– We periodically review long-lived assets for impairment
whenever changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We consider relevant
cash flow, management’s strategic plans, significant decreases in the market value of the asset and other available information
in assessing whether the carrying value of the assets can be recovered. When such events occur, we compare the carrying amount
of the asset to the expected future cash flows, excluding interest charges, from the use and eventual disposition of the asset.
If this comparison indicates an impairment, the carrying amount would then be compared to the estimated fair value of the long-lived
asset. An impairment loss would be measured as the amount by which the carrying value of the long-lived asset exceeds its estimated
fair value. No provision for impairment was recorded during either of the year ended December 31, 2016 or the period ended December
31, 2015.
|
|
d.
|
Income Taxes
– We account for income taxes under the asset and liability method, as
required by the provisions of Accounting Standards Codification (“ASC”) 740-10-30, “Income Taxes”. Under
this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such
assets to be more likely than not.
|
|
e.
|
Deferred Financing Costs
- Deferred financing costs represent commitment fees, legal, title
and other third party costs associated with obtaining commitments for financing which result in a closing of such financing. These
costs are being offset against loans payable in the consolidated balance sheets. These costs are amortized over the terms of the
respective financing agreements. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid
before maturity. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is
determined that the financing will not close.
|
|
f.
|
Revenue Recognition
- Leases with tenants are accounted for as operating leases. Minimum
rents are recognized on a straight-line basis over the term of the respective leases, beginning when the tenant takes possession
of the space. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred
rents receivable. In addition, leases typically provide for the reimbursement of real estate taxes, insurance and other property
operating expenses. These reimbursements are recognized as revenue in the period the expenses are incurred. We make estimates of
the collectability of our accounts receivable related to tenant revenues. An allowance for doubtful accounts has been provided
against certain tenant accounts receivable that are estimated to be uncollectible. Once the amount is ultimately deemed to be uncollectible,
it is written off.
|
|
g.
|
Stock-based Compensation
- We have granted stock-based compensation, which is
described in Note 12 – Stock-Based Compensation to the consolidated financial statements. We account for stock-based
compensation in accordance with ASC 718-30-30, which establishes accounting for stock-based awards exchanged for employee
services. Under the provisions of ASC 718-10-35, stock-based compensation cost is measured at the grant date, based on the
fair value of the award on that date, and is expensed at the grant date (for the portion that vests immediately) or ratably
over the respective vesting periods (see Adoption of New Accounting Principle in Note 2 – Summary of Significant
Accounting Policies in our consolidated financial statements).
|
Results of Operations
Due to the change in our fiscal year end
approved by our Board of Directors on November 12, 2015, the comparable period presented only covers the ten-month period from
March 1, 2015 to December 31, 2015, which is a shorter period than the twelve months ended December 31, 2016 and thus is not directly
comparable.
Results of Operations for the Year
Ended December 31, 2016 Compared to the Ten-Month Period from March 1, 2015 through December 31, 2015
Total rental revenues and tenant reimbursement
revenues for the year ended December 31, 2016 were approximately $1.9 million. Total revenues for the ten-month period ended December
31, 2015 were approximately $841,000. These amounts represent rental revenues and tenant expense reimbursements from our West Palm
Beach, Florida and Paramus, New Jersey properties. The relative increase was mainly due to the increased occupancy at the West
Palm Beach property since June 2016.
Property operating expenses for the year
ended December 31, 2016 were approximately $624,000. Property operating expenses for the ten-month period ended December 31, 2015
were approximately $576,000. These amounts consisted of costs incurred for maintenance and repairs, utilities and general operating
expenses at our West Palm Beach, Florida property.
Real estate tax expense for the year ended
December 31, 2016 was approximately $275,000 for the West Palm Beach, Florida property. Real estate tax expense for the ten-month
period ended December 31, 2015 was approximately $165,000, primarily for the West Palm Beach, Florida property.
General and administrative
expenses for the year ended December 31, 2016 were approximately $5.9 million. Of this amount, approximately $2.8 million
related to stock-based compensation, $1.6 million related to payroll and payroll related expenses and $1.5 million related to
other corporate costs including board fees, corporate office rent and insurance. General and administrative expenses for
the ten-month period ended December 31, 2015 were approximately $4.3 million. Of this amount, approximately $1.4 million
related to stock-based compensation, $1.5 million related to payroll and payroll related costs and $1.4 million related to
other corporate costs including board fees, corporate office rent and insurance. The total increase of $1.6 million in
general and administrate expenses from 2015 mainly related to the vesting of stock-based compensation related to the
December 2015 rights offering.
Professional fees for the year
ended December 31, 2016 were approximately $1.5 million. These costs consisted of general corporate legal fees of
approximately $473,000, bankruptcy related professional fees of approximately $277,000, accounting, tax, audit and audit
related fees of approximately $336,000, intellectual property maintenance, licensing, operating and start-up costs (inclusive
of FilenesBasement.com) of approximately $317,000, and other professional fees of approximately $120,000. Professional fees
for the ten-month period ended December 31, 2015 were approximately $2.2 million which consisted of general corporate legal
fees of approximately $296,000, bankruptcy related professional fees of approximately $449,000, accounting, tax, audit and
audit related fees of approximately $511,000, professional fees related to work on our intellectual property of $937,000 and
other professional fees of approximately $44,000. The total decrease in professional fees of $714,000 from 2015 mainly
related to the one-time startup costs incurred in 2015 related to the launch of our e-commerce marketplace at FilenesBasement.com.
Transaction
related costs of $243,000 represent professional fees and other costs incurred in connection with formation activities and underwriting
and evaluating potential acquisitions and investments which are required to be expensed in accordance with the accounting for
business combinations.
Depreciation and amortization expenses
for the year ended December 31, 2016 were approximately $457,000. These costs consisted of depreciation for the West Palm Beach,
Florida property of approximately $165,000 and the amortization of trademarks, lease commissions and tenant improvements of approximately
$292,000. Depreciation and amortization expenses for the ten-month period ended December 31, 2015 were approximately $309,000.
These costs consisted of depreciation for the West Palm Beach, Florida property of $122,000, as well as amortization of trademarks
and deferred financing costs of $187,000.
Operating loss for the year ended December
31, 2016 was approximately $7.2 million. Operating loss for the ten-month period ended December 31, 2015 was approximately $6.7
million.
Net loss in equity of unconsolidated
joint venture was approximately $308,000. This amount represents our 50% share in the joint venture of the newly constructed
95-unit multi-family property in Brooklyn, New York purchased on December 5, 2016. Our share of the loss is primarily due to
one-time transaction related costs of $198,000 and depreciation and amortization of $110,000.
Interest income, net, for the year ended
December 31, 2016 was approximately $42,000, which consisted of $2.1 million of gross interest expense offset by $1.9 million of
capitalized interest and $223,000 of interest income. Interest expense, net, for the ten-month period ended December 31, 2015 was
approximately $246,000 which consisted of $1.5 million of gross interest expense offset by $1.2 million of capitalized interest
and $87,000 of interest income.
Amortization of deferred financing costs
for the year ended December 31, 2016 was approximately $98,000, which consisted of $443,000 of amortization of costs related to
obtaining the loans encumbering 77 Greenwich and West Palm Beach, Florida partially offset by $345,000 of capitalized costs. Amortization
of deferred financing costs for the ten-month period ended December 31, 2015 was approximately $63,000, which consisted of $291,000
of amortization of costs related to obtaining the loan encumbering 77 Greenwich partially offset by $228,000 of capitalized costs.
We recorded an adjustment to our claims
liability for the year ended December 31, 2016 of $132,000 which was due mainly to the positive settlement of the former Majority
Shareholder liability. We recorded an adjustment to our claims liability for the ten-month period ended December 31, 2015 of $557,000
which was due to the lower settlement of certain claims.
We recorded approximately $26,000 in
tax expense for the year ended December 31, 2016. We recorded tax expense for the ten-month period ended December 31, 2015
of approximately $67,000.
Net loss available to common stockholders
for the year ended December 31, 2016 was approximately $7.4 million. Net loss available to common stockholders for the ten-month
period ended December 31, 2015 was approximately $6.6 million.
Operating Activities for the Period
from February 10, 2015 through February 28, 2015
Total revenues for the period were approximately
$43,000. This represents rental revenues for the West Palm Beach, Florida and Paramus, New Jersey properties.
Property operating expenses for the period
were approximately $14,000 and consists of costs incurred for maintenance and repairs, utilities and general operating costs.
Real estate tax expense for the period
was approximately $12,000 and consists of real estate taxes for the West Palm Beach, Florida property.
General and administrative expenses for
the period were approximately $181,000 and consist of payroll and payroll related costs and costs to maintain the corporate office.
Of this amount approximately $85,000 relates to stock-based compensation.
Professional fees for the period were approximately
$121,000. These costs consist of general corporate legal fees of approximately $20,000, bankruptcy related professional fees of
approximately $30,000, audit fees of approximately $11,000, professional fees related to work on the intellectual property of $29,000
and other professional fees of approximately $31,000.
Depreciation and amortization expenses
for the period were approximately $18,000 and consists of depreciation for the West Palm Beach, Florida property.
Operating loss for the period was approximately
$303,000.
Interest expense for the period was approximately
$40,000 and mainly consists of interest on the $40.0 million loan payable that has a variable interest rate. Interest of $68,000
was capitalized as part of real estate under development.
Amortization of deferred financing costs
for the period was approximately $17,000, which consisted of amortization of costs related to obtaining the loan encumbering 77
Greenwich.
We recorded tax expense of approximately
$2,000 during the period.
Net loss available to common stockholders
for the period was approximately $362,000.
Liquidity and Capital Resources
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:
|
(2)
|
Increases to existing financings and/or other forms of secured financing;
|
|
(3)
|
Proceeds from common stock or preferred equity offerings, including rights offerings;
|
|
(4)
|
Cash flow from operations; and
|
|
(5)
|
Net proceeds from divestitures of 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.
On February 22, 2017, we entered into
two secured lines of credit for an aggregate of $12.0 million with Sterling National Bank as lender. The lines, which are secured
by our properties located in Paramus, New Jersey, and Westbury, New York, mature in 12 months. We have an option to extend the
maturity date of each line for an additional 12 months, subject to certain conditions. The lines, which bear interest at 100 basis
points over prime with a floor of 3.75%, are prepayable at any time without penalty.
On February 14, 2017, we closed on a private placement of common shares in
which we raised gross proceeds of approximately $26.9 million. We also commenced a rights offering to our existing
stockholders for up to 3.7 million shares of common stock on March 3, 2017.
As of December 31, 2016, we had total cash
of $8.4 million, of which approximately $4.7 million was cash and cash equivalents and approximately $3.7 million was restricted
cash. As of December 31, 2015, we had total cash of $41.8 million, of which approximately $38.2 million was cash and cash equivalents
and approximately $3.6 million was restricted cash. Restricted cash represents reserves required to be restricted under the 77
Greenwich Loan agreement (see Note 10 – Loans Payable to our consolidated financial statements), and the West Palm Beach,
Florida tenant security deposits and loan related reserves. The decrease in total cash during the period from December 31, 2015,
to December 31, 2016 was primarily the result of the final payment made to the former Majority Shareholder, the purchase of a 50%
joint venture interest in a newly constructed 95-unit multi-family property in Brooklyn, New York, as well as payments for operating
expenses and pre-development activities.
On May 11, 2016, our subsidiary that owns
our West Palm Beach, Florida property, commonly known as The Shoppes at Forest Hill, entered into a loan agreement with Citizens
Bank, National Association, as Lender, pursuant to which the Lender agreed to provide a loan in the amount of up to $12.6 million,
subject to the terms and conditions as set forth in the loan agreement. Our subsidiary borrowed $9.1 million at closing. This loan
requires interest-only payments and bears interest at the 30-day LIBOR plus 230 basis points. The effective rate at December 31,
2016 was 3.07%. This loan matures on May 11, 2019, subject to extension until May 11, 2021 under certain circumstances. The Borrower
can prepay the Loan at any time, in whole or in part, without premium or penalty.
