10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

(Mark One)

☒     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

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: 333-191820

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 of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (631) 584-5400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common shares of limited liability company interests, par value $1.00 per share	GYRO	Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes☐No☒

Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by Section 13 or Section 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☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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

(Check One):

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	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 Act). Yes ☐ No☒

The aggregate market value of common shares held by non-affiliates of the registrant on June 30, 2019 was $13,394,333. The aggregate market value was computed by reference to the closing price on such date of the common shares as reported on the Nasdaq Stock Market. Common shares held by each executive officer and director and by each person who to the registrant’s knowledge owns 5% or more of the outstanding voting stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

On March 26, 2020, 1,482,680 common shares of the Registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

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TABLE OF CONTENTS TO FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2019

ITEM # PAGE

PART I
1.	Business.	3
1A	Risk Factors.	16
1B.	Unresolved Staff Comments.	26
2.	Properties.	27
3.	Legal Proceedings.	28
4.	Mine Safety Disclosures.	28
PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	28
6.	Selected Financial Data.	29
7.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations.	29
7A.	Quantitative and Qualitative Disclosures about Market Risk.	41
8.	Financial Statements and Supplementary Data.	41
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	41
9A.	Controls and Procedures.	41
9B.	Other Information.	42
PART III
10.	Directors, Executive Officers and Corporate Governance.	44
11.	Executive Compensation.	46
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	50
13.	Certain Relationships and Related Transactions, and Director Independence.	52
14.	Principal Accounting Fees and Services.	52
PART IV
15.	Exhibits, Financial Statement Schedules.	53
	Signatures	55
	Exhibit Index	55

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PART I

Introduction:

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 herein to our Annual Report are to this Annual Report on Form 10-K for the year ended December 31, 2019. References to “common shares” in this report refer to Gyrodyne, LLC’s common shares representing limited liability company interests. References to the “Board” in this report refer to the Board of Directors of Gyrodyne, LLC.

All references to 2019 and 2018 refer to our fiscal years ended or the dates, as the context requires, December 31, 2019 and December 31, 2018, respectively.

Item 1. Business.

Description of the Company's Business

Gyrodyne, LLC (including its subsidiaries, “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 on such properties 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.

Gyrodyne’s corporate strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing entitlement opportunities and enhancing the value of its leases. The Board believes the aforementioned strategy will improve the chances of increasing the values for such properties. The value of the real estate reported in the consolidated statement of net assets as of December 31, 2019 (predicated on current asset values) includes some, but not all of 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 pursuit of joint venture relationships, entitlements, 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 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 Item 3 – 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 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.

We remain committed on (1) enhancing the net value of Flowerfield and Cortlandt Manor to maximize the returns for our shareholders, (2) completing the disposition of our assets, (3) making timely distributions to our shareholders, (4) managing capital and liquidity, (5) mitigating risks relating to interest rates and real estate cycles and (6) completing the liquidation of the Company.

After giving effect to the Company’s dispositions of real property through December 31, 2019, the Company owns the following properties:

● the Cortlandt Manor Medical Center comprising approximately 34,000 square feet residing on approximately 13.8 acres; and

● the Flowerfield Industrial Park comprising approximately 127,000 rentable square feet. The industrial park is multi-tenanted and situated on ten acres of a 68-acre property in St. James, New York, all of which is owned by the Company. Approximately 62 of the 68 acres are included in the subdivision application filed with the Town of Smithtown.  Approximately 5 of the 68 acres are zoned residential and are being actively marketed for sale.    

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Each of the medical office park in Cortlandt Manor and the Flowerfield Industrial Park (including its undeveloped portion) is individually owned in a single asset limited liability company wholly owned by the Company.

Properties Sold

Port Jefferson Professional Park.  During the year ended December 31, 2018, the Company sold its remaining building (approximately 4,000 square feet) located at 11 Medical Drive, in the Port Jefferson Professional Park for $800,000 Following this sale, the Company no longer owns any buildings in the Port Jefferson Professional Park

Properties Under Contract

Flowerfield. On August 27, 2019, the Company’s wholly-owned subsidiary GSD Flowerfield, LLC entered into a Purchase and Sale Agreement (the “BSL Agreement”) for the sale of an approximately 9.0 acre parcel of vacant land in the Flowerfield complex in Smithtown, New York for $16,800,000 to BSL St. James LLC, a Delaware limited liability company (“BSL”).

Under the BSL Agreement: (i) BSL will have the right to terminate the BSL Agreement during an investigation period by written notice to GSD if BSL is not fully satisfied, in its sole discretion, as to the status of title, suitability of the Premises and all factors concerning same, in which case BSL will have the right to receive a refund of its earnest money deposit; (ii) if BSL does not terminate the BSL Agreement on or prior to the end of the investigation period, BSL will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless BSL terminates the BSL Agreement on or prior to the end of the investigation period, the closing will occur on the 30th day following the earlier of (y) the Town of Smithtown’s granting of the Site Plan Approval (as defined in the BSL Agreement and as described below); or (z) BSL’s waiver of the Site Plan Approval.

The BSL Agreement is also contingent on the receipt of Subdivision Approval (as defined in the BSL Agreement and as described below). The Subdivision Approval condition requires that GSD obtain a subdivision of the Gyrodyne/Flowerfield complex into separate parcels to create the Property (as generally depicted in the BSL Agreement) within a specified time (the “Subdivision Approval Period”) following the last day of the investigation period. If the Subdivision Approval is not obtained within the Subdivision Approval Period, each of GSD and BSL have the right to terminate the BSL Agreement. BSL will also have a limited right to terminate the BSL Agreement in the event the Subdivision Approval contains requirements specified in the BSL Agreement. If Subdivision Approval has not been denied by the Town of Smithtown at or prior to the last day of the Subdivision Approval Period, GSD shall have the right to extend its time to obtain the Subdivision Approval for a specified period of time. If Subdivision Approval is not obtained within such additional time, each of GSD and BSL have the right to terminate the BSL Agreement.

 The Site Plan Approval is specifically delineated in the BSL Agreement. If BSL fails to obtain the Site Plan Approval prior to the end of the site plan approval period, BSL may cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for a specified period upon the payment of an extension fee. If, after such extension, BSL fails to obtain the Site Plan Approval, BSL may cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for an additional specified period with a second non-refundable extension fee. 

The BSL Agreement also contains additional customary covenants, conditions, representations and warranties.

4

Cortlandt Manor. Gyrodyne, LLC, a New York limited liability company (the “Company”), has announced the execution by its subsidiaries GSD Cortlandt, LLC, a New York limited liability company (“GSD”), and Buttonwood Acquisition, LLC (“Buttonwood” and together with GSD, the “Cortlandt Subsidiaries”), of a Purchase and Sale Agreement (the “Agreement”) effective as of December 7, 2019 (the “Effective Date”) for the sale of  approximately 4.5 acres of its real property located in Cortlandt Manor, New York, together with the improvements thereon (the “Property”), to Sound Cortlandt, LLC, a Delaware limited liability company (“SC LLC”), for a purchase price of $5,720,000. 

The Town of Cortlandt (the “Town”) is processing a proposed zoning initiative to create a Medical Oriented District (“MOD”) that would include the entire Cortlandt property (owned by the Cortlandt Subsidiaries) within its boundaries.  Included in the Town’s initiative is the Company’s site plan to subdivide the entire property into three parcels for the development of (i) a medical office building with retail, (ii) a multi-family residential housing project and (iii) an open space, passive recreation parcel. The Property that is the subject of the Agreement consists of the medical office building with ancillary retail space and does not include the multi-family residential housing parcel or the open space, passive recreation parcel. 

