10-Q

    FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

(Mark One)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended             June 30, 2018        

OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number      001-37547

Gyrodyne, LLC

(Exact name of registrant as specified in its charter)

New York	46-3838291
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 Flowerfield, Suite 24, St. James, NY 11780

(Address and Zip Code of principal executive offices)     

   (631) 584-5400    

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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. Yes  X   No ___

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). Yes_X__ No___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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). Yes _ No  X

On August 9, 2018, there were 1,482,680 common shares outstanding.

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INDEX TO QUARTERLY REPORT OF GYRODYNE, LLC

QUARTER ENDED JUNE 30, 2018

	Seq. Page
Form 10-Q Cover	1
Index to Form 10-Q	2
PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements.	3
Consolidated Statements of Net Assets as of June 30, 2018 (liquidation basis and unaudited) and December 31, 2017 (liquidation basis)	3
Consolidated Statement of Changes in Net Assets for the six months ended June 30, 2018 (liquidation basis and unaudited)	4
Notes to Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	30
Item 4. Controls and Procedures.	30
PART II - OTHER INFORMATION	30
Item 1. Legal Proceedings.	30
Item 6. Exhibits.	31
SIGNATURES	32
EXHIBIT INDEX	32

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PART I - FINANCIAL INFORMATION               

Item 1. Financial Statements.

GYRODYNE, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET ASSETS

AS OF JUNE 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017

(Liquidation Basis)

	June 30,		December 31,
	2018 (Unaudited)		2017
ASSETS:
Real estate held for sale	$	33,016,665	$	33,016,665
Cash and cash equivalents		3,840,167		5,265,368
Rent receivable		75,044		41,226
Other receivables		48,399		53,392
Total Assets	$	36,980,275	$	38,376,651
LIABILITIES:
Accounts payable	$	554,375	$	532,671
Accrued liabilities		159,446		261,160
Deferred rent liability		31,929		26,675
Tenant security deposits payable		276,624		293,978
Mortgage loan payable		1,100,000		-
Estimated liquidation and operating costs net of receipts		8,102,781		10,624,817
Total Liabilities		10,225,155		11,739,301
Net assets in liquidation	$	26,755,120	$	26,637,350

See notes to consolidated financial statements

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GYRODYNE, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

FOR THE SIX-MONTHS ENDED JUNE 30, 2018

(Liquidation Basis)

(Unaudited)

Net assets in liquidation, as of December 31, 2017		$	26,637,350
Changes in assets and liabilities in liquidation:
Remeasurement of assets and liabilities	117,770
Net increase in liquidation value			117,770
Net assets in liquidation, as of June 30, 2018		$	26,755,120

See notes to consolidated financial statements 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTHS ENDED JUNE 30, 2018 (unaudited)

1. The Company

Gyrodyne, LLC (“Gyrodyne”, the “Company” or the “Registrant”) is a limited liability company formed under the laws of the State of New York whose primary business is the management of a portfolio of medical office and industrial properties and the pursuit of entitlement/re-zoning on such properties, which are located in Suffolk and Westchester Counties, New York. 

Substantially all of our developed properties are subject to leases in which the tenant reimburses the Company for a portion, all of or substantially all of the costs and/or cost increases for utilities, insurance, repairs, maintenance and real estate taxes. Certain leases provide that the Company is responsible for certain operating expenses.

The Company’s corporate strategy is to pursue re-zoning and/or entitlement opportunities which are intended to increase the values of our two remaining major properties (Flowerfield and Cortlandt Manor) so that they can be sold at higher prices (than those achievable under their current entitlements) that will maximize distributions to our shareholders during the liquidation process and then dissolve the Company.  The value of the real estate reported in the Statements of Net Assets as of June 30, 2018 and December 31, 2017 (predicated on current asset values) does not include the potential value impact that may result from such value enhancement efforts.  There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances the acquisition of certain adjacent properties, pursuit of joint venture relationships, entitlements and/or zoning changes, other investments and/or other strategies to enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders. The Company does not expect the acquisition of properties or the pursuit of joint ventures, if any, to adversely affect the timing of distributions to our shareholders. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. The liquidation process and the amount and timing of distributions involve risks and uncertainties. As such, it is impossible at this time to determine the ultimate amount of proceeds that will actually be distributed to our shareholders or the timing of such payments. Accordingly, no assurance can be given that the distributions will equal or exceed the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets. The actual nature, amount and timing of all distributions will be determined by Gyrodyne’s Board in its sole discretion and will depend in part upon the Company’s ability to convert our remaining assets into cash in compliance with our obligations under the Stipulation entered into in connection with the class action lawsuit (See Note 12 – Contingencies) and settle and pay our remaining liabilities and obligations. Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement, such dissolution may be effected upon the vote of holders of a majority of Gyrodyne common shares or, in the Board’s discretion and without any separate approval by the holders of the Gyrodyne common shares, at any time the value of Gyrodyne’s assets, as determined by the Board in good faith, is less than $1,000,000.

The Company currently owns one medical office park and one of fourteen buildings in a second medical office park, together comprising approximately 37,000 rentable square feet, and a multitenant industrial park comprising approximately 130,000 rentable square feet. The aforementioned industrial park is situated on ten acres of a 68-acre property in St. James, New York, all of which is owned by the Company.  Each of the medical office park in Cortlandt Manor, the building in the Port Jefferson Professional Park and the Flowerfield Industrial Park (including its undeveloped portion) is individually held in a single asset LLC wholly-owned by the Company.

2. Strategic Plan to Enhance Property Values, Liquidate and Dissolve

Our corporate strategy is to pursue zoning and/or entitlement opportunities which are intended to increase the values of our two remaining major properties so that they can be sold at higher prices (than those achievable under their current entitlements) that will maximize distributions to our shareholders during the liquidation process. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. To accomplish this, the Company’s plan will consist of:

● managing the real estate portfolio to improve operating cash flow while simultaneously increasing the market values of the underlying properties;

● managing the strategic sale of real estate assets;

● pursuing the entitlement/re-zoning efforts of the Flowerfield and Cortlandt Manor properties, to maximize value;

● focusing use of capital by the Company to preserve or improve the market value of the real estate portfolio; and

● balancing working capital and funds available for the entitlement process.

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Gyrodyne’s dual strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing possible entitlement and/or zoning opportunities while simultaneously enhancing the value of its leases.  The Board believes the aforementioned dual strategy will improve the chances of increasing the values for such properties. The value of the real estate reported in the Statements of Net Assets as of June 30, 2018 and December 31, 2017 (predicated on current asset values) does not include the potential value impact that may result from such value enhancement efforts. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.  Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve, in limited circumstances, the acquisition of certain adjacent properties, pursuit of joint venture relationships, entitlements and/or zoning changes and other investments and/or other strategies to maximize the returns for our shareholders.  The Company does not expect the acquisition of properties or the pursuit of joint ventures, if any, to adversely affect the timing of the return of capital to our shareholders.  Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. We are unable to predict the precise nature, amount or timing of such distributions.

The Company is making tenant improvements at Flowerfield to convert certain existing industrial space into office space pursuant to our amended lease with Stony Brook University.  The Company believes the amended lease enhances the value of the property as a whole by improving the building space and expanding the amount of space we are leasing to a high-quality long-term tenant. The Company is pursuing the re-opening of the Long Island Railroad (“LIRR”) crossing gate connecting the Flowerfield property and the University.  This re-opening would increase the synergy with the University and allow for a portion of the vehicle trip generation from this office space to be accommodated using the internal access point between the properties. The Company believes positioning the industrial park buildings to mitigate traffic impact on the local roads will maximize the entitlements and related value it is pursuing on the Flowerfield property.  The planned tenant improvements for leases signed in the first quarter were estimated to cost approximately $1,100,000 and were financed with a non-revolving credit line (rather than cash on hand) secured by the Flowerfield industrial buildings and the specific tax lot they reside on.  The additional value from the Stony Brook lease expansion signed in the first quarter of 2018 and the estimated cost of the related tenant improvements were included in the real estate value and estimated costs in excess of receipts, respectively, of both the June 30, 2018 and the December 31, 2017 financial statements. 

Sales of properties by Gyrodyne could take the form of individual sales of assets, as has been our recent experience in Port Jefferson, sales of groups of assets, a single sale of all or substantially all of the assets or some other form of sale. The assets may be sold to one or more purchasers in one or more transactions over a period of time.

A sale of substantially all of the assets of the Company would require shareholder approval under New York law.  However, New York law does not require shareholder approval for the sale of individual properties that do not constitute substantially all of a company’s assets. The prices at which the various assets may be sold depend largely on factors beyond our control, including, without limitation, the condition of financial and real estate markets, the availability of financing to prospective purchasers of the assets, regulatory approvals, public market perceptions, and limitations on transferability of certain assets.

We cannot give any assurance on the timing of the ultimate sale of all of the Company’s properties.  Assuming the liquidation process continues through the end of 2019 and after giving effect to the estimated flow of cash from the operation of our existing properties, we expect that Gyrodyne will have a cash balance of approximately $26.8 million, prior to any future special distributions, based on the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets.  Such cash would equate to future liquidating distribution of approximately $18.05 per share based on Gyrodyne having 1,482,680 common shares outstanding.  These estimated distributions are based on values at June 30, 2018 and do not include the potential value that may be derived from our efforts to maximize the value on Flowerfield and Cortlandt Manor. 

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The Statements of Net Assets are based on certain estimates.  Uncertainties as to the precise value of our non-cash assets, which exclude the estimated additional value achievable from the costs incurred to pursue the maximum value on Flowerfield and Cortlandt Manor through certain land entitlement efforts (including the pursuit of special permits and or zone changes) and the ultimate amount of our liabilities make it impracticable to predict the aggregate net value ultimately distributable to shareholders in a liquidation. Land entitlement costs, claims, liabilities and expenses from operations, including operating costs, salaries, income taxes, payroll and local taxes, legal, accounting and consulting fees and miscellaneous office expenses, will continue to be incurred during our liquidation process, which includes certain enhancement efforts.  Excluding the value that may be achieved from the entitlement efforts, expenses incurred in pursuing the Company’s business plan will reduce the amount of assets available for ultimate distribution to shareholders, and, while a precise estimate of those expenses cannot currently be made, management and our Board believe that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims (including contingent liabilities) and to make cash distributions to shareholders. However, no assurances can be given that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims and to make cash distributions to shareholders. If such available cash and amounts received on the sale of assets are not adequate to provide for our obligations, liabilities, expenses and claims, distributions to our shareholders will be reduced and could be eliminated.

3. Basis of Quarterly Presentations

The accompanying interim quarterly financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements of the Company included herein have been prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all adjustments which are necessary to present fairly the results for the six-months ended June 30, 2018.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.

This report should be read in conjunction with the audited consolidated financial statements and footnotes therein included in the Annual Report on Form 10-K for the year ended December 31, 2017.

4. Summary of Significant Accounting Policies

Gyrodyne is pursuing the disposition of its remaining property in Port Jefferson and the enhancement of the value of the Flowerfield and Cortlandt Manor properties by pursuing various zoning/entitlement opportunities, which the Gyrodyne Board believes will improve the chances of increasing the values for such properties. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares.  Therefore, effective September 1, 2015, Gyrodyne adopted the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the entity is “imminent”, as defined in ASC 205-30, Presentation of Financial Statements Liquidation Basis of Accounting.  Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement the Board has the ability to sell all the Company’s assets without further approval.  As a result, liquidation is “imminent” in accordance with the guidance provided in ASC 205-30.

Principles of consolidation - The consolidated financial statements include the accounts of Gyrodyne and all subsidiaries. All consolidated subsidiaries are wholly-owned. All inter-company balances and transactions have been eliminated.

Basis of Presentation - Liquidation Basis of Accounting – Under the liquidation basis of accounting, the consolidated balance sheet and consolidated statements of operations, equity, comprehensive income and cash flows are no longer presented. The consolidated statements of net assets and the consolidated statement of changes in net assets are the principal financial statements presented under the liquidation basis of accounting.

Under the liquidation basis of accounting, all the Company’s assets have been stated at their estimated net realizable value, or liquidation value (which represents the estimated amount of cash that Gyrodyne will collect on the disposal of assets as it carries out the plan of liquidation), which is based on current contracts, estimates and other indications of sales value (predicated on current values). All liabilities of the Company, including those estimated costs associated with implementing the plan of liquidation, have been stated at their estimated settlement amounts. These amounts are presented in the accompanying statements of net assets. These estimates are periodically reviewed and adjusted as appropriate. There can be no assurance that these estimated values will be realized. Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the plan of liquidation. The actual values and costs associated with carrying out the plan of liquidation may differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences may be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the plan of liquidation, which is currently anticipated to be completed by the end of 2019. The Company is in the process of pursuing entitlements, density and/or rezoning, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities and community groups. The process will involve extensive analysis internally at the government entity level, as well as between government entities such as town planning departments and Gyrodyne, and will continue up until such time as entitlement, rezoning and density decisions are made by the relevant government entities. We hope to secure favorable decisions on entitlements, rezoning and density so that we can then seek the sale of our remaining properties at higher prices (than those achievable under their current entitlements) and then proceed with the liquidation and dissolution of the Company. The Company expects the process of pursuing entitlements, rezoning and density could take up to 18 months with the ultimate timing to a certain extent managed by Gyrodyne but ultimately dependent and under the control of the applicable municipality’s planning board or other governmental authority. Accordingly, it is not possible to predict with certainty the timing or aggregate amount which may ultimately be distributed to common shareholders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying statements of net assets.

7

The Company is incurring expenses in its pursuit of value associated with the highest and best use for Flowerfield and the Cortlandt Medical Center. The actual costs of achieving such values may differ materially from the assumptions and estimates utilized and accordingly, could have a significant impact on the value of net assets.

The Company’s assumptions and estimates (including the sales proceeds of all its real estate holdings, selling costs, retention bonus payments, rental revenues, rental expenses, capital expenditures, land entitlement/re-zoning costs, general and administrative fees, director and officer liability and reimbursement, post liquidation insurance tail coverage policy and final liquidation costs) are based on completing the liquidation by the end of 2019. As previously stated, on an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update respective information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company’s properties.

Management Estimates – In preparing the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and the liquidation basis of accounting, management is required to make estimates and assumptions that affect the reported amounts of assets, including net assets in liquidation, and liabilities, and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of receipts and expenditures for the reporting period. Actual results could differ from those estimates.

Estimated Distributions per Share – Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets in liquidation by the number of shares outstanding.  

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not, as of June 30, 2018 and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

5. Statements of Net Assets in Liquidation

Net assets in liquidation as of June 30, 2018 would result in estimated liquidating distributions of approximately $18.05 per common share. This is an increase of $0.08 from the December 31, 2017 estimated net assets in liquidation of $17.97 per common share.

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2019, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the June 30, 2018 cash balance of $3.8 million plus adjustments for the following items which are estimated through December 31, 2019:

1. Adjustments for the estimated cash receipts from the operation of the properties net of rental property related expenditures as well as costs expected to be incurred to preserve or improve the net realizable value of the property at its estimated gross sales proceeds.

2. Proceeds from the sale of all the Company’s real estate holdings.

3. The net cash used to settle the working capital accounts.

4. The general and administrative expenses and or liabilities associated with operations and the liquidation of the Company including severance, director and officer liability inclusive of post liquidation tail policy coverage, and financial and legal fees to complete the liquidation.

5. Costs for the pursuit of entitlement/re-zoning of the Flowerfield and Cortlandt Manor properties, to maximize value.

6. Estimated retention bonus amounts based on the net realizable value of the real estate under the Retention Bonus Plan (See Note 11).

7. Proceeds from the drawdowns on the debt facility to fund tenant improvements and costs to repay such outstanding debt.

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques. The Company may estimate net realizable values using market information such as broker opinions of value, appraisals, and recent sales data for similar assets or discounted cash flow models, which primarily rely on Level 3 inputs, as defined under FASB ASC Topic No. 820, Fair Value Measurement. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent the Company under estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over estimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated.

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The Company estimates that it will incur approximately $2 million (included in the Statement of Net Assets as of June 30, 2018, as part of the estimated liquidation and operating costs net of receipts, See Note 6) in land entitlement/re-zoning costs over the remainder of 2018 and 2019, in an effort to obtain entitlements, including zone changes and special permits. The Company believes the commitment of these resources will enable the Company to position the properties for sale with all entitlements necessary to maximize the Flowerfield and Cortlandt Manor property values.  During the six-months ended June 30, 2018, the Company incurred approximately $508,000 of land entitlement/re-zoning costs.  The Company believes the remaining balance of approximately $2 million will be incurred from July 2018 through the end of the liquidation period. The Company does not intend to develop the properties but rather to commit resources to position the properties for sale in a timely manner with all entitlements necessary to achieve maximum pre-construction values.  The costs and time frame to achieve the entitlements could change due to a range of factors including a shift in the value of certain entitlements making it more profitable to pursue a different mix of zones/entitlements and the dynamics of the real estate market.  As a result, the Company has focused and will continue to focus its land entitlement/re-zoning efforts on achieving the highest and best use.  During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement processes itself.  The value of the real estate reported in the Statements of Net Assets as of June 30, 2018 and December 31, 2017 (predicated on current asset values) does not include the potential value impact that may result from the land entitlement/re-zoning costs. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The Company is making tenant improvements at Flowerfield to convert certain existing industrial space into office space pursuant to our amended lease with Stony Brook University.  The Company believes the amended lease enhances the value of the property as a whole by improving the building space and expanding the amount of space we are leasing to a high-quality long-term tenant. The Company is pursuing the re-opening of the Long Island Railroad (“LIRR”) crossing gate connecting the Flowerfield property and the University.  This re-opening would increase the synergy with the University and allow for a portion of the vehicle trip generation from this office space to be accommodated using the internal access point between the properties. The Company believes positioning the industrial park buildings to mitigate traffic impact on the local roads will maximize the entitlements and related value it is pursuing on the Flowerfield property.  The tenant improvements for leases signed in the first quarter of 2018 cost approximately $1.1 million which were financed with a non-revolving credit line ( rather than cash on hand) secured by the Flowerfield industrial buildings and the specific tax lot they reside on.  The additional value from the Stony Brook lease expansion signed in the first quarter of 2018 and the estimated cost of the related tenant improvements were included in the real estate value and estimated costs in excess of receipts, respectively, of both the June 30, 2018 and the December 31, 2017 financial statements.  There can be no assurance that the Flowerfield property will increase in value as a result of the tenant improvements or that any resulting increase in value of the Flowerfield property will exceed the cost of our planned tenant improvements including the cost of the related financing.

The net assets in liquidation as of June 30, 2018 ($26,755,120) and December 31, 2017 ($26,637,350) would result in estimated liquidating distributions of approximately $18.05 and $17.97, respectively, per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value but excluding any actual additional sales proceeds that may result directly or indirectly from our land entitlement/re-zoning efforts.  The increase in net assets in liquidation for the six months ended June 30, 2018 was due to the savings in the officers and directors insurance policy and the timing of individual property sales.  Neither the additional value that may be derived from the land entitlement/re-zoning costs, nor the retention bonus on one property are included in the estimated liquidating distributions as of June 30, 2018 and December 31, 2017. The Company believes the land entitlement/re-zoning costs will enhance estimated distributions per share through the improved values from the sales of the Flowerfield and Cortlandt Manor properties. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the period required to complete the plan of liquidation. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, improved values of the Cortlandt Manor and/or Flowerfield properties resulting from the land entitlement efforts net of any bonuses if such values exceed the minimum values required to pay bonuses under the retention bonus plan, favorable or unfavorable changes in the land entitlement efforts, the performance of the underlying assets, the market for commercial real estate properties generally and any changes in the underlying assumptions of the projected cash flows. 

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6. Liability for Estimated Costs in Excess of Receipts during Liquidation

The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation. The Company currently estimates that it will incur costs in excess of estimated receipts during the liquidation period, excluding the net proceeds from the real estate sales. These amounts can vary significantly due to, among other things, land entitlement/re-zoning costs, the timing and estimates for executing and renewing leases, capital expenditures to maintain the real estate at its current estimated realizable value and estimates of tenant improvement costs, the timing of property sales and any direct/indirect costs incurred that are related to the sales (e.g., retention bonuses on the sale of the Cortlandt Manor and Flowerfield properties, costs to address buy side due diligence inclusive of administrative fees, legal fees and property costs to address items arising from such due diligence and not previously known), the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding up of operations. These costs are estimated and are anticipated to be paid during the liquidation period.

