QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
State or Other Jurisdiction of Incorporation or Organization |
I.R.S. Employer Identification No. | |
Address of Principal Executive Offices |
Zip Code | |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
N/A |
N/A |
N/A |
| Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
| * | New York REIT Liquidating LLC is the successor in interest to New York REIT, Inc. and files reports under the Commission file number for New York REIT, Inc. |
NEW YORK REIT LIQUIDATING LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||||||
| PART I – FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements (unaudited) | |||||
| Consolidated Statements of Net Assets (Liquidation Basis) as of September 30, 2022 and December 31, 2021 | 1 | |||||
| Consolidated Statements of Changes in Net Assets (Liquidation Basis) for the Three and Nine Months Ended September 30, 2022 and September 30, 2021 | 2 | |||||
| Notes to Consolidated Financial Statements | 3 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 20 | ||||
| Item 4. |
Controls and Procedures | 20 | ||||
| Item 1. |
Legal Proceedings | 21 | ||||
| Item 1A. |
Risk Factors | 21 | ||||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. | 21 | ||||
| Item 3. |
Defaults Upon Senior Securities | 21 | ||||
| Item 4. |
Mine Safety Disclosures | 21 | ||||
| Item 5. |
Other Information | 21 | ||||
| Item 6. |
Exhibits | 21 | ||||
| 23 | ||||||
| September 30, 2022 | December 31, 2021 | |||||||
Assets |
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Investment in unconsolidated joint venture |
$ | $ | ||||||
Cash and cash equivalents |
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Restricted cash |
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Total Assets |
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Liabilities |
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Liability for estimated costs in excess of estimated receipts during liquidation |
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Accounts payable, accrued expenses and other liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Net assets in liquidation |
$ | $ | ||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
|||||||||||||
Net assets in liquidation, beginning of period |
$ | $ | $ | $ | ||||||||||||
Changes in net assets in liquidation: |
||||||||||||||||
Changes in liquidation value of investment in unconsolidated joint venture |
( |
) | ( |
) | ||||||||||||
Remeasurement of assets and liabilities |
( |
) | ( |
) | ( |
) | ||||||||||
Net changes in liquidation value |
( |
) | ( |
) | ||||||||||||
Liquidating distributions to unitholders |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Changes in net assets in liquidation |
( |
) | ( |
) | ( |
) | ||||||||||
Net assets in liquidation, end of period |
$ | $ | $ | $ | ||||||||||||
September 30, 2022 |
December 31, 2021 |
|||||||
General and administrative expenses |
$ |
( |
) |
$ |
( |
) | ||
Liability for estimated costs in excess of estimated receipts during liquidation |
$ |
( |
) |
$ |
( |
) | ||
Net Change |
Remeasurement |
|||||||||||||||
in Working |
of Assets and |
|||||||||||||||
January 1, 2022 |
Capital (1) |
Liabilities |
September 30, 2022 |
|||||||||||||
Liabilities: |
||||||||||||||||
General and administrative expenses |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Total liability for estimated costs in excess of estimated receipts during liquidation |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Net Change |
Remeasurement |
|||||||||||||||
in Working |
of Assets and |
|||||||||||||||
January 1, 2021 |
Capital (1) |
Liabilities |
September 30, 2021 |
|||||||||||||
Liabilities: |
||||||||||||||||
General and administrative expenses |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Total liability for estimated costs in excess of estimated receipts during liquidation |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
(1) |
Represents changes in cash, restricted cash, accounts receivable, accounts payable and accrued expenses as a result of the Company’s operating activities for the nine months ended September 30, 2022 and 2021. |
September 30, |
||||||||||
| Property Portfolio |
Tenant |
2022 |
2021 |
|||||||
| Worldwide Plaza |
Cravath, Swaine & Moore, LLP | % |
% | |||||||
| Worldwide Plaza |
Nomura Holdings America, Inc. | % |
% | |||||||
September 30, |
December 31, |
|||||||
| (In thousands) |
2022 |
2021 |
||||||
| Real estate assets, at cost |
$ | $ | ||||||
| Less accumulated depreciation and amortization |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total real estate assets, net |
||||||||
| Cash and cash equivalents |
||||||||
| Other assets |
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| |
|
|
|
|||||
| Total assets |
$ | $ | ||||||
| |
|
|
|
|||||
| Debt |
$ | $ | ||||||
| Other liabilities |
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| |
|
|
|
|||||
| Total liabilities |
||||||||