On December 8, 2015, we consummated a common
stock rights offering and the transactions contemplated by the Investment Agreements, dated as of September 11, 2015, between the
Company and each of MFP Partners, L.P. and Third Avenue. The consummation of the rights offering and the transactions contemplated
by the Investment Agreements resulted in our issuance of 5,000,000 shares of common stock whereby we received gross proceeds of
$30.0 million.
On February 9, 2015, a newly
formed special purpose entity and wholly-owned subsidiary of ours (“TPH Borrower”) entered into a loan
agreement pursuant to which the lenders agreed to extend credit to TPH Borrower in the amount of $40.0 million (the “77
Greenwich Loan”). The 77 Greenwich Loan can be increased up to $50.0 million subject to satisfaction of certain
conditions. The 77 Greenwich Loan bears interest at a rate per annum equal to the greater of (i) the rate published from time
to time in the Wall Street Journal as the U.S. Prime Rate plus 1.25% (the “Contract Rate”) or (ii) 4.50% and
requires interest only payments through maturity. The interest rate on the 77 Greenwich Loan was 4.50% through December 16,
2015, when it was then increased to 4.75% through December 15, 2016 and then increased to 5.00%. The 77 Greenwich Loan was
extended to August 8, 2017 after having satisfied certain conditions. We are currently evaluating our options which include,
among others, an extension of the existing loan or refinancing as part of a construction loan. The collateral for the 77
Greenwich Loan is our fee interest in 77 Greenwich and the related air rights owned by us with respect to 77 Greenwich. See
Note 10 – Loans Payable to our consolidated financial statements for further discussion.
We had claims liabilities recorded in
our consolidated financial statements of approximately $2.5 million and $10.5 million at December 31, 2016 and December 31, 2015,
respectively. The claims liability included the multi-employer pension plan of approximately $2.5 million and $3.4 million at December
31, 2016 and December 31, 2015, respectively, which is payable in quarterly distributions of $0.2 million until completely paid
(see Note 8 - Pension and Profit Sharing Plans to our consolidated financial statements) as well as the obligation to the former
Majority Shareholder of approximately $7.1 million at December 31, 2015. On March 8, 2016, a General Unsecured Claim Satisfaction
occurred and on March 14, 2016, we made the final payment to the Majority Shareholder in the amount of approximately $6.9 million.
Following this General Unsecured Claim Satisfaction and final payment to the former Majority Shareholder as described above “-
Claims Payment Process,” we satisfied our payment and reserve obligations under the Plan and we had no liability to the
former Majority Shareholder at December 31, 2016 (see Note 13 - Related Party Transactions to our consolidated financial statements).
At-The-Market Equity Offering Program
In December 2016, we entered into an
"at-the-market" equity offering program (the “ATM Program”), to sell up to an aggregate of $12.0
million of our common stock. During the year ended December 31, 2016, we sold 120,299 shares of our
common stock for aggregate gross proceeds of $1.2 million (excluding approximately $218,000 in professional and
brokerage fees) at a weighted average price of $9.76 per share. As of December 31, 2016, $10.8 million of
common stock remained available for issuance under the ATM Program.
Cash Flows
Cash Flows for the year ended December
31, 2016
Net cash used in operating activities was
approximately $14.8 million for the year ended December 31, 2016. The net cash used during this period reflects the net loss available
to common stockholders of $7.4 million, a decrease in the obligation to the former Majority Shareholder of $6.9 million, a decrease
in pension liabilities of $1.4 million and a decrease in accounts payable and accrued expenses of $1.5 million. This was partially
offset by the impact of non-cash stock-based compensation expense of $2.8 million.
Net cash used in investing activities for
year ended December 31, 2016 was approximately $26.2 million. The net cash used reflects the payments for certain property development
and redevelopment costs of $11.9 million capitalized as part of the real estate under development as well as our equity investment
of $14.3 million in the joint venture which acquired The Berkley property in Brooklyn, New York.
Net cash provided by financing activities
for year ended December 31, 2016 was approximately $7.6 million. This amount was primarily from the net proceeds of $8.6 million
received from the WPB Loan, net proceeds of $0.9 million from the at-the-market stock offering, net of professional fees and brokerage
fees, partially offset by the repurchase of approximately $2.0 million of common stock units from certain employees in order to
pay withholding taxes on those common stock units for those employees.
Cash Flows for the period ended December
31, 2015
Net cash used in operating activities was
approximately $7.0 million for the period ended December 31, 2015. The net cash used during this period reflects the net loss available
to common stockholders of $6.6 million as well as a decrease in other liabilities, primarily lease settlement liabilities, of $16.2
million and a decrease in accounts payable and accrued expenses of $1.9 million related mainly to payments of other non-lease related
claims, as well as a decrease in pension liabilities of $1.2 million. This was partially offset by a reduction of $18.0 million
of restricted cash for the use of paying claims, as well as the impact of non-cash stock-based compensation expense of $1.4 million.
Net cash used in investing activities for
the period ended December 31, 2015 was approximately $6.3 million. The net cash used reflects the payments for certain property
development and redevelopment costs capitalized as part of the real estate under development.
Net cash provided by financing activities
for period ended December 31, 2015 was approximately $27.6 million. This amount was primarily from the net proceeds of $29.6 million
from the Rights Offering, partially offset by the repurchase of approximately $2.0 million of common stock units from certain employees
in order to pay withholding taxes on those common stock units for those employees.
Contractual Obligations
The following table summarizes our contractual
obligations as of December 31, 2016 (dollars in thousands):
|
|
Payments Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
|
Less than
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
More than
5 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims (1)
|
|
$
|
2,547
|
|
|
$
|
813
|
|
|
$
|
1,734
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating lease (2)
|
|
|
225
|
|
|
|
225
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loans payable (3)
|
|
|
49,100
|
|
|
|
40,000
|
|
|
|
9,100
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense on loans (4)
|
|
|
1,915
|
|
|
|
1,517
|
|
|
|
398
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total—Contractual Obligations
|
|
$
|
53,787
|
|
|
$
|
42,555
|
|
|
$
|
11,232
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(1)
|
This represents the remaining claims payments we expect to make for the multiemployer pension plan.
Payments are made quarterly extending through 2019.
|
|
(2)
|
This represents the operating lease payments for our corporate office in New York, New
York.
|
|
(3)
|
See Note 10 - Loans Payable to our consolidated financial statements for further discussion regarding
the loans. This excludes $395,000 of net deferred financing costs.
|
|
(4)
|
This represents the estimated monthly interest expense on the loans that are typically paid on
the first business day after the month incurred based on interest rates in effect on December 31, 2016.
|
Capital Expenditures
We estimate that for the year ending
December 31, 2017, we may incur approximately $9.9 million of capital expenditures and development or redevelopment
expenditures (including tenant improvements and leasing commissions) on existing properties. We anticipate funding these
capital expenditures through a combination of operating cash flow, additional property level mortgage financings,
construction financing, issuance of equity and cash on hand. Future property acquisitions may require substantial capital
investments for refurbishment and leasing costs.
Inflation
Substantially all of our leases provide
for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases.
We believe that inflationary increases will be at least partially offset by the contractual rent increases and expense escalations
described above.
Net Operating Losses
We believe that our U.S. Federal NOLs
as of the emergence date were approximately $162.8 million and believe our U.S. Federal NOLs at December 31, 2016 were
approximately $230.2 million. 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 strategy. Accordingly a valuation allowance of $95.3
million was recorded as of December 31, 2016.
We believe that the rights offering and
the redemption of the Syms shares owned by the former Majority Shareholder that occurred in connection with our emergence from
bankruptcy on September 14, 2012 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 currently believe that our NOLs are not subject
to an annual limitation under Code Section 382. However, if we were to undergo a subsequent ownership change in the future, our
NOLs could be subject to limitation under Code Section 382.
Notwithstanding the above, even if all
of our regular U.S. Federal income tax liability for a given year is reduced to zero by virtue of utilizing our NOLs, we may still
be subject to the U.S. Federal alternative minimum tax and to state, local or other non-Federal income taxes.
On February 12, 2015, we amended our certificate
of incorporation to, among other things, add a new provision to the certificate of incorporation intended to help preserve certain
tax benefits primarily associated with our NOLs (the “Protective Amendment”). The Protective Amendment 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.
Accounting Standards Updates
See Note 2 - Summary of Significant Accounting
Policies to our consolidated financial statements.
|
Item 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Market risks that arise from changes in
interest rates, foreign currency exchange rates and other market changes affect market sensitive instruments. In pursuing our business
strategies, the primary market risk which we are exposed to is interest rate risk.
Low to moderate levels of inflation during
the past several years have favorably impacted our operations by stabilizing operating expenses. At the same time, low inflation
has had the indirect effect of reducing our ability to increase tenant rents. However, our tenant leases include expense reimbursements
and other provisions to minimize the effect of inflation.
The market risk associated with financial
instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Of
our long-term debt, which consists of secured financings, the 77 Greenwich Loan bears interest at a rate per annum equal to the
greater (i) of the rate published from time to time by the Wall Street Journal as the U.S. Prime Rate plus 1.25% or (ii) 4.50%
and the WPB Loan bears interest at the 30-day LIBOR plus 230 basis points. Our interest rate risk management objectives are to
limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. From time to time,
we may enter into interest rate hedge contracts such as swaps, collars, and treasury lock agreements in order to mitigate our interest
rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative
purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.
As of December 31, 2016, our debt consisted
of two variable-rate secured mortgage loans payable, with carrying values of $40.0 million and $9.1 million, which approximated
their fair value at December 31, 2016. Changes in market interest rates on our variable-rate debt impact the fair value of the
loans and interest incurred or cash flow. For instance, if interest rates increase 100 basis points and our variable-rate debt
balance remains constant, we expect the fair value of our obligation to decrease, the same way the price of a bond declines as
interest rates rise. The sensitivity analysis related to our variable–rate debt assumes an immediate 100 basis point move
in interest rates from their December 31, 2016 levels, with all other variables held constant. A 100 basis point increase in market
interest rates would result in a decrease in the fair value of our variable-rate debt by $0.5 million. A 100 basis point decrease
in market interest rates would result in an increase in the fair value of our variable-rate debt by $0.5 million. These amounts
were determined by considering the impact of hypothetical interest rates changes on our borrowing costs, and assuming no other
changes in our capital structure.
As of December 31, 2016, the debt on the
unconsolidated joint venture, in which we hold a 50% interest, consisted of a variable-rate secured mortgage loan payable, with
a carrying value of $42.5 million (see Note 14 – Investment in Unconsolidated Joint Venture to the consolidated financial
statements), which approximated its fair value at December 31, 2016. A 100 basis point increase in market interest rates on the
loan taken out by the unconsolidated joint venture would result in a decrease in the fair value of the joint ventures’ variable-rate
debt by $0.5 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of the
joint ventures’ variable-rate debt by $0.5 million. These amounts were determined by considering the impact of hypothetical
interest rates changes on borrowing costs, and assuming no other changes in the capital structure of the joint venture.
As the information presented above includes
only those exposures that existed as of December 31, 2016, it does not consider exposures or positions arising after that date.
The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest
rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations. As the
information presented above includes only those exposures that existed as of December 31, 2016, it does not consider exposures
or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains
or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude
of the fluctuations.
|
Item 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
See Index to Financial Statements and Supplemental
Data on page 35.
|
Item 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
|
None.
|
Item 9A.
|
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in
Rule 13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material
information otherwise required to be set forth in our periodic reports.
As of the end of the period covered by
this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures. Based upon that evaluation as of the end of the period covered by this report, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective to give reasonable assurances to the
timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure
under the Exchange Act and the rules and regulations promulgated thereunder.
Management’s Report on Internal
Control Over Financial Reporting
Management of Trinity Place Holdings Inc.