The Agreement requires: (i) an inspection period that will expire after a set period, during which time SC LLC will have the right to terminate the Agreement by written notice to GSD if SC LLC will not be fully satisfied, in SC LLC’s sole discretion, as to the status of title, suitability of the Property and all factors concerning same, prior to the expiration of the inspection period, in which case SC LLC will have the right to receive a refund of its earnest money deposit; (ii) if SC LLC does not terminate the Agreement on or prior to the end of the inspection period, SC LLC will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless SC LLC terminates the Agreement on or prior to the end of the inspection period, the closing will occur on the 60th day following the earlier of (y) the applicable governmental authorities granting of the Final Project Approvals (as defined in the Agreement and as described below); or (z) SC LLC’s waiver of the Final Project Approvals.

The Final Project Approvals are also contingent on the receipt of Subdivision Approval and Site Plan Approval (each as defined in the Agreement and as described below). The Subdivision Approval condition requires that the Cortlandt Subsidiaries obtain approval as and to the extent necessary to allow for the conveyance of the  medical office building parcel to SC LLC and the conveyance of the recreation parcel  to the owner’s association within a specified time following the last day of the inspection period. If such Subdivision Approval is not obtained within such specified time following the last day of the inspection period, SC LLC has the right to terminate the Agreement. The Agreement provides SC LLC with a limited right to terminate the Agreement in the event the Subdivision Approval contains requirements specified in the Agreement. In the event the Subdivision Approval has not been denied by the Town at or prior to the last day of the specified period, SC LLC shall have the right to extend the time to obtain the Subdivision Approval for a specified period of time.  If such Subdivision Approval is not obtained within such additional time, SC LLC has the right to terminate the Agreement.

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The Site Plan Approval is specifically delineated in the Agreement. If SC LLC fails to obtain the Site Plan Approval prior to the closing date (expected to be May 4, 2021), SC LLC may cancel the Agreement, waive the Site Plan Approval contingency, or extend the closing date.

The Agreement also contains additional customary covenants, conditions, representations and warranties.

Strategic Plan to Enhance Property Values, Liquidate and Dissolve

Our corporate strategy is to pursue entitlement opportunities intended to increase the values of our two remaining properties so that they can be sold to one or more developers at higher prices (than those achievable under their current entitlements) that will maximize value 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. We are unable to predict the precise nature, amount or timing of such distributions. 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;

● managing the strategic sale of real estate assets;

● pursuing the entitlement 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 entitlement 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 consolidated statement of net assets as of December 31, 2019 (predicated on current asset values) includes some but not all of 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 pursuit of joint venture relationships, and other investments and/or other strategies to maximize the returns for our shareholders. The Company does not expect the pursuit of joint ventures, if any, to adversely affect the timing of the distributions to our shareholders.

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, in the event of the sale of individual properties, that do not constitute substantially all of the Company’s assets, it is not required or anticipated that any shareholder votes will be solicited. 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 is completed by December 31, 2021 and giving effect to the estimated cash flows from the operation of our existing properties, we expect that Gyrodyne will have a cash balance at December 31, 2021 of approximately $31.4 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 $21.16 per share based on Gyrodyne having 1,482,680 common shares outstanding. These estimated distributions are based on values at December 31, 2019 and include some but not all of 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 remaining estimated $1.8 million investment in those efforts, although there can be no assurance of such excess or whether any appreciation at all will be realized.

6

The Consolidated Statements of Net Assets is based on certain estimates. Uncertainties as to the precise value of our non-cash assets, which include some but not all of the estimated potential additional value from the costs incurred to pursue the maximum value on Flowerfield and Cortlandt Manor through the entitlement efforts (including the pursuit of special permits) 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 (including amounts available under our credit facilities) 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 would 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 the distributions made to them.

Property Value Enhancement

The Company is pursuing entitlements to maximize the value of Flowerfield and Cortlandt Manor.  During the year ended December 31, 2019, the Company incurred approximately $1,422,000 of land entitlement costs, consisting predominantly of engineering costs to support the Company’s respective entitlement efforts.  We estimate that the Company may incur approximately $1.8 million in additional land entitlement costs (an aggregate of approximately $556,000 which Company vendors have agreed to defer until the first post subdivision property lot is sold) through December 31, 2021 in pursuit of entitlements (approximately $600,000 in Cortlandt Manor and $1.2 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. The purpose of the proposed Medical Oriented District (“MOD”) is to expand the Town’s existing medical infrastructure and encourage economic development, including capital investment, job creation and housing options. The MOD would allow 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 13.8 acres are located directly opposite New York Presbyterian’s Hudson Valley Hospital Center and within the boundaries of the 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 four 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.

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 mitigation, financial impact and other variables to conform our application with the Town’s vision on the MOD.

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The entitlement costs for the years ended December 31, 2019 and 2018 associated with the ownership and development of this property were $425,699 and $414,982, respectively. 

As a property owner with eligible parcels in this 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 and residential use with limited retail 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 two public hearing community outreach meetings in June and August 2018 where the Company presented its development plan for the Cortlandt Manor property. As anticipated, on August 7, 2018, the Town Planning Board formally issued 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 scope of which was also adopted. On August 28, 2018, the Town filed the Scope for a Draft Generic Environmental Impact Statement (“DGEIS”) 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. On September 17, 2019 the Town of Cortlandt Town Board as Lead Agency under SEQRA adopted a resolution accepting the DGEIS as complete for public review.  The first public hearing on the DGEIS was held on November 19, 2019.  A second public hearing on the DGEIS was held on January 14, 2020. The Town of Cortlandt Planning Board extended the public comment period 90 days with the next public hearing scheduled for April 14, 2020.  Subsequent to DGEIS public hearings and public comment period, a Final Generic EIS will be prepared and is anticipated to be accepted by the Town Board with SEQRA completed in the third quarter of 2020.  Subdivision and site plan public hearings will occur simultaneous with the Town Planning Board during the third and fourth quarters of 2020.  The Town Board is anticipated to adopt a MOD designation for the property in the fourth quarter of 2020 with subdivision and site plan approval granted by the Town Planning Board occurring in early 2021. The Company does not plan on developing the property but rather positioning the property 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 the 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.

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 for the application at the Town of Smithtown’s Planning Board is a simple majority.

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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 (“EIS”). As a result, at the April 11, 2018 Planning Board meeting, 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 then current Town Planning Board Chairman communicated that a Positive Declaration would require up to one year to complete the SEQRA process. The Town issued the Final Scope on July 7, 2018. On August 15, 2018, the Company submitted the EIS to the Town of Smithtown Planning Department prior to the public hearing. The Company received comments on its EIS at the end of the third quarter of 2018 and submitted its response to the Town of Smithtown Planning Department on February 15, 2019. In May 2019 the Company received additional comments on its EIS and submitted its responses to the Town on June 4, 2019. On July 3, 2019, the Company received additional comments on its EIS and submitted its response to the Town of Smithtown Planning Department on August 28, 2019. On September 24, 2019 the company received additional comments on its EIS and submitted its response to the Town of Smithtown Planning Department on September 25, 2019. The Town of Smithtown Planning Board as Lead Agency under SEQRA adopted a resolution accepting the DEIS as complete for public review on December 11, 2019 and announced a public comment period that closed on January 24, 2020. Furthermore, the Town Planning Board held and closed the public hearing for the DEIS on January 8, 2020. Following the closing of the public comment period, the Company received a copy of the public comments in February 2020, accordingly. The company is reviewing the public comments and will respond by submitting a Final EIS (“FEIS”). The FEIS is anticipated to be accepted by the Planning Board with SEQRA completed in the second quarter or early third quarter of 2020.     

The entitlement costs for the years ended December 31, 2019 and 2018 associated with the ownership and development of this property consisted of architectural and engineering costs, legal expenses, economic analysis, soil management and surveys were $996,493 and $846,066, respectively. The Company owns and is actively marketing for sale 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.