| Deficit |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total liabilities and deficit |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
| (In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
| Rental income |
$ | $ | $ | $ | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Operating expenses |
||||||||||||||||
| Depreciation and amortization |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
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| Operating income |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
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NEW YORK REIT LIQUIDATING LLC
September 30, 2022
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of New York REIT Liquidating LLC and the notes thereto. As used herein, the terms “Company,” “we,” “our” and “us” refer to New York REIT Liquidating LLC, a Delaware limited liability company, and, as required by context to New York REIT, Inc., a Maryland corporation (the “Predecessor”), to New York Recovery Operating Partnership LP, a Delaware Limited Partnership (the “OP”), and to their subsidiaries. We are externally managed by Winthrop REIT Advisors, LLC (the “Winthrop Advisor”). Capitalized terms used herein but not otherwise defined have the meaning ascribed to those terms in “Part I—Financial Information” included in the notes to consolidated financial statements and contained herein.
Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “estimates,” “expects,” “anticipates,” “intends,” “plans,” “should,” “would,” “will,” “may” or similar expressions in this Quarterly Report on Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, public health crises, such as the COVID-19 pandemic, as well as those set forth in our Annual Report on Form 10-K for the year ended December 31, 2021 under “Forward Looking Statements” and “Item 1A. Risk Factors,” as well as our other filings with the Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based on information, judgments and estimates at the time they are made, to anticipate future results or trends.
Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our unaudited consolidated interim financial statements and notes thereto. These unaudited interim financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which 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 amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.
Overview
On August 22, 2016 the Predecessor’s Board of Directors (the “Board”) approved a plan of liquidation to sell in an orderly manner all or substantially all of our assets and the assets of the OP (the “Liquidation Plan”), subject to stockholder approval. The Liquidation Plan was approved at a special meeting of stockholders on January 3, 2017.
The Liquidation Plan provides for an orderly sale of our assets, payment of our liabilities and other obligations and the winding down of operations and the dissolution of the Company. We are no longer permitted to make any new investments except to make protective acquisitions or advances with respect to our existing assets. We are permitted to satisfy any existing contractual obligations and pay for required tenant improvements and capital expenditures at our real estate property owned by the joint venture in which we own an interest.
In order to comply with applicable tax laws, the Predecessor converted into a limited liability company known as New York REIT Liquidating LLC. The conversion to the Company was approved by the stockholders on September 7, 2018 and became effective on November 7, 2018. The Liquidation Plan enables us to sell our assets without further approval of the stockholders or unitholders and provides that liquidating distributions be made to the stockholders as determined by the Board, and following the conversion, to our unitholders as determined by the Board of Managers.
14
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
In October 2018, the Predecessor announced the withdrawal of its common stock from listing on the NYSE in connection with the conversion. November 2, 2018 was the last day on which shares of its common stock were traded on the NYSE and our stock transfer books were closed as of 4:00 p.m. (Eastern Time) on such date. At the effective time of the conversion, each outstanding share of common stock of the Predecessor was converted into one unit of common membership interest in the Company (a “Unit”), and holders of shares of our common stock automatically received one Unit (which Unit was in book entry form) for each share of the Predecessor’s common stock held by such stockholder. Unlike shares of the Predecessor’s common stock, which, in addition to being listed on the NYSE, were freely transferable, Units are not listed for trading and generally are not transferable except by will, intestate succession or operation of law. Therefore, the holders of Units do not have the ability to realize any value from these interests except from distributions made by the Company, the timing of which will be solely in the discretion of the Board of Managers.