The change in the liability for estimated costs in excess of estimated receipts during liquidation from January 1, 2018 through June 30, 2018 is as follows:

	January 1, 2018			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			June 30, 2018
Assets:
Estimated rents and reimbursements	$	4,044,202		$	(1,180,071	)	$	179,064		$	3,043,195
Liabilities:
Property operating costs		(2,403,872	)		749,705			(120,642	)		(1,774,809	)
Tenant improvements		(1,304,109	)		1,061,545			29,691			(212,873	)
Common area capital expenditures		(500,000	)		47,964			6,834			(445,202	)
Land entitlement costs		(2,516,394	)		508,222			-			(2,008,172	)
Corporate expenditures		(5,650,775	)		1,097,481			22,823			(4,530,471	)
Selling costs on real estate assets*		(1,981,000	)		-			-			(1,981,000	)
Retention bonus payments to Directors (a)*		(417,469	)		-			-			(417,469	)
Retention bonus payments to Executives and other employees (a)*		(224,790	)		-			-			(224,790	)
Less prepaid expenses and other assets		329,390			119,420			-			448,810
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,624,817	)	$	2,404,266		$	117,770		$	(8,102,781	)

*The amounts reported are based on the provisions of the retention bonus plan and the reported amount of the real estate assets estimated net realizable value.

** These estimates are based on the liquidation being completed by the end of 2019.

(a) The value of the real estate reported in the Statement of Net Assets as of June 30, 2018, does not include the increased value, if any, that may result from the estimated land entitlement costs. As a result, net realizable value as reported does not exceed the adjusted appraised value under the Retention Bonus Plan (the appraisal of the real estate in late 2013 plus the estimated development costs) for one of the properties and accordingly the Company has not included any retention bonuses on the sale of such properties.

7. Disposition Activities

Port Jefferson Professional Park.  On June 7, 2018, the Company’s wholly-owned subsidiary GSD Port Jefferson, LLC entered into a Purchase and Sale Agreement (the “Agreement”) to sell the real property known as 11 Medical Drive, Port Jefferson Station, New York for $800,000.  The outside closing date is September 21, 2018 with no right to extend.

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8. Mortgage Loan Payable

The Company’s wholly-owned subsidiary GSD Flowerfield, LLC secured a non-revolving credit line with a bank for up to $3,000,000, which closed on March 21, 2018. There is an interest only phase for the first eight months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on November 30, 2025 (84 months after conversion to a permanent loan) (the “Permanent Phase”). The interest rate during the Interest-Only Phase is a variable rate equal to the daily highest prime rate published by the Wall Street Journal plus 100 basis points (1% rounded up to the nearest 1/8 percent). During the Permanent Phase, the Company will pay interest at a fixed rate based on the Federal Home Loan Bank rate for a 7-year maturity as made available by the Federal Home Loan Bank of New York plus a margin of 200 basis points (2%) rounded up to the nearest 1/8 percent but in no event less than 4.25%, plus principal based on a 20-year amortization period.

The first advance of $1.1 million was used to finance the tenant improvements pursuant to the expanded signed leasing relationship with SBU Hospital described above. The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with State University of New York or its affiliates (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase. 

The mortgage loan is secured by approximately 31.8 acres of the Flowerfield Industrial Park including the respective buildings and related leases. The only significant financial covenant associated with the loan is a debt service ratio on GSD Flowerfield, LLC of 1.35 to 1. The Company anticipates modifying the terms of the loan following the completion of its subdivision. As of June 30, 2018, the Company is in compliance with the loan covenants. The mortgage loan is guaranteed by Gyrodyne LLC.

The mortgage loan payable matures upon the earlier of the sale of the Flowerfield Industrial Park (unless assigned) or as follows:

Years Ending December 31,
2018	$	2,537
2019		31,359
2020		33,114
2021		34,968
2022		36,926
Thereafter		961,096
Total	$	1,100,000

9. Income Taxes

As a limited liability company, Gyrodyne is not subject to an entity level income tax but rather is treated as a partnership for tax purposes, with its items of income, gain, deduction, loss and credit being reported on the Company’s information return, on Form 1065, and allocated annually on Schedule K-1 to its members pro rata. Flowerfield Properties Inc. (“FPI”) is a wholly-owned subsidiary of the Company. FPI is a “C” corporation. Any income generated by FPI is subject to a corporate level tax; therefore FPI files separate federal and state income tax returns. The only asset owned by FPI is the investment in The Grove.

Prior to January 1, 2018, the Internal Revenue Service (the “IRS”) would generally determine adjustments of income and deductions at the partnership level when auditing partnership tax returns, but was required to collect any additional taxes, interest and penalties from each of the partners.

The Bipartisan Budget Act of 2015 (the “2015 Act”) changed this procedure for partnership tax audits and audit adjustments for partnership returns of large partnerships for fiscal years beginning after December 31, 2017. Pursuant to the 2015 Act, if any audit by the IRS of our income tax returns for any fiscal year beginning after December 31, 2017 results in any adjustments, the IRS may collect any resulting taxes, including any applicable penalties and interest, directly from Gyrodyne. IRS tax audit assessments on tax years beginning January 1, 2018 will require Gyrodyne to bear any tax liability resulting from such audit, as opposed to passing it through to our shareholders, unless we elect to push out the tax audit adjustments to our shareholders once it has been calculated at the company level.

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As of June 30, 2018 and December 31, 2017, Statements of Net Assets include federal and state tax current receivables of $12,544. During the six-months ended June 30, 2018, the Company filed a net operating loss carryback claim, resulting from the write-off of its investment in the Grove, and received a refund of $73,085, the benefit of which was included in the estimated liquidation and operating costs net of receipts in the Statement of Net Assets at December 31, 2017. The Company does not expect to receive any further distributions from the Grove.

10. Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions and generally limits the amount of credit exposure in any one financial institution. The Company maintains bank account balances, which exceed insured limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash. Management does not believe significant credit risk existed at June 30, 2018 and December 31, 2017. As the Company executes on the sale of its assets, its regional concentration in tenants will shrink thereby resulting in the increased credit risk from exposure to the local economies.

For the six-months ended June 30, 2018 rental income from the three largest tenants represented approximately 20%, 18% and 6% of total rental income. The three largest tenants by revenue as of June 30, 2018 consist of a state agency located in the industrial park and two medical tenants in the Cortlandt Manor Medical Center. During the six-months ended June 30, 2018 we increased the space leased to the state agency, by approximately 93%, which will increase the concentration of credit risk respectively.

11. Commitments

As of June 30, 2018, other commitments and contingencies are summarized in the below table:

Management employment agreements with bonus and severance commitment contingencies	$	350,000
Other employee severance commitment contingencies		81,716
Total	$	431,716

Employment agreements - The Company has an employment agreement with its Chief Executive Officer (the “Agreement”).  The Agreement contains a bonus of $125,000 payable upon a change of control as defined in the agreement.  In addition, the agreement provides for severance equal to 6 months of base salary and the vesting and related payment of the change of control bonus. 

The Company also has an employment agreement with its Chief Operating Officer executed on May 8, 2014 which provides for severance equal to 6 months of base salary. On January 25, 2018, Gyrodyne entered into an amendment to the employment agreement with Mr. Pitsiokos effective January 25, 2018, to define with greater specificity Mr. Pitsiokos’ duties and responsibilities with respect to the Company’s properties.

Under Company policy, the aggregate severance commitment contingency to other employees is approximately $81,716.

Retention Bonus Plan- In May 2014, the Board of Directors approved a Retention Bonus Plan designed to recognize the nature and scope of the responsibilities related to the Company’s business plan, to reward and incent performance in connection therewith, to align the interests of directors, executives and employees with our shareholders and to retain such persons during the term of such plan.  The Retention Bonus Plan provides for bonuses to directors and to officers and employees determined by the gross sales proceeds from the sale of each property and the date of sale.

The Retention Bonus Plan provides for a bonus pool to be funded with an amount equal to 5% of the specified appraised value of such properties (set forth in the Plan), so long as the gross selling price of a property is equal to or greater than 100% of its 2013 appraised value as designated in the bonus plan.  The aggregate amount of the 2013 appraisals for the Company’s properties was utilized by the Company to help set the aggregate valuation of the real estate that was included in the non-cash dividend distributed on December 30, 2013.  Additional funding of the bonus pool will occur on a property-by-property basis when the gross sales price of a property exceeds its appraised value as follows: 10% on the first 10% of appreciation, 15% on the next 10% of appreciation and 20% on appreciation greater than 20%.

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The bonus pool is distributable in the following proportions to the named participants in the bonus plan for so long as they are directors or employees of the Company: 15% for the Chairman, 50% for the directors other than the Chairman (10% for each of the other five directors) and 35% (the “Employee Pool”) for the Company’s executives and employees. Such share of the bonus pool is earned only upon the completion of the sale of a property at a gross selling price equal to or greater than its appraised value and is paid to the named beneficiaries of the Retention Bonus Plan or their designees within 60 days of the completion of such sale or, if later, within 60 days of receipt of any subsequent post-completion installment payment related to such sale.

On May 24, 2016, the Company’s Board of Directors amended the Retention Bonus Plan to provide that land development costs incurred on a property since the date of the 2013 appraisal will be added to the 2013 appraised value of the property (“Adjusted Appraised Value”) in calculating appreciation for determining the bonus pool. The foregoing change was approved to better align the interests of the participants in the Retention Bonus Plan with those of the shareholders. The amendment also provides that each of the ten buildings in the Port Jefferson Professional Park will be treated as a “property”, so that a participant’s right to bonus payment on the sale of a Port Jefferson building will vest on, and payments to the bonus pool may be made shortly following, the closing of the sale of that building. As originally adopted, all ten buildings in the Port Jefferson Professional Park were treated as one property, so that a participant departing prior to the sale of all ten buildings would forfeit bonus on all ten buildings. The reason for this original designation was that, at the time of adoption, the Board of Directors believed that Gyrodyne’s entire Port Jefferson property would be sold as one block, not as individual buildings. Subsequent to adoption, the Gyrodyne Board came to believe that the sale of individual buildings would generate the greatest aggregate values and thus would be in the best interests of the Company and its shareholders.

On January 26, 2018, the Board of Directors of the Company approved Amendment No. 2 to the Retention Bonus Plan (the “Plan Amendment”). The Plan Amendment provides for (i) vesting of benefits upon the sale of each individual post-subdivision lot at Flowerfield and Cortlandt Manor, (ii) entitlement to a future benefit in the event of death, voluntary termination following substantial reduction in compensation or board fees, mutually agreed separation to right-size the board or involuntary termination without cause, and (iii) clarification of how development costs are calculated. As to any of the events referred to in clause (ii) above, a participant will only be eligible to receive a benefit to the extent that a property is sold within three years following the event and the sale produces an internal rate of return equal to at least four percent of the property’s value as of December 31 immediately preceding such event. The Plan Amendment does not have the effect of increasing the size of the participant pool, but rather only how benefits are divided among plan participants. The allocations are as follows:

Board Members/Employees	Bonus Pool Percentage
Board Members		65.000	%
Chief Executive Officer		15.474	%
Chief Operations Officer		13.926	%
Officer Discretionary Amount (a)		1.750	%
Other Employees		3.850	%
Total		100.000	%

(a) The officer discretionary amount of 1.75% is vested but not allocated and will be allocated to the officers within the discretion of the Board.

The value of the real estate reported in the Statements of Net Assets as of June 30, 2018 and December 31, 2017, does not include the increase in value that may result from the estimated land entitlement/re-zoning costs. As a result, net realizable value as reported does not exceed the Adjusted Appraised Value under the Retention Bonus Plan on one property and accordingly the Company has not included any retention bonuses on such sales in the estimated costs in excess of receipt.

There were no payments made during the six-months ended June 30, 2018 under the Retention Bonus Plan.

12. Contingencies

Putative Class Action Lawsuit - On July 3, 2014, a purported stockholder of the Company filed a putative class action lawsuit against Gyrodyne Company of America, Inc. (the “Corporation”) and members of its Board of Directors (the "Individual Defendants"), and against Gyrodyne Special Distribution, LLC (“GSD”) and the Company (collectively, the "Defendants"), in the Supreme Court of the State of New York, County of Suffolk (the "Court"), captioned Cashstream Fund v. Paul L. Lamb, et al., Index No. 065134/2014 (the "Action"). The complaint alleged, among other things, that (i) the Individual Defendants breached their fiduciary duties or aided and abetted the breach of those duties in connection with the merger of the Corporation and GSD into the Company (the “Merger”) and (ii) the Corporation and the Individual Defendants breached their fiduciary duties by failing to disclose material information in the proxy statement/prospectus relating to the Merger.

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On August 14, 2015, the parties to the Action entered into a Stipulation of Settlement (the "Settlement") providing for the settlement of the Action, subject to the Court's approval. Under the Settlement, Gyrodyne amended its Proxy Statement on August 17, 2015 with certain supplemental disclosures and agreed that any sales of its properties would be effected only in arm's-length transactions at prices at or above their appraised values as of December 2014. The plaintiff, on behalf of itself and the members of the putative class it represents, agreed to release and dismiss with prejudice all claims that had or could have been asserted in the Action or in any other forum against the Defendants and their affiliates and agents arising out of or relating to the Merger and the other transactions alleged by plaintiff in its complaint, as supplemented. On April 8, 2016, the Court entered a Final Order and Judgment approving the Settlement. By order of the same date, the Court also granted plaintiff’s application for an award of attorney’s fees and reimbursement of expenses in the amount of $650,000 which was paid in full in April 2016.

The 2014 aggregate appraised value of Gyrodyne’s properties was approximately $100,000 higher than the 2013 aggregate appraised value for such properties. As of June 30, 2018, the aggregate value of the remaining unsold properties was $4,416,665 higher than the 2014 appraised value.

General - In the normal course of business, the Company is a party to various legal proceedings. After reviewing all actions and proceedings pending against or involving the Company, management considers that any loss resulting from such proceedings individually or in the aggregate will not be material to the Company’s financial statements.

13. Fair Value of Financial Instruments

Assets and Liabilities Measured at Fair-Value – The Company believes the concepts for determining net realizable value are consistent with the guidance for measuring fair value. As a result, the Company follows authoritative guidance on fair value measurements, which defines fair-value, establishes a framework for measuring fair-value, and expands disclosures about fair-value measurements. The guidance applies to reported balances that are required or permitted to be measured at fair-value under existing accounting pronouncements.

The Company follows authoritative guidance on the fair value option for financial assets, which permits companies to choose to measure certain financial instruments and other items at fair-value in order to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently. However, the Company adopted the liquidation basis of accounting, and therefore reports all assets and liabilities at net realizable value.

The guidance emphasizes that fair-value is a market-based measurement, not an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, the guidance establishes a fair-value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy, as defined under FASB ASC Topic No. 820, Fair Value Measurements) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the level in the fair-value hierarchy within which the entire fair-value measurement falls is based on the lowest level input that is significant to the fair-value measurement in its entirety. Our assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Fair Value Measurements - The Company adopted the liquidation basis of accounting effective September 1, 2015; accordingly, the Company reports all real estate at their net realizable value.

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques. The Company may estimate net realizable values using market information such as broker opinions of value, appraisals, and recent sales data for similar assets or discounted cash flow models, which primarily rely on Level 3 inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent, the Company under estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over estimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated.

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14. Related Party Transactions

The Company has entered into various leasing arrangements with a not-for-profit organization of which the Company’s Chairman, Paul Lamb, serves as Chairman and a director but receives no compensation or any other financial benefit. A summary of the leasing arrangements is as follows:

Term			Square Feet		Annual Rent		Rent Abatement		Total Commitment (net of abatement, excluding renewal options)		Additional Commitment (assumes both two-year renewal options are exercised)
May 2016	-	Dec 2018		1,971	$	16,754	$	14,153(a)	$	29,825	$	67,014
Aug 2016	-	Dec 2018		2,130		-(b)		-(b)		-(b)		-(b)
May 2017	-	Dec 2018		1,905	$	16,193	$	5,398	$	21,590	$	64,770

(a) In exchange for the rent abatement, the tenant completed capital improvements that exceeded the abatement amount. In addition, the tenant signed a multi-year lease.

(b) In April 2017, the Company extended the term of a master lease with the not-for-profit originally entered into in August 2016. The Company understood that the tenant’s main intent was to sublease the space to artists, on a short-term basis, after which such subtenant artists would transition into their own space leased directly from the Company. Under the master lease, the tenant has the right to sublease the space without prior written consent for use as an art studio, art school or related use. Under the terms of the master lease, rent is payable by the tenant only to the extent the space is sublet, at the rent amount per square foot payable by the subtenant up to a maximum of $10 per square foot per year. The lease term of 29 months covers 2,130 square feet with a maximum annual and total lease commitment of up to $21,300 and $51,475, respectively. Approximately $3,500 in improvements were provided. Any space not subleased may be used by the tenant rent-free for certain stated art uses, although the tenant is responsible for certain passthrough expenses such as electric and heat. Since rent is only due if the space is sublet, the Company believes the fair value of the space to the extent not sublet reflects a below market lease over the term ending December 31, 2018 of up to $ 51,475 and total commitments including both two-year renewal options of $136,675.

During 2017, the Company extended the term of the first of the above two leases to coincide with the expiration of the third lease as well as provide for two two-year renewals at the tenant’s option.

During the six-months ended June 30, 2018 and the twelve months ended December 31, 2017, respectively, the Company received rental revenue of $40,527 and $22,165, respectively. In addition, the Company made total tenant improvements of $4,220, all of which were completed in 2016.

The Chairman is also a partner of the firm Lamb & Barnosky, LLP that provided pro bono legal representation to the aforementioned not-for-profit corporation on the lease.

The independent members of the Board of the Company approved all of the leasing transaction described above.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

When we use the terms “Gyrodyne,” the “Company,” “we,” “us,” and “our,” we mean Gyrodyne, LLC and all entities owned or controlled by us, including non-consolidated entities. References to “common shares” in this report refer to Gyrodyne, LLC’s common shares representing limited liability company interests. References herein to our Quarterly Report are to this Quarterly Report on Form 10-Q for the six-months ended June 30, 2018.

Cautionary Statement Concerning Forward- Looking Information. This Quarterly Report and the documents incorporated by reference into this Quarterly Report contain forward-looking statements about the Company 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”). Statements containing the words “believes,” “anticipates,” “estimates,” “expects,” “intends,” “plans,” “seeks,” “will,” “may,” “should,” “would,” “projects,” “continues” and similar expressions or the negative of these terms constitutes forward-looking statements that involve risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and they are included in this Quarterly Report for the purpose of invoking these safe harbor provisions. Such statements are based on current expectations and are subject to risks, uncertainties and changes in condition, significance, value and effect. The risks, uncertainties and changes in condition, significance, value and effect that could cause the Company’s actual results to differ materially from anticipated results include risks and uncertainties relating to our efforts to enhance the values of our remaining major properties and seek the orderly, strategic sale and liquidation of such properties as soon as reasonably practicable, the risk that the proceeds from the sale of our assets may not be sufficient to satisfy our obligations to our current and future creditors and retention bonus plan participants, the effect of economic and business conditions, risks inherent in the real estate markets of Suffolk and Westchester Counties in New York, the ability to obtain additional capital in order to enhance the value of the Flowerfield and Cortlandt Manor properties, risks and uncertainties associated with any litigation that may develop in connection with our efforts to sell our properties strategically (including related enhancement efforts), make liquidating distributions and dissolve, and other risks detailed from time to time in the Company’s SEC filings. Except as may be required under federal law, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur.

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Overview

Gyrodyne, LLC (“Gyrodyne”, the “Company” or the “Registrant”) is a limited liability company formed under the laws of the State of New York whose primary business is the management of a geographically diverse portfolio of medical office and industrial properties and the pursuit of entitlement/re-zoning on the properties located in Suffolk and Westchester Counties, New York.