Flowerfield Industrial Park Value Enhancement Strategy. The Company’s strategy is to: a) pursue entitlements to maximize the pre-construction value of Flowerfield and b) enhance the value of the Flowerfield Industrial Park’s current buildings even further by expanding our relationship with our largest tenant, Stony Brook University and institutions affiliated with it.

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 and institutions affiliated with it, 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.

Our business relationship with Stony Brook University and institutions affiliated with it has expanded from approximately 16,000 square feet in the third quarter of 2017 (the beginning of the repositioning strategy) to approximately 27,000 square feet. The annual lease commitments (as of December 31, 2019) to service Stony Brook University and institutions affiliated with it, inclusive of Stony Brook University Hospital is $628,440 (most of which is not up for renewal until 2025).

Health Care Industry 

Our tenants in our Cortlandt Manor property are healthcare service providers. Furthermore, the Company has expanded its leasing relationship with Stony Brook University, Stony Brook University Hospital and affiliates of Stony Brook University Hospital at our Flowerfield property which may increase its exposure to the healthcare industry. 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 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, which in turn may adversely impact us. Congress may revisit ACA or Medicaid reform legislation in 2020 or shortly thereafter. 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.

Real Estate

The Company owns properties in St. James and Cortlandt Manor, New York.

St. James, New York.  In St. James, New York, the Company owns a 68-acre site called Flowerfield, primarily zoned for light industry, which is located approximately 50 miles east of New York City on the North Shore of Long Island in the Town of Smithtown. Approximately 5 acres of the 68 acres at Flowerfield, are non-contiguous to the Flowerfield industrial park and zoned residential. The Company is actively marketing the 5-acre lot for sale.  Flowerfield's location places it in Hydrogeologic Zone VIII, one of the most liberal with respect to effluent discharge rates. As of December 31, 2019, there were 30 tenants, including two tenants under month-to-month commitments, comprising 36 leases.  The annual base rent at Flowerfield based on the rates in effect as of December 2019 is approximately $1,430,000 which included month-to-month annualized base rent of approximately $20,000 on 3,666 square feet.  The occupancy rate was 83% as of December 31, 2019.    

Cortlandt Manor, New York. In Cortlandt Manor, New York, the Company owns 13.8 acres inclusive of the 33,871 square foot Cortlandt Medical Center.  The property is located directly opposite New York Presbyterian’s Hudson Valley Hospital Center and within the boundaries of the MOD.  The property consists of six office buildings. As of December 31, 2019, there were 6 tenants, comprising 7 leases. The annual base rent based on the rates in effect as of December 2019, is approximately $773,000. The property was 81% occupied as of December 31, 2019.  The Company is actively repositioning the Cortlandt Manor property toward short-term leases to allow for a more timely and efficient transition into a development property.  During early 2019, the Company terminated a long-term lease for 3,943 square feet and annual revenue of $115,380.  The Company is negotiating agreements with all of its Cortlandt Manor tenants granting the landlord an early termination option to allow buyers of the property maximum flexibility to begin development following receipt of site approvals.

Tax Status

Gyrodyne is a limited liability company. 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.

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 a) bear any tax liability resulting from such audit, or b) elect to push out the tax audit adjustments to the respective shareholders once it has been calculated at the company level.

Competition

Our properties are located in St. James and Cortlandt Manor, New York. The Company competes in the leasing of medical, professional and general office space and engineering, manufacturing and warehouse space with a considerable number of other real estate companies, some of which may have greater marketing and financial resources than the Company and may generally be able to accept more risk than we can prudently manage, including risk with respect to creditworthiness of tenants. These entities and others may be prospective buyers, as well as competitors, with respect to both properties when we expect to sell such properties, which would be following the receipt of entitlements. Principal factors of competition in the Company’s rental property business are the quality of properties, leasing terms (including rent and other charges and allowances for tenant improvements), attractiveness and convenience of location, financial strength of its competitors, the quality and breadth of tenant services provided and reputation as an owner and operator of quality office properties in its relevant market. Additionally, the Company’s ability to compete depends upon, among other factors, trends in the national and local economies, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

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In pursuit of its business plan, and the sale of properties, the Company competes with other real estate investors, including pension funds, insurance companies, foreign investors, real estate partnerships, public and private real estate investment trusts, private individuals and other domestic real estate companies, many of which have greater financial and other resources than the Company. With respect to properties presently owned by the Company, it competes with other owners of like properties for tenants.                       

Internal Growth and Effective Asset Management

Tenant Relations and Lease Compliance. We strive to maintain strong contacts with our tenants in order to understand their current and future real estate rental and development needs. We directly monitor each of our rental properties to ensure they are properly maintained and meet the needs of our tenants.

Extending Lease Maturities. We seek to extend leases at the Flowerfield Industrial Park in advance of expirations to achieve high occupancy levels. Additionally, our strategy includes expanding our leasing relationship with Stony Brook University and institutions affiliated with it, inclusive of Stony Brook University Hospital, which we believe will enhance the value of the existing buildings as well as the entitlements being pursued.

We are seeking to covert the Cortlandt Manor leases to predominantly short-term leases to allow prospective buyers the maximum flexibility to begin development following receipt of site approvals. The entitlements being pursued, if secured, would allow for a 100,000 square foot medical building and a 200-unit multitenant residential building.

Financing Strategy

The Company believes it is currently capitalized with adequate cash levels and adequate access to its credit facilities to operate our business and complete our strategic plan of positioning our remaining properties for sale at enhanced values and making liquidating distributions to our shareholders. The Company focuses its available capital to operate the Company and pursue the entitlements strategy. 

To finance the capital improvements, most of which relate to leasing activity, the Company secured a non-revolving credit line for up to $3,000,000 (the “Original Line”) with a bank, which closed on March 21, 2018. There was 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”).

On January 24, 2019, the Company amended and extended the Original Line which included extending the maturity date of the interest only phase to the earlier of January 20, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of January 20, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”).  The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 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), but in no event less than the initial interest rate in effect on the closing date (6.5%).  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, plus principal based on a 20-year amortization period.  The Permanent Phase interest rate currently would be 3.25%. 

The first advance, drawn in March 2018, of $1.1 million was used to finance the work required for the lease amendment with Stony Brook University Hospital (“SBU Hospital”). An additional advance of $1.1 million was drawn on March 29, 2019 to finance the buildouts on leases signed through December 31, 2018. The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with the State University of New York or institutions affiliated with it (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase.

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To secure access to additional working capital, if needed, through the final sale date of the Flowerfield industrial buildings, the Company secured a second loan evidenced by a secured non-revolving business line of credit agreement and promissory note with a bank for up to $3,000,000, which closed on January 24, 2019. There is an interest only phase for the first twenty-four months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on January 20, 2028 (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), but in no event less than the initial interest rate in effect on the closing date (6.5%). 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, plus principal based on a 20-year amortization period. The Permanent Phase interest rate currently would be 3.25%. Two advances of $1,000,000 and $500,000 were drawn on September 30 and December 31, 2019, respectively. The balance of $1,419,932, net of closing costs of $80,068, is available to be drawn down.

Both are secured by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and 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 is in compliance with the loan covenants. The Company anticipates modifying the terms of the loan following the completion of its subdivision.   

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

The line is secured by the Cortlandt property (approximately 14 acres) and cross collateralized by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

Environmental Matters

Based on our ongoing review of each of our properties, as of the date of this report, we are not aware of any environmental condition with respect to any of the properties which we believe would be reasonably likely to have a material adverse effect on our financial condition and/or results of operations. There can be no assurance that (i) changes in law, (ii) the conduct of tenants, (iii) activities related to properties in the surrounding area, (iv) contamination through the water table due to the low elevation and immediate proximity of the industrial park to the Long Island Sound or (v) the discovery of environmental conditions the extent or severity of which were unknown, will not expose us to material liability in the future.