During the period ended September 30, 2022, the Board of Managers was comprised of three members: Randolph C. Read, Craig T. Bouchard and Howard Goldberg. On November 7, 2022, Howard Goldberg resigned from the Board of Managers, effective immediately, pursuant to the terms of the Limited Liability Agreement of the Company and not as a result of any disagreement with the operations, policies or practices of the Company. On November 9, 2022, Michael L. Ashner was appointed as a member of the Board of Managers. As of November 9, 2022, the Board of Managers is comprised of Randolph C. Read, Craig T. Bouchard and Michael L. Ashner.
Additionally, during the period ended September 30, 2022, John Lee and Joseph Moinian representing two of the Company’s largest unitholders, served as observers to the Board of Managers in unpaid positions with no voting rights in connection with Board of Managers matters. On November 8, 2022, John Lee resigned from his position as an observer to the Board of Managers, effective immediately, in accordance with the terms of the previously disclosed Board Observer Agreement between himself and the Company. On November 13, 2022, Joseph Moinian resigned from his position as an observer to the Board of Managers, effective immediately, in accordance with the terms of the previously disclosed Board Observer Agreement between himself and the Company.
The Company is deemed to be the same entity as the Predecessor with the same assets and liabilities as the Predecessor on the date of conversion. In addition, the charter and bylaws of the Predecessor were replaced by the operating agreement of the Company. For tax purposes, the fair value of each Unit in the Company received by stockholders when the conversion became effective, which reflected the value of the remaining assets of the Company (net of liabilities), was $14.00 per Unit and was equal to the average of the high and low trading prices for shares of the Predecessor’s common stock on the last three days on which the shares were traded on the NYSE.
The business of the Company is the same as the business of the Predecessor immediately preceding the conversion, which, consistent with the Liquidation Plan, consists of the continued ownership of the Predecessor’s interest in Worldwide Plaza, the only remaining property-related asset. Under its operating agreement, the business and affairs of the Company will be managed by or under the direction of its Board of Managers, and the sole purpose is winding up the affairs of the Company and the liquidation of its remaining property-related asset. On March 14, 2022, pursuant to the terms of the operating agreement of the Company, the Board of Managers extended the term of the Company such that the Company will remain in existence until the earlier of (i) the distribution of all company assets pursuant to liquidation or (ii) December 31, 2023.
The dissolution process and the amount and timing of distributions to unitholders involve risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will be ultimately distributed to unitholders, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Consolidated Statement of Net Assets.
Liquidation Plan
As of the date of this Quarterly Report on Form 10-Q, all of our property related assets have been sold except our remaining interest in Worldwide Plaza. For purposes of liquidation accounting, our estimate of net assets in liquidation value assumes a sale of our interest in WWP based on an indicative non-binding proposal received to purchase some or all of our interest in WWP and our share of Worldwide Plaza’s net assets. The actual timing of sale has not yet been determined and is subject to future events and uncertainties. These estimates are subject to change based on the actual timing of the sale of our remaining interest in Worldwide Plaza and the actual cash distributions received from the property during our holding period. The net assets in liquidation of $121.2 million at September 30, 2022 are presented on an undiscounted basis.
15
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
Net operating income at Worldwide Plaza has remained relatively steady throughout the COVID-19 pandemic. We will continue to monitor the market and adjust the net realizable value of the investment, if necessary, at each reporting period. The timing of the sale of the property, and the ultimate value we receive from the sale, are subject to change. The capital plan includes targeted capital improvements aimed at maintaining the institutional quality of the building and an appropriate allocation to allow for critical tenant lease renewals and rolls. In addition, capital will be available for management to focus on repositioning the property primarily as it relates to re-tenanting and modernizing the space currently occupied by Cravath Swaine & Moore if the Company elects to contribute to the repositioning. We have set aside approximately $90.7 million from the refinancing proceeds to cover an original estimate of our share of potential future leasing and capital costs at the property. To the extent all or a portion of the $90.7 million reserve is not used, the balance is to be distributed to unitholders. To date, all capital costs incurred at the property have been satisfied from operating cash flow of the property.