Gyrodyne is the surviving entity in the merger of Gyrodyne Company of America, Inc. (the “Corporation”) and Gyrodyne Special Distribution, LLC (“GSD”) with and into Gyrodyne (the “Merger”), effective August 31, 2015. The Merger completed the Corporation’s plan of liquidation under the Internal Revenue Code.

Substantially all of our developed properties are subject to leases in which the tenant reimburses the Company for a portion, all of or substantially all of the costs and/or cost increases for utilities, insurance, repairs, maintenance and real estate taxes. Certain leases provide that the Company is responsible for certain operating expenses.

Gyrodyne’s dual strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing possible entitlement and/or zoning opportunities while simultaneously enhancing the value of its leases.  The Board believes the aforementioned dual strategy will improve the chances of increasing the values for such properties. The value of the real estate reported in the Statements of Net Assets as of June 30, 2018 and December 31, 2017 (predicated on current asset values) does not include any potential value impact that may result from such value enhancement efforts. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all. 

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor may involve in limited circumstances the acquisition of certain adjacent properties, pursuit of joint venture relationships, entitlements and/or zoning changes, other investments and/or other strategies to enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders. The Company does not expect the acquisition of properties or the pursuit of joint ventures, if any, to adversely affect the timing of distributions to our shareholders. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. The liquidation process and the amount and timing of distributions involve risks and uncertainties. As such, it is impossible at this time to determine the ultimate amount of proceeds that will actually be distributed to our shareholders or the timing of such payments. Accordingly, no assurance can be given that the distributions will equal or exceed the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets. The actual nature, amount and timing of all distributions will be determined by Gyrodyne’s Board in its sole discretion and will depend in part upon the Company’s ability to convert our remaining assets into cash in compliance with our obligations under the Stipulation entered into in connection with the class action lawsuit (See Part II, Item 1 – Legal Proceedings) and settle and pay our remaining liabilities and obligations. Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”), dissolution of the Company may be effected upon the vote of holders of a majority of Gyrodyne common shares or, in the Board’s discretion and without any separate approval by the holders of Gyrodyne common shares, at any time the value of Gyrodyne’s assets, as determined by the Board in good faith, is less than $1,000,000.

After giving effect to the Company’s dispositions of real property through June 30, 2018, the Company owns the following properties:

●         The Cortlandt Manor Medical Center comprising approximately 34,000 square feet residing on approximately 12 acres,

●         one medical office building, comprising approximately 3,000 square feet in the Port Jefferson Professional Park; and

●         the Flowerfield Industrial Park comprising approximately 130,000 rentable square feet. The industrial park is multi-tenanted and situated on ten acres of a 68-acre property in St. James, New York. 

Each of the medical office park in Cortlandt Manor, the building in the Port Jefferson Professional Park and the Flowerfield Industrial Park (including its undeveloped portion) are individually owned in single asset LLCs wholly-owned by the Company.

Strategic Plan to Enhance Property Values, Liquidate and Dissolve

Our corporate strategy is to pursue zoning and/or entitlement opportunities intended to increase the values of our two remaining major properties so that they can be sold to a developer at higher prices (than those achievable under their current entitlements) that will maximize distributions to our shareholders during the liquidation process. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. To accomplish this, the Company’s plan consists of:

● managing the real estate portfolio to improve operating cash flow while simultaneously increasing the market values of the underlying properties;

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● managing the strategic sale of real estate assets;

● pursuing the entitlement/re-zoning efforts of the Flowerfield and Cortlandt Manor properties, to maximize value;

● focusing use of capital by the Company to preserve or improve the market value of the real estate portfolio; and

● balancing working capital and funds available for the entitlement/re-zoning process.

The value of the real estate reported in the Statement of Net Assets as of June 30, 2018 and December 31, 2017 (predicated on current asset values), does not include the potential value impact that may result from the Company’s value enhancement efforts. Our efforts to generate the highest values of Flowerfield and Cortlandt Manor may involve, in limited circumstances, the acquisition of certain adjacent properties, pursuit of joint venture relationships, entitlement and/or zoning changes and other investments and/or other strategies to maximize the returns for our shareholders. The Company does not expect the acquisition of properties or the pursuit of joint ventures, if any, to adversely affect the timing of distributions to our shareholders. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. We are unable to predict the precise nature, amount or timing of such distributions.

The Company is making tenant improvements at Flowerfield to convert certain existing industrial space into office space pursuant to our amended lease with Stony Brook University.  The Company believes the amended lease enhances the value of the property as a whole by improving the building space and expanding the amount of space we are leasing to a high-quality long-term tenant. The Company is pursuing the re-opening of the LIRR crossing gate connecting the Flowerfield property and the University.  This re-opening would increase the synergy with the University and allow for a portion of the vehicle trip generation from this office space to be accommodated using the internal access point between the properties. The Company believes positioning the industrial park buildings to mitigate traffic impact on the local roads will maximize the entitlements and related value it is pursuing on the Flowerfield property.  The planned tenant improvements for leases signed in the first quarter of approximately $1.1 million were financed with a non-revolving credit line (rather than cash on hand) secured by the Flowerfield industrial buildings and the specific tax lot they reside on.  The additional value from the Stony Brook lease expansion signed in the first quarter of 2018 and the estimated cost of the related tenant improvements were included in the real estate value and estimated costs in excess of receipts, respectively, of both the June 30, 2018 and the December 31, 2017 financial statements. 

Sales of properties by Gyrodyne could take the form of individual sales of assets, as has been our recent experience in Port Jefferson, sales of groups of assets, a single sale of all or substantially all of the assets or some other form of sale. The assets may be sold to one or more purchasers in one or more transactions over a period of time.

A sale of substantially all of the assets of the Company would require shareholder approval under New York law. However, New York law does not require shareholder approval for the sale of individual properties that do not constitute substantially all of a company’s assets and it is not anticipated that any shareholder approval would be sought for any such sales. The prices at which the various assets may be sold depend largely on factors beyond our control, including, without limitation, the condition of financial and real estate markets, the availability of financing to prospective purchasers of the assets, regulatory approvals, public market perceptions, and limitations on transferability of certain assets.

We cannot give any assurance on the timing of the ultimate sale of all of the Company’s properties. Assuming the liquidation process continues through the end of 2019 and after giving effect to the estimated cash flows from the operation of our existing properties, we expect that Gyrodyne will have a cash balance of approximately $26.76 million, prior to any future special distributions based on the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets. Such cash would equate to future liquidating distributions of $18.05 per share based on Gyrodyne having 1,482,680 common shares outstanding. These estimated distributions are based on values at June 30, 2018 and do not include the potential value that may be derived from the entitlement efforts to maximize the value of Flowerfield and Cortlandt Manor. While the real estate market is dynamic and the economy is volatile, the Company believes that the increase in estimated distributions resulting from these enhancement efforts will exceed the estimated remaining $2 million investment in those efforts, although there can be no assurance of any such excess or whether any appreciation at all will be realized.

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The Statement of Net Assets is based on certain estimates. Uncertainties as to the precise value of our non-cash assets, which exclude any estimated additional value achievable from the efforts to pursue the maximum value on Flowerfield and Cortlandt Manor through the entitlement/re-zoning process and the ultimate amount of our liabilities make it impracticable to predict the aggregate net value ultimately distributable to shareholders in a liquidation. Land entitlement/re-zoning costs, claims, liabilities and expenses from operations, including operating costs, salaries, income taxes, payroll and local taxes, legal, accounting and consulting fees and miscellaneous office expenses, will continue to be incurred during our liquidation process, which includes certain enhancement efforts. Excluding the value that may be achieved from the entitlement efforts, expenses incurred in pursuing the Company’s business plan will reduce the amount of assets available for ultimate distribution to shareholders, and, while a precise estimate of those expenses cannot currently be made, management and our Board believe that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims (including contingent liabilities) and to make cash distributions to shareholders. However, no assurances can be given that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims and to make cash distributions to shareholders. If such available cash and amounts received on the sale of assets are not adequate to provide for our obligations, liabilities, expenses and claims, distributions of cash and other assets to our shareholders will be reduced and could be eliminated. In the event our shareholders receive distributions from Gyrodyne and there are insufficient funds to pay any creditors who seek payment of claims against Gyrodyne, shareholders could be held liable for payments made to them and could be required to return all or a part of distributions made to them.

Properties Under Contract or Sold

Port Jefferson Profession Park

On June 7, 2018, the Company’s wholly-owned subsidiary GSD Port Jefferson, LLC entered into a Purchase and Sale Agreement (the “Agreement”) to sell the real property known as 11 Medical Drive, Port Jefferson Station, New York for $800,000.  The outside closing date is September 21, 2018 with no right to extend.

Property Value Enhancement

The Company is pursuing entitlements/zoning to maximize the value of Flowerfield and Cortlandt Manor.  During the six-months ended June 30, 2018, the Company incurred approximately $508,000 of land entitlement/re-zoning costs, mainly engineering costs to support the Company’s respective entitlement/zoning efforts.  We estimate that the Company may incur approximately $2 million in additional land entitlement/re-zoning costs through 2019 in pursuit of entitlements (approximately $400,000 in Cortlandt Manor and $1.6 million in Flowerfield).

The Company is focusing its resources on positioning the properties to be sold with all entitlements necessary to achieve maximum pre-construction values in the shortest period of time with the least amount of risk to the Company.  During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay prices for the properties that the Company finds more attractive from a timing or value perspective than values we believe may be reasonably achievable through completing the entitlement process ourselves.  While the real estate market is dynamic, the economy is uncertain and there can be no assurances, we anticipate that these expenditures will result in higher sale prices of the properties and larger liquidating distributions to our shareholders than could otherwise be achievable.  

Cortlandt Manor. On March 15, 2016, the Town of Cortlandt Manor (the “Town”) adopted a 2016 Sustainable Comprehensive Plan (the “Plan”) of which one key strategy was the simultaneous creation of a Medical Oriented District (“MOD”). The purpose of the MOD is to expand the Town’s existing medical infrastructure and encourage economic development, including capital investment, job creation and housing options. The MOD allows for a continuum of care, i.e., independent living, assisted living and nursing/hospital care, within or in neighboring facilities by centralizing medical services and related activities. As a designated zoning district, the MOD could include hospital, ambulatory surgery, primary and urgent care, hospice, laboratories, social services, boutique hotels, retail and a wide range of housing.

The Company’s existing 33,871 square foot Cortlandt Medical Center and its approximate twelve acres are located directly opposite New York Presbyterian’s Hudson Valley Hospital Center and within the boundaries of the proposed MOD. The Company has committed resources toward both market research and feasibility studies in support of achieving entitlements to maximize the value of the property. For approximately two years the Company along with its planner and engineers have been working closely with the Town to identify issues and solutions involved in creating the Plan and more specifically, the MOD.

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On April 20, 2017, the Company closed on the purchase of a 1,950-square foot single-family residential dwelling located on approximately 0.3 acres.  The purchase price, inclusive of closing costs, was approximately $353,000.  The Company was able to take advantage of a distressed sale following foreclosure action by the lender.  The property, adjacent to the Cortlandt Medical Center and across the street from New York Presbyterian Hudson Valley Hospital Center, is within the boundary of the MOD.  Although there can be no assurances the property may provide additional vehicular access to the site from Buttonwood Drive and State Route 202 and additional parking which the Company believes will further increase the yield in a manner that is cost effective and provide a significant return on investment to the shareholders.

On March 31, 2017, The Company filed an application with the Town to develop the Cortlandt Manor property, as follows:

SUBDIVISION LOT #	BUILDING SIZE/YIELD
Medical office	100,000 sft
Multi-family apartments	200 units
Retail	4,000 sft

The Company has been working with Town officials on entitlement complexity, environmental impact studies, traffic mitigation, effluent, financial impact and other variables to ensure the application synchronizes with the Town’s vision for the MOD.  Furthermore, we are also seeking flexible approval of overall yield that would allow us to reallocate yield among medical office, multi-family and retail to accommodate changes in market demand.

The entitlement/re-zoning costs from December 2013 through June 30, 2018 associated with the ownership and development of this property consisted of architectural and engineering costs, legal expenses, economic analysis, soil management, surveys and land acquisitions totaling $1,441,005.

As a property owner with eligible parcels in this proposed district, Gyrodyne submitted an Environmental Assessment Form to the Town of Cortlandt Planning Department in December 2017 to support its application to receive a MOD campus designation. Once designated, the parcels would be governed by the use, dimensional and other provisions of the MOD zoning regulations and MOD zoning would replace the existing zoning. While the MOD zoning has not been formally adopted, Gyrodyne is proposing medical office with limited retail and residential use and has designed the site to function as part of a future "hamlet center” with mixed use, streetscape improvements, a hamlet green and public plaza, and significant open space around Orchard Lake.

The Town of Cortlandt Planning Department hosted a public hearing (community outreach meeting) in June 2018 where the Company presented its development plan for the Cortlandt Manor property.  We anticipate a second public meeting to take place in August 2018.  We anticipate that the hearings will result in the Town Planning Board formally issuing a “positive declaration” under the State Environmental Quality Review Act (“SEQRA”), i.e., a declaration that the project may result in one or more significant environmental impacts and will require the preparation of an Environmental Impact Statement (“EIS”).  The Town will then prepare a Generic Environmental Impact Statement (“GEIS”) with input from Gyrodyne for both the MOD zoning and the proposed uses so that upon adoption, minimal further SEQRA review should be required to develop the property. It is noted that the Town planning consultant has been performing the traffic/transportation study over the past six months which will comprise a substantial portion of the GEIS.  The Company does not plan on developing the property but rather positioning the properties to be sold with all entitlements necessary to achieve maximum pre-construction value for the Company in the shortest period of time with the least amount of risk to the Company.

Flowerfield.  Following market research and related feasibility studies, we identified entitlements that we believe will maximize the value of Flowerfield in the shortest amount of time with the lowest amount of risk.  The Company has been in discussions with the Town of Smithtown on the potential real estate development projects identified by the market research and feasibility studies, all of which currently fall within our “as of right to build” zoning.  We are also exploring with the Town of Smithtown whether it would be amenable to certain entitlements, special permits, or other concessions that would allow for the identified development projects. 

In March 2017, the Company filed a pre-subdivision application with the Town of Smithtown (the “Pre-application”) for the Flowerfield property along with the previously sold (2002) catering hall facility for an eight-lot subdivision which the Town of Smithtown has determined must be processed as a nine-lot subdivision in response to certain comments received from the planning department. In June 2017, the Company filed a subdivision application with the Town of Smithtown based on feedback provided by the Town of Smithtown staff in the Pre-application process. Because of the property’s location within 500 feet of a municipal boundary and a state road, the Town of Smithtown referred the Company’s subdivision application to the Suffolk County Planning Commission as required by the Suffolk County Administrative Code and the New York State General Municipal Law.

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On August 2, 2017, the Suffolk County Planning Commission voted 11-0 to approve Gyrodyne’s subdivision application without conditions.  Although the approval by the Suffolk County Planning Commission is not binding on the Town of Smithtown, the approval without conditions means that the requisite vote threshold at the Town of Smithtown’s Planning Board is a simple majority.  

On November 15, 2017, the Town of Smithtown Planning Board conducted a public hearing where the Company presented its subdivision plan of the Flowerfield property.  On April 11, 2018, the Planning Board determined that the subdivision plan may result in one or more significant environmental impacts which will require the preparation of an Environmental Impact Statement.  As a result, at the Planning Board meeting dated April 11, 2018, the Planning Board issued a SEQRA Positive Declaration, which was rescinded and re-issued by Planning Board Resolution dated May 9, 2018 to include a public scoping process.  The former Town Plan Board Chairman communicated that a Positive Declaration will require up to one year to complete the SEQRA process.   The Town issued the Final Scope on July 7, 2018.  The Company has begun to prepare the Environmental Impact Statement and has already submitted various studies (which are intended to support its Environmental Impact Statement) to the Town of Smithtown Planning Department prior to the public hearing that it hopes will reduce the time frame to complete the SEQRA process.  The Company anticipates submitting its EIS in the third quarter of 2018.   

The details of the Company’s subdivision application are as follows:

SUBDIVISION LOT #	LOT SIZE (acres)	LAND USE	BUILDING SIZE/YIELD
1	13	Existing Industrial Park – Mixed Use	132,719 sft
2	13	Catering Hall (sold in 2002)	34,685sft
3	2	Parking to support Lot 1	N/A
4	6	Hotel with Restaurant, Spa/Fitness and Conference Center	150 Rooms plus 150 seat restaurant 10,000 sft 500 seats
5	5	Medical Office /R&D Office Building	55,350 sft
6	6	Medical Office/R&D Office Building	74,650 sft
7	3	Assisted Living	110 units
8	3	Assisted Living	110 units
9	24	Common Area

In addition to the common area within Lot 9, the plan envisions an open space network of trails, designated biking lanes and passive recreation that will serve as a recreational amenity to tie together the uses within the overall Flowerfield campus landscape.  The entitlement costs from December 2013 through June 30, 2018 associated with the ownership and development of this property consisted of architectural and engineering costs, legal expenses, economic analysis, soil management and surveys totaling $2,293,240. The Company owns an additional 5.2 acres bordering the industrial park that are currently zoned residential and are not part of the subdivision application.

While we cannot predict the outcome of the subdivision application, we have undertaken to subdivide the Flowerfield property in a manner that we believe will result in maximum pre-construction values in the shortest amount of time and limited risk.

The subdivision application seeks to subdivide the Flowerfield property using a low-impact development campus approach that provides a complementary mix of land uses with a green space network throughout the subdivision. Opportunities for shared green space, roads, utilities and parking are incorporated into the plan and preserves the historic 200-foot setback from Route 25A.  The Flowerfield campus would be a beautiful, environmentally sound and amenity enriched community that wouldn’t overly burden existing infrastructure and the local community with the additional costs of public education.  We believe the campus will generate a significant new real estate tax base for the Town of Smithtown and the Smithtown Central School District. 

The Company’s subdivision application is expected to include proposed uses for the subdivided lots, although the specific uses will be determined by the eventual purchasers. It is anticipated that the proposed uses described herein would be typical of those chosen by the future owners and as a result we requested that the subdivision be considered with those uses so that the purchasers of the lots would have an assigned density. Furthermore, while we are pursuing the above entitlements, we are also seeking the approval of yield that can be transferred between the proposed uses as market demand changes. The Company’s subdivision application includes perfecting the subdivision of the catering facility (13 acres hereafter referred to as lot 2) which the Company sold in 2002.

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The new additions to the Flowerfield campus conform with the 2015 draft Smithtown Comprehensive Plan Update as they would be focused on uses supportive and beneficial to Stony Brook University (SBU), inclusive of Stony Brook University Hospital, namely, the development of a first class 150 bed hotel with conference facilities, restaurant and health club; medical office facilities; and assisted living facilities. Furthermore, the future connection with SBU via the existing LIRR crossing, which we are actively negotiating the re-opening of, will help to foster synergies between Flowerfield and SBU. It is noted that the Town has recently issued an RFP for a new Comprehensive Plan Update and will not adopt the Update prepared in 2015.

Lot 1 encompasses the existing uses of the current light industrial park being retained thereby keeping in place jobs from the local business community, locations for back office operations of SBU, and studios for a vibrant arts community that yields cultural benefits to Smithtown and the surrounding communities.

Lot 2 owned by a catering facility that sits on a 12-acre lot that was sold in 2002. The subdivision was deferred by the town until the overall plan for Flowerfield was submitted.

Lot 3 is set aside for additional parking to support Lot 1, with a potential for a small building in the future if the uses on Lot 1 do not require all of the Lot 3 parking.

Lot 4 is planned as a 150-room hotel that would include a 150-seat restaurant. The hotel could also have a 500-seat conference space and a 10,000-square foot day spa/fitness center. It is envisioned that this hotel would serve the adjacent catering facility, as well as the office uses on-site and the nearby SBU.