The Company believes that each of its properties is in compliance, in all material respects, with federal, state and local regulations regarding hazardous waste and other environmental matters and is not aware of any environmental contamination at any of its properties that would require any material capital expenditure for the remediation thereof. No assurance can be given, however, that environmental regulations will not in the future have a materially adverse effect on the properties.

Insurance

The Company carries comprehensive liability, property, terrorism and umbrella insurance coverage which includes fire, flood, earthquakes and business interruption insurance on all our properties. The Company annually reviews its policies with regard to both risk management and the underlying premiums and believes the policy specifications, insurance limits and deductibles are appropriate given the relative risk of loss, the cost of the coverage and industry practice and, in the opinion of the Company’s management, all its properties are adequately insured.

Major Tenants

For the year ended December 31, 2019, rental income from the Company’s three largest tenants represented approximately 23%, 20% and 7%, respectively, of total rental income.

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The three largest tenants by revenue as of December 31, 2019, consist of Stony Brook University Hospital, located in the industrial park, a medical tenant in the Cortlandt Manor Medical Center and a tenant in the industrial park that recently expanded its space.

For the year ended December 31, 2018, pro forma rental income (excluding revenue related to assets sold on or prior to December 31, 2018) from the three largest tenants represented approximately 21%, 21% and 6% of total rental income.

The three largest tenants by revenue as of December 31, 2018, consist of Stony Brook University Hospital, located in the industrial park and two medical tenants in the Cortlandt Manor Medical Center.

The current economic challenges facing state and local budgets impacted most of the Company’s largest tenants. In addition, the current economic challenges stemming from the coronavirus are disproportionately impacting small businesses which comprise 39% of our expected 2020 rental revenue. There can be no assurance that the Company’s leases will renew for the same square footage, at favorable rates net of tenant improvements, if at all.

Fiscal Year 2019 Transaction Summary

The following summarizes our significant transactions and other activity during the year ended December 31, 2019.

Disposition Activity.

Flowerfield - On August 27, 2019, the Company’s wholly-owned subsidiary GSD Flowerfield, LLC entered into a Purchase and Sale Agreement (the “BSL Agreement”) for the sale of an approximately 9.0 acre parcel of vacant land in the Flowerfield complex in Smithtown, New York for $16,800,000 to BSL St. James LLC, a Delaware limited liability company (“BSL”).  See, “Business--Properties Under Contract--Flowerfield”, above, for more detailed disclosure.

Cortlandt Manor - Gyrodyne, LLC, a New York limited liability company (the “Company”), has announced the execution by its subsidiaries GSD Cortlandt, LLC, a New York limited liability company (“GSD”), and Buttonwood Acquisition, LLC (“Buttonwood” and together with GSD, the “Cortlandt Subsidiaries”), of a Purchase and Sale Agreement (the “Agreement”) effective as of December 7, 2019 (the “Effective Date”) for the sale of  approximately 4.5 acres of its real property located in Cortlandt Manor, New York, together with the improvements thereon (the “Property”), to Sound Cortlandt, LLC, a Delaware limited liability company (“SC LLC”), for a purchase price of $5,720,000.  See, “Business--Properties Under Contract—Cortlandt Manor”, above, for more detailed disclosure.

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Leasing Activity.

During 2019, the Company signed five new leases comprising 4,606 square feet, annual base rent of approximately $51,500 and total lease commitments of approximately $128,000, excluding tenant reimbursements, at an average rate per square foot of $11.18, which were offset by seven terminations comprising 8,981 square feet, approximately $187,000 in annual revenue, excluding tenant reimbursements at an average rate per square foot of $20.85. The net impact was a decrease in annual lease commitments and rented square footage of approximately $135,500 and 4,375 square feet, respectively.  A total of ten lease renewals were signed during 2019 comprising approximately 17,600 square feet, $,332,200 in annual revenue and $375,900 in total commitments.  In addition, there were a total of two expansion/downsizing signed in 2019 with no change in square footage and a net increase of approximately $2,700 in annual revenue and $4,700 in total commitments.  There were no incentives or lease concessions in the form of rent abatements during the year ended 2019.  The Company paid commissions of approximately $10,900.

Financing Activity.

To finance capital improvements, most of which relate to leasing activity, the Company secured a non-revolving credit line for up to $3,000,000 (the “Original Line”) with a bank, which closed on March 21, 2018. There was 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”).

On January 24, 2019, the Company amended and extended the Original Line which included extending the maturity date of the interest only phase to the earlier of January 20, 2020 (which has since been extended to April 30,2020) or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of January 20, 2027 or 84 months after conversion to a permanent loan. See, “Business—Financing Strategy”, above, for more detailed disclosure.

Retention Bonus Plan

In May 2014, the Board of Directors approved a retention bonus plan (as amended, the “Plan”)  designed to recognize the nature and scope of the responsibilities of our directors, executives and employees related to the Company’s strategic plan to enhance the property values, liquidate and dissolve, 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 Plan provides for bonuses to directors, officers and employees determined by the gross sales proceeds from the sale of each property and the date of sale. The summary appearing below reflects the terms set forth in the Plan as modified by three amendments.  There were no further amendments to the terms of the Plan during the current reporting period.  See, “Item 1., Executive Compensation—Retention Bonus Plan” below for more detailed disclosure.

Deferred Compensation Plan

On December 6, 2019, the Company’s Board of Directors (the “Board”) approved the Gyrodyne, LLC Nonqualified Deferred Compensation Plan for Employees and Directors (the “DCP”) effective as of January 1, 2020. The plan is a nonqualified deferred compensation plan maintained for officers and directors of the Company.  Under the DCP, officers and directors may elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of 5%.  All DCP benefits will be paid in a single lump sum cash payment on December 15, 2026, unless a plan of liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP. The foregoing description of the DCP does not purport to be complete and is qualified in its entirety by reference to the full text of the DCP, which is attached hereto as Exhibit 10.12.  Each of the Directors elected (under the DCP) to defer 100% of their director fees for 2020.

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Subsequent Business Events

Leasing Activity. Subsequent to December 31, 2019, the Company signed one new lease and four lease extensions comprising approximately 8,200 square feet, $156,000 in annual revenue and $206,000 in total lease commitments.    

Subsequent to December 31, 2019, the Company experienced one lease termination comprising approximately 1,300 square feet and $34,000 in annual revenue. No rental income from this lease was included in the estimated liquidation and operating costs net of receipts in the consolidated statement of net assets for December 31, 2019.

The net increase in annual rent from subsequent leasing activity is approximately $122,000.

Credit Facility. The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”).

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

The line is secured by the Cortlandt property (approximately 14 acres) and cross collateralized by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

Coronavirus/COVID-19 Pandemic.  In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China In the first several months of 2020, the virus, SARS-CoV-2, and resulting disease, COVID-19, spread to the United States, including New York State, the geographic location in which the Company operates. In February and March 2020, some of our tenants began to experience decreasing demand for their products and services which may impact their ability to timely meet their lease obligations.  On March 21, 2020, New York Governor Andrew Cuomo issued an Executive Order entitled “New York State on PAUSE” (Policy that Assures Uniform Safety for Everyone) (the “Order”), pursuant to which all non-essential employees (as defined by the State) must stay at home starting March 22, 2020 through April 19, 2020.  The Order also includes a 90-day moratorium on any residential or commercial evictions.  Although it is difficult to estimate the duration and full extent of this disruption, the impact of COVID-19 on our future results could be significant and will largely depend on future developments.  We are actively working with our tenants to manage and mitigate the impact to COVID-19 on the Company’s operations, liquidity and resulting Net Asset Value. The COVID-19 public health crisis may also adversely impact our efforts to secure entitlements and the sale of our real estate.  State and local governments are prioritizing COVID-19 crisis management and, to the extent possible, re-allocating resources accordingly which may adversely impact the timeline of our entitlements and technical approvals.  Furthermore, the real estate market is also expected to be adversely affected which could further negatively impact the timing of sales and the resulting value of our real estate.  See, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”, for more detailed disclosure.