Management’s estimate, like any estimate or projection, is subject to various assumptions and uncertainties including the joint venture’s ability to execute on the business plan, tenants paying their rental obligations, the equity capital and financing markets and New York City market conditions generally. There is no assurance that the joint venture will be successful in taking these various actions and, if taken, that these actions will, in fact, result in any increase in the value of the property.
Current Activity
For the fiscal quarter ended September 30, 2022, there were no property sales.
Liquidity and Capital Resources
As of September 30, 2022, we had cash and cash equivalents of $8.2 million. Our total assets and undiscounted net assets in liquidation were $123.0 million and $121.2 million, respectively, at September 30, 2022.
Our principal demands for funds are to pay or fund operating expenses, capital expenditures and liquidating distributions to our unitholders. We believe that our current cash balance plus distributions we expect to receive from our investment in Worldwide Plaza will continue to provide adequate capital to fund our operating, administrative and other expenses incurred during liquidation. We currently estimate that our current cash balance is sufficient to cover approximately three years of net operating expenses at the Company. If by August 31, 2023, the space currently leased by Cravath, Swaine & Moore has not been sufficiently re-leased on terms that would generate sufficient cash flow to satisfy debt service requirements, the joint venture that owns Worldwide Plaza would be restricted from making distributions under the terms of its indebtedness. If cash flow distributions from Worldwide Plaza are suspended or lower than currently estimated, we will still be able to satisfy our current operating, administrative and other expenses; however, it is likely that liquidating distributions to our unitholders would be suspended or reduced accordingly.
Our principal sources and uses of funds are further described below.
Principal Sources of Funds
Cash Flows from Operating Activities
Our cash flows from operating activities are primarily dependent upon the occupancy level at Worldwide Plaza, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants at Worldwide Plaza and the level of operating and other costs, including general and administrative expenses and other expenses associated with carrying out our Liquidation Plan.
16
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
Rent collections for retail and amenities tenants at Worldwide Plaza were not impacted by the COVID-19 pandemic during the nine months ended September 30, 2022 though they were impacted during the year ended December 31, 2021. It is uncertain as to the extent of the future impact of the COVID-19 pandemic, including its multiple variants and government mandated measures thereto on rent collections at the property for future quarters. During the nine months ended September 30, 2022 and the year ended December 31, 2021, the property collected 100% of the office rents that were due. WWP has forgiven approximately $494,000 of base rents for current retail and amenities tenants and has written off approximately $477,000 of base rents related to surrendered retail and amenities space. To date, the impact of the COVID-19 pandemic has not been material to the rent collection at Worldwide Plaza, however, it is not possible to estimate the future impact of the pandemic at this time.
Sales Proceeds
In connection with the Liquidation Plan, we plan to sell our remaining 50.1% interest in Worldwide Plaza.
Principal Use of Funds
Capital Expenditures
As of September 30, 2022, we owned a 50.1% interest in the joint venture that owns Worldwide Plaza. In connection with the leasing of the property, the joint venture entered into agreements with its tenants to provide allowances for tenant improvements. These allowances require the joint venture to fund capital expenditures up to amounts specified in the lease agreements. Our share of capital expenditures for the nine months ended September 30, 2022 was funded from property cash flow.
In October 2017 we set aside approximately $90.7 million from the proceeds of our sale of a 48.7% interest in Worldwide Plaza to cover estimated future leasing and capital improvement costs at the property. To the extent all or a portion of the $90.7 million reserve is not used, the balance is to be distributed to unitholders. To date, none of the $90.7 million has been utilized.
Liquidating Distributions
Until such time as we are able to dispose of our remaining asset, the actual amount and timing of, and record dates for, future liquidating distributions will be determined by our Board of Managers and will depend upon the timing and amount of cash flow distributions we receive from our Worldwide Plaza joint venture and the amounts deemed necessary by our Board of Managers to pay or provide for our liabilities and obligations. The timing and amount of our final liquidating distribution will be dependent on the timing and proceeds of the sale of our remaining interest in Worldwide Plaza. As the Company is treated as a partnership for federal and state income tax purposes, any such liquidating distributions on the Units will be deemed a return of capital.