Lots 5 and 6 are envisioned as medical office, general office, or tech space (R&D) in support of SBU, its Hospital and Children’s Hospital, and its Center of Excellence in Wireless and Information Technology (CEWIT). Approximately 130,000 square feet of office space in two buildings (55,350 and 74,650 sf) would be provided.

Lots 7 and 8 are envisioned as assisted living communities, comprising a total of 220 units, again either as two separate lots or one combined lot. There would be a synergy with the SBU Hospital and with the medical office uses for medical care of the residents of the assisted living facilities.

Lot 9 houses a wastewater treatment plant to serve all of the development in the subdivision, as well as an open space network including the 200-foot buffer and the onsite pond.

Flowerfield Industrial Park Value Enhancement Strategy. The Company’s primary strategy is to pursue entitlements to maximize the pre-construction value of Flowerfield.  The Company is also implementing a secondary but parallel strategy to enhance the value of the Flowerfield Industrial Park’s current buildings even further by expanding our relationship with our largest tenant, Stony Brook University. 

The Company’s strategy to maximize the value of the Flowerfield Industrial Park includes repositioning the park’s industrial buildings to service Stony Brook University, inclusive of Stony Brook University Hospital, while also making it a cultural destination (arts, health and wellness center) for the community. The Company believes this strategy will enhance the value of the entitlements while also increasing the cashflow and market value of the industrial buildings.

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Our business relationship with Stony Brook University is expanding. Effective October 24, 2017, the Company and the State of New York acting through Stony Brook University Hospital (“SBU Hospital”) entered into an amendment to the existing lease with SBU Hospital (approved by the New York State Controller’s Office on January 19, 2018) for the expansion of the existing space currently occupied by SBU Hospital from approximately 13,747 square feet at a rate of $24.76 per square foot to 26,573 square feet at rate of $19.00 (plus annual escalators) per square foot. The total lease commitment from the amendment net of the existing lease is approximately $3.5 million and extends through 2025. The lease amendment obligated the Company, at its sole cost and expense, to build out the additional 12,826 square feet (the “Additional Space”) and provide a "turnkey" facility in accordance with an agreed-upon work letter. The tenant took possession in the third quarter of 2018.

To finance the buildout of the additional space, the Company secured a non-revolving credit line with a bank for up to $3,000,000, which closed on March 21, 2018. There is an interest only phase for the first eight months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on November 30, 2025 (84 months after conversion to a permanent loan) (the “Permanent Phase”). The interest rate during the Interest-Only Phase shall be a variable rate equal to the daily highest prime rate published by the Wall Street Journal plus 100 basis points (1% rounded up to the nearest 1/8 percent). During the Permanent Phase, the Company will pay interest at a fixed rate based on the Federal Home Loan Bank rate for a 7-year maturity as made available by the Federal Home Loan Bank of New York plus a margin of 200 basis points (2%) rounded up to the nearest 1/8 percent but in no event less than 4.25%, plus principal based on a 20-year amortization period.

The first advance of $1.1 million was used to finance the tenant improvements pursuant to the expanded signed leasing relationship with SBU Hospital described above. The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with State University of New York or its affiliates (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase. 

The mortgage loan is secured by approximately 31.8 acres of the Flowerfield Industrial Park including the respective buildings and related leases. The only significant financial covenant associated with the loan is a debt service ratio on GSD Flowerfield, LLC of 1.35 to 1.  The Company anticipates modifying the terms of the loan following the completion of its subdivision.  

The Company is committed to focusing its current capital on supporting operations and the pursuit of entitlements.  The loan is financing the tenant improvements pursuant to current and future leases associated with the Company’s secondary but dual strategy of maximizing the value of the Flowerfield industrial buildings.

Health Care Industry

Our tenants in our Cortlandt Manor and Port Jefferson properties are healthcare service providers. Furthermore, the Company is repositioning the industrial buildings, in the Flowerfield Industrial Park, to expand and support Stony Brook University and Stony Brook University Hospital. The healthcare industry is subject to substantial regulation and faces increased regulation particularly relating to fraud, waste and abuse, cost control and healthcare management. The healthcare industry may experience a significant expansion of applicable federal, state or local laws and regulations, previously enacted or future healthcare reform, new interpretations of existing laws and regulations or changes in enforcement priorities, all of which could materially impact the business and operations of our tenants and therefore the marketability of our medical office properties.

The Patient Protection and Affordable Care Act of 2010 (the “ACA”) impacted the healthcare marketplace by decreasing the number of uninsured individuals in the United States through the establishment of health insurance exchanges to facilitate the purchase of health insurance, expanded Medicaid eligibility, subsidized insurance premiums and included requirements and incentives for businesses to provide healthcare benefits. The ACA remains subject to continuing and increasing legislative and administrative scrutiny, including current efforts by Congress and the current presidential administration to repeal, alter and replace the ACA in total or in part. In 2017, Congress unsuccessfully sought to replace substantial parts of the ACA with different mechanisms for facilitating insurance coverage in the commercial and Medicaid markets, but was able to enact legislation eliminating the tax penalty for individuals who do not purchase insurance. Additionally, the Centers for Medicare and Medicaid Services (“CMS”) discontinued providing cost-sharing reduction subsidies to insurance providers, which is expected to have the result of increasing the cost of insurance premiums. Further, CMS has begun approving waivers permitting states to alter state Medicaid programs by, among other things, requiring individuals to meet certain requirements, such as work requirements, in order to maintain eligibility for Medicaid. These and other actions may impact the insurance markets and reduce the number of individuals purchasing insurance or qualifying for Medicaid and may negatively impact the operations and financial condition of our medical office tenants and/or the potential value of certain entitlements being perused in Cortlandt and Flowerfield, which in turn may adversely impact us. Congress may revisit ACA or Medicaid reform legislation in 2018. If the ACA is repealed or further substantially modified, or if implementation of certain aspects of the ACA are suspended, such actions could negatively impact the operations and financial condition of our medical office tenants, which in turn may adversely impact us.

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Our tenants are subject to extensive federal, state, and local licensure laws, regulations and industry standards governing business operations, the physical plant and structure, patient rights and privacy and security of health information. Our tenants’ failure to comply with any of these laws could result in loss of licensure, denial of reimbursement, imposition of fines or other penalties, suspension or exclusion from the government sponsored Medicare and Medicaid programs, loss of accreditation or certification, or closure of the facility. In addition, efforts by third-party payors, such as the Medicare and Medicaid programs and private insurance carriers, including health maintenance organizations and other health plans, impose greater discounts and more stringent cost controls upon healthcare provider operations (through changes in reimbursement rates and methodologies, discounted fee structures, the assumption by healthcare providers of all or a portion of the financial risk or otherwise). Our tenants may also face significant limits on the scope of services reimbursed and on reimbursement rates and fees, all of which could impact their ability to pay rent or other obligations to us.

Transaction Summary for the Six-Months Ended June 30, 2018

The following summarizes our significant transactions and other activity during the six-months ended June 30, 2018.

Debt Facility. To finance the tenant improvements associated with the SBU expansion, the Company secured a non-revolving credit line with a bank for up to $3,000,000, which closed on March 21, 2018.  There is an interest only phase for the first eight months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on November 30, 2025 (84 months after conversion to a permanent loan) (the “Permanent Phase”).  The interest rate during the Interest-Only Phase shall be a variable rate equal to the daily highest prime rate published by the Wall Street Journal plus 100 basis points (1% rounded up to the nearest 1/8 percent).  During the Permanent Phase, the Company will pay interest at a fixed rate based on the Federal Home Loan Bank rate for a 7-year maturity as made available by the Federal Home Loan Bank of New York plus a margin of 200 basis points (2%) rounded up to the nearest 1/8 percent but in no event less than 4.25%, plus principal based on a 20-year amortization period. 

The first advance of $1.1 million was used to finance the tenant improvements pursuant to the expanded signed leasing relationship with SBU Hospital described above. The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with State University of New York or its affiliates (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase. 

The mortgage loan is secured by approximately 31.8 acres of the Flowerfield Industrial Park including the respective buildings and related leases. The only significant financial covenant associated with the loan is a debt service ratio on GSD Flowerfield, LLC of 1.35 to 1. The Company anticipates modifying the terms of the loan following the completion of its subdivision.

Leasing Activity. During the six-months ended June 30, 2018, the Company executed three new leases comprising approximately 2,000 square feet and approximately $23,000 in annual revenue plus tenant reimbursements. In addition, the Company executed nine renewals comprising approximately 9,000 square feet and approximately $114,000 in annual revenue. The Company also executed one expansion and one down-size resulting in a net increase of approximately 10,500 square feet, approximately $82,000 in annual revenue and approximately $3.2 million in total lease commitments.

The new lease, lease renewals, expansion and down-size signed during the six-months ended June 30, 2018 included tenant allowances and rent abatements of approximately $1.1 million and $42,000, respectively which were associated with total lease commitments of approximately $3.3 million. The Company incurred approximately $210,000 in lease commissions during the six-months ended June 30, 2018.

There were three terminations during the six-months ended June 30, 2018, comprising approximately 2,300 square feet and approximately $29,000 in annual revenue.

Retention Bonus Plan. On January 26, 2018, the Board of Directors of the Company approved Amendment No. 2 to its Retention Bonus Plan (the “Plan Amendment”). The Plan Amendment provides for (i) vesting of benefits upon the sale of each individual post-subdivision lot at Flowerfield and Cortlandt Manor, (ii) entitlement to a future benefit in the event of death, voluntary termination following substantial reduction in compensation or board fees, mutually agreed separation to right-size the board or involuntary termination without cause, and (iii) clarification of how development costs are calculated. As to any of the events referred to in clause (ii) above, a participant will only be eligible to receive a benefit to the extent that a property is sold within three years following the event and the sale produces an internal rate of return equal to at least four percent of the property’s value as of December 31 immediately preceding such event. The Plan Amendment does not have the effect of increasing the size of the participant pool, but rather only how benefits are divided among plan participants.

During the six-months ended June 30, 2018, there were no payments made under the Retention Bonus Plan.

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Critical Accounting Policies

Gyrodyne is pursuing the disposition of certain properties and the enhancement of the value of the Flowerfield and Cortlandt Manor properties, by pursuing various zoning/entitlement opportunities, which the Gyrodyne Board believes will improve the chances of obtaining better values for such properties. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares.  Therefore, effective September 1, 2015 Gyrodyne adopted the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the entity is “imminent”, as defined in ASC 205-30, Presentation of Financial Statements Liquidation Basis of Accounting.  Under the LLC Agreement, the Board may elect, in its sole discretion and without any separate approval by shareholders, to dissolve the Company at any time the value of the Company’s assets, as determined by the Board in good faith, is less than $1 million.  The LLC Agreement also provides that the Company will dissolve, and its affairs wound up upon the sale, exchange or other disposition of all the real properties of the Company.  As a result, liquidation is “imminent” in accordance with the guidance provided in ASC 205-30.

Principles of consolidation - The consolidated financial statements include the accounts of Gyrodyne and all subsidiaries. All consolidated subsidiaries are wholly-owned. All inter-company balances and transactions have been eliminated.

Basis of Presentation - Liquidation Basis of Accounting – Under the liquidation basis of accounting the consolidated balance sheet and consolidated statements of operations, equity, comprehensive income and cash flows are no longer presented. The consolidated statements of net assets and the consolidated statement of changes in net assets are the principal financial statements presented under the liquidation basis of accounting.

Under the liquidation basis of accounting, all the Company’s assets have been stated at their estimated net realizable value, or liquidation value, (which represents the estimated amount of cash that Gyrodyne will collect on the disposal of assets as it carries out the plan of liquidation), which is based on current contracts, estimates and other indications of sales value (predicated on current values).  All liabilities of the Company, including those estimated costs associated with implementing the plan of liquidation, have been stated at their estimated settlement amounts.  These amounts are presented in the accompanying statements of net assets.  These estimates are periodically reviewed and adjusted as appropriate.  There can be no assurance that these estimated values will be realized.  Such amounts should not be taken as an indication of the timing or amount of future distributions or our actual dissolution.  The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the plan of liquidation.  The actual values and costs associated with carrying out the plan of liquidation may differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty.  These differences may be material.  In particular, the estimates of our costs will vary with the length of time necessary to complete the plan of liquidation, which is currently anticipated to be completed by the end of 2019.  The Company is in the process of pursuing entitlements, density and/or rezoning, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities and community groups. The process will involve extensive analysis internally at the government entity level, as well as between government entities such as town planning departments and Gyrodyne, and will continue up until such time as entitlement, rezoning and density decisions are made by the relevant government entities. We hope to secure favorable decisions on entitlements, rezoning and density so that we can then seek the sale of our remaining properties at higher prices (than those achievable under their current entitlements) and then proceed with the liquidation and dissolution of the Company. The Company expects the process of pursuing entitlements, rezoning and density could take up to 18 months with the ultimate timing to a certain extent managed by Gyrodyne but ultimately dependent and under the control of the applicable municipality’s planning board or other governmental authority.  Accordingly, it is not possible to predict with certainty the timing or aggregate amount which may ultimately be distributed to common shareholders and no assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying Statements of Net Assets.

The Company is pursuing value associated with the highest and best use for Flowerfield and the Cortlandt Medical Center. The actual costs of achieving such values may differ materially from the assumptions and estimates utilized and accordingly, could have a significant impact on the value of net assets.

The Company’s assumptions and estimates (including the sales proceeds of all its real estate holdings, selling costs, retention bonus payments, rental revenues, rental expenses, capital expenditures, land entitlement/re-zoning costs, general and administrative fees, director and officer liability and reimbursement, post liquidation insurance tail coverage policy and final liquidation costs) are based on completing the liquidation by the end of 2019. As previously stated, on an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update respective information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company’s properties.

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Management Estimates – In preparing the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and the liquidation basis of accounting, management is required to make estimates and assumptions that affect the reported amounts of assets, including net assets in liquidation, and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of receipts and expenditures for the reporting period.  Actual results could differ from those estimates.

The most significant estimates are the estimates on the net realizable value from the sale of our real estate, the estimated costs/time to pursue entitlements/change of zone and the related timeline to complete the liquidation.

Allowance for doubtful accounts – Rent receivable is carried at net realizable value. Management makes estimates of the collectability of rents receivable. Management specifically analyzes receivables and historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

Cash equivalents - The Company considers all certificates of deposits, money market funds, treasury securities and other highly liquid debt instruments purchased with short-term maturities to be cash equivalents.

Income taxes - The Company follows the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, Accounting for Uncertainty in Income Taxes. This guidance, among other things, creates a two-step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. This interpretation specifically prohibits the use of a valuation allowance as a substitute for derecognition of tax positions, and it has expanded disclosure requirements. The Company believes it is more likely than not that its tax positions will be sustained in any tax examinations. The Company has no income tax expense, deferred tax assets or liabilities, associated with any such uncertain tax positions. The Company’s open tax years are 2015, 2016, and 2017.

Tax legislation signed into law on December 22, 2017, makes numerous changes to the tax rules. For example, the top federal income tax rate for individuals is reduced to 37%, there is a new deduction available for certain Qualified Business Income, that reduces the top effective tax rate applicable to ordinary dividends from REITs to 29.6% (through a 20% deduction for ordinary REIT dividends received) and various deductions are eliminated or limited. Most of the changes applicable to individuals are temporary. There are only minor changes to the REIT rules (other than the 20% deduction applicable to individuals for ordinary REIT dividends received). To date, the Internal Revenue Service has issued only limited guidance on the changes made by the new legislation. It is unclear at this time whether Congress will address these issues or when the Internal Revenue Service will issue additional administrative guidance on the changes made by the new legislation.

Fair Value Measurements – The Company believes the concepts for determining net realizable value are consistent with the guidance for measuring fair value. As a result, the Company follows the guidance of FASB Accounting Standards Codification, Fair Value Measurements and Disclosures to determine the fair value of financial and non-financial instruments. The guidance defines fair value, establishes a hierarchy framework for measuring fair value and expands disclosures related to the fair value. The guidance establishes a hierarchy breaking down observable and unobservable inputs into three levels: Level 1 – observable inputs in an active market on or around the measurement date, Level 2 – observable inputs that are based on prices not quoted on active markets but corroborated by market data and Level 3 – unobservable inputs utilized when no other data is available.

New Accounting Pronouncements - Management has evaluated the impact of newly issued accounting pronouncements, whether effective or not as of June 30, 2018, and has concluded that they will not have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

Discussion of the Statements of Net Assets

Net assets in liquidation as of June 30, 2018 would result in estimated liquidating distributions of approximately $18.05 per common share. This increase of $0.08 from the December 31, 2017 estimated net assets in liquidation of $17.97 per common share is mainly attributable to the savings in the officer and director policy and the timing of individual property sales.

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The cash balance at the end of the liquidation period (currently estimated to be December 31, 2019, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the June 30, 2018 cash balance of $3.8 million plus adjustments for the following items which are estimated through December 31, 2019:

1. The estimated cash receipts from the operation of the properties net of rental property related expenditures as well as costs expected to be incurred to preserve or improve the net realizable value of the property at its estimated gross sales proceeds.

2. Proceeds from the sale of all the Company’s real estate holdings.

3. The net cash used to settle the working capital accounts.

4. The general and administrative expenses and or liabilities associated with operations and the liquidation of the Company including severance, director and officer liability inclusive of post liquidation tail policy coverage, and financial and legal fees to complete the liquidation.

5. Costs for the pursuit of the entitlement/rezoning of the Flowerfield and Cortlandt Manor properties, to maximize value.

6. Estimated retention bonus amounts based on the net realizable value of the real estate under the Retention Bonus Plan.

7. Proceeds from the draw downs on the debt facility to fund tenant improvements and costs to repay such outstanding debt.

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques. The Company may estimate net realizable values using market information such as broker opinions of value, appraisals, and recent sales data for similar assets or discounted cash flow models, which primarily rely on Level 3 inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent the Company under estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over estimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated.

The Company is pursuing various avenues to maximize total distributions to our shareholders during the liquidation process. The Company estimates that it will incur approximately $2 million (included in the statements of net assets as part of the estimated liquidation and operating costs net of receipts) in land entitlement/re-zoning costs over the 18 months ended December 31, 2019, inclusively, in an effort to obtain entitlements, inclusive of zone changes and special permits. The Company believes the commitment of these resources will enable the Company to position the properties for sale with all entitlements necessary to maximize the Flowerfield and Cortlandt Manor property values. During the six-months ended June 30, 2018, the Company incurred approximately $508,000 of land entitlement/re-zoning costs. The Company believes the remaining balance of approximately $2 million will be incurred from July 2018 through the end of liquidation. The Company does not intend to develop the properties but rather to commit resources to position the properties for sale in a timely manner with all entitlements necessary to achieve maximum pre-construction values. The costs and time frame to achieve the entitlements could change due to a range of factors including a shift in the value of certain entitlements making it more profitable to pursue a different mix of zones/entitlements and the dynamics of the real estate market. As a result, the Company has focused and will continue to focus its land entitlement/re-zoning efforts on achieving the highest and best use. During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement processes itself. The value of the real estate reported in the Statements of Net Assets as of June 30, 2018 (predicated on current asset values) does not include the potential value impact that may result from the estimated remaining $2 million in land entitlement/re-zoning costs. There can be no assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The Company is making tenant improvements at Flowerfield to convert certain existing industrial space into office space pursuant to our amended lease with Stony Brook University.  The Company believes the amended lease enhances the value of the property as a whole by improving the building space and expanding the amount of space we are leasing to a high-quality long-term tenant. The Company is pursuing the re-opening of the LIRR crossing gate connecting the Flowerfield property and the University.  This re-opening would increase the synergy with the University and allow for a portion of the vehicle trip generation from this office space to be accommodated using the internal access point between the properties. The Company believes positioning the industrial park buildings to mitigate traffic impact on the local roads will maximize the entitlements and related value it is pursuing on the Flowerfield property.  The planned tenant improvements for leases signed in the first quarter of 2018 of approximately $1.1 million were financed with a debit facility, rather than using our cash on hand.  To finance the tenant improvements, we secured a non-revolving credit line with a bank for up to $3 million, with the first advance of $1.1 million used to finance the foregoing tenant improvements with Stony Brook Hospital.  The balance of the credit line is available for improvements under future leases with Stony Brook University or its affiliates or other tenant spaces with bank approval.  The additional value from the Stony Brook lease expansion signed in the first quarter of 2018 and the remaining balance of the estimated cost of the related tenant improvements were included in the real estate value and estimated costs in excess of receipts, respectively, of both the June 30, 2018 and the December 31, 2017 financial statements.  There can be no assurance that the Flowerfield property will increase in value as a result of the tenant improvements or that any resulting increase in value of the Flowerfield property will exceed the cost of our planned tenant improvements including the cost of the related financing.