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Securities Exchange Act of 1934, as amended (the “Exchange Act”) Rule 13(a)-15(f). Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment
of the effectiveness of our internal control over financial reporting as of December 31, 2016 as required by Exchange Act Rule
13(a)-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control–Integrated Framework
(2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).
Based on our evaluation under the COSO criteria, our management concluded that our internal control over financial reporting was
effective as of December 31, 2016 to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
BDO USA, LLP, an independent registered
public accounting firm that audited our Financial Statements included in this Annual Report on Form 10-K, has issued an attestation
report on the effectiveness of our internal control over financial reporting as of December 31, 2016, which appears below in this
Item 9A.
Changes in Internal Controls Over Financial
Reporting
There have been no changes in our internal
control over financial reporting during the period from September 30, 2016 to December 31, 2016 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation report of the independent
registered public accounting firm
Board of Directors and Stockholders
Trinity Place Holdings Inc.
New York, New York
We have audited Trinity
Place Holdings Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). Trinity Place Holdings Inc.’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the company’s internal control over financial reporting based on our audit.
We conducted our audit
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Trinity
Place Holdings Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31,
2016, based on the COSO criteria.
We also
have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Trinity Place Holdings Inc. as of December 31, 2016 and 2015, the consolidated statements of
operations and comprehensive loss for the year ended December 31, 2016 and the period from March 1, 2015 to December 31, 2015
and the period from February 10, 2015 to February 28, 2015, the consolidated statements of changes in net assets for the
period from March 1, 2014 to February 9, 2015 (liquidation basis), the consolidated statements of stockholders’ equity
for the year ended December 31, 2016 and the periods from March 1, 2015 to December 31, 2015 and February 10, 2015 to
February 28, 2015, the consolidated statements of changes in net assets for the periods from March 1, 2014 to February 10,
2015, and the consolidated statements of cash flows for the year ended December 31, 2016 and the period from March 1, 2015 to
December 31, 2015 and our report dated March 15, 2017 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
New York, New York
March 15, 2017
|
Item 9B.
|
OTHER INFORMATION
|
None.
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
|
|
For the
Year Ended
December 31, 2016
|
|
|
For the Period
March 1, 2015 to
December 31, 2015
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders
|
|
$
|
(7,436
|
)
|
|
$
|
(6,561
|
)
|
Adjustments to reconcile net loss available to common stockholders to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
457
|
|
|
|
309
|
|
Amortization of deferred finance costs
|
|
|
98
|
|
|
|
63
|
|
Stock-based compensation expense
|
|
|
2,782
|
|
|
|
1,446
|
|
Deferred rents receivable
|
|
|
(343
|
)
|
|
|
(200
|
)
|
Reduction of claims liability
|
|
|
(135
|
)
|
|
|
(230
|
)
|
Equity in net loss from unconsolidated joint venture
|
|
|
308
|
|
|
|
-
|
|
Distribution of cumulative earnings from unconsolidated joint venture
|
|
|
39
|
|
|
|
-
|
|
(Increase) decrease in operating assets:
|
|
|
|
|
|
|
|
|
Restricted cash, net
|
|
|
(88
|
)
|
|
|
17,978
|
|
Receivables, net
|
|
|
(189
|
)
|
|
|
59
|
|
Prepaid expenses and other assets, net
|
|
|
(472
|
)
|
|
|
(517
|
)
|
Decrease in operating liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(1,544
|
)
|
|
|
(1,943
|
)
|
Pension liabilities
|
|
|
(1,388
|
)
|
|
|
(1,241
|
)
|
Obligation to former Majority Shareholder
|
|
|
(6,931
|
)
|
|
|
-
|
|
Other liabilities, primarily lease settlement liabilities
|
|
|
-
|
|
|
|
(16,197
|
)
|
Net cash used in operating activities
|
|
|
(14,842
|
)
|
|
|
(7,034
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Additions to real estate
|
|
|
(11,928
|
)
|
|
|
(6,278
|
)
|
Investment in unconsolidated joint venture
|
|
|
(14,286
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(26,214
|
)
|
|
|
(6,278
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from loan, net
|
|
|
8,647
|
|
|
|
-
|
|
Settlement of stock awards
|
|
|
(1,966
|
)
|
|
|
(1,943
|
)
|
Proceeds from sale of common stock, net
|
|
|
880
|
|
|
|
29,558
|
|
Net cash provided by financing activities
|
|
|
7,561
|
|
|
|
27,615
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(33,495
|
)
|
|
|
14,303
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
38,173
|
|
|
|
23,870
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
4,678
|
|
|
$
|
38,173
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,073
|
|
|
$
|
1,483
|
|
Taxes
|
|
$
|
38
|
|
|
$
|
67
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Adjustment of liability related to stock-based compensation
|
|
$
|
(5,140
|
)
|
|
$
|
5,140
|
|
Adjustment to retained earnings for capitalized stock-based compensation expense
|
|
$
|
(541
|
)
|
|
$
|
-
|
|
Accrued development costs included in accounts payable and accrued expenses
|
|
$
|
1,195
|
|
|
$
|
1,866
|
|
Capitalized amortization of deferred financing costs
|
|
$
|
345
|
|
|
$
|
228
|
|
Capitalized stock-based compensation expense
|
|
$
|
5,024
|
|
|
$
|
3,266
|
|
See Notes to Consolidated Financial Statements
Trinity Place Holdings Inc.
Notes to Consolidated Financial Statements
December 31, 2016
NOTE 1 – BASIS OF PRESENTATION
General Business Plan
Trinity Place Holdings
Inc. (“Trinity,” “we”, “our”, or “us”) is a real estate holding, investment
and asset management company. Our business is primarily to own, invest in, manage, develop or redevelop real estate assets
and/or real estate related securities. Currently, our largest asset is a property located at 77 Greenwich Street
(“77 Greenwich”) in Lower Manhattan. 77 Greenwich is a vacant building that is being demolished and under
development as a residential condominium tower that also includes plans for retail and a New York City elementary school. We
also own a retail strip center located in West Palm Beach, Florida, former retail properties in Westbury, New York and
Paramus, New Jersey, and, through a joint venture, a 50% interest in a newly constructed 95-unit multi-family property, known
as The Berkley, located in Brooklyn, New York. In addition, we control a variety of intellectual property assets focused
on the consumer sector, including our on-line marketplace at FilenesBasement.com launched in September 2015, and we had
approximately $230.2 million of federal net operating losses (“NOLs”) at December 31, 2016.
Trinity is the successor to Syms Corp.
(“Syms”), which also owned Filene’s Basement. Syms and its subsidiaries filed for relief
under the United States Bankruptcy Code in 2011. In September 2012, the Syms Plan of Reorganization became effective and Syms and
its subsidiaries consummated their reorganization under Chapter 11 through a series of transactions contemplated by the Plan and
emerged from bankruptcy. As part of those transactions, reorganized Syms merged with and into Trinity, with Trinity as the surviving
corporation and successor issuer pursuant to Rule 12g-3 under the Exchange Act.
On or about March 8, 2016, a General
Unsecured Claim Satisfaction occurred under the Plan. On March 14, 2016, we made the final Majority Shareholder payment (as
defined in the Plan) to the former Majority Shareholder in the amount of approximately $6.9 million. Together these satisfied
our remaining payment and reserve obligations under the Plan. Also, in connection with these events and pursuant to the
terms of our Certificate of Incorporation, the board terms of certain of our directors automatically terminated, following
which the Board reappointed those directors, and shares of preferred stock issued in connection with the Plan,
which conveyed certain governance rights in favor of creditors under the Plan, were automatically redeemed, resulting in the
extinguishment of the governance and other rights associated with the shares of preferred stock.
We have also explored and continue to explore
monetizing our intellectual property assets, including our rights to the Stanley Blacker® brand, and the intellectual property
associated with the Running of the Brides® event and An Educated Consumer is Our Best Customer® slogan. In September 2015,
we launched our on-line marketplace at FilenesBasement.com.
Change in Basis of Accounting
In response to the Chapter 11 filing, we
adopted the liquidation basis of accounting effective October 30, 2011. Under the liquidation basis of accounting, assets are stated
at their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation
are accrued to the extent reasonably determinable. Effective February 9, 2015, the closing date of the 77 Greenwich loan transaction
described in Note 10 - Loans Payable, we ceased reporting on the liquidation basis of accounting in light of our available cash
resources, the estimated range of outstanding payments on unresolved claims, and our ability to operate as a going concern. We
resumed reporting on the going concern basis of accounting on February 10, 2015 which resulted in all remaining assets and liabilities
at that date being adjusted to their historic carrying values reduced by depreciation and/or amortization calculated from the date
we entered liquidation through the date we emerged from liquidation. Accordingly, this change in accounting basis resulted in a
decrease in the reporting basis of the respective assets and liabilities.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
a.
|
Accounting Period
- Our fiscal year has historically been a 52-week or 53-week period ending
on the Saturday on or nearest to February 28. On November 12, 2015, our Board of Directors approved a change to a December 31 calendar
year end, effective with the year ended December 31, 2015. The 2016 year is based on a calendar year and Fiscal 2015 is based on
the period from March 1, 2015 to December 31, 2015.
|
|
b.
|
Principles of Consolidation -
The consolidated financial statements include our
accounts and those of our subsidiaries, which are wholly-owned or controlled by us. Entities which we do not control through
our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are
accounted for under the equity method. Accordingly, our share of the earnings of these unconsolidated joint ventures is
included in our consolidated statement of operations (see Note 14 - Investment in Unconsolidated Joint Venture). All
significant intercompany balances and transactions have been
eliminated.
|
We consolidate
a variable interest entity (the “VIE”) in which we are considered the primary beneficiary. The primary beneficiary
is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance
and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant
to the VIE. As of December 31, 2016, we had no VIEs.
We assess
the accounting treatment for each joint venture. This assessment includes a review of each joint venture or limited liability
company agreement to determine which party has what rights and whether those rights are protective or participating. For all
VIEs, we review such agreements in order to determine which party has the power to direct the activities that most
significantly impact the entity's economic performance. In situations where we and our partner approve, among other things,
the annual budget, receive a detailed monthly reporting package, meet on a quarterly basis to review the results of the joint
venture, review and approve the joint venture's tax return before filing, and approve all leases that cover more than a
nominal amount of space relative to the total rentable space at each property, we do not consolidate the joint venture as we
consider these to be substantive participation rights that result in shared power of the activities that most significantly
impact the performance of the joint venture. Our joint venture agreements may contain certain protective rights such as
requiring partner approval to sell, finance or refinance the property and the payment of capital expenditures and operating
expenditures outside of the approved budget or operating plan.
|
c.
|
Investments in Unconsolidated Joint Ventures -
We account for our investments in
unconsolidated joint ventures under the equity method of
accounting. We also assess our
investments in
unconsolidated joint ventures for recoverability, and if it is
determined that a loss in value of the investment is other than
temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on
the joint ventures' projected discounted cash flows. We do not believe that the value of our equity investment was impaired
at December 31, 2016.
|
|
d.
|
Use of Estimates
- The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ
from those estimates.
|
|
e.
|
Reportable Segments
- As of December 31, 2016 and December 31, 2015, we operated in one
reportable segment, commercial real estate.
|
|
f.
|
Concentrations of Credit Risk
- Our financial instruments that are exposed to concentrations
of credit risk consist primarily of cash and cash equivalents. We hold substantially all of our cash and cash equivalents in banks.
Such cash balances at times exceed federally-insured limits. We have not experienced any losses in such accounts.
|
|
g.
|
Real Estate
- Real estate assets are stated at historical cost, less accumulated depreciation
and amortization. All costs related to the improvement or replacement of real estate properties are capitalized. Additions, renovations
and improvements that enhance and/or extend the useful life of a property are also capitalized. Expenditures for ordinary maintenance,
repairs and improvements that do not materially prolong the normal useful life of an asset are charged to operations as incurred.