Cash Flows
Our level of liquidity based upon cash and cash equivalents increased by approximately $0.7 million from $7.5 million at December 31, 2021 to $8.2 million at September 30, 2022.
The holders of shares of common stock of the Predecessor approved the Liquidation Plan on January 3, 2017, and we adopted the liquidation basis of accounting effective January 1, 2017. We did not make any acquisitions in new investments during 2021 or the first nine months of 2022, and, in accordance with the Liquidation Plan, no further acquisitions are expected.
Our primary sources of non-operating cash flow for the nine months ended September 30, 2022 include:
| • | $7.6 million distributions in respect of our interest in Worldwide Plaza. |
17
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
Our primary uses of non-operating cash flow for the nine months ended September 30, 2022 include:
| • | $5.4 million for liquidating distributions to unitholders. |
Our primary sources of non-operating cash flow for the nine months ended September 30, 2021 include:
| • | $11.0 million distributions in respect to our interest in Worldwide Plaza. |
Our primary uses of non-operating cash flow for the nine months ended September 30, 2021 include:
| • | $9.4 million for liquidating distributions to unitholders. |
Contractual Obligations
We did not have any contractual debt or lease obligations as of September 30, 2022.
Comparability of Financial Data From Period to Period
Results of Operations
Our remaining asset continues to perform in a manner that is relatively consistent with prior reporting periods. We have experienced no significant changes in occupancy or rental rates at Worldwide Plaza.
Occupancy and Leasing
As of September 30, 2022, Worldwide Plaza was 90.6% leased, compared to 94.6% as of September 30, 2021. The decrease was due to Nomura Holdings America, Inc. exercising their termination rights effective December 31, 2021 for two floors. Additionally, a lease with another tenant expired in accordance with its terms. These spaces are actively being marketed for lease.
Changes in Net Assets in Liquidation
Net assets in liquidation decreased by $191.9 million during the three months ended September 30, 2022, primarily due to a decrease of $192.0 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza and a $0.5 million liquidating distribution to unitholders. The decrease was offset by a $0.7 million net increase due to a remeasurement of estimated costs.
Net assets in liquidation decreased by $202.0 million during the nine months ended September 30, 2022, primarily due to a decrease of $196.1 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza, liquidating distributions to unitholders of $5.4 million and a $0.5 million net decrease due to a remeasurement of estimated costs.
Net assets in liquidation increased by $0.8 million during the three months ended September 30, 2021, primarily due to a net increase of $3.5 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations. The increase was offset in part by a liquidating distribution to unitholders of $2.2 million and a $0.5 million net decrease due to a remeasurement of estimated costs.
Net assets in liquidation decreased by $3.6 million during the nine months ended September 30, 2021, primarily due to liquidating distributions to unitholders of $9.4 million and a $1.9 million net decrease due to a remeasurement of estimated costs. The decrease was offset in part by a net increase of $7.7 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
18
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
The net assets in liquidation at September 30, 2022, which are presented on an undiscounted basis, includes Worldwide Plaza valued based on an indicative non-binding proposal received to purchase some or all of our interest in WWP plus the Company’s respective share of WWP’s net assets, resulting in estimated future liquidating distributions of approximately $7.22 per Unit. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the next 12 months and costs to dispose of the Company’s remaining investment in WWP. Any change in the future market value of Worldwide Plaza, if any, will be evaluated at each reporting period and will be reflected in the Statement of Net Assets in liquidation at such times. Management’s estimate, like any estimate or projection, is subject to various assumptions and uncertainties including the joint venture’s ability to execute on the business plan, tenants paying their rental obligations, the equity capital and financing markets and New York City market conditions generally.