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The net assets in liquidation as of June 30, 2018 ($26,755,120) results in estimated liquidating distributions of approximately $18.05 per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value but excluding any actual additional sales proceeds that may result directly or indirectly from our land entitlement/re-zoning efforts. Neither the additional value that may be derived from the land entitlement/re-zoning costs, nor the retention bonuses for the sale of one certain property are included in the estimated liquidating distributions as of June 30, 2018. The Company believes the land entitlement/re-zoning costs will enhance estimated distributions per share through the improved values from the sales of the Flowerfield and Cortlandt Manor properties. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the period required to complete the plan of liquidation. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, improved values of the Cortlandt Manor and/or Flowerfield properties resulting from the land entitlement/re-zoning efforts net of any bonuses if such values exceed the minimum values required to pay bonuses under the retention bonus plan, favorable or unfavorable changes in the land entitlement/re-zoning costs, the performance of the underlying assets, the market for commercial real estate properties generally and any changes in the underlying assumptions of the projected cash flows.

The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of June 30, 2018 (dollars are in millions).

June 30, 2018 cash and cash equivalents balance	$	3.84
Interest income offset by net cash used to settle current working capital acct and security deposits		(0.93	)	(i)
Principal payments on mortgage loan		(1.10	)
Free cash flow from rental operations		1.04		(ii)
General and administrative expenses including final liquidation and dissolution		(3.67	)	(iii)
Land entitlement costs in pursuit of the highest and best use		(2.01	)	(iv)
Gross real estate proceeds		33.02
Selling costs on real estate		(1.98	)
Retention bonus plan for directors, officers and employees		(0.64	)	(v)
Severance		(0.43	)
Directors and officers insurance (“D&O”) – tail policy		(0.38	)
Net Assets in Liquidation	$	26.76		(vi)

(i) The Company estimates interest income will be offset by the settlement of its working capital accounts resulting in a balance of $(0.93).

(ii) The Company estimates the cash proceeds from rental operations net of commissions and rental costs, inclusive of expenditures to preserve or improve the properties at its current estimated market value will total $1.04.

(iii) The General and Administrative expenses are estimated to be $3.67. The costs represent all costs to liquidate the company excluding rental operating costs and non-operating costs (D&O tail and severance).

(iv) The Company is considering various options to maximize total distributions to our shareholders during the liquidation process. The Company estimates that it will incur approximately $2.01 million in costs over the liquidation period ending December 31, 2019 to obtain entitlements, inclusive of zone changes and special permits that it believes will result in maximizing the values in the Flowerfield and Cortlandt Manor properties. The Company does not intend to develop the properties but rather to commit resources to position the properties for sale in a timely manner with all entitlements necessary to achieve maximum pre-construction values. During the process of pursuing such entitlements, the Company may entertain offers from potential buyers who may be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement processes.

(v) The gross real estate proceeds do not include the value impact that may result from the estimated land entitlement/re-zoning efforts. As a result, fair value as reported does not exceed the minimum value under the retention bonus plan (the appraisal of the real estate in late 2013 plus the estimated entitlement costs) on one property and accordingly the Company has not included any estimated bonuses on the sale of such property. However, if the Company concludes in future periodic filings that the value of the real estate to the extent actual net proceeds from the ultimate disposition of the property exceeds the value of the real estate reported in the Statement of Net Assets as of June 30, 2018, and such net proceeds exceeds the minimum value required to pay bonuses under the retention bonus plan (whether due to appreciation of the underlying real estate and/or a reduction in estimated land entitlement/re-zoning costs), then the Company will report the updated estimated real estate value and the estimated bonuses related to such value of the property in accordance with the provisions of the retention bonus plan.

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(vi) The net assets in liquidation at June 30, 2018 would result in liquidating distributions of approximately $18.05 per common share ($26.76 million with 1,482,680 shares outstanding), excluding any additional sales proceeds, that may result directly or indirectly from the remaining $2 million in land entitlement/re-zoning costs. The Company believes the land entitlement/re-zoning costs will enhance estimated distributions per share through the improved values from the sales of the Flowerfield and Cortlandt Manor properties. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the period required to complete the liquidation process. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, favorable or unfavorable changes in the land entitlement/re-zoning costs, the performance of the underlying assets and any changes in the underlying assumptions of the projected cash flows.

Discussion of Changes in Net Assets

Gyrodyne’s strategy is to enhance the value of Flowerfield and Cortlandt Manor, by pursuing various zoning or entitlement opportunities, which the Gyrodyne Board believes will improve the chances of obtaining better values for such properties. The pursuit of the highest and best use of Flowerfield and Cortlandt Manor may involve the acquisition of properties, pursuit of joint venture relationships and other investments and or other strategies to maximize the returns for our shareholders. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. Therefore, the Company includes in its financial statements the Statement of Changes in Net Assets for the six-months ended June 30, 2018 which is discussed below:

Net assets in liquidation as of January 1, 2018	$	26,637,350
Changes in net assets in liquidation for the six-months ended June 30, 2018:
Remeasurement of assets and liabilities in liquidation		117,770
Net increase in net assets in liquidation		117,770
Net assets in liquidation as of June 30, 2018	$	26,755,120

Liquidity and Capital Resources 

Cash Flows:

As we pursue our plan to sell our properties strategically, including certain enhancement efforts, we believe that a main focus of management is to effectively manage our net assets through cash flow management of our tenant leases, maintaining or improving occupancy, and enhance the value of the Flowerfield and Cortlandt Manor properties via the pursuit of the associated change in zone/entitlements.

As the Company executes on the sale of assets, it will no less than annually review its capital needs and make prudent distribution decisions regarding any excess cash.  Upon completion of these activities, if successful, Gyrodyne will distribute the remaining cash to its shareholders and then proceed to complete the dissolution of the Company, delist its shares from Nasdaq or other exchange platform and terminate its registration and reporting obligations under the Securities Exchange Act of 1934, as Amended (the “Exchange Act”).  Gyrodyne is required to make adequate provisions to satisfy its known and unknown liabilities which could substantially delay or limit its ability to make future distributions to shareholders.  The process of accounting for liabilities, including those that are currently unknown or whose amounts are uncertain may involve difficult valuation decisions which could adversely impact the amount or timing of any future distributions.

We generally finance our operations through cash on hand.  However, we entered into a secured non-revolving credit line on March 21, 2018 that provides up to $3.0 million in financing for tenant improvements pursuant to certain leases with Stony Brook University.  During the first six months of 2018, the Company borrowed $1.1 million, with $1.9 million still available to be drawn upon to finance tenant improvements if required in the event, the Company signs additional leases or lease expansions with Stony Brook University or its affiliates (or other improvements subject to the bank’s approval) anytime during the Interest-Only Phase.  We believe leveraging our tenant improvements will allow us to continue focusing our cash on funding the pursuit of entitlements and our operations.  The Company believes the combination of the investments in tenant improvements related to strategically important leases and the pursuit of entitlements will enable the Company to maximize the ultimate real estate value and the distributions per share. 

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As of June 30, 2018, the Company had cash and cash equivalents totaling approximately $3.8 million. The Company anticipates that its current cash and cash equivalent balance will be adequate to fund its liquidation process and dissolution over the next twelve months. The $3.8 million of cash will be partially used to fund our efforts to generate the highest values for the Flowerfield and Cortlandt Manor properties while simultaneously pursuing the strategic sale of these properties. The pursuit to generate the highest values of Flowerfield and Cortlandt Manor may involve the acquisition of properties, pursuit of joint venture relationships, entitlements and/or zoning changes and other investments and or other strategies to maximize the returns for our shareholders. The Company is estimating and reporting in the Statement of Net Assets total gross cash proceeds from the sale of its assets of approximately $33.0 million. Based on the Company’s current cash balance and the above forecast, the Company estimates distributable cash stemming from the liquidation of the Company of approximately $26.76 million.    

The Company’s primary sources of funds which are limited and expected to narrow as we liquidate properties and make distributions are as follows:

● current cash and cash equivalents;

● rents and tenant reimbursements received on our remaining real estate operating assets;

● sale of assets; and

● debt facility earmarked for tenant improvements.

Excluding gross proceeds from the sale of assets, the Company’s gross rents and tenant reimbursements net of rental expenses is less than the combined total annual general and administrative costs, capital expenditures and land entitlement/re-zoning costs creating a net use of cash on an annual basis through the liquidation process. The Company believes the cash and cash equivalents plus the proceeds from the sale of assets and funds available through its debt facility will exceed the costs to complete the liquidation of the Company. In addition, the Company has and will continue to review operating activities for possible cost reductions throughout the liquidation process.

Major elements of the Company’s cashflows for the six-months ended June 30, 2018 were as follows:

● $1,100,000 in loan proceeds.

● $(138,723) of costs incurred in the pursuit of entitlements for the Cortlandt Manor property.

● $(369,499) of costs incurred in the pursuit of entitlements for the Flowerfield property.

● $(1,109,509) of capital expenditures on the real estate portfolio excluding those costs incurred under the land entitlement effort.

● $(118,392) of costs incurred to secure non-revolving credit line.

The continued economic challenges for small businesses, including the lack of available credit to many of our tenant classes who are small businesses and the uncertainty facing medical tenants brought about by the 2010 Federal health care reform legislation, recent changes impacting such legislation and the current legislative environment could adversely affect our operating results and accordingly the estimated cash proceeds from the liquidation process.

Limited Partnership Investment

The Company has a 10.12% limited partnership interest in Callery-Judge Grove, L.P. (the “Grove”). The Grove previously owned a 3,700+ acre citrus grove (the “Grove Property”) located in Palm Beach County, Florida as its only asset, which is the subject of a plan for mixed-use development. On September 19, 2013, the Grove Property was sold in a foreclosure proceeding to Minto Florida Developments, LLC (“Minto”) pursuant to a purchase and sale agreement which provided that the Grove had the right to receive certain payments on the sale of single family residential units constructed on the property or on the sale of the property itself. During 2016, Gyrodyne was informed by the Grove’s managing partner that Minto transferred the property to an affiliate which triggered an appraisal process that resulted in the payment (in lieu of being required to make payments on the sale of individual units or the property itself) by Minto to the Grove of $1,968,750. The Grove’s managing partner also informed Gyrodyne that the payment along with some of its existing cash would be utilized to repay certain debt obligations owed to certain limited partners in the amount of $2.7 million. In light of the foregoing, Gyrodyne believes that the Grove will most likely not receive any additional payments from Minto beyond the aforementioned $1,968,750. Inasmuch as the Grove’s obligations to certain limited partners exceeded the payment it received from Minto, it is unlikely that Gyrodyne could expect to receive any final liquidating distribution from the Grove.

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During the six-months ended June 30, 2018, the Company filed a net operating loss carryback claim, resulting for the write-off of its investment in the Grove, and received a refund of $73, 085, the benefit of which was included in the Statement of Net Assets as of December 31, 2017.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company places its temporary cash investments with high credit quality financial institutions. Certain financial instruments could potentially subject the Company to concentrations of credit risk, such as cash equivalents and longer-term investments. The Company maintains bank account balances, which exceed FDIC insurance limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash. Management does not believe significant credit risk exists at June 30, 2018.

The Company believes there have been no significant changes in market risk from that disclosed in the Company's Report on Form 10-K for the twelve months ended December 31, 2017, filed with the Securities and Exchange Commission on March 28, 2018.

Item 4. Controls and Procedures.

The Company’s management, including the Chief Executive Officer (“CEO”)/ Chief Financial Officer (“CFO”), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, our management concluded that our disclosure controls and procedures were effective, at a reasonable assurance level, as of the Evaluation Date, to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management in a manner that allows timely decisions regarding required disclosures.

An evaluation was performed under the supervision and with the participation of the Company’s management of the effectiveness of the design and operation of the Company’s procedures and internal control over financial reporting as of December 31, 2017. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework of 2013 (the “2013 COSO Framework”). Based on that evaluation, the Company’s management concluded that the Company’s internal controls over financial reporting were effective as of December 31, 2017.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting identified with our evaluation that occurred during the fiscal quarter ended June 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Putative Class Action Lawsuit

On July 3, 2014, a purported stockholder of the Company filed a putative class action lawsuit against Gyrodyne Company of America, Inc. (the “Corporation”) and members of its Board of Directors (the "Individual Defendants"), and against GSD and the Company (collectively, the "Defendants"), in the Supreme Court of the State of New York, County of Suffolk (the "Court"), captioned Cashstream Fund v. Paul L. Lamb, et al., Index No. 065134/2014 (the "Action").  The complaint alleged, among other things, that (i) the Individual Defendants breached their fiduciary duties or aided and abetted the breach of those duties in connection with the merger of the Corporation and GSD into the Company (the “Merger”) and (ii) the Corporation and the Individual Defendants breached their fiduciary duties by failing to disclose material information in the proxy statement/prospectus relating to the Merger.

On August 14, 2015, the parties to the Action entered into a Stipulation of Settlement (the "Settlement") providing for the settlement of the Action, subject to the Court's approval.  Under the Settlement, Gyrodyne amended its Proxy Statement on August 17, 2015 with certain supplemental disclosures and agreed that any sales of its properties would be effected only in arm's-length transactions at prices at or above their appraised values as of December 2014.  The plaintiff, on behalf of itself and the members of the putative class it represents, agreed to release and dismiss with prejudice all claims that had or could have been asserted in the Action or in any other forum against the Defendants and their affiliates and agents arising out of or relating to the Merger and the other transactions alleged by plaintiff in its complaint, as supplemented.  On April 8, 2016, the Court entered a Final Order and Judgment approving the Settlement. By order of the same date, the Court also granted plaintiff’s application for an award of attorney’s fees and reimbursement of expenses in the amount of $650,000 which was paid in full in April 2016.

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The 2014 aggregate appraised value of Gyrodyne’s properties was approximately $100,000 higher than the 2013 aggregate appraised values for such properties. As of June 30, 2018, the aggregate appraised value of our remaining unsold properties was $4,416,665 higher than the 2014 appraised values for such properties.

Other Proceedings

In addition to the foregoing, in the normal course of business, the Company is a party to various legal proceedings. After reviewing all actions and proceedings pending against or involving the Company, management considers that any loss resulting from such proceedings individually or in the aggregate will not be material to the Company’s financial condition or results of operations.

Items 2 through 5 are not applicable to the Company in the six-months ended June 30, 2018.

Item 6. Exhibits.

3.1 Articles of Organization of Gyrodyne, LLC, dated as of October 3, 2013 (1)

3.2	Form of Amended and Restated Limited Liability Company Agreement of Gyrodyne, LLC (Included as Annex F to the proxy statement/prospectus that is a part of Amendment No. 2 to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on June 17, 2014 and is incorporated herein by reference.)
3.3	Amendment No. 1, dated June 26, 2014, to the Limited Liability Company Agreement of Gyrodyne, LLC (2)

10.1	Amended and Restated Retention Bonus Plan (3)
10.2	Amendment No. 2 to the Retention Bonus Plan (4)

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (5)

32.1 CEO and CFO Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (6)

101.INSXBRL Instance (5)

101.SCHXBRL Taxonomy Extension Schema (5)

101.CALXBRL Taxonomy Extension Calculation (5)

101.DEFXBRL Taxonomy Extension Definition (5)

101.LABXBRL Taxonomy Extension Labels (5)

101.PREXBRL Taxonomy Extension Presentation (5)

(1) Incorporated herein by reference to Exhibit 3.1 to the registrant's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on October 21, 2013.

(2) Incorporated herein by reference to Exhibit 3.3 to Amendment No. 4 to the registrant's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on June 26, 2014.

(3)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on May 26, 2016.
(4)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on January 31, 2018.
(5)	Filed as part of this Report.
(6)	Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K. This Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filings under the Securities Act, expect to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GYRODYNE, LLC

Date: August 9, 2018	/s/ Gary Fitlin
	By Gary Fitlin
	President and Chief Executive Officer Chief Financial Officer and Treasurer

EXHIBIT INDEX

3.1 Articles of Organization of Gyrodyne, LLC, dated as of October 3, 2013 (1)

3.2	Form of Amended and Restated Limited Liability Company Agreement of Gyrodyne, LLC (Included as Annex F to the proxy statement/prospectus that is a part of Amendment No. 2 to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on June 17, 2014 and is incorporated herein by reference.)
3.3	Amendment No. 1, dated June 26, 2014, to the Limited Liability Company Agreement of Gyrodyne, LLC (2)

10.1	Amended and Restated Retention Bonus Plan (3)
10.2	Amendment No. 2 to the Retention Bonus Plan (4)

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (5)

32.1 CEO and CFO Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (6)

101.INSXBRL Instance (5)

101.SCHXBRL Taxonomy Extension Schema (5)

101.CALXBRL Taxonomy Extension Calculation (5)

101.DEFXBRL Taxonomy Extension Definition (5)

101.LABXBRL Taxonomy Extension Labels (5)

101.PREXBRL Taxonomy Extension Presentation (5)

(1) Incorporated herein by reference to Exhibit 3.1 to the registrant's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on October 21, 2013.

(2) Incorporated herein by reference to Exhibit 3.3 to Amendment No. 4 to the registrant's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on June 26, 2014.

(3)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on May 26, 2016.
(4)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on January 31, 2018.
(5)	Filed as part of this Report.
(6)	Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K. This Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filings under the Securities Act, expect to the extent that the registrant specifically incorporates it by reference.

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EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Gary Fitlin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gyrodyne, LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

     (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2018
	/s/ Gary Fitlin
	By Gary Fitlin,
	President and Chief Executive Officer,
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CFO CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Gyrodyne, LLC (the “Company”) on Form 10-Q for the period ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Gary Fitlin, Chief Executive Officer and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented.

Date: August 9, 2018
	/s/ Gary Fitlin
	By Gary Fitlin,
	President and Chief Executive Officer,
	Chief Financial Officer and Treasurer

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 09, 2018
Document Information [Line Items]
Entity Registrant Name	Gyrodyne, LLC
Entity Central Index Key	0001589061
Trading Symbol	gyro
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		1,482,680
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false

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Consolidated Statements of Net Assets (Liquidation Basis) (Current Period Unaudited) - Liquidation Basis of Accounting [Member] - USD ($)		Jun. 30, 2018	Dec. 31, 2017
ASSETS:
Real estate held for sale		$ 33,016,665	$ 33,016,665
Cash and cash equivalents		3,840,167	5,265,368
Rent receivable		75,044	41,226
Other receivables		48,399	53,392
Total Assets		36,980,275	38,376,651
LIABILITIES:
Accounts payable		554,375	532,671
Accrued liabilities		159,446	261,160
Deferred rent liability		31,929	26,675
Tenant security deposits payable		276,624	293,978
Mortgage loan payable		1,100,000
Estimated liquidation and operating costs net of receipts	[1]	8,102,781	10,624,817
Total Liabilities		10,225,155	11,739,301
Net assets in liquidation		$ 26,755,120	$ 26,637,350

[1] These estimates are based on the liquidation being completed by the end of 2019.

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Consolidated Statement of Changes in Net Assets (Liquidation Basis) (Unaudited) - Liquidation Basis of Accounting [Member]	6 Months Ended
	Jun. 30, 2018 USD ($)
Net assets in liquidation	$ 26,637,350
Remeasurement of assets and liabilities	117,770	[1]
Net increase in liquidation value	117,770
Net assets in liquidation	$ 26,755,120

[1] These estimates are based on the liquidation being completed by the end of 2019.

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Note 1 - The Company

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. The Company

Gyrodyne, LLC (“Gyrodyne”, the “Company” or the “Registrant”) is a limited liability company formed under the laws of the State of New York whose primary business is the management of a portfolio of medical office and industrial properties and the pursuit of entitlement/re-zoning on such properties, which are located in Suffolk and Westchester Counties, New York. 