Employees

As of December 31, 2019 and 2018 we had 4 employees.

Industry Segments

We operate in one segment; the ownership and management of industrial and medical office buildings.

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Available Information

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and proxy statements, with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, or you may obtain information by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet address at http://www.sec.gov that contains reports, proxy statements and information statements, and other information, which you may obtain free of charge. In addition, copies of our filings with the SEC may be obtained from our website located at www.gyrodyne.com. We make available, free of charge, on or through the Investor Relations section of our website, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as prospectuses and Proxy Statements, as soon as reasonably practicable following the electronic filing of such material with the U.S. Securities and Exchange Commission (“SEC”). Also available on our website is our Audit Committee Charter and our Code of Business Conduct and Ethics governing our directors, officers and employees. In addition, our web site includes information with respect to purchases and sales of securities by our officers, directors as well as any non-GAAP financial disclosures (defined by SEC’s Regulation G) that we may make public orally, or in writing. We are not incorporating our website or any information from the website into this Form 10-K.

Our Investor Relations department can be contacted at One Flowerfield, Suite 24, St. James, New York 11780, ATTN: Investor Relations or by Telephone: 631-584-5400.

Principal Executive Offices – Our principal executive office is located at One Flowerfield, Suite 24, St James, New York 11780. Our telephone number is 631-584-5400.

Item 1A. Risk Factors.

Gyrodyne’s business, financial condition, results of operations and liquidating distribution potential are subject to risks customary for real property owners, as well as additional risks associated with Gyrodyne’s strategic plan of positioning our remaining properties for sale at enhanced values and making liquidating distributions to our shareholders. In addition to the factors discussed elsewhere in this Report, the following risks and uncertainties could materially harm the value of our properties and the magnitude of distributions to our shareholders, including causing Gyrodyne’s actual results to differ materially from those projected in any forward-looking statements. The following summary of significant risk factors is not all-inclusive or necessarily in order of importance. Additional risks and uncertainties not presently known to Gyrodyne or that Gyrodyne currently deems immaterial also may materially adversely affect us in future periods. For more information about forward-looking statements, see the section of this report entitled “Cautionary Statement Concerning Forward-Looking Information” below.

Illiquidity of real estate and lack of diversification may make it difficult for us to sell properties or achieve satisfactory returns in one or more properties within projected timelines.

Our assets consist substantially of real properties which are relatively illiquid assets. We may encounter difficulty in disposing of properties when tenants vacate either at the expiration of the applicable lease or otherwise. When we decide to sell a particular property, our ability to do so and the prices we receive on their sale may be affected by many factors, including the number of potential buyers, the number of competing properties on the market and other market conditions, as well as whether the property is leased and if it is leased, the terms of the lease. As a result, we may be unable to sell our properties for an extended period of time at the values disclosed in our Consolidated Statement of Net Assets, which would adversely affect our results of operations, liquidity and financial condition. We expect to complete our process of pre-development enhancement and liquidation of all our properties by December 31, 2021.  However, the illiquid nature of real estate and the short timeframe that we have chosen to complete the pre-development value enhancement and liquidation process could adversely impact the prospects for achieving our value enhancement and sale objectives and may ultimately result in an extension of the timeline and or additional costs for achieving our pre-development property value enhancement and liquidation objectives.

If our land entitlement and liquidation costs or unpaid liabilities are greater than we expect, our liquidating distributions to our shareholders may be delayed or reduced.

In order to obtain certain entitlements, permits and approvals, we may be required to prepare and present additional data to governmental authorities pertaining to the potential adverse impact that any proposed activities may have on the environment, individually or in the aggregate. Certain approval procedures may require preparation of studies to assess the environmental impact of new sites or the expansion of existing sites. Compliance with these regulatory requirements is expensive and significantly lengthens the time needed to develop a site.

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The liquidation basis of accounting requires us to accrue all costs associated with implementing and completing our plan of liquidation. Total liability for estimated costs in excess of estimated receipts during liquidation, inclusive of the costs listed above plus costs associated with the sale of real estate, payments made under the retention bonus plan and liquidating costs, total $14,348,681. The total amount of land entitlement costs, transaction fees and all operating and administrative costs in the liquidation is not yet known and, therefore, we have used estimates of these costs in calculating the amounts of our projected liquidating distributions to our shareholders. To the extent that we have underestimated these costs in calculating our projections or we incur unforeseen additional costs, our actual liquidating distributions may be lower than our estimated net assets in liquidation. In addition, if the claims of our creditors are greater than we have anticipated, or we decide to acquire one or more insurance policies covering unknown or contingent claims against us, our liquidating distributions may be delayed or reduced. Further, if a reserve fund is established, payment of liquidating distributions to our holders of common shares may be delayed or reduced.

Stipulation of Settlement prohibits us from selling our remaining properties at prices below December 2014 appraised values.

On July 3, 2014, a purported shareholder of the Company filed a putative class action lawsuit against the Company, Gyrodyne Company of America, Inc. (the “Corporation”), Gyrodyne Special Distribution, LLC (“GSD”) and members of our Board of Directors (the "Action"). The complaint alleged, among other things, that (i) our directors 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 directors 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 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 relating to the Merger 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 2014.

The 2014 aggregate appraised value for our properties was approximately $100,000 higher than the 2013 aggregate appraised value for such properties. As of December 31, 2019, the aggregate appraised value of our remaining unsold properties exceeded the respective 2014 aggregate appraised value for such properties.

The requirement in the Settlement that the Company sell its remaining properties at prices above the December 2014 appraised values could limit the options available to the Company. The Company believes that it is in the best interests of the shareholders to pursue certain pre-development enhancements to its remaining properties prior to seeking their ultimate disposition to a developer or other purchaser because doing so will result in higher estimated distributions as compared with selling the properties with their current zoning and entitlements. The Company may also entertain offers from potential buyers who may be willing to pay prices for the properties in their current entitlement and zoning status that the Company finds more attractive from a timing or value perspective than might be achievable through completing an entitlement process. If the Company receives an offer prior to the completion of the entitlement process that it believes is in the best interests of the shareholders, it may nevertheless be prevented from consummating such transaction because of the price floor set in the Settlement. In addition, a severe downturn in the general economy or in the real estate market, or other negative factors beyond our control, may drive down the values of commercial real estate properties, or otherwise result in the values of our remaining properties being reduced to levels below the 2014 appraised values, in which case we may be prohibited under the Settlement from selling such properties. Such limitation on the options available to the Company may make it more difficult to accomplish our stated objective of completing the liquidation process by December 31, 2021.

Furthermore, the Stipulation’s price floor provision does not factor in land entitlement costs that may be incurred in enhancing the value of any particular property. Although the Company intends only to engage in value enhancement efforts and incur land entitlement costs if it reasonably believes that property values will increase more than the amount of such costs, and the Retention Bonus Plan as amended properly incentivizes the Company to do so by calculating the bonus pool as a percentage of the excess of gross sales proceeds from the sale of each property over the designated appraised value as adjusted by land entitlement costs, the price floor provision may nevertheless create a perverse incentive for the Company to incur certain land entitlement costs to increase the value of a property beyond its stipulated price floor even if the land entitlement costs incurred exceed the amount of the increase.

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Risks incidental to real estate ownership and management.