Our unaudited financial statements included in this Quarterly Report on Form 10-Q are prepared on the liquidation basis of accounting and accordingly include an estimate of the liquidation value of our assets and other estimates, including estimates of anticipated cash flow, timing of asset sales and liquidation expenses. These estimates update estimates that we have previously provided. These estimates are based on multiple assumptions, some of which may prove to be incorrect, and the actual amount of liquidating distributions we pay to you may be more or less than these estimates. We cannot assure you of the actual amount or timing of liquidating distributions you will receive pursuant to the Liquidation Plan.
Tax Status
We are taxed as a partnership for federal and state income tax purposes. Accordingly, no provision or benefit for income taxes is made in the consolidated financial statements. All distributions from the Company will be considered a return of capital for tax purposes. Unitholders will receive a Schedule K-1 from the Company annually reflecting their allocable share of the Company’s income, loss, gains and deductions.
Inflation
Many of Worldwide Plaza’s leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions.
Off-Balance Sheet Arrangements
We have no off-balance-sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. Subsequent to the adoption of the Liquidation Plan, we are required to estimate all costs and income we expect to incur and earn through the end of liquidation including the estimated amount of cash we expect to collect on the disposal of our assets and the estimated costs to dispose of our assets.
Investment in Unconsolidated Joint Venture
We account for our investment in unconsolidated joint venture under the equity method of accounting because we exercise significant influence over, but do not control the entity and are not considered to be the primary beneficiary. Under liquidation accounting, the investment in unconsolidated joint venture is recorded at its net realizable value. We evaluate the net realizable value of our unconsolidated joint venture at each reporting period.
19
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
Any changes in net realizable value will be reflected as a change in our net assets in liquidation. The liquidation value of our remaining investment in Worldwide Plaza as of September 30, 2022 is based on an indicative non-binding proposal received to purchase some or all of the Company’s interest in WWP and the Company’s share of Worldwide Plaza’s net assets.
Recent Accounting Pronouncement
There are no new accounting pronouncements that are applicable or relevant to the Company under the liquidation basis of accounting.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2022, we had $601.2 million of unconsolidated mortgage debt reflecting our pro rata share of Worldwide Plaza’s total mortgage debt of $1.2 billion. This debt consisted of fixed-rate secured mortgage notes payable. Changes in market interest rates have no impact on interest due on the notes.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the SEC 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 (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
As of September 30, 2022 an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2022.
Other Matters
There have been no changes in our internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
20
NEW YORK REIT LIQUIDATING LLC
September 30, 2022
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The information related to litigation and regulatory matters contained in Note 8—Commitments and Contingencies of our notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
Resignation of Howard Goldberg from the Board of Managers
On November 7, 2022, Howard Goldberg resigned from the Board of Managers (the “Board”) of New York REIT Liquidating LLC (the “Company”), effective November 7, 2022, pursuant to the terms of the Limited Liability Company Agreement of the Company. Mr. Goldberg did not resign as a result of any disagreement with the Company on any matter relating to its operations, policies or practices.
Appointment of Michael L. Ashner to the Board of Managers
On November 9, 2022, Michael L. Ashner was appointed as a manager to the Board of the Company. Mr. Ashner was appointed on the recommendation of WW Investors (as defined below), pursuant to the terns of the previously disclosed Manager Designation Agreement, dated as of June 30, 2020 (the “Manager Designation Agreement”), by and among the Company and WW Investors LLC, Michael L. Ashner and Steven Witkoff (collectively, “WW Investors”). Mr. Ashner is the manager and a member of WW Investors LLC. A copy of the Manager Designation Agreement has been filed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2022.