Substantially all of our developed properties are subject to leases in which the tenant reimburses the Company for a portion, all of or substantially all of the costs and/or cost increases for utilities, insurance, repairs, maintenance and real estate taxes. Certain leases provide that the Company is responsible for certain operating expenses.

The Company’s corporate strategy is to pursue re-zoning and/or entitlement opportunities which are intended to increase the values of our

two

remaining major properties (Flowerfield and Cortlandt Manor) so that they can be sold at higher prices (than those achievable under their current entitlements) that will maximize distributions to our shareholders during the liquidation process and then dissolve the Company.  The value of the real estate reported in the Statements of Net Assets as of

June 30, 2018

and

December 31, 2017 (

predicated on current asset values) does

not

include the potential value impact that

may

result from such value enhancement efforts.  There can be

no

assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

Our efforts to generate the highest values for Flowerfield and Cortlandt Manor

may

involve in limited circumstances the acquisition of certain adjacent properties, pursuit of joint venture relationships, entitlements and/or zoning changes, other investments and/or other strategies to enhance the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders. The Company does

not

expect the acquisition of properties or the pursuit of joint ventures, if any, to adversely affect the timing of distributions to our shareholders. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions

first

to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. The liquidation process and the amount and timing of distributions involve risks and uncertainties. As such, it is impossible at this time to determine the ultimate amount of proceeds that will actually be distributed to our shareholders or the timing of such payments. Accordingly,

no

assurance can be given that the distributions will equal or exceed the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets. The actual nature, amount and timing of all distributions will be determined by Gyrodyne’s Board in its sole discretion and will depend in part upon the Company’s ability to convert our remaining assets into cash in compliance with our obligations under the Stipulation entered into in connection with the class action lawsuit (See Note

12

– Contingencies) and settle and pay our remaining liabilities and obligations. Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement, such dissolution

may

be effected upon the vote of holders of a majority of Gyrodyne common shares or, in the Board’s discretion and without any separate approval by the holders of the Gyrodyne common shares, at any time the value of Gyrodyne’s assets, as determined by the Board in good faith, is less than

$1,000,000.

The Company currently owns

one

medical office park and

one

of

fourteen

buildings in a

second

medical office park, together comprising approximately

37,000

rentable square feet, and a multitenant industrial park comprising approximately

130,000

rentable square feet. The aforementioned industrial park is situated on

ten

acres of a

68

-acre property in St. James, New York, all of which is owned by the Company.  Each of the medical office park in Cortlandt Manor, the building in the Port Jefferson Professional Park and the Flowerfield Industrial Park (including its undeveloped portion) is individually held in a single asset LLC wholly-owned by the Company.

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Note 2 - Strategic Plan to Enhance Property Values, Liquidate and Dissolve

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Strategic Process Disclosure [Text Block]

2. Strategic Plan to Enhance Property Values, Liquidate and Dissolve

Our corporate strategy is to pursue zoning and/or entitlement opportunities which are intended to increase the values of our

two

remaining major properties so that they can be sold at higher prices (than those achievable under their current entitlements) that will maximize distributions to our shareholders during the liquidation process. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions

first

to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. To accomplish this, the Company’s plan will consist of:

● managing the real estate portfolio to improve operating cash flow while simultaneously increasing the market values of the underlying properties;

● managing the strategic sale of real estate assets;

● pursuing the entitlement/re-zoning efforts of the Flowerfield and Cortlandt Manor properties, to maximize value;

● focusing use of capital by the Company to preserve or improve the market value of the real estate portfolio; and

● balancing working capital and funds available for the entitlement process.

Gyrodyne’s dual strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing possible entitlement and/or zoning opportunities while simultaneously enhancing the value of its leases.  The Board believes the aforementioned dual strategy will improve the chances of increasing the values for such properties. The value of the real estate reported in the Statements of Net Assets as of

June 30, 2018

and

December 31, 2017 (

predicated on current asset values) does

not

include the potential value impact that

may

result from such value enhancement efforts. There can be

no

assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.  Our efforts to generate the highest values for Flowerfield and Cortlandt Manor

may

involve, in limited circumstances, the acquisition of certain adjacent properties, pursuit of joint venture relationships, entitlements and/or zoning changes and other investments and/or other strategies to maximize the returns for our shareholders.  The Company does

not

expect the acquisition of properties or the pursuit of joint ventures, if any, to adversely affect the timing of the return of capital to our shareholders.  Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions

first

to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares. We are unable to predict the precise nature, amount or timing of such distributions.

The Company is making tenant improvements at Flowerfield to convert certain existing industrial space into office space pursuant to our amended lease with Stony Brook University.  The Company believes the amended lease enhances the value of the property as a whole by improving the building space and expanding the amount of space we are leasing to a high-quality long-term tenant. The Company is pursuing the re-opening of the Long Island Railroad (“LIRR”) crossing gate connecting the Flowerfield property and the University.  This re-opening would increase the synergy with the University and allow for a portion of the vehicle trip generation from this office space to be accommodated using the internal access point between the properties. The Company believes positioning the industrial park buildings to mitigate traffic impact on the local roads will maximize the entitlements and related value it is pursuing on the Flowerfield property.  The planned tenant improvements for leases signed in the

first

quarter were estimated to cost approximately

$1,100,000

and were financed with a non-revolving credit line (rather than cash on hand) secured by the Flowerfield industrial buildings and the specific tax lot they reside on.  The additional value from the Stony Brook lease expansion signed in the

first

quarter of

2018

and the estimated cost of the related tenant improvements were included in the real estate value and estimated costs in excess of receipts, respectively, of both the

June 30, 2018

and the

December 31, 2017

financial statements. 

Sales of properties by Gyrodyne could take the form of individual sales of assets, as has been our recent experience in Port Jefferson, sales of groups of assets, a single sale of all or substantially all of the assets or some other form of sale. The assets

may

be sold to

one

or more purchasers in

one

or more transactions over a period of time.

A sale of substantially all of the assets of the Company would require shareholder approval under New York law.  However, New York law does

not

require shareholder approval for the sale of individual properties that do

not

constitute substantially all of a company’s assets. The prices at which the various assets

may

be sold depend largely on factors beyond our control, including, without limitation, the condition of financial and real estate markets, the availability of financing to prospective purchasers of the assets, regulatory approvals, public market perceptions, and limitations on transferability of certain assets.

We cannot give any assurance on the timing of the ultimate sale of all of the Company’s properties.  Assuming the liquidation process continues through the end of

2019

and after giving effect to the estimated flow of cash from the operation of our existing properties, we expect that Gyrodyne will have a cash balance of approximately

$26.8

million, prior to any future special distributions, based on the estimate of net assets in liquidation presented in our Consolidated Statements of Net Assets.  Such cash would equate to future liquidating distribution of approximately

$18.05

per share based on Gyrodyne having

1,482,680

common shares outstanding.  These estimated distributions are based on values at

June 30, 2018

and do

not

include the potential value that

may

be derived from our efforts to maximize the value on Flowerfield and Cortlandt Manor. 

The Statements of Net Assets are based on certain estimates.  Uncertainties as to the precise value of our non-cash assets, which exclude the estimated additional value achievable from the costs incurred to pursue the maximum value on Flowerfield and Cortlandt Manor through certain land entitlement efforts (including the pursuit of special permits and or zone changes) and the ultimate amount of our liabilities make it impracticable to predict the aggregate net value ultimately distributable to shareholders in a liquidation. Land entitlement costs, claims, liabilities and expenses from operations, including operating costs, salaries, income taxes, payroll and local taxes, legal, accounting and consulting fees and miscellaneous office expenses, will continue to be incurred during our liquidation process, which includes certain enhancement efforts.  Excluding the value that

may

be achieved from the entitlement efforts, expenses incurred in pursuing the Company’s business plan will reduce the amount of assets available for ultimate distribution to shareholders, and, while a precise estimate of those expenses cannot currently be made, management and our Board believe that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims (including contingent liabilities) and to make cash distributions to shareholders. However,

no

assurances can be given that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims and to make cash distributions to shareholders. If such available cash and amounts received on the sale of assets are

not

adequate to provide for our obligations, liabilities, expenses and claims, distributions to our shareholders will be reduced and could be eliminated.

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Note 3 - Basis of Quarterly Presentations

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Basis of Accounting [Text Block]

3. Basis of Quarterly Presentations

The accompanying interim quarterly financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements of the Company included herein have been prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all adjustments which are necessary to present fairly the results for the

six

-months ended

June 30, 2018.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented

not

misleading.

This report should be read in conjunction with the audited consolidated financial statements and footnotes therein included in the Annual Report on Form

10

-K for the year ended

December 31, 2017.

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Note 4 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

4. Summary of Significant Accounting Policies

Gyrodyne is pursuing the disposition of its remaining property in Port Jefferson and the enhancement of the value of the Flowerfield and Cortlandt Manor properties by pursuing various zoning/entitlement opportunities, which the Gyrodyne Board believes will improve the chances of increasing the values for such properties. Gyrodyne intends to dissolve after it completes the disposition of all of its real property assets, applies the proceeds of such dispositions

first

to settle any debts and claims, pending or otherwise, against Gyrodyne, and then makes liquidating distributions to holders of Gyrodyne common shares.  Therefore, effective

September 1, 2015,

Gyrodyne adopted the liquidation basis of accounting. This basis of accounting is considered appropriate when, among other things, liquidation of the entity is “imminent”, as defined in ASC

205

-

30,

Presentation of Financial Statements Liquidation Basis of Accounting.  Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement the Board has the ability to sell all the Company’s assets without further approval.  As a result, liquidation is “imminent” in accordance with the guidance provided in ASC

205

-

30.

Principles of consolidation -

The consolidated financial statements include the accounts of Gyrodyne and all subsidiaries. All consolidated subsidiaries are wholly-owned. All inter-company balances and transactions have been eliminated.

Basis of Presentation - Liquidation Basis of Accounting –

Under the liquidation basis of accounting, the consolidated balance sheet and consolidated statements of operations, equity, comprehensive income and cash flows are

no

longer presented. The consolidated statements of net assets and the consolidated statement of changes in net assets are the principal financial statements presented under the liquidation basis of accounting.

Under the liquidation basis of accounting, all the Company’s assets have been stated at their estimated net realizable value, or liquidation value (which represents the estimated amount of cash that Gyrodyne will collect on the disposal of assets as it carries out the plan of liquidation), which is based on current contracts, estimates and other indications of sales value (predicated on current values). All liabilities of the Company, including those estimated costs associated with implementing the plan of liquidation, have been stated at their estimated settlement amounts. These amounts are presented in the accompanying statements of net assets. These estimates are periodically reviewed and adjusted as appropriate. There can be

no

assurance that these estimated values will be realized. Such amounts should

not

be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the plan of liquidation. The actual values and costs associated with carrying out the plan of liquidation

may

differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences

may

be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the plan of liquidation, which is currently anticipated to be completed by the end of

2019.

The Company is in the process of pursuing entitlements, density and/or rezoning, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities and community groups. The process will involve extensive analysis internally at the government entity level, as well as between government entities such as town planning departments and Gyrodyne, and will continue up until such time as entitlement, rezoning and density decisions are made by the relevant government entities. We hope to secure favorable decisions on entitlements, rezoning and density so that we can then seek the sale of our remaining properties at higher prices (than those achievable under their current entitlements) and then proceed with the liquidation and dissolution of the Company. The Company expects the process of pursuing entitlements, rezoning and density could take up to

18

months with the ultimate timing to a certain extent managed by Gyrodyne but ultimately dependent and under the control of the applicable municipality’s planning board or other governmental authority. Accordingly, it is

not

possible to predict with certainty the timing or aggregate amount which

may

ultimately be distributed to common shareholders and

no

assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying statements of net assets.

The Company is incurring expenses in its pursuit of value associated with the highest and best use for Flowerfield and the Cortlandt Medical Center. The actual costs of achieving such values

may

differ materially from the assumptions and estimates utilized and accordingly, could have a significant impact on the value of net assets.

The Company’s assumptions and estimates (including the sales proceeds of all its real estate holdings, selling costs, retention bonus payments, rental revenues, rental expenses, capital expenditures, land entitlement/re-zoning costs, general and administrative fees, director and officer liability and reimbursement, post liquidation insurance tail coverage policy and final liquidation costs) are based on completing the liquidation by the end of

2019.

As previously stated, on an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update respective information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company’s properties.

Management Estimates –

In preparing the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and the liquidation basis of accounting, management is required to make estimates and assumptions that affect the reported amounts of assets, including net assets in liquidation, and liabilities, and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of receipts and expenditures for the reporting period. Actual results could differ from those estimates.

Estimated Distributions

per

Share

– Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets in liquidation by the number of shares outstanding.  

New

A

ccounting

P

ronouncements -

Management has evaluated the impact of newly issued accounting pronouncements, whether effective or

not,

as of

June 30, 2018

and has concluded that they will

not

have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

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Note 5 - Statements of Net Assets in Liquidation

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Liquidation Basis of Accounting [Text Block]

5. Statements of Net Assets in Liquidation

Net assets in liquidation as of

June 30, 2018

would result in estimated liquidating distributions of approximately

$18.05

per common share. This is an increase of

$0.08

from the

December 31, 2017

estimated net assets in liquidation of

$17.97

per common share.

The cash balance at the end of the liquidation period (currently estimated to be

December 31, 2019,

although the estimated completion of the liquidation period

may

change), excluding any interim distributions, is estimated based on the

June 30, 2018

cash balance of

$3.8

million plus adjustments for the following items which are estimated through

December 31, 2019:

1. Adjustments for the estimated cash receipts from the operation of the properties net of rental property related expenditures as well as costs expected to be incurred to preserve or improve the net realizable value of the property at its estimated gross sales proceeds.

2. Proceeds from the sale of all the Company’s real estate holdings.

3. The net cash used to settle the working capital accounts.

4. The general and administrative expenses and or liabilities associated with operations and the liquidation of the Company including severance, director and officer liability inclusive of post liquidation tail policy coverage, and financial and legal fees to complete the liquidation.

5. Costs for the pursuit of entitlement/re-zoning of the Flowerfield and Cortlandt Manor properties, to maximize value.

6. Estimated retention bonus amounts based on the net realizable value of the real estate under the Retention Bonus Plan (See Note 11 ).

7. Proceeds from the drawdowns on the debt facility to fund tenant improvements and costs to repay such outstanding debt.

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques. The Company

may

estimate net realizable values using market information such as broker opinions of value, appraisals, and recent sales data for similar assets or discounted cash flow models, which primarily rely on Level

3

inputs, as defined under FASB ASC Topic

No.

820,

Fair Value Measurement. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows

may

include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent the Company under estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over estimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated.

The Company estimates that it will incur approximately

$2

million (included in the Statement of Net Assets as of

June 30, 2018,

as part of the estimated liquidation and operating costs net of receipts, See Note

6

) in land entitlement/re-zoning costs over the remainder of

2018

and

2019,

in an effort to obtain entitlements, including zone changes and special permits. The Company believes the commitment of these resources will enable the Company to position the properties for sale with all entitlements necessary to maximize the Flowerfield and Cortlandt Manor property values.  During the

six

-months ended

June 30, 2018,

the Company incurred approximately

$508,000

of land entitlement/re-zoning costs.  The Company believes the remaining balance of approximately

$2

million will be incurred from

July 2018

through the end of the liquidation period. The Company does

not

intend to develop the properties but rather to commit resources to position the properties for sale in a timely manner with all entitlements necessary to achieve maximum pre-construction values.  The costs and time frame to achieve the entitlements could change due to a range of factors including a shift in the value of certain entitlements making it more profitable to pursue a different mix of zones/entitlements and the dynamics of the real estate market.  As a result, the Company has focused and will continue to focus its land entitlement/re-zoning efforts on achieving the highest and best use.  During the process of pursuing such entitlements, the Company

may

entertain offers from potential buyers who

may

be willing to pay premiums for the properties that the Company finds more acceptable from a timing or value perspective than completing the entitlement processes itself.  The value of the real estate reported in the Statements of Net Assets as of

June 30, 2018

and

December 31, 2017 (

predicated on current asset values) does

not

include the potential value impact that

may

result from the land entitlement/re-zoning costs. There can be

no

assurance that our value enhancement efforts will result in property value increases that exceed the costs we incur in such efforts, or even any increase at all.

The Company is making tenant improvements at Flowerfield to convert certain existing industrial space into office space pursuant to our amended lease with Stony Brook University.  The Company believes the amended lease enhances the value of the property as a whole by improving the building space and expanding the amount of space we are leasing to a high-quality long-term tenant. The Company is pursuing the re-opening of the Long Island Railroad (“LIRR”) crossing gate connecting the Flowerfield property and the University.  This re-opening would increase the synergy with the University and allow for a portion of the vehicle trip generation from this office space to be accommodated using the internal access point between the properties. The Company believes positioning the industrial park buildings to mitigate traffic impact on the local roads will maximize the entitlements and related value it is pursuing on the Flowerfield property.  The tenant improvements for leases signed in the

first

quarter of

2018

cost approximately

$1.1

million which were financed with a non-revolving credit line ( rather than cash on hand) secured by the Flowerfield industrial buildings and the specific tax lot they reside on.  The additional value from the Stony Brook lease expansion signed in the

first

quarter of

2018

and the estimated cost of the related tenant improvements were included in the real estate value and estimated costs in excess of receipts, respectively, of both the

June 30, 2018

and the

December 31, 2017

financial statements.  There can be

no

assurance that the Flowerfield property will increase in value as a result of the tenant improvements or that any resulting increase in value of the Flowerfield property will exceed the cost of our planned tenant improvements including the cost of the related financing.

The net assets in liquidation as of

June 30, 2018 (

$26,755,120

) and

December 31, 2017 (

$26,637,350

) would result in estimated liquidating distributions of approximately

$18.05

and

$17.97,

respectively, per common share (based on

1,482,680

shares outstanding), based on estimates and other indications of sales value but excluding any actual additional sales proceeds that

may

result directly or indirectly from our land entitlement/re-zoning efforts.  The increase in net assets in liquidation for the

six

months ended

June 30, 2018

was due to the savings in the officers and directors insurance policy and the timing of individual property sales.  Neither the additional value that

may

be derived from the land entitlement/re-zoning costs, nor the retention bonus on

one

property are included in the estimated liquidating distributions as of

June 30, 2018

and

December 31, 2017.

The Company believes the land entitlement/re-zoning costs will enhance estimated distributions per share through the improved values from the sales of the Flowerfield and Cortlandt Manor properties. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the period required to complete the plan of liquidation. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, improved values of the Cortlandt Manor and/or Flowerfield properties resulting from the land entitlement efforts net of any bonuses if such values exceed the minimum values required to pay bonuses under the retention bonus plan, favorable or unfavorable changes in the land entitlement efforts, the performance of the underlying assets, the market for commercial real estate properties generally and any changes in the underlying assumptions of the projected cash flows. 

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Note 6 - Liability for Estimated Costs in Excess of Receipts During Liquidation

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Liquidation Basis of Accounting, Liability for Estimated Costs in Excess of Receipts [Text Block]

6. Liability for Estimated Costs in Excess of Receipts during Liquidation

The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation. The Company currently estimates that it will incur costs in excess of estimated receipts during the liquidation period, excluding the net proceeds from the real estate sales. These amounts can vary significantly due to, among other things, land entitlement/re-zoning costs, the timing and estimates for executing and renewing leases, capital expenditures to maintain the real estate at its current estimated realizable value and estimates of tenant improvement costs, the timing of property sales and any direct/indirect costs incurred that are related to the sales (e.g., retention bonuses on the sale of the Cortlandt Manor and Flowerfield properties, costs to address buy side due diligence inclusive of administrative fees, legal fees and property costs to address items arising from such due diligence and

not

previously known), the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding up of operations. These costs are estimated and are anticipated to be paid during the liquidation period.