Depreciation and amortization are determined using the straight-line method over the estimated useful lives described in the table
below:
|
Category
|
|
Terms
|
|
|
|
Buildings and improvements
|
|
10 - 39 years
|
Tenant improvements
|
|
Shorter of remaining term of the lease or useful life
|
|
h.
|
Real Estate Under Development
- We capitalize certain costs related to the development and
redevelopment of real estate including initial project acquisition costs, pre-construction costs and construction costs for each
specific property. Additionally, we capitalize operating costs, interest, real estate taxes, insurance and salaries and related
costs of personnel directly involved with the specific project related to real estate under development. Capitalization of these
costs begins when the activities and related expenditures commence, and ceases when the property is held available for occupancy
upon substantial completion of tenant improvements, but no later than one year from the completion of major construction activity
at which time the project is placed in service and depreciation commences. Revenue earned under short-term license agreements at
properties under development is offset against these capitalized costs.
|
|
i.
|
Valuation of Long-Lived Assets
- We periodically review long-lived assets for impairment
whenever changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We consider relevant
cash flow, management’s strategic plans and significant decreases in the market value of the asset and other available information
in assessing whether the carrying value of the assets can be recovered. When such events occur, we compare the carrying amount
of the asset to the expected future cash flows, excluding interest charges, from the use and eventual disposition of the asset.
If this comparison indicates an impairment, the carrying amount would then be compared to the estimated fair value of the long-lived
asset. An impairment loss would be measured as the amount by which the carrying value of the long-lived asset exceeds its estimated
fair value. No provision for impairment was recorded during either of the year ended December 31, 2016 or the period ended December
31, 2015.
|
|
j.
|
Trademarks and Customer Lists
- Trademarks and customer lists are stated at cost, less accumulated
amortization. Amortization is determined using the straight-line method over useful lives of 10 years.
|
|
k.
|
Fair Value Measurements
- We determine fair value in accordance with Accounting Standards
Codification (“ASC”) 820-10-05 for financial assets and liabilities. This standard defines fair value, provides guidance
for measuring fair value and requires certain disclosures.
|
Fair value is defined as the
price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at
the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices
or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve
some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments
or market and the instruments’ complexity.
Assets and liabilities disclosed
at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical
levels, which are defined by ASC 820-10-35, are directly related to the amount of subjectivity associated with the inputs to fair
valuation of these assets and liabilities. Determining which category an asset or liability falls within the hierarchy requires
significant judgment and we evaluate our hierarchy disclosures each quarter.
Level 1
- Valuations based
on quoted prices for identical assets and liabilities in active markets.
Level 2
- Valuations based
on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in
active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that
are observable or can be corroborated by observable market data.
Level 3
- Valuations based
on unobservable inputs reflecting management’s own assumptions, consistent with reasonably available assumptions made by
other market participants. These valuations require significant judgment.
|
l.
|
Cash and Cash Equivalents
- Cash and cash equivalents include securities with original maturities
of three months or less when purchased.
|
|
m.
|
Restricted Cash -
Restricted cash represents amounts required to be restricted under the
77 Greenwich Loan agreement (see Note 10 - Loans Payable) and the West Palm Beach, Florida tenant and property related security
deposits.
|
|
n.
|
Revenue Recognition
- Leases with tenants are accounted for as operating leases. Minimum
rents are recognized on a straight-line basis over the term of the respective leases, beginning when the tenant takes possession
of the space. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred
rents receivable. In addition, leases typically provide for the reimbursement of real estate taxes, insurance and other property
operating expenses. These reimbursements are recognized as revenue in the period the expenses are incurred. We make estimates of
the collectability of our accounts receivable related to tenant revenues. An allowance for doubtful accounts has been provided
against certain tenant accounts receivable that are estimated to be uncollectible. Once the amount is ultimately deemed to be uncollectible,
it is written off.
|
|
o.
|
Stock-Based Compensation
– We have granted stock-based compensation, which is described
below in Note 12 – Stock-Based Compensation. We account for stock-based compensation in accordance with ASC 718-30-30, which
establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC 718-10-35, stock-based
compensation cost is measured at the grant date, based on the fair value of the award on that date, and is expensed at the grant
date (for the portion that vests immediately) or ratably over the respective vesting periods (see Adoption of New Accounting Principle
below).
|
|
p.
|
Income Taxes
- We account for income taxes under the asset and liability method as required
by the provisions of ASC 740-10-30, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance for deferred
tax assets for which we do not consider realization of such assets to be more likely than not.
|
ASC 740-10-65 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under
ASC 740-10-65, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater
than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10-65 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of
both December 31, 2016 and December 31, 2015, we had determined that no liabilities are required in connection with unrecognized
tax positions. As of December 31, 2016, our tax returns for the prior three years are subject to review by the Internal Revenue
Service.
We are subject to certain federal,
state, and certain local and franchise taxes.
|
q.
|
Earnings (loss) Per Share
- We present both basic and diluted earnings (loss) per share.
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise
or conversion would result in a lower per share amount. Shares issuable under restricted stock units that have vested but not yet
settled were excluded from the computation of diluted earnings (loss) per share because the awards would have been antidilutive
for the periods presented.
|
|
r.
|
Deferred Financing Costs
– Deferred financing costs represent commitment fees, legal,
title and other third party costs associated with obtaining commitments for mortgage financing which result in a closing of such
financing. These costs are being offset against loans payable in the consolidated balance sheets. These costs are amortized over
the terms of the related financing arrangements. Unamortized deferred financing costs are expensed when the associated debt is
refinanced or repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period
in which it is determined that the financing will not close.
|
|
s.
|
Deferred Lease Costs
– Deferred lease costs consist of fees and direct costs incurred
to initiate and renew operating leases and are amortized on a straight-line basis over the related lease term
|
|
t.
|
Underwriting Commissions and Costs
– Underwriting commissions and costs incurred in
connection with our stock offerings are reflected as a reduction of additional paid-in-capital.
|
|
u.
|
Reclassifications -
Certain prior year financial statement amounts have been reclassified
to conform to the current year presentation due to the adoption of Accounting Standards Update (“ASU”) 2016-09 and
ASU 2015-03 as described below.
|
|
v.
|
Change in Estimate
- Management periodically reviews the assumptions used in determining
the accrued postretirement benefit obligation (see Note 8 – Pension and Profit Sharing Plans). In 2016, management changed
the base mortality table used in determining the accrued postretirement benefit obligation to the newer RP-2016 table. The accrued postretirement benefit obligation increased by approximately
$0.8 million at December 31, 2016 and was due mainly to the effect of this change in estimate.
|
Liquidation Basis of Accounting
The liquidation basis of accounting is
appropriate when the liquidation of a company appears imminent and the net realizable value of its assets is reasonably determinable.
Accordingly, we implemented the liquidation basis of accounting effective on October 30, 2011. Under this basis of accounting,
assets are stated at their net realizable value and liabilities are stated at their net settlement amount and estimated costs over
the period of liquidation are accrued to the extent reasonably determinable.
|
a.
|
Accounting Period
- Fiscal 2014 ended on February 28, 2015. Our fiscal year historically
has been 52-week or 53-week period ending on the Saturday on or nearest to February 28. The fiscal year ended February 28, 2015
was comprised of 52 weeks.
|
|
b.
|
Accrued Liquidation Costs
– Under the liquidation basis of accounting,
management was required to make significant estimates and judgments regarding the anticipated costs of liquidation. These
estimates were subject to change based upon work required for the claims settlement process, changes in market conditions and
changes in the strategy surrounding the sale of properties.
|
|
c.
|
Pension Expense
– We may, at our option, terminate our pension plans. Under the liquidation
basis of accounting, actuarial valuation analyses are prepared annually to determine the fair value, or termination value, of the
plans. These valuations and the ultimate liability to settle the plans may result in adjustments driven by changes in assumptions
due to market conditions. The liabilities related to these pension plans will be settled at the same payout percentage as all other
unsecured creditor claims.
|
|
d.
|
Income Taxes
– To the extent that income taxes, including alternate minimum income
taxes, were expected to be incurred as a result of the liquidation of our properties, such costs are reflected in accrued expenses.
As of February 9, 2015 a total of $1.2 million had been accrued. As part of the process of estimating the amount of income taxes
to be incurred during the liquidation period, management has taken into consideration the extent to which NOLs are expected to
be available to offset the amount of income otherwise taxable on the sale of properties. This involved a process of estimating
the extent to which each property had a fair value in excess of its tax basis (a “built in gain”) as of the date of
emerging from bankruptcy on September 14, 2012. We have analyzed the impact of the change in control that occurred on September
14, 2012 when we emerged from bankruptcy could have on our ability to utilize our NOLs. While the analysis is complex and subject
to subjective determinations and uncertainties, we believed that we should qualify for treatment under Section 382(l)(5) of the
Internal Revenue Code of 1986, as amended (the “Code”). As a result, we believed that our NOLs are not subject to an
annual limitation under Code Section 382 even though an “ownership change” (as defined under Code Section 382) occurred
on September 14, 2012. However, if we were to undergo a subsequent ownership change in the future, our NOLs could be subject to
limitation under Code Section 382. We believed that our U.S. Federal NOLs as of the emergence date were approximately $162.8 million
and believed our U.S. Federal NOLs at February 9, 2015 were approximately $195.0 million.
|
Since under liquidation basis
accounting all future estimated taxes are accrued as of the reporting date net of the benefit expected to be derived from available
NOLs, it is not appropriate to record a separate deferred tax asset on the same NOLs. Accordingly, a valuation allowance of approximately
$89.5 million was recorded through February 9, 2015.
|
e.
|
Use of Estimates
– The preparation of the accompanying consolidated financial statements
in conformity with the liquidation basis of accounting requires management to make significant estimates and assumptions about
future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities. These estimates
include, among others, realizable value of real estate and other assets, accrued liquidation costs, lease settlement costs, and
deferred tax assets. Actual results could differ from those estimates.
|
Estimated Costs of Liquidation
Significant estimates and judgment were
required to determine the accrued costs of liquidation, which reflects all other remaining operating expenses and contractual commitments
such as payroll and related expenses, lease termination costs, professional fees and other outside services to be incurred during
the liquidation period. Our accrued costs that were expected to be incurred in liquidation and recorded payments made related to
the accrued liquidation costs through February 9, 2015 were as follows (dollars in thousands):
|
|
Liquidation Period
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
February 9,
|
|
|
Adjustments
|
|
|
|
|
|
March 1,
|
|
Estimated Costs of Liquidation
|
|
2015
|
|
|
to Reserves
|
|
|
Payments
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate related carrying costs
|
|
$
|
259
|
|
|
$
|
(5,119
|
)
|
|
$
|
(5,583
|
)
|
|
$
|
10,961
|
|
Professional fees
|
|
|
641
|
|
|
|
958
|
|
|
|
(3,983
|
)
|
|
|
3,666
|
|
Payroll related costs
|
|
|
372
|
|
|
|
(227
|
)
|
|
|
(2,118
|
)
|
|
|
2,717
|
|
Other
|
|
|
-
|
|
|
|
(453
|
)
|
|
|
(115
|
)
|
|
|
568
|
|
|
|
$
|
1,272
|
|
|
$
|
(4,841
|
)
|
|
$
|
(11,799
|
)
|
|
$
|
17,912
|
|
The assumptions underlying the estimated
accrued costs of liquidation of $1.3 million as of February 9, 2015 contemplated all of our operating expenses and contractual
commitments such as payroll and related expenses, lease termination costs, property carrying costs and professional fees to determine
the estimated costs to be incurred during the liquidation period which concluded on February 9, 2015.
The following discussion explains the
adjustments to the costs of liquidation reserves as recorded during the period from March 2, 2014 through February 9, 2015:
Adjustments to decrease the reserve for
real estate related carrying costs of approximately $5.1 million were recorded during the period ended February 9, 2015. The adjustments
were mainly the result of reversing the estimated selling expenses and operating expenses for the remaining four properties accrued
through the historical anticipated liquidation period of July 2015, as well as the expenses related to the sale of the Secaucus
Lease.