Because our business plan is to pursue the opportunistic disposition of our properties, we do not expect to make any further investments other than to enhance the values of the Flowerfield and Cortlandt Manor properties which may include acquisitions of land and/or executing land swaps. Accordingly, an investment in Gyrodyne depends upon the financial performance and the value of our current portfolio of properties, which properties are subject to the risks normally associated with the ownership and management of rental properties and real estate in general. The risks associated with ownership and management of rental properties include the non-performance of lease obligations by tenants, leasehold improvements that will be costly or difficult to remove should it become necessary to re-rent the leased space for other uses, covenants in certain retail leases that limit the types of tenants to which available space can be rented (which may limit demand or reduce the rents realized on re-renting), rights of termination of leases due to events of casualty or condemnation affecting the leased space or the property or due to interruption of the tenant's quiet enjoyment of the leased premises, and obligations of a landlord to restore the leased premises or the property following events of casualty or condemnation. The risks associated with ownership and management of real estate in general include:

• adverse changes in general and local economic conditions which affect the demand for real estate assets;

• competition from other properties;

• fluctuations in interest rates;

• reduced availability of financing;

• the cyclical nature of the real estate industry and possible oversupply of, or reduced demand for, properties in the markets in which our investments are located;

• the attractiveness of our properties to tenants and purchasers;

• how well we manage our properties;

• changes in market rental rates and our ability to rent space on favorable terms;

• the financial condition of our tenants including their becoming insolvent and bankrupt;

• the need to periodically renovate, repair and re-lease space and the costs thereof; and

• increases in maintenance, insurance and operating costs.

There are risks associated with seeking to enhance the value of certain properties.

Gyrodyne is currently exploring enhancements of the value of our Flowerfield and Cortlandt Manor properties by pursuing various entitlement opportunities. The Board believes that the cost of doing so will be exceeded by the resulting increase in value in such properties. Our efforts to seek enhancements of such properties are subject to various risks, including the following:

• any delay or denial of a required entitlement or permit, including zoning, land use, environmental, emissions or other related permits, would adversely impact our property enhancement plans;

• our analysis of site context, of demographic trends, of decisions of anchor institutions and of growth opportunities generally may not result in identifying the correct high value land uses and programmatic synergies;

• capital improvement costs and other expenses of such enhancements may be higher than projected, potentially making the project unfeasible or unprofitable;

• we may not have funds available or be able to obtain financing for these value-enhancement projects on favorable terms, if at all;

• we may experience delays in the repositioning or improvement process.

For these and other reasons, we cannot assure you that we will realize growth in the value of our Flowerfield and Cortlandt Manor properties that exceeds our land entitlement costs or any at all, and as a result our ability to make distributions to our shareholders could be adversely affected.

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Community opposition could adversely impact our efforts to obtain entitlements and enhance the value of our properties.

The process of seeking required entitlements, permits and approvals is sometimes delayed or prevented due to community opposition and adverse publicity from neighboring property owners, members of the general public or non-governmental organizations, or other third parties and other factors beyond our control. The Company’s efforts to seek entitlements, permits or other approvals has been the subject of recent protests by civic groups asserting environmental, traffic and congestion issues as well as adverse impact to the historic nature of the area. Such community opposition could lead to the denial of entitlements, permits or other approvals essential to our efforts to increase the value of our properties or the imposition of restrictive conditions with which it is not practicable or feasible to comply could impact our ability to enhance the value of our properties.

We cannot assure you of the exact timing and amount of any further distributions to our shareholders.

Our estimate of net assets in liquidation at December 31, 2019 is $31.4 million or $21.16 per common share. These estimated amounts are based on a number of assumptions and factors outside of our control. The process of disposing of our real property assets in an orderly manner designed to obtain the best value reasonably available for such assets may fail to create value or may result in lower than expected value and may result in lower than expected proceeds, or in no proceeds, for distribution to our shareholders. The actual nature, amount and timing of all distributions will be determined by Gyrodyne in our sole discretion, and will depend on, and could be delayed by, among other things, sales of our real estate assets, claim settlements with creditors, resolution of outstanding litigation matters, payment of incentive bonuses to those employees and directors who are vested under the Retention Bonus Plan and unanticipated or greater-than-expected expenses. Examples of uncertainties that could reduce the value of or eliminate distributions to our shareholders include unanticipated costs relating to:

• failure to achieve favorable values for our properties in their disposition;

• the defense, satisfaction or settlement of lawsuits or other claims that may be made or threatened against us in the future;

• delay or failure to settle claims; and

• administration and settlement of federal and state tax audits, if any.

As a result, we cannot determine with certainty the amount or timing of distributions to our shareholders.

If we are unable to find buyers for our properties at our expected sales prices, distributions may be delayed or reduced.

In calculating our estimated net assets in liquidation, we assume that we will be able to find buyers for all our properties at our estimated amounts. However, we may have overestimated the sales prices that we will be able to obtain for these properties or underestimated the costs associated with such sales. If we are not able to find buyers for these properties in a reasonably timely manner or if we have overestimated the sales prices we will receive, distributions payable to holders of our common shares would be delayed or reduced. Furthermore, our estimated net assets in liquidation are based on current market conditions, but real estate market values are constantly changing and tend to fluctuate with changes in interest rates, supply and demand dynamics, occupancy percentages, lease rates, the availability of suitable buyers, the perceived quality and dependability of income flows from tenancies and a number of other factors, both local and national. In addition, transactional fees and expenses, environmental contamination at our properties or unknown liabilities, if any, may adversely impact the net liquidation proceeds from those properties.

Distributions to shareholders may be delayed or reduced as a result of sale agreement provisions that allow purchasers to terminate agreements and/or result in purchaser defaults.

Purchase and sale agreements that we have entered into with respect to properties we previously sold contained provisions that gave the purchaser the right to terminate the agreement, for any reason or no reason, prior to the expiration of an evaluation period, and receive a refund of earnest money deposits, and it can be anticipated that agreements for future property sales will have similar provisions. The consummation of property sales for which we will enter into sale agreements in the future will also be subject to satisfaction of standard closing conditions. If any property sale contemplated by future sale agreements does not close because a purchaser exercises its termination right or defaults, or because of a failure of a closing condition or for any other reason, we will need to locate a new buyer for the property, which we may be unable to do promptly or at a price or on terms that are as favorable as contained in the original sale agreement. Many of the costs incurred due to a sale that fails to close are sunk costs with no future value and we will also incur additional costs involved in negotiating a new sale agreement for such property. These additional costs are not included in our projections. In the event that we incur these additional costs, distributions to our shareholders would be delayed or reduced.

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Our shareholders may be liable to our creditors for an amount up to the amount distributed by us if our reserves for payments to creditors are inadequate.

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 under New York State’s fraudulent conveyance laws for payments made to them and could be required to return all or a part of distributions made to them.  Under the New York Uniform Voidable Transactions Act signed into law on December 6, 2019, the reach-back period for voidable transaction claims other than claims based on fraud is reduced from six years to four years with respect to distributions made on or after April 4, 2020.

Our properties may subject us to known and unknown liabilities.

Our existing properties may have known and unknown liabilities for which we would have no recourse, or only limited recourse, to the former owners of such properties. As a result, if a liability were successfully asserted against us based upon ownership of an acquired property, we might be required to pay significant sums to settle it, which could adversely affect our financial results, cash flow and proceeds available for distribution. Unknown liabilities relating to properties could include:

• liabilities for clean-up of pre-existing disclosed or undisclosed environmental contamination;

• claims by tenants, vendors or other persons arising on account of actions or omissions of the former owners of the properties; and

• liabilities incurred in the ordinary course of business.

If we are unable to maintain the occupancy rates of currently leased space and/or to lease currently available space, if tenants default under their leases or other obligations to us or if our cash flow is otherwise less than we expect, distributions to our shareholders may be delayed or reduced.