Mr. Ashner, 70, currently serves as the Chief Executive Officer of Winthrop Capital Advisors, LLC, First Winthrop Corp. and Winthrop Realty Partners L.P., a group of affiliated companies that own, operate and provide asset management services to real estate related assets, He formerly served as a trustee of Winthrop Realty Liquidating Trust, the liquidating trust established to liquidate the remaining assets of Winthrop Realty Trust, a New York Stock Exchange (“NYSE”) listed real estate investment trust. Winthrop Capital Advisors, LLC and its affiliated entities are affiliates of Winthrop REIT Advisors, LLC (the “Winthrop Advisor”). The Winthrop Advisor currently administers the activities of the Company pursuant to the terms of an advisory agreement (as amended, the “Advisory Agreement”) between the Company and the Winthrop Advisor. In accordance with the terms of the Advisory Agreement, the Company pays the Winthrop Advisor two monthly fees aggregating $100,000 (prorated for any partial month). For the 21-month period commencing at the beginning of the Company’s last fiscal year through September 30, 2022, the Company has paid the Winthrop Advisor $2.1 million. Copies of the Advisory Agreement and all amendments thereto have been filed as Exhibits 10.1, 10.5, 10.6 and 10.15 to the Company’s 2021 Form 10-K.
In addition to the above, Mr. Ashner also currently serves as the Chief Executive Officer of First Winthrop Corporation, a real estate investment and management company, a position he has held since 1996. From December 31, 2003 to December 31, 2016, he also served as Chief Executive Officer and Chairman (from April 2004) of Winthrop Realty Trust. Mr. Ashner also served as the Executive Chairman and a Trustee of Lexington Realty Trust (“Lexington”), a NYSE listed real estate investment trust, from December 31, 2006 (when Newkirk Realty Trust, Inc. (“Newkirk”) was merged into Lexington) to March 20, 2008. Prior to the merger between Lexington and Newkirk, he also served as a director and the Chairman and Chief Executive Officer of Newkirk. From August 2002 until their liquidation in 2004, Mr. Ashner served as a director and Chief Executive Officer of Shelbourne Properties I, Inc., Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc. (collectively, the “Shelbourne Entities”), three real estate investment trusts. From 2019 to 2021, he served as a director of CBL Associates & Properties, Inc. Mr. Ashner is a Trustee of the Northwell Hospital System, American Friends of Beit Ruth and a past trustee of the National World War II Museum of New Orleans. He is a graduate of Cornell University and the University of Miami School of Law.
Mr. Ashner’s compensation for service as a non-employee manager will be consistent with that of the Company’s other non-employee managers. The non-employee manager compensation program is described under the caption “Item 11. Executive Compensation – Compensation of Managers” in the Company’s 2021 Form 10-K. Additionally, the Company entered into an indemnification agreement (the “Indemnification Agreement”) with Mr. Ashner in the same form as the indemnification agreements the Company has entered into with its other managers. Mr. Ashner will be indemnified by the Company for certain liabilities and will be advanced certain expenses that have been incurred as a result of action brought, or threatened to be brought, against him as a manager as a result of his service, subject to the limitations set forth in the Indemnification Agreement.
Resignation of John L. Lee as Board Observer
On November 8, 2022, John J. Lee resigned from his position as a Board observer, effective November 8, 2022, in accordance with the terms of the previously disclosed Board Observer Agreement, dated as of October 4, 2021, by and between Mr. Lee and the Company.
Resignation of Joseph Moinian as Board Observer
On November 13, 2022, Joseph Moinian resigned from his position as a Board observer, effective November 13, 2022, in accordance with the terms of the previously disclosed Board Observer Agreement, dated as of June 30, 2022, by and between Mr. Moinian and the Company.
Item 6. Exhibits.
The exhibits listed on the Exhibit Index are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.
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EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (and are numbered in accordance with Item 601 of Regulation S-K).
| Exhibit No. |
Description | |
| 31.1* | Certification of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| .101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within Inline XBRL document) | |
| * | Filed herewith |
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NEW YORK REIT LIQUIDATING LLC
September 30, 2022
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NEW YORK REIT LIQUIDATING LLC | ||
| By: | /s/ John Garilli | |
| John Garilli | ||
| Chief Executive Officer, President, Chief Financial Officer, | ||
| Treasurer and Secretary (Principal Executive Officer, | ||
| Principal Financial Officer and Principal Accounting Officer) | ||
Date: November 14, 2022
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