Adjustments to increase the reserve for
professional fees of approximately $1.0 million were recorded during the period from March 2, 2014 through February 9, 2015. The
majority of the increase reflects the increased costs resulting from the complexities of litigation related to the bankruptcy cases.
Adjustments to decrease the reserve for
payroll and related liquidation expenses of approximately $0.2 million were primarily the result of the reversal of estimated future
payroll costs through the historical anticipated liquidation period of July 2015.
The assumptions underlying the estimated
accrued costs of liquidation of $17.9 million as of March 1, 2014 contemplated all changes in estimates resulting from the Plan.
We reviewed all of our operating expenses
and contractual commitments such as payroll and related expenses, lease termination costs, property carrying costs and professional
fees to determine the estimated costs to be incurred during the liquidation period. The liquidation period, which was initially
anticipated to conclude in August 2012, was amended in fiscal 2012 to conclude in July 2015 based on expectations that substantially
all of our real estate properties were likely to be monetized prior to the end of 2014, with a short period thereafter to conclude
the liquidation
.
Accounting Standards Updates
In February 2017, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-05, Other Income-Gains and
Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) to add guidance for partial sales of nonfinancial assets,
including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether
the transfer of certain assets qualified for sale treatment. ASU 2017-05 reduces the number of potential accounting models that
might apply and clarifies which model does apply in various circumstances. ASU 2017-05 is effective for annual reporting periods
after December 16, 2017, including interim reporting period within that reporting period. The adoption of ASU 2017-05 is not expected
to have a material impact on our consolidated financial statements.
In January, 2017, the FASB issued ASU No. 2017-01, Business Combinations
(Topic 805): Clarifying the Definition of a Business. The guidance clarifies the definition of a business and provides
guidance to assist with determining whether transactions should be accounted for as acquisitions of assets or businesses. The
main provision is that an acquiree is not a business if substantially all of the fair value of the gross assets is
concentrated in a single identifiable asset or group of assets. We adopted the guidance on the issuance date
effective January 5, 2017. We expect that most of our real estate acquisitions will be considered asset
acquisitions under the new guidance and that transaction costs will be capitalized to the investment basis which is then
subject to a purchase price allocation based on relative fair value.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments (A Consensus of the FASB Emerging Issues Task Force).
The
ASU provides final guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration
payments made after a business combination, distributions received from equity method investees, separately identifiable cash flows
and application of the predominance principle, and others. The amendments in the ASU are effective for fiscal years beginning after
December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim
period. We have not yet adopted this new guidance and are currently evaluating the impact of adopting this new accounting standard
on our consolidated financial statements.
In March 2016, FASB issued ASU 2016-09,
Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09
changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income
taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU
2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. If
an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes
that interim period and the entity must adopt all of the amendments from ASU 2016-09 in the same period. We elected
to early adopt ASU 2016-09 as of January 1, 2016 and the adoption has resulted in an adjustment of a reduction in real estate,
net of $0.5 million, a reduction in liability related to stock-based compensation of $5.1 million, an increase in additional paid-in
capital of $4.4 million and an increase in retained earnings of $0.2 million (see Adoption of New Accounting Principle below).
In February 2016, FASB issued ASU No. 2016-02,
“Leases (Topic 842).” The new standard requires a lessor to classify leases as either sales-type, finance or operating.
A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to
the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor
does not convey risks and rewards or control, an operating lease results. The new standard is effective for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required
for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements, with certain practical expedients available. The new standard establishes
a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet
for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification
affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required
for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period
presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our
pending adoption of the new standard on our consolidated financial statements.
In September 2015, FASB issued ASU No.
2015-16, “Business Combination (Topic 805): Simplifying the Accounting for Measurement Period Adjustments.” ASU 2015-16
requires adjustments to provisional amounts that are identified during the measurement period to be recognized in the reporting
period in which the adjustment amounts are determined. This includes any effect on earnings of changes in depreciation, amortization,
or other income effects as a result of the change to the provisional amounts, calculated as if the accounting had been completed
at the acquisition date. ASU 2015-16 requires an entity to disclose the nature and amount of measurement-period adjustments recognized
in the current period, including separately the amounts in current-period income statement line items that would have been recorded
in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The
adoption of ASU 2015-16 in 2016 did not impact our consolidated financial statements.
In August 2015, the FASB issued ASU 2015-14,
“Revenue from Contracts with Customers: Deferral of Effective Date”. ASU 2015-14 defers the effective date of adoption
of ASU 2014-09, “Revenue from Contracts with Customers”, to annual reporting periods beginning after December 15, 2017,
including interim periods within that reporting period. ASU 2014-09 was issued in May 2014 and it supersedes nearly all existing
revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services
are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods
or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates
may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual
periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a
full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect
certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized
at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending
adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which the standard will
be adopted.
In April 2015, the FASB issued ASU No.
2015-04, “Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s
Defined Benefit Obligation and Plan Assets”. ASU 2015-04 provides a practical expedient that permits the entity to measure
defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply
that practical expedient consistently from year to year. ASU 2015-04 is effective for fiscal years beginning after December 15,
2016, and interim periods within fiscal years beginning after December 15, 2017. The adoption of ASU 2015-04 is not expected to
have a material impact on our consolidated financial statements.
In April 2015, the FASB issued ASU No.
2015-03, “Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 modifies
the treatment of debt issuance costs from a deferred charge to a deduction of the carrying value of the financial liability. We
adopted ASU 2015-03 effective January 1, 2016, resulting in the reclassification of $385,000 from prepaid expenses and other assets,
net, to loans payable, net, as of December 31, 2015. There was no effect on the results of operations for any period presented.
In February 2015, the FASB issued ASU No.
2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis.” ASU 2015-02 amends the consolidation
requirements in ASC 810, “Consolidation” and changes the required consolidation analysis. The amendments in ASU No.
2015-02 affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. The amendments
impact limited partnerships and legal entities, the evaluation of fees paid to a decision maker or service provider of a variable
interest, the effect of fee arrangements on the primary beneficiary determination, the effect of related parties on the primary
beneficiary determination, and certain investment funds. The adoption of ASU 2015-02 in 2015 did not have any impact on our consolidated
financial statements.
Adoption of New Accounting Principle
As noted above, FASB issued ASU 2016-09,
Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new
standard contains several amendments that will simplify the accounting for employee share-based payment transactions, including
the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity
or liabilities, and classification on the statement of cash flows. The changes in the new standard eliminate the accounting for
excess tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in the income tax provision
or in additional paid-in capital. We elected adoption of ASU 2016-09 in the first quarter of 2016 using the prospective approach.
For the three months ended March 31, 2016, we recognized all excess tax benefits and tax deficiencies as income tax expense or
benefit as a discrete event. No income tax benefit or expense was recognized in the quarterly period ended March 31, 2016
as a result of the adoption of ASU 2016-09. There will be no change to retained earnings with respect to excess tax benefits, as
this is not applicable to us as any tax benefits associated with stock compensation were historically not recorded with any windfalls
or shortfalls that would give rise to APIC pool adjustments and is not expected to be recognized in the foreseeable future. The
treatment of forfeitures has not changed as we are electing to continue our current process of estimating the number of forfeitures.
As such, this has no cumulative effect on retained earnings. With the early adoption of ASU 2016-09 on a prospective basis, the
adoption had no impact on our prior period statement of operations, statement of cash flow, balance sheet and statement of stockholders
equity.
NOTE 3 – REAL ESTATE, NET
As of December 31, 2016 and December 31,
2015, real estate, net consisted of the following (dollars in thousands):
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Real estate under development
|
|
$
|
53,712
|
|
|
$
|
37,856
|
|
Buildings and building improvements
|
|
|
5,794
|
|
|
|
3,868
|
|
Tenant improvements
|
|
|
569
|
|
|
|
400
|
|
Land
|
|
|
2,452
|
|
|
|
2,452
|
|
|
|
|
62,527
|
|
|
|
44,576
|
|
Less: accumulated depreciation
|
|
|
2,143
|
|
|
|
1,938
|
|
|
|
$
|
60,384
|
|
|
$
|
42,638
|
|
Real estate under development consists
of the 77 Greenwich, Paramus, New Jersey and Westbury, New York properties. Buildings and building improvements, tenant improvements
and land consist of the West Palm Beach, Florida property.
Depreciation expense amounted to $205,000
and $121,000 for the year ended December 31, 2016 and the period ended December 31, 2015, respectively.
NOTE 4 – PREPAID EXPENSES AND
OTHER ASSETS, NET
Prepaid expenses and other assets, net
include the following (dollars in thousands):
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Trademarks and customer lists
|
|
$
|
2,090
|
|
|
$
|
2,090
|
|
Prepaid expenses
|
|
|
867
|
|
|
|
564
|
|
Lease commissions
|
|
|
433
|
|
|
|
416
|
|
Other
|
|
|
417
|
|
|
|
266
|
|
|
|
|
3,807
|
|
|
|
3,336
|
|
Less: accumulated amortization
|
|
|
1,658
|
|
|
|
1,407
|
|
|
|
$
|
2,149
|
|
|
$
|
1,929
|
|
NOTE 5 - TAXES
The provision for taxes is as follows (dollars
in thousands):
|
|
Year Ended
December
31, 2016
|
|
|
March 1, 2015
through
December
31, 2015
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
26
|
|
|
|
41
|
|
|
|
$
|
26
|
|
|
$
|
41
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Provision for taxes
|
|
$
|
26
|
|
|
$
|
41
|
|
The following is a reconciliation of income
taxes computed as the U.S. Federal statuary rate to the provision for income taxes:
|
|
Year Ended
December
31, 2016
|
|
|
March 1, 2015
through
December
31, 2015
|
|
|
|
|
|
|
|
|
Statuary Federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes
|
|
|
7.5
|
%
|
|
|
16.2
|
%
|
Non-taxable bargain purchase gain
|
|
|
-6.9
|
%
|
|
|
-7.4
|
%
|
Change of valuation allowance
|
|
|
-35.7
|
%
|
|
|
-44.4
|
%
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
-0.1
|
%
|
|
|
-0.6
|
%
|
The composition of our deferred tax assets and liabilities is
as follows (dollars in thousands):
|
|
Year Ended
December
31, 2016
|
|
|
March 1, 2015
through December
31, 2015
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Pension costs
|
|
$
|
1,801
|
|
|
$
|
2,589
|
|
Stock-based compensation reserves not currently deductible
|
|
|
(220
|
)
|
|
|
71
|
|
Net operating loss carry forwards
|
|
|
88,968
|
|
|
|
83,486
|
|
Depreciation (including air rights)
|
|
|
1,685
|
|
|
|
2,058
|
|
AMT Credit
|
|
|
3,181
|
|
|
|
3,181
|
|
Accrued expenses
|
|
|
212
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
95,627
|
|
|
$
|
91,427
|
|
Valuation allowance
|
|
|
(95,327
|
)
|
|
|
(91,277
|
)
|
Deferred tax asset after valuation allowance
|
|
$
|
300
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangibles
|
|
$
|
(300
|
)
|
|
$
|
(150
|
)
|
Other
|
|
|
-
|
|
|
|
-
|
|
Total deferred tax liabilities
|
|
$
|
(300
|
)
|
|
$
|
(150
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Long term deferred tax assets
|
|
|
-
|
|
|
|
-
|
|
Total deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At December 31, 2016, we had federal net
operating loss (“NOLs”) carry forwards of approximately $230.2 million. These net operating losses will expire in years
through fiscal 2034. At December 31, 2016, we also had state NOL carry forwards of approximately $100.2 million. These NOL’s
expire between 2029 and 2034. We also had the New York State and New York City prior net operating loss conversion (“PNOLC”)
subtraction pools of approximately $31.1 million and $25.5 million, respectively. The conversion to the PNOLC under the New York
State and New York City corporate tax reforms does not have any material tax impact.