The sales proceeds that could be generated from opportunistic dispositions of our real properties depend in large part on occupancy and rental rates, our success in renting currently available space and the existence of any significant tenant defaults that were not subsequently cured. In calculating the estimated liquidating distributions, it was assumed that we would maintain the occupancy rates of currently leased space, that we would be able to rent currently available space in the ordinary course and that we would not experience any significant tenant defaults during the liquidation process that were not subsequently cured. Negative trends in one or more of these factors may adversely affect the resale value of the properties, which would reduce our distributions. Disposition proceeds and related distributions will be reduced to the extent that we receive less rental income than we expect. We may also decide in the event of a tenant default to restructure the lease, which could require us to substantially reduce the rent payable to us under the lease or make other modifications that are unfavorable to us.

We are subject to risks associated with the financial condition of our tenants.

Our tenants may experience a downturn in their business resulting in their inability to make rental payments when due. In addition, a tenant may seek the protection of bankruptcy, insolvency or similar laws, which could result in the rejection and termination of such tenant’s lease and cause a reduction in our cash flow.  We cannot evict a tenant solely because of its filing for bankruptcy. A bankruptcy court, however, may authorize a tenant to reject and terminate its lease. In such a case, our claim against the tenant for past due rent and unpaid future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease. In any event, it is unlikely that a bankrupt tenant will pay the entire amount it owes us under a lease. The loss of rental payments from tenants would likely reduce proceeds from real property dispositions and distributions from such proceeds.

The Coronavirus pandemic has affected and will likely for the foreseeable future affect the markets in which our tenants operate and otherwise impact our facilities, which will adversely impact the businesses of our tenants and, in turn, our business, financial condition, results of operations and our ability to pay distributions. Small businesses and not-for-profit corporations, which account for approximately 39% ($834,000) of the Company’s projected annual rental revenues for 2020, are expected to be adversely affected disproportionately by the economic ramifications of COVID-19.  Furthermore, New York Governor Andrew Cuomo’s Executive Order mandating that all non-essential employees stay at home starting March 22, 2020 through April 19, 2020 also includes a 90-day moratorium on any residential or commercial evictions.

The loss of a major tenant could adversely affect our financial condition.

We are and expect that we will continue to be subject to a degree of tenant concentration at certain of our operating properties. As indicated above, we are subject to risks associated with the financial condition of our tenants. In the event that a tenant occupying a significant portion of one or more of our properties or whose rental income represents a significant portion of the rental revenue at such property or properties were to experience financial weakness, default on its lease, elect not to renew its lease or file bankruptcy it would negatively impact our financial condition and, as a result, our distributions. Our existing leases with Stony Brook University Hospital and affiliates comprise approximately 21% of our total rentable square feet and the annual rent is expected to represent approximately 30% of our annual rental revenue for 2020.

The largest medical tenant in the Cortlandt Manor Medical Center represents 10% of our total rentable square feet as of December 31, 2019. The annual rent from such tenant is expected to represent approximately 22%, of our annual rental revenue for 2020.

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We may experience increased operating costs, which might reduce our estimated net assets in liquidation and the sales prices received for our properties.

Our properties are subject to increases in operating expenses such as for cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping and repairs and maintenance of our properties. In general, under our leases with tenants, we pass through all or a portion of these costs to them. There can be no assurance that tenants will actually bear the full burden of these higher costs, or that such increased costs will not lead them, or other prospective tenants, to seek space elsewhere. If operating expenses increase, the availability of other comparable space in the geographic markets of our properties might limit our ability to increase rents; if operating expenses increase without a corresponding increase in revenues, our profitability could diminish thereby reducing our estimated proceeds on disposition of real properties and limit the amount and likely delay the timing of our distributions.

Some of our potential losses may not be covered by insurance.

We use our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance coverage on our properties at a reasonable cost and on suitable terms. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of the property and also may result in certain losses being totally uninsured. Inflation, changes in building codes, zoning or other land use ordinances, environmental considerations or other factors might not make it feasible to use insurance proceeds to replace a building after such building has been damaged or destroyed. Under such circumstances, the insurance proceeds, if any, received by us might not be adequate to restore our economic position with respect to such property. 

We may incur costs to comply with environmental laws.

The obligation to pay for the cost of complying with existing environmental laws, ordinances and regulations, as well as the cost of complying with future legislation, may increase our operating costs. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on or under the property. Environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances and whether or not such substances originated from the property.  Insurance that we maintain related to potential environmental issues on our properties may not be adequate to cover all possible contingencies. 

Our business, operations and timelines for pursuing entitlements, property sales and distributions of proceeds could be adversely affected by the Coronavirus pandemic.

The Coronavirus pandemic has affected and will likely for the foreseeable future affect the markets in which our tenants operate and otherwise impact our facilities, which in turn will adversely impact the businesses of our tenants and, in turn, our business, financial condition, results of operations and our ability to pay distributions. 

Small businesses and not-for-profit corporations, which account for approximately 39% ($834,000) of the Company’s projected annual rental revenues for 2020, are expected to be adversely affected disproportionately by the economic ramifications of COVID-19.  Although, the duration and full extent of this disruption, the impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, the success of actions taken to contain or treat the coronavirus and reactions by consumers, companies, governmental entities and capital markets.  We are actively working with our tenants to manage and mitigate the impact to COVID-19 on the Company’s operations, liquidity and resulting Net Asset Value.

The COVID-19 public health crisis may also adversely impact our efforts to secure entitlements and the sale of our real estate.  State and local government is prioritizing COVID-19 crisis management and, to the extent possible, re-allocating resources accordingly which may adversely impact the timeline of our entitlements and technical approvals. 

Furthermore, the real estate market is expected also to be adversely affected which could further negatively impact the timing of sales and the resulting value of our real estate.

The extent of the impact of COVID-19 on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on future developments, including the duration and spread of the outbreak and related governmental or other regulatory actions.  The Company has four employees.  As a result, the Company’s ability to operate seamlessly and limit any adverse impact on its forecasted Net Asset Value will also depend, in part, on whether any of its key employees are infected by the Coronavirus and become ill from COVID-19. 

Our common shares are thinly traded and there may not be an active, liquid trading market for our common shares.

Our common shares are thinly traded and have substantially less liquidity than the average trading market for many other publicly traded companies.  Thinly traded stocks can be more volatile than stock trading in an active public market.  Our stock price has been volatile in the past and several factors could cause the price to fluctuate substantially in the future. These factors include but are not limited to our announcement of developments related to our plan to sell our properties opportunistically (some of which are or may be the subject of enhancement efforts), stock performance of other companies deemed to be peers, news reports of issues related to REITs or other real property owners and the real estate market and market forces generally.  Over the past several years, the stock market has experienced a high level of price and volume volatility, and market prices for the stock of many companies, including those in the real estate sector, have experienced wide price fluctuations that have not necessarily been related to operating performance.  Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance.  General market declines or market volatility in the future, especially in the real estate sector of the economy, could adversely affect the price of our common shares, and the current market price may not be indicative of future market prices.  There is no guarantee that an active trading market for our common shares will be maintained on Nasdaq, or that the volume of trading will be sufficient to allow for timely trades.  Investors may not be able to sell their shares quickly or at the latest market price if trading in our stock is not active or if trading volume is limited.  In addition, if trading volume in our common shares is limited, trades of relatively small numbers of shares may have a disproportionate effect on the market price of our common shares.  Therefore, our shareholders may not be able to sell their shares at the volume, prices or times that they desire.

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If our common shares are delisted from Nasdaq, shareholders may find it difficult to dispose of their shares.