The change in the liability for estimated costs in excess of estimated receipts during liquidation from

January 1, 2018

through

June 30, 2018

is as follows:

	January 1, 2018			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			June 30, 2018
Assets:
Estimated rents and reimbursements	$	4,044,202		$	(1,180,071	)	$	179,064		$	3,043,195
Liabilities:
Property operating costs		(2,403,872	)		749,705			(120,642	)		(1,774,809	)
Tenant improvements		(1,304,109	)		1,061,545			29,691			(212,873	)
Common area capital expenditures		(500,000	)		47,964			6,834			(445,202	)
Land entitlement costs		(2,516,394	)		508,222			-			(2,008,172	)
Corporate expenditures		(5,650,775	)		1,097,481			22,823			(4,530,471	)
Selling costs on real estate assets*		(1,981,000	)		-			-			(1,981,000	)
Retention bonus payments to Directors (a)*		(417,469	)		-			-			(417,469	)
Retention bonus payments to Executives and other employees (a)*		(224,790	)		-			-			(224,790	)
Less prepaid expenses and other assets		329,390			119,420			-			448,810
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,624,817	)	$	2,404,266		$	117,770		$	(8,102,781	)

*The amounts reported are based on the provisions of the retention bonus plan and the reported amount of the real estate assets estimated net realizable value.

** These estimates are based on the liquidation being completed by the end of

2019.

(a) The value of the real estate reported in the Statement of Net Assets as of June 30, 2018, does not include the increased value, if any, that may result from the estimated land entitlement costs. As a result, net realizable value as reported does not exceed the adjusted appraised value under the Retention Bonus Plan (the appraisal of the real estate in late 2013 plus the estimated development costs) for one of the properties and accordingly the Company has not included any retention bonuses on the sale of such properties.

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Note 7 - Disposition Activities

6 Months Ended

Jun. 30, 2018

Liquidation Basis of Accounting [Member]

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

7. Disposition Activities

Port Jefferson Professional Park. 

On

June 7, 2018,

the Company’s wholly-owned subsidiary GSD Port Jefferson, LLC entered into a Purchase and Sale Agreement (the “Agreement”) to sell the real property known as

11

Medical Drive, Port Jefferson Station, New York for

$800,000.

  The outside closing date is

September 21, 2018

with

no

right to extend.

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Note 8 - Mortgage Loan Payable

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

8. Mortgage Loan Payable

The Company’s wholly-owned subsidiary GSD Flowerfield, LLC secured a non-revolving credit line with a bank for up to

$3,000,000,

which closed on

March 21, 2018.

There is an interest only phase for the

first

eight

months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on

November 30, 2025 (

84

months after conversion to a permanent loan) (the “Permanent Phase”). The interest rate during the Interest-Only Phase is a variable rate equal to the daily highest prime rate published by the Wall Street Journal plus

100

basis points (

1%

rounded up to the nearest

1/8

percent). During the Permanent Phase, the Company will pay interest at a fixed rate based on the Federal Home Loan Bank rate for a

7

-year maturity as made available by the Federal Home Loan Bank of New York plus a margin of

200

basis points (

2%

) rounded up to the nearest

1/8

percent but in

no

event less than

4.25%,

plus principal based on a

20

-year amortization period.

The

first

advance of

$1.1

million was used to finance the tenant improvements pursuant to the expanded signed leasing relationship with SBU Hospital described above. The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with State University of New York or its affiliates (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase. 

The mortgage loan is secured by approximately

31.8

acres of the Flowerfield Industrial Park including the respective buildings and related leases. The only significant financial covenant associated with the loan is a debt service ratio on GSD Flowerfield, LLC of

1.35

to

1.

The Company anticipates modifying the terms of the loan following the completion of its subdivision. As of

June 30, 2018,

the Company is in compliance with the loan covenants. The mortgage loan is guaranteed by Gyrodyne LLC.

The mortgage loan payable matures upon the earlier of the sale of the Flowerfield Industrial Park (unless assigned) or as follows:

Years Ending December 31,
2018	$	2,537
2019		31,359
2020		33,114
2021		34,968
2022		36,926
Thereafter		961,096
Total	$	1,100,000

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Note 9 - Income Taxes

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. Income Taxes

As a limited liability company, Gyrodyne is

not

subject to an entity level income tax but rather is treated as a partnership for tax purposes, with its items of income, gain, deduction, loss and credit being reported on the Company’s information return, on Form

1065,

and allocated annually on Schedule K-

1

to its members pro rata. Flowerfield Properties Inc. (“FPI”) is a wholly-owned subsidiary of the Company. FPI is a “C” corporation. Any income generated by FPI is subject to a corporate level tax; therefore FPI files separate federal and state income tax returns. The only asset owned by FPI is the investment in The Grove.

Prior to

January 1, 2018,

the Internal Revenue Service (the “IRS”) would generally determine adjustments of income and deductions at the partnership level when auditing partnership tax returns, but was required to collect any additional taxes, interest and penalties from each of the partners.

The Bipartisan Budget Act of

2015

(the

“2015

Act”) changed this procedure for partnership tax audits and audit adjustments for partnership returns of large partnerships for fiscal years beginning after

December 31, 2017.

Pursuant to the

2015

Act, if any audit by the IRS of our income tax returns for any fiscal year beginning after

December 31, 2017

results in any adjustments, the IRS

may

collect any resulting taxes, including any applicable penalties and interest, directly from Gyrodyne. IRS tax audit assessments on tax years beginning

January 1, 2018

will require Gyrodyne to bear any tax liability resulting from such audit, as opposed to passing it through to our shareholders, unless we elect to push out the tax audit adjustments to our shareholders once it has been calculated at the company level.

As of

June 30, 2018

and

December 31, 2017,

Statements of Net Assets include federal and state tax current receivables of

$12,544.

During the

six

-months ended

June 30, 2018,

the Company filed a net operating loss carryback claim, resulting from the write-off of its investment in the Grove, and received a refund of

$73,085,

the benefit of which was included in the estimated liquidation and operating costs net of receipts in the Statement of Net Assets at

December 31, 2017.

The Company does

not

expect to receive any further distributions from the Grove.

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Note 10 - Concentration of Credit Risk

6 Months Ended

Jun. 30, 2018

Credit Concentration Risk [Member]

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

10. Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions and generally limits the amount of credit exposure in any

one

financial institution. The Company maintains bank account balances, which exceed insured limits. The Company has

not

experienced any losses in such accounts and believes that it is

not

exposed to any significant credit risk on cash. Management does

not

believe significant credit risk existed at

June 30, 2018

and

December 31, 2017.

As the Company executes on the sale of its assets, its regional concentration in tenants will shrink thereby resulting in the increased credit risk from exposure to the local economies.

For the

six

-months ended

June 30, 2018

rental income from the

three

largest tenants represented approximately

20%,

18%

and

6%

of total rental income. The

three

largest tenants by revenue as of

June 30, 2018

consist of a state agency located in the industrial park and

two

medical tenants in the Cortlandt Manor Medical Center. During the

six

-months ended

June 30, 2018

we increased the space leased to the state agency, by approximately

93%,

which will increase the concentration of credit risk respectively.

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Note 11 - Commitments

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Commitments Disclosure [Text Block]

11. Commitments

As of

June 30, 2018,

other commitments and contingencies are summarized in the below table:

Management employment agreements with bonus and severance commitment contingencies	$	350,000
Other employee severance commitment contingencies		81,716
Total	$	431,716

Employment agreements -

The Company has an employment agreement with its Chief Executive Officer (the “Agreement”).  The Agreement contains a bonus of

$125,000

payable upon a change of control as defined in the agreement.  In addition, the agreement provides for severance equal to

6

months of base salary and the vesting and related payment of the change of control bonus. 

The Company also has an employment agreement with its Chief Operating Officer executed on

May 8, 2014

which provides for severance equal to

6

months of base salary. On

January 25, 2018,

Gyrodyne entered into an amendment to the employment agreement with Mr. Pitsiokos effective

January 25, 2018,

to define with greater specificity Mr. Pitsiokos’ duties and responsibilities with respect to the Company’s properties.

Under Company policy, the aggregate severance commitment contingency to other employees is approximately

$81,716.

Retention Bonus Plan-

In

May 2014,

the Board of Directors approved a Retention Bonus Plan designed to recognize the nature and scope of the responsibilities related to the Company’s business plan, to reward and incent performance in connection therewith, to align the interests of directors, executives and employees with our shareholders and to retain such persons during the term of such plan.  The Retention Bonus Plan provides for bonuses to directors and to officers and employees determined by the gross sales proceeds from the sale of each property and the date of sale.

The Retention Bonus Plan provides for a bonus pool to be funded with an amount equal to

5%

of the specified appraised value of such properties (set forth in the Plan), so long as the gross selling price of a property is equal to or greater than

100%

of its

2013

appraised value as designated in the bonus plan.  The aggregate amount of the

2013

appraisals for the Company’s properties was utilized by the Company to help set the aggregate valuation of the real estate that was included in the non-cash dividend distributed on

December 30, 2013. 

Additional funding of the bonus pool will occur on a property-by-property basis when the gross sales price of a property exceeds its appraised value as follows:

10%

on the

first

10%

of appreciation,

15%

on the next

10%

of appreciation and

20%

on appreciation greater than

20%.

The bonus pool is distributable in the following proportions to the named participants in the bonus plan for so long as they are directors or employees of the Company:

15%

for the Chairman,

50%

for the directors other than the Chairman (

10%

for each of the other

five

directors) and

35%

(the “Employee Pool”) for the Company’s executives and employees. Such share of the bonus pool is earned only upon the completion of the sale of a property at a gross selling price equal to or greater than its appraised value and is paid to the named beneficiaries of the Retention Bonus Plan or their designees within

60

days of the completion of such sale or, if later, within

60

days of receipt of any subsequent post-completion installment payment related to such sale.

On

May 24, 2016,

the Company’s Board of Directors amended the Retention Bonus Plan to provide that land development costs incurred on a property since the date of the

2013

appraisal will be added to the

2013

appraised value of the property (“Adjusted Appraised Value”) in calculating appreciation for determining the bonus pool. The foregoing change was approved to better align the interests of the participants in the Retention Bonus Plan with those of the shareholders. The amendment also provides that each of the

ten

buildings in the Port Jefferson Professional Park will be treated as a “property”, so that a participant’s right to bonus payment on the sale of a Port Jefferson building will vest on, and payments to the bonus pool

may

be made shortly following, the closing of the sale of that building. As originally adopted, all

ten

buildings in the Port Jefferson Professional Park were treated as

one

property, so that a participant departing prior to the sale of all

ten

buildings would forfeit bonus on all

ten

buildings. The reason for this original designation was that, at the time of adoption, the Board of Directors believed that Gyrodyne’s entire Port Jefferson property would be sold as

one

block,

not

as individual buildings. Subsequent to adoption, the Gyrodyne Board came to believe that the sale of individual buildings would generate the greatest aggregate values and thus would be in the best interests of the Company and its shareholders.

On

January 26, 2018,

the Board of Directors of the Company approved Amendment

No.

2

to the Retention Bonus Plan (the “Plan Amendment”). The Plan Amendment provides for (i) vesting of benefits upon the sale of each individual post-subdivision lot at Flowerfield and Cortlandt Manor, (ii) entitlement to a future benefit in the event of death, voluntary termination following substantial reduction in compensation or board fees, mutually agreed separation to right-size the board or involuntary termination without cause, and (iii) clarification of how development costs are calculated. As to any of the events referred to in clause (ii) above, a participant will only be eligible to receive a benefit to the extent that a property is sold within

three

years following the event and the sale produces an internal rate of return equal to at least

four

percent of the property’s value as of

December 31

immediately preceding such event. The Plan Amendment does

not

have the effect of increasing the size of the participant pool, but rather only how benefits are divided among plan participants. The allocations are as follows:

Board Members/Employees	Bonus Pool Percentage
Board Members		65.000	%
Chief Executive Officer		15.474	%
Chief Operations Officer		13.926	%
Officer Discretionary Amount (a)		1.750	%
Other Employees		3.850	%
Total		100.000	%

(a) The officer discretionary amount of 1.75% is vested but not allocated and will be allocated to the officers within the discretion of the Board.

The value of the real estate reported in the Statements of Net Assets as of

June 30, 2018

and

December 31, 2017,

does

not

include the increase in value that

may

result from the estimated land entitlement/re-zoning costs. As a result, net realizable value as reported does

not

exceed the Adjusted Appraised Value under the Retention Bonus Plan on

one

property and accordingly the Company has

not

included any retention bonuses on such sales in the estimated costs in excess of receipt.

There were

no

payments made during the

six

-months ended

June 30, 2018

under the Retention Bonus Plan.

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Note 12 - Contingencies

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Contingencies Disclosure [Text Block]

12. Contingencies

Putative Class Action Lawsuit -

On

July 3, 2014,

a purported stockholder of the Company filed a putative class action lawsuit against Gyrodyne Company of America, Inc. (the “Corporation”) and members of its Board of Directors (the "Individual Defendants"), and against Gyrodyne Special Distribution, LLC (“GSD”) and the Company (collectively, the "Defendants"), in the Supreme Court of the State of New York, County of Suffolk (the "Court"), captioned Cashstream Fund v. Paul L. Lamb, et al., Index

No.

065134/2014

(the "Action"). The complaint alleged, among other things, that (i) the Individual Defendants breached their fiduciary duties or aided and abetted the breach of those duties in connection with the merger of the Corporation and GSD into the Company (the “Merger”) and (ii) the Corporation and the Individual Defendants breached their fiduciary duties by failing to disclose material information in the proxy statement/prospectus relating to the Merger.

On

August 14, 2015,

the parties to the Action entered into a Stipulation of Settlement (the "Settlement") providing for the settlement of the Action, subject to the Court's approval. Under the Settlement, Gyrodyne amended its Proxy Statement on

August 17, 2015

with certain supplemental disclosures and agreed that any sales of its properties would be effected only in arm's-length transactions at prices at or above their appraised values as of

December 2014.

The plaintiff, on behalf of itself and the members of the putative class it represents, agreed to release and dismiss with prejudice all claims that had or could have been asserted in the Action or in any other forum against the Defendants and their affiliates and agents arising out of or relating to the Merger and the other transactions alleged by plaintiff in its complaint, as supplemented. On

April 8, 2016,

the Court entered a Final Order and Judgment approving the Settlement. By order of the same date, the Court also granted plaintiff’s application for an award of attorney’s fees and reimbursement of expenses in the amount of

$650,000

which was paid in full in

April 2016.

The

2014

aggregate appraised value of Gyrodyne’s properties was approximately

$100,000

higher than the

2013

aggregate appraised value for such properties. As of

June 30, 2018,

the aggregate value of the remaining unsold properties was

$4,416,665

higher than the

2014

appraised value.

General -

In the normal course of business, the Company is a party to various legal proceedings. After reviewing all actions and proceedings pending against or involving the Company, management considers that any loss resulting from such proceedings individually or in the aggregate will

not

be material to the Company’s financial statements.

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Note 13 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

13. Fair Value of Financial Instruments

Assets and Liabilities Measured at Fair-Value –

The Company believes the concepts for determining net realizable value are consistent with the guidance for measuring fair value. As a result, the Company follows authoritative guidance on fair value measurements, which defines fair-value, establishes a framework for measuring fair-value, and expands disclosures about fair-value measurements. The guidance applies to reported balances that are required or permitted to be measured at fair-value under existing accounting pronouncements.

The Company follows authoritative guidance on the fair value option for financial assets, which permits companies to choose to measure certain financial instruments and other items at fair-value in order to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently. However, the Company adopted the liquidation basis of accounting, and therefore reports all assets and liabilities at net realizable value.

The guidance emphasizes that fair-value is a market-based measurement,

not

an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, the guidance establishes a fair-value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels

1

and

2

of the hierarchy, as defined under FASB ASC Topic

No.

820,

Fair Value Measurements) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level

3

of the hierarchy). In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the level in the fair-value hierarchy within which the entire fair-value measurement falls is based on the lowest level input that is significant to the fair-value measurement in its entirety. Our assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Fair Value Measurements -

The Company adopted the liquidation basis of accounting effective

September 1, 2015;

accordingly, the Company reports all real estate at their net realizable value.

The Company estimates the net realizable value of its real estate assets by using income and market valuation techniques. The Company

may

estimate net realizable values using market information such as broker opinions of value, appraisals, and recent sales data for similar assets or discounted cash flow models, which primarily rely on Level

3

inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows

may

include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent, the Company under estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over estimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated.

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Note 14 - Related Party Transactions

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

14. Related Party Transactions

The Company has entered into various leasing arrangements with a

not

-for-profit organization of which the Company’s Chairman, Paul Lamb, serves as Chairman and a director but receives

no

compensation or any other financial benefit. A summary of the leasing arrangements is as follows:

Term			Square Feet		Annual Rent		Rent Abatement		Total Commitment (net of abatement, excluding renewal options)		Additional Commitment (assumes both two-year renewal options are exercised)
May 2016	-	Dec 2018		1,971	$	16,754	$	14,153(a)	$	29,825	$	67,014
Aug 2016	-	Dec 2018		2,130		-(b)		-(b)		-(b)		-(b)
May 2017	-	Dec 2018		1,905	$	16,193	$	5,398	$	21,590	$	64,770

(a) In exchange for the rent abatement, the tenant completed capital improvements that exceeded the abatement amount. In addition, the tenant signed a multi-year lease.

(b) In April 2017, the Company extended the term of a master lease with the not -for-profit originally entered into in August 2016. The Company understood that the tenant’s main intent was to sublease the space to artists, on a short-term basis, after which such subtenant artists would transition into their own space leased directly from the Company. Under the master lease, the tenant has the right to sublease the space without prior written consent for use as an art studio, art school or related use. Under the terms of the master lease, rent is payable by the tenant only to the extent the space is sublet, at the rent amount per square foot payable by the subtenant up to a maximum of $10 per square foot per year. The lease term of 29 months covers 2,130 square feet with a maximum annual and total lease commitment of up to $21,300 and $51,475, respectively. Approximately $3,500 in improvements were provided. Any space not subleased may be used by the tenant rent-free for certain stated art uses, although the tenant is responsible for certain passthrough expenses such as electric and heat. Since rent is only due if the space is sublet, the Company believes the fair value of the space to the extent not sublet reflects a below market lease over the term ending December 31, 2018 of up to $ 51,475 and total commitments including both two -year renewal options of $136,675.

During

2017,

the Company extended the term of the

first

of the above

two

leases to coincide with the expiration of the

third

lease as well as provide for

two two

-year renewals at the tenant’s option.

During the

six

-months ended

June 30, 2018

and the

twelve

months ended

December 31, 2017,

respectively, the Company received rental revenue of

$40,527

and

$22,165,

respectively. In addition, the Company made total tenant improvements of

$4,220,

all of which were completed in

2016.

The Chairman is also a partner of the firm Lamb & Barnosky, LLP that provided pro bono legal representation to the aforementioned

not

-for-profit corporation on the lease.

The independent members of the Board of the Company approved all of the leasing transaction described above.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of consolidation -

The consolidated financial statements include the accounts of Gyrodyne and all subsidiaries. All consolidated subsidiaries are wholly-owned. All inter-company balances and transactions have been eliminated.

Liquidation Basis of Accounting [Policy Text Block]

Basis of Presentation - Liquidation Basis of Accounting –

Under the liquidation basis of accounting, the consolidated balance sheet and consolidated statements of operations, equity, comprehensive income and cash flows are

no

longer presented. The consolidated statements of net assets in liquidation and the consolidated statement of changes in net assets are the principal financial statements presented under the liquidation basis of accounting.

Under the liquidation basis of accounting, all the Company’s assets have been stated at their estimated net realizable value, or liquidation value (which represents the estimated amount of cash that Gyrodyne will collect on the disposal of assets as it carries out the plan of liquidation), which is based on current contracts, estimates and other indications of sales value (predicated on current values). All liabilities of the Company, including those estimated costs associated with implementing the plan of liquidation, have been stated at their estimated settlement amounts. These amounts are presented in the accompanying statements of net assets. These estimates are periodically reviewed and adjusted as appropriate. There can be

no

assurance that these estimated values will be realized. Such amounts should

not

be taken as an indication of the timing or amount of future distributions or our actual dissolution. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amount represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the plan of liquidation. The actual values and costs associated with carrying out the plan of liquidation

may

differ from amounts reflected in the accompanying financial statements because of the plan’s inherent uncertainty. These differences

may

be material. In particular, the estimates of our costs will vary with the length of time necessary to complete the plan of liquidation, which is currently anticipated to be completed by the end of

2019.