Based on management’s assessment,
it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategy.
Accordingly a valuation allowance of $91.3 million was recorded as of December 31, 2015. The valuation allowance was adjusted by
approximately $4.0 million during the year ended December 31, 2016 to $95.3 million.
NOTE 6 – RENTAL REVENUE
Our properties are leased to various
national and local companies under leases expiring through 2031. As of December 31, 2016, 17 tenants leased approximately
67.8% of the space at the West Palm Beach, Florida property, two tenants leased 100% of the space at the Paramus, New Jersey
property, and one tenant leased 100% of the space at the Westbury, New York property. One tenant at the Paramus property and
the tenant at the Westbury property leased their space pursuant to short-term license agreements for most of 2016.
Future minimum rentals under noncancellable
terms of tenants’ operating leases as of December 31, 2016 are as follows (dollars in thousands):
Year ended:
|
|
Future
Minimum
Rentals
|
|
|
|
|
|
|
2017
|
|
$
|
1,227
|
|
2018
|
|
|
1,083
|
|
2019
|
|
|
1,069
|
|
2020
|
|
|
1,040
|
|
2021
|
|
|
831
|
|
Thereafter
|
|
|
7,212
|
|
|
|
$
|
12,462
|
|
NOTE 7 – FAIR VALUE MEASUREMENTS
The fair values of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses, and other liabilities approximated their carrying value because of
the short-term nature based on Level 1 inputs. The fair value of the loans payable approximated their carrying values as they are
variable-rate instruments.
On an annual recurring basis, we are required
to use fair value measures when measuring plan assets of our pension plans. As we elected to adopt the measurement date provisions
of ASC 715, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” as of March 4,
2007, we are required to determine the fair value of our pension plan assets as of December 31, 2016. The fair value of pension
plan assets was $10.9 million at December 31, 2016. These assets are valued in active liquid markets.
NOTE 8 – PENSION AND PROFIT SHARING
PLANS
|
a.
|
Pension Plans
- Syms sponsored a defined benefit pension plan for certain eligible
employees not covered under a collective bargaining agreement. The pension plan was frozen effective December 31, 2006. As of December
31, 2016 and December 31, 2015, we had a recorded liability of $3.4 million and $3.1 million, respectively, which is included in
pension liabilities on the accompanying consolidated balance sheets. This liability represents the estimated cost to us of terminating
the plan in a standard termination, which would require us to make additional contributions to the plan so that the assets of the
plan are sufficient to satisfy all benefit liabilities.
|
We had contemplated other courses
of action, including a distress termination, whereby the Pension Benefits Guaranty Corporation (“PBGC”) would take
over the plan. On February 27, 2012, Syms notified the PBGC and other affected parties of its consideration to terminate the plan
in a distress termination. However, the estimated total cost associated with a distress termination was approximately $15 million.
As a result of the cost savings associated with the standard termination approach, Syms elected not to terminate the plan in a
distress termination and formally notified the PBGC of this decision. We will maintain the Syms pension plan and make all contributions
required under applicable minimum funding rules; provided, however, that we may terminate the Syms pension plan from and after
January 1, 2017. In the event that we terminate the Syms pension plan, we intend that any such termination shall be a standard
termination. Although we have accrued the liability associated with a standard termination, we have not taken any steps to commence
such a termination and have made no commitment to do so by a certain date.
In accordance with minimum funding
requirements and court ordered allowed claims distributions, we paid approximately $3.6 million to the Syms sponsored plan from
September 17, 2012 through December 31, 2016 of which $0.6 million was funded during the year ended December 31, 2016 to the Syms
sponsored plan.
Presented below is financial
information relating to this plan for the periods indicated (dollars in thousands):
|
|
Year Ended
December 31, 2016
|
|
|
Period from
March 1, 2015
through
December 31, 2015
|
|
|
|
|
|
|
|
|
CHANGE IN BENEFIT OBLIGATION:
|
|
|
|
|
|
|
|
|
Net benefit obligation - beginning of period
|
|
$
|
13,394
|
|
|
$
|
13,333
|
|
Interest cost
|
|
|
653
|
|
|
|
538
|
|
Actuarial loss
|
|
|
867
|
|
|
|
52
|
|
Gross benefits paid
|
|
|
(636
|
)
|
|
|
(529
|
)
|
Net benefit obligation - end of period
|
|
$
|
14,278
|
|
|
$
|
13,394
|
|
|
|
|
|
|
|
|
|
|
CHANGE IN PLAN ASSETS:
|
|
|
|
|
|
|
|
|
Fair value of plan assets - beginning of period
|
|
$
|
10,254
|
|
|
$
|
10,423
|
|
Employer contributions
|
|
|
575
|
|
|
|
631
|
|
Gross benefits paid
|
|
|
(636
|
)
|
|
|
(529
|
)
|
Actual return (loss) on plan assets
|
|
|
696
|
|
|
|
(271
|
)
|
Fair value of plan assets - end of period
|
|
$
|
10,889
|
|
|
$
|
10,254
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of period
|
|
$
|
(3,389
|
)
|
|
$
|
(3,140
|
)
|
The pension expense includes
the following components (dollars in thousands):
|
|
Year Ended
December 31, 2016
|
|
|
Period from
March 1,
2015 through
December 31, 2015
|
|
|
|
|
|
|
|
|
COMPONENTS OF NET PERIODIC COST:
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
653
|
|
|
$
|
538
|
|
(Gain) loss of assets
|
|
|
(696
|
)
|
|
|
271
|
|
Amortization of loss
|
|
|
478
|
|
|
|
454
|
|
Net periodic cost
|
|
$
|
435
|
|
|
$
|
1,263
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE ASSUMPTION USED:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
Rate of compensation increase
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The expected long-term rate of
return on plan assets was 6% for both the year ended December 31, 2016 and the period from March
1, 2015 through December 31, 2015.
As of December 31, 2016 the benefits
expected to be paid in the next five fiscal years and then in the aggregate for the five fiscal years thereafter are as follows
(dollars in thousands):
Year
|
|
Amount
|
|
|
|
|
|
|
2017
|
|
$
|
807
|
|
2018
|
|
|
918
|
|
2019
|
|
|
932
|
|
2020
|
|
|
940
|
|
2021
|
|
|
969
|
|
2022-2026
|
|
|
4,678
|
|
The fair values and asset allocation of
our plan assets as of December 31, 2016 and December 31, 2015 and the target allocation for fiscal 2016, by asset category, are
presented in the following table. All fair values are based on quoted prices in active markets for identical assets (Level 1 in
the fair value hierarchy) (dollars in thousands):
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
% of Plan
|
|
|
|
|
|
% of Plan
|
|
Asset Category
|
|
Asset Allocation
|
|
Fair Value
|
|
|
Assets
|
|
|
Fair Value
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
0% to 10%
|
|
$
|
648
|
|
|
|
6
|
%
|
|
$
|
932
|
|
|
|
9
|
%
|
Equity securities
|
|
40% to 55%
|
|
|
5,871
|
|
|
|
54
|
%
|
|
|
5,295
|
|
|
|
52
|
%
|
Fixed income securities
|
|
35% to 50%
|
|
|
4,150
|
|
|
|
38
|
%
|
|
|
3,854
|
|
|
|
37
|
%
|
Alternative investments
|
|
2% to 10%
|
|
|
220
|
|
|
|
2
|
%
|
|
|
173
|
|
|
|
2
|
%
|
Total
|
|
|
|
$
|
10,889
|
|
|
|
100
|
%
|
|
$
|
10,254
|
|
|
|
100
|
%
|
Under the provisions of ASC 715,
we are required to recognize in our consolidated balance sheet the unfunded status of a benefit plan. This is measured as the difference
between plan assets at fair value and the projected benefit obligation. For the pension plan, this is equal to the accumulated
benefit obligation.
Certain employees
covered by collective bargaining agreements participate in multiemployer pension plans. Syms ceased to have an obligation
to contribute to these plans in 2012, thereby triggering a complete withdrawal from the plans within the meaning of section
4203 of the Employee Retirement Income Security Act of 1974. Consequently, we are subject to the payment of a withdrawal
liability to these pension funds. We had a recorded liability of $2.5 million and $3.4 million which is reflected in pension
liability as of December 31, 2016 and December 31, 2015, respectively, and is included as part of the net claims
distribution. We are required to make quarterly distributions in the amount of $0.2 million until this liability is
completely paid to the multiemployer plan by the end of 2019. In accordance with minimum funding requirements and court
ordered allowed claims distributions, we paid approximately $4.4 million to the multiemployer plans from September 17, 2012
through December 31, 2016 of which $0.8 million and $0.6 million was funded during the year ended December 31, 2016 and
the period ended December 31, 2015, respectively, to the multiemployer plan
.
401(k) Plan
–
During fiscal 2014, we established a 401(k) plan for all of our employees. Eligible employees are able to contribute a percentage
of their salary to the plan subject to statutory limits. We paid approximately $54,000 and $43,000 in matching contributions to
this plan during the year ended December 31, 2016 and the period March 1, 2015 to December 31, 2015, respectively.
NOTE 9 – COMMITMENTS
|
a.
|
Leases
-
The Corporate office located at 717 Fifth Avenue, New York, New York has
a remaining lease liability of $0.2 million payable through September 2017. The rent expense for this operating lease was approximately
$300,000 for the year ended December 31, 2016 and $225,000 during the period from March 1, 2015 to December 31,
2015.
|
|
b.
|
Legal Proceedings –
We are a party to routine litigation incidental to our
business. Some of the actions to which we are a party are covered by insurance and are being defended or reimbursed by our insurance
carriers. See Item 3. Legal Proceedings, for additional information on legal proceedings.
|
NOTE 10 – LOANS PAYABLE
77 Greenwich Loan
On February 9, 2015, our wholly-owned subsidiary
that owns 77 Greenwich and related assets (“TPH Greenwich Borrower”), entered into a loan agreement with Sterling National
Bank as lender and administrative agent (the “Agent”), and Israel Discount Bank of New York, as lender (the “Lender”),
pursuant to which we borrowed $40.0 million (the “77 Greenwich Loan”). The 77 Greenwich Loan can be increased up to
$50.0 million, subject to satisfaction of certain conditions. The 77 Greenwich Loan, which was scheduled to mature on February
8, 2017, was extended to August 8, 2017 after having satisfied certain conditions. We are currently evaluating our options which include, among others, an extension of the existing loan
or refinancing as part of a construction loan.
The 77 Greenwich Loan bears interest at
a rate per annum equal to the greater of (i) the rate published from time to time by the Wall Street Journal as the U.S. Prime
Rate plus 1.25% (the “Contract Rate”) or (ii) 4.50% and requires interest only payments through maturity. The interest
rate on the 77 Greenwich Loan was 4.50% through December 16, 2015, when it was then increased to 4.75% through December 15, 2016
and then increased to 5.00%. The Contract Rate will be increased by 1.5% per annum during any period in which TPH Greenwich Borrower
does not maintain funds in its deposit accounts with the Agent and the Lender sufficient to make payments then due under the 77
Greenwich Loan documents. TPH Greenwich Borrower can prepay the 77 Greenwich Loan at any time, in whole or in part, without premium
or penalty.
The collateral for the 77 Greenwich Loan
is TPH Greenwich Borrower’s fee interest in 77 Greenwich and the related air rights, which is the subject of a mortgage in
favor of the Agent. TPH Greenwich Borrower also entered into an environmental compliance and indemnification undertaking.
The 77 Greenwich Loan agreement requires
TPH Greenwich Borrower to comply with various affirmative and negative covenants including restrictions on debt, liens, business
activities, distributions and dividends, disposition of assets and transactions with affiliates. TPH Greenwich Borrower has established
blocked accounts with the initial lenders, and pledged the funds maintained in such accounts, in the amount of 9% of the outstanding
loans. The 77 Greenwich Loan agreement also provides for certain events of default. As of December 31, 2016, TPH Greenwich Borrower
was in compliance with all 77 Greenwich Loan covenants.
We entered into a Nonrecourse Carve-Out
Guaranty pursuant to which we agreed to guarantee certain items, including losses arising from fraud, intentional harm to 77 Greenwich,
or misapplication of loan, insurance or condemnation proceeds, a voluntary bankruptcy filing by TPH Greenwich Borrower, and the
payment by TPH Greenwich Borrower of maintenance costs, insurance premiums and real estate taxes.
The 77 Greenwich Loan was authorized by
order of the Court entered in response to the motion we made on December 31, 2014.
West Palm Beach, Florida Loan
On May 11, 2016, our subsidiary
that owns our West Palm Beach, Florida property commonly known as The Shoppes at Forest Hill (the “TPH Forest Hill Borrower”),
entered into a loan agreement with Citizens Bank, National Association, as lender (the “WPB Lender”), pursuant to which
the WPB Lender will provide a loan to the TPH Forest Hill Borrower in the amount of up to $12.6 million, subject to the terms and
conditions as set forth in the loan agreement (the “WPB Loan”). TPH Forest Hill Borrower borrowed $9.1 million under
the WPB Loan at closing. The WPB Loan requires interest-only payments and bears interest at the 30-day LIBOR plus 230 basis points.
The effective rate at December 31, 2016 was 3.07%. The WPB Loan matures on May 11, 2019, subject to extension until May 11, 2021
under certain circumstances. The TPH Forest Hill Borrower can prepay the WPB Loan at any time, in whole or in part, without premium
or penalty.
The collateral for the WPB Loan is the
TPH Forest Hill Borrower’s fee interest in our West Palm Beach, Florida property. The WPB Loan requires the TPH Forest Hill
Borrower to comply with various customary affirmative and negative covenants and provides for certain events of default, the occurrence
of which permit the WPB Lender to declare the WPB Loan due and payable, among other remedies. As of December 31, 2016, the TPH
Forest Hill Borrower was in compliance with all WPB Loan covenants.
On May 11, 2016 we entered into an interest
rate cap agreement as required under the WPB Loan. The interest rate cap agreement provides the right to receive cash if the reference
interest rate rises above a contractual rate. We paid a premium of $14,000 for the 3.0% interest rate cap for the 30-day LIBOR
rate on the notional amount of $9.1 million. The fair value of the interest rate cap as of December 31, 2016 is recorded in prepaid
expenses and other assets in our consolidated balance sheet. We did not designate this interest rate cap as a hedge and are recognizing
the change in estimated fair value in interest expense. During the year ended December 31, 2016, we recorded interest expense of
approximately $6,000 related to this interest rate cap.
Consolidated interest expense, excluding
capitalized interest, was comprised of the following (in thousands):
|
|
For the
|
|
|
For the Period
|
|
|
|
Year Ended
December
31, 2016
|
|
|
March 1, 2015
through December
31, 2015
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
2,110
|
|
|
$
|
1,534
|
|
Interest capitalized
|
|
|
(1,929
|
)
|
|
|
(1,201
|
)
|
Interest income
|
|
|
(223
|
)
|
|
|
(87
|
)
|
Interest (income) expense, net
|
|
$
|
(42
|
)
|
|
$
|
246
|
|
NOTE 11 – STOCKHOLDERS’
EQUITY
Capital Stock
Our authorized capital stock consists
of 120,000,000 shares, $0.01 par value per share, consisting of 79,999,997 shares of common stock, $0.01 par value per share,
two (2) shares of preferred stock, $0.01 par value per share (which have been redeemed in accordance with their terms and may
not be reissued), one (1) share of special stock, $0.01 par value per share, and 40,000,000 shares of a new class of blank
check preferred stock, $0.01 par value per share. As of December 31, 2016 and December 31, 2015, there were 30,679,566
shares and 29,978,471 shares of common stock issued, respectively, and 25,663,820 shares and 25,240,878 shares of
common stock outstanding, respectively.
At-The-Market Equity Offering Program
In December 2016, we entered into an
"at-the-market" equity offering program (the “ATM Program”), to sell up to an aggregate of $12.0 million of
our common stock. During the year ended December 31, 2016, we sold 120,299 shares of our common stock for aggregate
gross proceeds of $1.2 million (excluding approximately $218,000 in professional and brokerage fees) at a weighted average
price of $9.76 per share. As of December 31, 2016, $10.8 million of common stock remained available for
issuance under the ATM Program.
Preferred Stock
We were authorized to issue two shares
of preferred stock, one share of special stock and 40,000,000 shares of blank-check preferred stock. The share of Series A preferred
stock was issued to a trustee acting for the benefit of our creditors. The share of Series B preferred stock was issued to the
former Majority Shareholder. The share of special stock was issued and sold to Third Avenue, and enables Third Avenue or its affiliated
designee to elect one member of the Board of Directors.
On or about March 8, 2016, a General Unsecured
Claim Satisfaction (as defined in the Plan) occurred. Under the Plan, a General Unsecured Claim Satisfaction occurs when all of
the allowed creditor claims of Syms Corp. and Filene’s Basement, LLC, have been paid in full their distributions provided
for under the Plan and any disputed creditor claims have either been disallowed or reserved for by Trinity. On March 14, 2016,
we made the final Majority Shareholder payment (as defined in the Plan) to the Majority Shareholder in the amount of approximately
$6.9 million. Following the General Unsecured Claim Satisfaction and payment to the former Majority Shareholder, we satisfied our
payment and reserve obligations under the Plan.
Upon the occurrence of the General
Unsecured Claim Satisfaction, the share of Series A Preferred Stock was automatically redeemed in accordance with its terms
and may not be reissued. In addition, upon the payment to the former Majority Shareholder, the share of Series B Preferred Stock was
automatically redeemed in accordance with its terms
and may not be reissued.
NOTE 12 – STOCK-BASED COMPENSATION
Restricted Stock Units
During the year ended December 31,
2016, we granted 75,500 Restricted Stock Units (“RSUs”) to certain employees. The RSUs vest and settle over two
years, subject to each employee’s continued employment. The weighted average fair market value at grant date for these
shares was approximately $0.4 million, and we incurred approximately $0.3 million RSU expense for these shares for the year ended December 31, 2016, of which $0.2 million was capitalized in real estate under development for the year ended
December 31, 2016.
During the year ended December 31,
2016, we granted 1,214,169 RSUs to our President and Chief Executive Officer (the “CEO”), pursuant to his
employment agreement. The RSUs have vesting periods ranging over five years, subject to the CEO’s continued employment,
and settle in shares ranging over an eight-year period. Until shares are issued with respect to the RSUs, the CEO will not
have any rights as a shareholder and will not receive dividends or be able to vote the shares represented by the RSUs. We
use the fair-market value of our common stock on the date an award is granted to value the grant. The weighted average fair
market value at grant date for these shares was approximately $7.4 million, and we incurred approximately $4.5 million of RSU
expense for these shares during the year ended December 31, 2016, of which $3.1 million was capitalized in real estate under
development for the year ended December 31, 2016.
In April, 2015, we issued 238,095 shares
of common stock to the CEO to settle vested RSUs from previous RSU grants. In connection with that transaction, we repurchased/withheld
(from the 238,095 shares issued) 132,904 shares to provide for the CEO’s withholding tax liability. In accordance with ASC
Topic 718, Compensation-Stock Compensation, the repurchase or withholding of immature shares (i.e. shares held for less than six
months) by us upon the vesting of a restricted share would ordinarily result in liability accounting. ASC 718 provides an exception,
if the fair value of the shares repurchased or withheld is equal or less than the employer’s minimum statutory withholding
requirements. The aggregate fair value of the shares repurchased/withheld (valued at the then current fair value of $8.00 per share)
was in excess of the minimum statutory tax withholding requirements and as such we are required to account for the restricted stock
awards as a liability. At each reporting period in fiscal 2015, we re-measured the liability, until settled, with changes in the
fair value recorded as stock compensation expense in the statement of operations. As of January 1, 2016, we elected to early adopt
ASU 2016-09 (see Note 2 – Summary of Significant Accounting Policies - Recent Accounting Pronouncements) and the adoption
resulted in a reduction in real estate, net, of $0.5 million, a reduction in liability related to stock-based compensation of $5.1
million, an increase in additional paid-in capital of $4.4 million and an increase in retained earnings of $0.2 million as of the
date of adoption.
Stock-based compensation expense recognized
in the consolidated statement of operations during the year ended December 31, 2016 and the period ended December 31, 2015 totaled
$2.8 million and $1.4 million, respectively, which is net of $5.0 million and $3.3 million, respectively, capitalized as part
of real estate under development. Our RSU activity is as follows:
|
|
Year Ended
December 31, 2016
|
|
|
Period from
March 1, 2015 through December
31, 2015
|
|
|
|
Number of Shares
|
|
|
Weighted
Average Fair
Value at Grant Date
|
|
|
Number of Shares
|
|
|
Weighted
Average Fair
Value at Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at beginning of period
|
|
|
1,220,097
|
|
|
$
|
6.65
|
|
|
|
1,244,463
|
|
|
$
|
6.48
|
|
Granted
|
|
|
1,289,669
|
|
|
$
|
6.02
|
|
|
|
393,095
|
|
|
$
|
7.02
|
|
Vested
|
|
|
(888,531
|
)
|
|
$
|
6.23
|
|
|
|
(417,461
|
)
|
|
$
|
6.47
|
|
Non-vested at end of period
|
|
|
1,621,235
|
|
|
$
|
6.38
|
|
|
|
1,220,097
|
|
|
$
|
6.65
|
|
Stock Incentive Plan
During October 2015, we instituted the
Trinity Place Holdings Inc. 2015 Stock Incentive Plan (the “SIP”). The SIP, which has a ten year term, authorizes (i)
the grant of stock options that do not qualify as incentive stock options under Section 422 of the Code, or NQSOs, (ii) the grant
of stock appreciation rights, (iii) grants of shares of restricted and unrestricted common stock, and (iv) restricted stock units.
The exercise price of stock options will be determined by the compensation committee, but may not be less than 100% of the fair
market value of the shares of common stock on the date of grant. At December 31, 2016, approximately 644,500 shares of common stock
were reserved for issuance under the SIP.
During the 2016 year, there were 75,500
RSU grants under the SIP for employees, with a weighted average fair value of $0.4 million at grant date, and none of these grants
had vested as of December 31, 2016. During the 2016 year, there were 50,000 units of stock in the aggregate under the SIP that
were granted to the Board of Directors with a weighted average fair value of $0.5 million at grant date and which vested immediately.
During the period ending December 31,
2015, there were 30,000 RSU grants under the SIP for one employee, with a weighted average fair value of $6.70 at grant
date, and none of these grants had vested as of December 31, 2015.
Director Deferral Plan
Under our Non-Employee Director's Deferral
Program, which commenced November 2016, our non-employee directors may elect to defer 100% of their annual stock grant. Compensation
deferred under the program shall be credited in the form of a number of phantom stock units equal to the number of shares that
would have been received absent a deferral election. (The number of shares to be received by a director is generally determined
by applying the closing price of our common stock on the business day prior to the respective grant date to the amount of director
compensation being paid in shares.) The program provides that a director's phantom stock units generally will be settled in an
equal number of shares of common stock within 10 days after the participant ceases to be a director. In the event that the Company
distributes dividends, each participant shall receive a number of additional phantom stock units (including fractional phantom
stock units) equal to the quotient of (i) the aggregate amount of the dividend that the participant would have received had all
outstanding stock units been shares of common stock divided by (ii) the closing price of a share of common stock on the date the
dividend was issued.
During the year ended December 31,
2016, no phantom stock units were earned and no shares of common stock were issued to our board of directors
under this plan. As of December 31, 2016, there were no phantom stock units outstanding pursuant to our Non-Employee
Director's Deferral Program.