The Company is in the process of pursuing entitlements, density and/or rezoning, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities and community groups. The process will involve extensive analysis internally at the government entity level, as well as between government entities such as town planning departments and Gyrodyne, and will continue up until such time as entitlement, rezoning and density decisions are made by the relevant government entities. We hope to secure favorable decisions on entitlements, rezoning and density so that we can then seek the sale of our remaining properties at higher prices (than those achievable under their current entitlements) and then proceed with the liquidation and dissolution of the Company. The Company expects the process of pursuing entitlements, rezoning and density could take up to

18

months with the ultimate timing to a certain extent managed by Gyrodyne but ultimately dependent and under the control of the applicable municipality’s planning board or other governmental authority. Accordingly, it is

not

possible to predict with certainty the timing or aggregate amount which

may

ultimately be distributed to common shareholders and

no

assurance can be given that the distributions will equal or exceed the estimate presented in the accompanying statements of net assets.

The Company is incurring expenses in its pursuit of value associated with the highest and best use for Flowerfield and the Cortlandt Medical Center. The actual costs of achieving such values

may

differ materially from the assumptions and estimates utilized and accordingly, could have a significant impact on the value of net assets.

The Company’s assumptions and estimates (including the sales proceeds of all its real estate holdings, selling costs, retention bonus payments, rental revenues, rental expenses, capital expenditures, land entitlement/re-zoning costs, general and administrative fees, director and officer liability and reimbursement, post liquidation insurance tail coverage policy and final liquidation costs) are based on completing the liquidation by the end of

2019.

As previously stated, on an ongoing basis, Gyrodyne evaluates the estimates and assumptions that can have a significant impact on the reported net assets in liquidation and will update respective information accordingly for any costs and value associated with a change in the duration of the liquidation, as we cannot give any assurance on the timing of the ultimate sale of all the Company’s properties.

Use of Estimates, Policy [Policy Text Block]

Management Estimates –

In preparing the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and the liquidation basis of accounting, management is required to make estimates and assumptions that affect the reported amounts of assets, including net assets in liquidation, and liabilities, and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of receipts and expenditures for the reporting period. Actual results could differ from those estimates.

Earnings Per Share, Policy [Policy Text Block]

Estimated Distributions

per

Share

– Under the liquidation basis of accounting, the Company reports estimated distributions per share data by dividing net assets in liquidation by the number of shares outstanding.  

New Accounting Pronouncements, Policy [Policy Text Block]

New

A

ccounting

P

ronouncements -

Management has evaluated the impact of newly issued accounting pronouncements, whether effective or

not,

as of

June 30, 2018

and has concluded that they will

not

have a material impact on the Company’s consolidated financial statements since the Company reports on a liquidation basis.

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Note 6 - Liability for Estimated Costs in Excess of Receipts During Liquidation (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Liquidation Basis of Accounting, Change in Liability for Estimated Costs in Excess of Estimated Receipts [Table Text Block]

	January 1, 2018			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			June 30, 2018
Assets:
Estimated rents and reimbursements	$	4,044,202		$	(1,180,071	)	$	179,064		$	3,043,195
Liabilities:
Property operating costs		(2,403,872	)		749,705			(120,642	)		(1,774,809	)
Tenant improvements		(1,304,109	)		1,061,545			29,691			(212,873	)
Common area capital expenditures		(500,000	)		47,964			6,834			(445,202	)
Land entitlement costs		(2,516,394	)		508,222			-			(2,008,172	)
Corporate expenditures		(5,650,775	)		1,097,481			22,823			(4,530,471	)
Selling costs on real estate assets*		(1,981,000	)		-			-			(1,981,000	)
Retention bonus payments to Directors (a)*		(417,469	)		-			-			(417,469	)
Retention bonus payments to Executives and other employees (a)*		(224,790	)		-			-			(224,790	)
Less prepaid expenses and other assets		329,390			119,420			-			448,810
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,624,817	)	$	2,404,266		$	117,770		$	(8,102,781	)

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Note 8 - Mortgage Loan Payable (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Maturities of Long-term Debt [Table Text Block]

Years Ending December 31,
2018	$	2,537
2019		31,359
2020		33,114
2021		34,968
2022		36,926
Thereafter		961,096
Total	$	1,100,000

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Note 11 - Commitments (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Other Commitments [Table Text Block]

Management employment agreements with bonus and severance commitment contingencies	$	350,000
Other employee severance commitment contingencies		81,716
Total	$	431,716

Schedule of Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits by Title of Individual and Type of Deferred Compensation [Table Text Block]

Board Members/Employees	Bonus Pool Percentage
Board Members		65.000	%
Chief Executive Officer		15.474	%
Chief Operations Officer		13.926	%
Officer Discretionary Amount (a)		1.750	%
Other Employees		3.850	%
Total		100.000	%

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Note 14 - Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

Term			Square Feet		Annual Rent		Rent Abatement		Total Commitment (net of abatement, excluding renewal options)		Additional Commitment (assumes both two-year renewal options are exercised)
May 2016	-	Dec 2018		1,971	$	16,754	$	14,153(a)	$	29,825	$	67,014
Aug 2016	-	Dec 2018		2,130		-(b)		-(b)		-(b)		-(b)
May 2017	-	Dec 2018		1,905	$	16,193	$	5,398	$	21,590	$	64,770

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Note 1 - The Company (Details Textual)	Sep. 01, 2015 USD ($)	Jun. 30, 2018 ft² a
Second Medical Park [Member]
Number of Real Estate Properties		14
Multi-Tenant Industrial Park [Member] | Controlled by Parent Company [Member]
Area of Real Estate Property		130,000
St. James, New York [Member] | Controlled by Parent Company [Member]
Area of Real Estate Property | a		68
Controlled by Parent Company [Member] | Remaining Medical Park [Member]
Number of Real Estate Properties		1
Controlled by Parent Company [Member] | Second Medical Park [Member]
Number of Real Estate Properties		1
Area of Real Estate Property		37,000
The Corporation [Member]
Maximum Value of Asset to Effect Dissolution | $	$ 1,000,000

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Note 2 - Strategic Plan to Enhance Property Values, Liquidate and Dissolve (Details Textual) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Scenario, Plan [Member]
Tenant Improvements	$ 1,100,000
Liquidation Basis of Accounting [Member]
Net Assets, Ending Balance	$ 26,755,120	$ 26,637,350
Liquidation Basis of Accounting, Common Stock Per Share	$ 18.05	$ 17.97
Common Stock, Shares, Outstanding, Ending Balance	1,482,680

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Note 5 - Statements of Net Assets in Liquidation (Details Textual) - USD ($)	6 Months Ended	24 Months Ended
	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2017
Liquidation Basis of Accounting [Member]
Liquidation Basis of Accounting, Common Stock Per Share	$ 18.05		$ 17.97
Liquidation Basis of Accounting, Net Increase (Decrease) in Liquidation Value Per Share	0.08
Liquidation Basis of Accounting, Common Stock Per Share, Net	$ 17.97
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 3,840,167		$ 5,265,368
Net Assets, Ending Balance	$ 26,755,120		$ 26,637,350
Common Stock, Shares, Outstanding, Ending Balance	1,482,680
Liquidation Basis of Accounting [Member] | Single Family Residential Building [Member]
Payments to Acquire Real Estate, Total	$ 508,000
Scenario, Forecast [Member]
Liquidation Basis of Accounting, Land Entitlement Costs		$ 2,000,000
Scenario, Plan [Member]
Tenant Improvements	$ 1,100,000

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Note 6 - Liability for Estimated Costs in Excess of Receipts During Liquidation - Changes in Liability for Estimated Costs in Excess of Estimated Receipts (Details) - Liquidation Basis of Accounting [Member] - USD ($)		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2018
Estimated rents and reimbursements		$ 4,044,202
Estimated rents and reimbursements		(1,180,071)
Estimated rents and reimbursements		179,064
Estimated rents and reimbursements		4,044,202	$ 3,043,195
Property operating costs		(2,403,872)
Property operating costs		749,705
Property operating costs		(120,642)
Property operating costs		(1,774,809)
Tenant improvements		(1,304,109)
Tenant improvements		1,061,545
Tenant improvements		29,691
Tenant improvements		(212,873)
Common area capital expenditures		(500,000)
Common area capital expenditures		47,964
Common area capital expenditures		6,834
Common area capital expenditures		(445,202)
Land entitlement costs		(2,516,394)
Land entitlement costs		508,222
Land entitlement costs		(2,008,172)
Corporate expenditures		(5,650,775)
Corporate expenditures		1,097,481
Corporate expenditures		22,823
Corporate expenditures		(4,530,471)
Selling costs on real estate assets*	[1]	(1,981,000)
Selling costs on real estate assets*	[1]
Selling costs on real estate assets*	[1]	(1,981,000)
Retention bonus payments to Directors (a)*	[1],[2]	(417,469)
Retention bonus payments to Directors (a)*	[1],[2]
Retention bonus payments to Directors (a)*	[1],[2]	(417,469)
Retention bonus payments to Executives and other employees (a)*	[1],[2]	(224,790)
Retention bonus payments to Executives and other employees (a)*	[1],[2]
Retention bonus payments to Executives and other employees (a)*	[1],[2]	(224,790)
Less prepaid expenses and other assets		329,390
Less prepaid expenses and other assets		119,420
Less prepaid expenses and other assets		448,810
Liability for estimated costs in excess of estimated receipts during liquidation**	[3]	(10,624,817)
Liability for estimated costs in excess of estimated receipts during liquidation**	[3]	2,404,266
Liability for estimated costs in excess of estimated receipts during liquidation**	[3]	117,770
Liability for estimated costs in excess of estimated receipts during liquidation**	[3]	$ (8,102,781)

[1] The amounts reported are based on the provisions of the retention bonus plan and the reported amount of the real estate assets estimated net realizable value.

[2] The value of the real estate reported in the Statement of Net Assets as of June 30, 2018, does not include the increased value, if any, that may result from the estimated land entitlement costs. As a result, net realizable value as reported does not exceed the adjusted appraised value under the Retention Bonus Plan (the appraisal of the real estate in late 2013 plus the estimated development costs) for one of the properties and accordingly the Company has not included any retention bonuses on the sale of such properties.

[3] These estimates are based on the liquidation being completed by the end of 2019.

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Note 7 - Disposition Activities (Details Textual)	Jun. 07, 2018 USD ($)
Property at Port Jefferson Station, New York [Member]
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment	$ 800,000

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Note 8 - Mortgage Loan Payable (Details Textual)	Mar. 21, 2018 USD ($) a
Real Estate Securing Mortgage Loan [Member] | Flowerfield Industrial Park [Member]
Area of Real Estate Property | a	31.8
Non-revolving Credit Line [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 3,000,000
Debt Instrument, Interest Only Phase, Term	240 days
Debt Instrument, Interest and Principal Phase, Term	7 years
Proceeds from Lines of Credit, Total	$ 1,100,000
Debt Service Ratio	1.35
Non-revolving Credit Line [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Amortization Period	20 years
Non-revolving Credit Line [Member] | After Interest Only Payment Period [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage	4.25%
Non-revolving Credit Line [Member] | Prime Rate [Member] | Interest Only Period of Payments [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Non-revolving Credit Line [Member] | Federal Home Loan Bank Rate [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Basis Spread on Variable Rate	2.00%

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Note 8 - Mortgage Loan Payable - Mortgage Loan Maturity (Details)	Jun. 30, 2018 USD ($)
2018	$ 2,537
2019	31,359
2020	33,114
2021	34,968
2022	36,926
Thereafter	961,096
Total	$ 1,100,000

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Note 9 - Income Taxes (Details Textual) - Domestic Tax Authority [Member] - USD ($)	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Income Taxes Receivable, Current	$ 12,544	$ 12,544
Income Tax Expense (Benefit), Total	$ (73,085)

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Note 10 - Concentration of Credit Risk (Details Textual)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
State Agency [Member]
Increase in Space Leased, Percentage	93.00%
Credit Concentration Risk [Member] | Cash, Cash Equivalents, and Government Securities [Member]
Concentration Risk, Percentage	0.00%	0.00%
Rental Income [Member]
Number of Major Customers	3
Customer Concentration Risk [Member] | Rental Income [Member] | Customer 1 [Member]
Concentration Risk, Percentage	20.00%
Customer Concentration Risk [Member] | Rental Income [Member] | Customer 2 [Member]
Concentration Risk, Percentage	18.00%
Customer Concentration Risk [Member] | Rental Income [Member] | Customer 3 [Member]
Concentration Risk, Percentage	6.00%

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Note 11 - Commitments (Details Textual) - USD ($)		6 Months Ended
		Jun. 30, 2018	May 31, 2014
Other Commitment, Total		$ 431,716
Bonus Pool Funding as Percentage of Appraised Value of Contributed Properties			5.00%
Retention Bonus Plan, Gross Selling Price Requirement, Percentage			100.00%
Additional Bonus Pool Funding, Percentage of Gross Sales Price on First Ten Percent Of Property Appreciation			10.00%
Additional Bonus Pool, Funding Percentage of Gross Sales Price on Second Ten Percent of Property Appreciation			15.00%
Additional Bonus Pool Funding, Percentage of Gross Sales Price on Property Appreciation Greater than Twenty Percent			20.00%
Defined Benefit Plan, Distretionary Bonus Pool Percentage		100.00%
Deferred Compensation Arrangement with Individual, Distribution Paid		$ 0
Chief Executive Officer [Member]
Defined Benefit Plan, Distretionary Bonus Pool Percentage		15.474%
Chief Executive Officer [Member] | Bonus Payable [Member]
Other Commitment, Total		$ 125,000
Other Employees [Member]
Supplemental Unemployment Benefits, Severance Benefits		$ 81,716
Defined Benefit Plan, Distretionary Bonus Pool Percentage		3.85%
Board of Directors Chairman [Member]
Bonus Pool Distribution Proportions			15.00%
Directors Other Than Chairman [Member]
Bonus Pool Distribution Proportions			50.00%
Other 5 Directors [Member]
Bonus Pool Distribution Proportions			10.00%
Executives and Employees [Member]
Bonus Pool Distribution Proportions			35.00%
Officer [Member]
Defined Benefit Plan, Distretionary Bonus Pool Percentage	[1]	1.75%

[1] The officer discretionary amount of 1.75% is vested but not allocated and will be allocated to the officers within the discretion of the Board.

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Note 11 - Commitments - Other Commitments (Details)	Jun. 30, 2018 USD ($)
Contractual obligation	$ 431,716
Management Employment Agreements with Bonus and Severance Commitment Contingencies [Member]
Contractual obligation	350,000
Other Employee Severance Commitment Contingencies [Member]
Contractual obligation	$ 81,716

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Note 11 - Commitments - Allocation of Retention Bonus (Details)	Jun. 30, 2018
Bonus pool percentage	100.00%
Board Members [Member]
Bonus pool percentage	65.00%
Chief Executive Officer [Member]
Bonus pool percentage	15.474%
Chief Operating Officer [Member]
Bonus pool percentage	13.926%
Officer [Member]
Bonus pool percentage	1.75%	[1]
Other Employees [Member]
Bonus pool percentage	3.85%

[1] The officer discretionary amount of 1.75% is vested but not allocated and will be allocated to the officers within the discretion of the Board.

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Note 12 - Contingencies (Details Textual) - Putative Class Action Lawsuit [Member] - USD ($)	1 Months Ended
	Apr. 30, 2016	Jun. 30, 2018	Dec. 31, 2014
Litigation Settlement, Amount Awarded to Other Party	$ 650,000
Litigation Settlement, Appraised Value Value of Properties, Difference Amount			$ 100,000
Litigation Settlement, Appraised Value Value of Unsold Properties, Difference Amount		$ 4,416,665

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Note 14 - Related Party Transactions (Details Textual) - Not-for-profit Corporation [Member]	1 Months Ended	6 Months Ended		12 Months Ended
	Apr. 30, 2017 USD ($) ft² $ / ft²	Jun. 30, 2018 USD ($) ft²		Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Payments for Tenant Improvements					$ 4,220
Operating Leases, Income Statement, Lease Revenue, Total		$ 40,527		$ 22,165
Lease Term August 2016 Through December 2018 [Member]
Rent Amount Per Square Foot Per Month, Maximum | $ / ft²	10
Lessor, Operating Lease, Term of Contract	2 years 150 days
Area of Real Estate Property | ft²	2,130	2,130
Annual Rent	$ 21,300		[1]
Operating Leases, Maximum Total Lease Commitment	51,475
Payments for Tenant Improvements	$ 3,500
Commitments, Fair Value Disclosure		$ 51,475
Lessor, Operating Lease, Renewal Term		2 years
Operating Leases, Additional Commitment		$ 136,675

[1] In April 2017, the Company extended the term of a master lease with the not-for-profit originally entered into in August 2016. The Company understood that the tenant's main intent was to sublease the space to artists, on a short-term basis, after which such subtenant artists would transition into their own space leased directly from the Company. Under the master lease, the tenant has the right to sublease the space without prior written consent for use as an art studio, art school or related use. Under the terms of the master lease, rent is payable by the tenant only to the extent the space is sublet, at the rent amount per square foot payable by the subtenant up to a maximum of $10 per square foot per year. The lease term of 29 months covers 2,130 square feet with a maximum annual and total lease commitment of up to $21,300 and $51,475, respectively. Approximately $3,500 in improvements were provided. Any space not subleased may be used by the tenant rent-free for certain stated art uses, although the tenant is responsible for certain passthrough expenses such as electric and heat. Since rent is only due if the space is sublet, the Company believes the fair value of the space to the extent not sublet reflects a below market lease over the term ending December 31, 2018 of up to $ 51,475 and total commitments including both two-year renewal options of $136,675.

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Note 14 - Related Party Transactions - Summary of Leasing Arrangements (Details) - Not-for-profit Corporation [Member]		1 Months Ended	6 Months Ended
		Apr. 30, 2017 USD ($) ft²	Jun. 30, 2018 USD ($) ft²
Lease Term May 2016 Through December 2018 [Member]
Square feet (Square Foot) | ft²			1,971
Annual rent			$ 16,754
Rent abatement	[1]		14,153
Total commitment			29,825
Additional commitment			$ 67,014
Lease Term August 2016 Through December 2018 [Member]
Square feet (Square Foot) | ft²		2,130	2,130
Annual rent		$ 21,300		[2]
Rent abatement	[2]
Total commitment	[2]
Additional commitment			$ 136,675
Lease Term May 2017 Through December 2018 [Member]
Square feet (Square Foot) | ft²			1,905
Annual rent			$ 16,193
Rent abatement			5,398
Total commitment			21,590
Additional commitment			$ 64,770

[1] In exchange for the rent abatement, the tenant completed capital improvements that exceeded the abatement amount. In addition, the tenant signed a multi-year lease.

[2] In April 2017, the Company extended the term of a master lease with the not-for-profit originally entered into in August 2016. The Company understood that the tenant's main intent was to sublease the space to artists, on a short-term basis, after which such subtenant artists would transition into their own space leased directly from the Company. Under the master lease, the tenant has the right to sublease the space without prior written consent for use as an art studio, art school or related use. Under the terms of the master lease, rent is payable by the tenant only to the extent the space is sublet, at the rent amount per square foot payable by the subtenant up to a maximum of $10 per square foot per year. The lease term of 29 months covers 2,130 square feet with a maximum annual and total lease commitment of up to $21,300 and $51,475, respectively. Approximately $3,500 in improvements were provided. Any space not subleased may be used by the tenant rent-free for certain stated art uses, although the tenant is responsible for certain passthrough expenses such as electric and heat. Since rent is only due if the space is sublet, the Company believes the fair value of the space to the extent not sublet reflects a below market lease over the term ending December 31, 2018 of up to $ 51,475 and total commitments including both two-year renewal options of $136,675.