NOTE 13 – RELATED PARTY TRANSACTIONS
Former Majority Shareholder
On March 8, 2016, a General Unsecured Claim
Satisfaction (as defined in the Plan) occurred. Under the Plan, a General Unsecured Claim Satisfaction occurs when all of the allowed
creditor claims of Syms Corp. and Filene’s Basement, LLC, have been paid in full their distributions provided for under the
Plan and any disputed creditor claims have either been disallowed or reserved for by Trinity. On March 14, 2016, we made the final
payment to the former Majority Shareholder (as defined in the Plan) in the amount of approximately $6.9 million. Following the
General Unsecured Claim Satisfaction and final payment to the former Majority Shareholder, we satisfied our payment and reserve
obligations under the Plan and we have no further liability to the former Majority Shareholder.
NOTE 14 –
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
We
indirectly own a 50% interest in a joint venture formed to acquire and operate 223 North 8th Street, Brooklyn, New York,
a newly constructed 95-unit multi-family property, known as The Berkley, encompassing approximately 99,000 gross
square feet. On December 5, 2016, the joint venture closed on the acquisition of The Berkley through a wholly-owned
special purpose entity (the “Property Owner”) for a purchase price of $68.885 million, of which $42.5 million was
borrowed by the joint venture through the Property Owner pursuant to a 10-year loan (the “Loan”) secured by The
Berkley and the balance was paid in the form of an equity investment (half of which was funded indirectly by us). The
Loan bears interest at the 30-day LIBOR rate plus 216 basis points, is interest only for five years, is pre-payable after
two years with a 1% prepayment premium and has covenants and defaults customary for a Freddie Mac financing. The
Company and the joint venture partner are joint and several recourse carve-out guarantors under the Loan pursuant to Freddie
Mac’s standard form of guaranty
This joint venture
is a voting interest entity. As we do not control this joint venture, we account for it under the equity method of accounting.
The balance sheet
for the unconsolidated joint venture at December 31, 2016 is as follows (in thousands):
|
|
December 31,
2016
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
|
$
|
54,310
|
|
Cash and cash equivalents
|
|
|
77
|
|
Restricted cash
|
|
|
52
|
|
Tenant and other receivables, net
|
|
|
101
|
|
Prepaid expenses and other assets, net
|
|
|
169
|
|
Intangible assets, net
|
|
|
14,362
|
|
Total assets
|
|
$
|
69,071
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Mortgage payable, net
|
|
$
|
40,799
|
|
Accounts payable and accrued expenses
|
|
|
403
|
|
Total liabilities
|
|
|
41,202
|
|
|
|
|
|
|
MEMBERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Members' equity
|
|
|
28,485
|
|
Accumulated deficit
|
|
|
(616
|
)
|
Total members equity
|
|
|
27,869
|
|
|
|
|
|
|
Total liabilities and members' equity
|
|
$
|
69,071
|
|
Our investment in unconsolidated joint venture
|
|
$
|
13,939
|
|
The statement
of operations for the unconsolidated joint venture, from acquisition date through December 31, 2016, is as follows (in thousands):
|
|
For the Period from
December
5, 2016
(acquisition date) to
December 31, 2016
|
|
|
|
|
|
Revenues
|
|
|
|
|
Rental revenues
|
|
$
|
238
|
|
|
|
|
|
|
Total revenues
|
|
|
238
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
Property operating expenses
|
|
|
107
|
|
Real estate taxes
|
|
|
3
|
|
General and administrative
|
|
|
24
|
|
Interest expense, net
|
|
|
106
|
|
Transaction related costs
|
|
|
395
|
|
Amortization
|
|
|
126
|
|
Depreciation
|
|
|
93
|
|
|
|
|
|
|
Total operating expenses
|
|
|
854
|
|
|
|
|
|
|
Net loss
|
|
$
|
(616
|
)
|
|
|
|
|
|
Our equity in net loss from unconsolidated joint venture
|
|
$
|
(308
|
)
|
NOTE 15 – QUARTERLY FINANCIAL
DATA (unaudited)
The following table reflects quarterly
consolidated statements of operations for the periods indicated (in thousands, except per share amounts):
|
|
For the Year Ended December 31, 2016
|
|
|
|
January 1,
2016 to
March 31,
2016
|
|
|
April 1,
2016 to
June 30,
2016
|
|
|
July 1, 2016
to
September
30, 2016
|
|
|
October 1,
2016 to
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
475
|
|
|
$
|
398
|
|
|
$
|
536
|
|
|
$
|
447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,519
|
|
|
|
1,892
|
|
|
|
1,906
|
|
|
|
2,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,044
|
)
|
|
|
(1,494
|
)
|
|
|
(1,370
|
)
|
|
|
(2,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net loss from unconsolidated joint venture
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(308
|
)
|
Interest income (expense), net
|
|
|
73
|
|
|
|
22
|
|
|
|
(12
|
)
|
|
|
(41
|
)
|
Amortization of deferred finance costs
|
|
|
(2
|
)
|
|
|
(20
|
)
|
|
|
(38
|
)
|
|
|
(38
|
)
|
Reduction of claims liability
|
|
|
135
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(1,838
|
)
|
|
|
(1,493
|
)
|
|
|
(1,422
|
)
|
|
|
(2,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders
|
|
$
|
(1,838
|
)
|
|
$
|
(1,493
|
)
|
|
$
|
(1,422
|
)
|
|
$
|
(2,683
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic and diluted
|
|
|
25,284
|
|
|
|
25,458
|
|
|
|
25,483
|
|
|
|
25,531
|
|
|
|
For the Ten Months Ended December 31,
2015
|
|
|
|
March 1,
2015 to
May 30,
2015
|
|
|
May 31,
2015 to
August 29,
2015
|
|
|
August 30,
2015 to
November
28, 2015
|
|
|
November 29,
2015 to
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
224
|
|
|
$
|
188
|
|
|
$
|
326
|
|
|
$
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,345
|
|
|
|
1,769
|
|
|
|
2,663
|
|
|
|
806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,121
|
)
|
|
|
(1,581
|
)
|
|
|
(2,337
|
)
|
|
|
(703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net
|
|
|
(120
|
)
|
|
|
(83
|
)
|
|
|
(54
|
)
|
|
|
11
|
|
Amortization of deferred finance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(63
|
)
|
Reduction of claims liability
|
|
|
230
|
|
|
|
300
|
|
|
|
27
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(2,011
|
)
|
|
|
(1,364
|
)
|
|
|
(2,364
|
)
|
|
|
(755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
|
4
|
|
|
|
-
|
|
|
|
22
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders
|
|
$
|
(2,015
|
)
|
|
$
|
(1,364
|
)
|
|
$
|
(2,386
|
)
|
|
$
|
(796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic and diluted
|
|
|
20,053
|
|
|
|
20,124
|
|
|
|
20,159
|
|
|
|
23,877
|
|
NOTE 16 – SUBSEQUENT EVENTS
On January 23, 2017, we received approximately
$1.0 million as part of a settlement concerning, among other things, funds that were being held as collateral by our pre-petition
insurance carrier on account of escrows and draws on certain letters of credit. These funds had not been reported on our balance
sheet as management previously deemed the funds to be uncollectable.
On February 14, 2017, we sold an
aggregate of 3,585,000 shares of common stock in a private placement at a purchase price of $7.50 per share, for aggregate
gross proceeds of $26,887,500. We anticipate using proceeds from the private placement for the development of 77
Greenwich, potential new real estate acquisition and investment opportunities and for working capital.
Our Board of Directors also approved
a rights offering of up to 3,700,000 shares of our common stock to be made to our holders of common stock, as of March 1,
2017, which would entitle the security holders as of the record date to purchase shares of common stock at $7.50 per
share.
On February 22, 2017, we entered
into two secured lines of credit for an aggregate of $12.0 million, with Sterling National Bank as the lender. The lines,
which are secured by our properties located in Paramus, New Jersey and Westbury, New York, mature in 12 months. We have an
option to extend the maturity date of each line for an additional 12 months, subject to certain conditions. The lines, which
bear interest at 100 basis points over prime with a floor of 3.75%, are pre-payable at any time without penalty.
Schedule
III - Consolidated Real Estate and Accumulated Depreciation
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
Cost
|
|
|
|
|
|
Amounts
at which Carried at December 31, 2016
|
|
|
|
|
Property
Description
|
|
Encumbrances
|
|
|
Land
|
|
|
Air
Rights
|
|
|
Building
&
Improvements
(1)
|
|
|
Cost
Capitalized
Subsequent to
Acquisition
|
|
|
Land
|
|
|
Air
Rights
|
|
|
Building
&
Improvements
(1)
|
|
|
Total
|
|
|
Accumulated
Depreciation
|
|
|
Date
of Acquisition (A) /
Construction (C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77 Greenwich, NY
|
|
$
|
40,000
|
|
|
$
|
5,500
|
|
|
$
|
9,134
|
|
|
$
|
3,587
|
|
|
$
|
19,990
|
|
|
$
|
5,500
|
|
|
$
|
9,134
|
|
|
$
|
23,577
|
|
|
$
|
38,211
|
|
|
$
|
-
|
|
|
|
1990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paramus, NJ
|
|
|
-
|
|
|
|
908
|
|
|
|
-
|
|
|
|
640
|
|
|
|
3,147
|
|
|
|
908
|
|
|
|
-
|
|
|
|
3,787
|
|
|
|
4,695
|
|
|
|
-
|
|
|
|
1980
(A) / 1984 (C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westbury, NY
|
|
|
-
|
|
|
|
4,920
|
|
|
|
-
|
|
|
|
1,707
|
|
|
|
4,179
|
|
|
|
4,920
|
|
|
|
-
|
|
|
|
5,886
|
|
|
|
10,806
|
|
|
|
-
|
|
|
|
1988
(A)/1989 (A) / 1989 (C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Palm Beach, FL
|
|
|
9,100
|
|
|
|
2,452
|
|
|
|
-
|
|
|
|
3,707
|
|
|
|
2,656
|
|
|
|
2,452
|
|
|
|
-
|
|
|
|
6,363
|
|
|
|
8,815
|
|
|
|
(2,143
|
)
|
|
|
2001
|
|
|
|
$
|
49,100
|
|
|
$
|
13,780
|
|
|
$
|
9,134
|
|
|
$
|
9,641
|
|
|
$
|
29,972
|
|
|
$
|
13,780
|
|
|
$
|
9,134
|
|
|
$
|
39,613
|
|
|
$
|
62,527
|
|
|
$
|
(2,143
|
)
|
|
|
|
|
|
(1)
|
Depreciation on buildings and improvements reflected in the consolidated statement of operations
is calculated on the straight-line basis over estimated useful lives of 10 to 39 years.
|
|
(2)
|
(a) Reconciliation of Real Estate Properties:
|
The following table reconciles
the activity for the real estate properties for the periods reported (dollars in thousands):
|
|
Year Ended
December 31,
2016
|
|
|
Period from
March 1, 2015
through
December 31,
2015
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
44,576
|
|
|
$
|
32,938
|
|
Additions
|
|
|
17,951
|
|
|
|
11,638
|
|
Balance at end of period
|
|
$
|
62,527
|
|
|
$
|
44,576
|
|
The aggregate cost of land, building
and improvements, before depreciation, for federal income tax purposes at December 31, 2016 was $53.4 million (unaudited).
(b) Reconciliation of Accumulated
Depreciation:
The following table reconciles
the accumulated depreciation for the periods reported (dollars in thousands):
|
|
Year Ended
December 31,
2016
|
|
|
Period from
March 1,
2015 through
December 31,
2015
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,938
|
|
|
$
|
1,817
|
|
Depreciation related to real estate
|
|
|
205
|
|
|
|
121
|
|
Balance at end of period
|
|
$
|
2,143
|
|
|
$
|
1,938
|
|
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