We believe we are currently in compliance with all of our Nasdaq listing requirements. Nevertheless, there are no assurances that we will be able to sustain long-term compliance with Nasdaq’s stockholders’ equity requirement or minimum bid price requirement for continued listing, particularly as we reduce our overall assets through the distribution of sales proceeds to our shareholders. If we fail to maintain compliance with applicable Nasdaq listing requirements, our common shares may be delisted by Nasdaq involuntarily. In addition, even if we are successful in maintaining compliance with applicable Nasdaq listing requirements, our board of directors may decide that the costs of compliance and the demands of management time and Company resources required to maintain our Nasdaq listing are greater than the benefits received by the Company and its shareholders from being a listed company and that, accordingly, consistent with other cash management and cost reduction measures that we have implemented, we should voluntarily delist from the Nasdaq Capital Market. If our common shares were delisted from Nasdaq voluntarily or involuntarily, trading of our common shares most likely will be conducted in the over-the-counter market on an electronic bulletin Board established for unlisted securities such as OTCQX, OTCBX or OTC Pink which will reduce the market liquidity of our common shares. Delisting may result in lower levels of ownership and trading by institutional shareholders, who are generally guided by quantitative and qualitative investment standards such as market capitalization, minimum share price and liquidity, which in turn often produces lower trading volumes and reduced liquidity. As a result, an investor would find it more difficult to dispose of, or obtain accurate quotations for the price of, our common shares. Also, many brokers will not allow customers to hold non-listed securities in managed accounts or place restrictions which inhibit holding or trading, and it is generally understood that brokers will not recommend non-listed securities to retail clients, perhaps not as official policy but rather as a practical reality. We cannot assure you that our common shares, if delisted from Nasdaq voluntarily, or if they would be delisted involuntarily by Nasdaq, will be listed on another national securities exchange or quoted on an over-the counter quotation system.

We do not anticipate making distributions other than distributions from property dispositions or of liquidation proceeds.

We have not paid any dividends other than the following special dividends/distributions:

• June 15, 2016- A special distribution of $9.25 per share.

• September 15, 2016- A special distribution of $1.50 per share.

• July 7, 2017 – A special distribution of $1.00 per share.

We have a history of operating losses and we anticipate operating losses in the future. There can be no guarantee that we will have income to distribute other than proceeds from the sale of properties or of the Company, and we may not make any dividends or distributions in the future other than distributions of proceeds on the sale of the Company or any of our assets.

The value of our medical office park may be affected by factors in the healthcare industry.

Approximately 34,000 square feet of our rentable space and approximately 34% of our gross revenues for 2019 was attributable to our medical office property. The medical office property is subject to various operating risks common to the healthcare industry, many of which are beyond our control, including the following:

• competition from other medical properties in our markets;

• over-building of medical parks in our markets, which adversely affects occupancy and revenues at our properties;

• hospitals servicing the local markets increasing their interest in employing private practitioners or increasing their real estate portfolio of medical office space for rent or real estate/medical practice related joint ventures;

• reductions in medical reimbursements from Medicaid and Medicare which directly impact private practitioners;

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• unknown or unidentified adverse consequences from the recent federal healthcare legislation on private practitioners will adversely affect our medical properties in the form of rent rates and tenant reimbursements; and

• changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances.

Investment in medical parks is capital intensive.

Our medical properties require periodic capital expenditures and renovation to remain competitive. Maintaining our occupancy upon renewals or locating new tenants may require rent concessions, tenant improvements or a combination of both. Additionally, the recent federal healthcare legislation has caused some medical professionals to increase their space requirements. Our ability to relocate our tenants into more suitable space within our medical parks may be limited due to the size of the suites currently vacant and the willingness of tenants to relocate within the building.  Our ability to fund capital expenditures may be limited.

Federal health care legislation has affected medical office real estate.

Our tenants in our Cortlandt Manor property are healthcare service providers. 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 recent U.S. presidential election, coupled with a Republican-controlled Congress, makes the repeal and replacement of the Patient Protection and Affordable Care Act (the “Affordable Care Act”) a possibility. In 2017, Congress unsuccessfully sought to replace substantial parts of the Affordable Care Act 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. A shift toward less comprehensive health insurance coverage and increased consumer cost-sharing on health expenditures could have a material adverse effect on our tenants’ financial conditions and results of operations and, in turn, their ability to satisfy their contractual obligations.

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.

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in the portfolio in response to changing economic, financial and investment conditions is limited.

The real estate market is affected by many factors that are beyond our control, including:

• adverse changes in international, national, regional and local economic and market conditions;

• changes in interest rates and in the cost and terms of debt financing;

• absence of liquidity in credit markets which limits the availability and amount of debt financing;

• changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;

• the ongoing need for capital improvements, particularly in older structures;

• changes in operating expenses; and

• civil unrest, acts of God, including earthquakes, floods and other natural disasters, and acts of war or terrorism, including the consequences of the terrorist acts, such as those that occurred on September 11, 2001.

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We are subject to risks stemming from the New York State budgets. 

Our industrial park borders Stony Brook University and the University’s leases, including leases with the University’s affiliates, with us represent over 21% of our overall rentable space.  The New York State budget puts additional pressure on Stony Brook University, part of the State University of New York system, to cut costs.  Many of our tenants service the local area and may be adversely affected by a reduction in business from Stony Brook University. Stony Brook University and its affiliates currently have three leases with Gyrodyne.

Geographic concentration of our properties will make our business vulnerable to economic downturns in the New York metropolitan area.

All our remaining properties are located in the New York metropolitan area, specifically Northern Westchester and eastern Long Island. Economic conditions in these locations will significantly affect our revenues and the value of our properties. Business layoffs or downsizing, industry slowdowns, changing demographics, the COVID-19 pandemic and other similar factors may adversely affect the economic climate in these areas. Any resulting oversupply or reduced demand for space in the New York metropolitan area would therefore have a disproportionate negative impact on our revenues.

We are subject to risks associated with renovations and capital improvements.

Our properties have an ongoing need for renovations and other capital improvements, including replacement of HVAC systems, parking lots, and other structural items.  Tenants often require us to make periodic capital improvements as a condition of renewing leases.  For the year ended December 31, 2019 we spent approximately $616,000 on capital improvements to our real estate portfolio (of which approximately $500,000 were tenant improvements for long term tenants). Capital improvements and renovation projects may give rise to the following risks:

• possible environmental problems;

• construction cost overruns and delays;

• a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms; and

• uncertainties as to market demand or a loss of market demand after capital improvements have begun.

The costs associated with capital improvements on our properties could adversely affect our financial condition.

Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our tenant and other business relationships, all of which could negatively impact our financial condition.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and investor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. There is no guarantee that any processes, procedures and internal controls we have implemented or will implement will prevent cyber intrusions, which could have a negative impact on our financial condition, operations, tenant and other business relationships or confidential information.

Our mortgage indebtedness could adversely impact the value of our shareholders’ investment if the value of the property securing the debt falls or if we are forced to refinance the debt during adverse economic conditions.

On March 21, 2018, our wholly owned subsidiary, GSD Flowerfield, LLC, closed on a non-revolving credit line with a bank for up to $3,000,000 (the “Original Line”), secured by approximately 31.8 acres of the Flowerfield Industrial Park including the respective buildings and related leases and guaranteed by the Company.

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On January 24, 2019, the Company amended and extended the Original Line which included extending the maturity date of the interest only phase to the earlier of January 20, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of January 20, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”). The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”).  The Permanent Phase interest rate currently would be 3.25%.

On January 24, 2019, the wholly owned subsidiary, GSD Flowerfield LLC closed on a working capital non-revolving line of credit of $3,000,000 secured by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases and guaranteed by the Company. There is an interest only phase for the first twenty-four months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on January 20, 2028 (84 months after conversion to a permanent loan) (the “Permanent Phase”). The Permanent Phase interest rate currently would be 3.25%.

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

The line is secured by the Cortlandt property (approximately 14 acres) and cross collateralized by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

If there is a shortfall between the cash flow from the mortgaged property and the cash flow needed to service mortgage debt on that property, then the amount available for distributions to shareholders may be reduced. In addition, incurring mortgage debt generally increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default and our ability to pay cash distributions to our shareholders will be adversely affected.

Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay distributions to our shareholders.

As of March 21, 2018, we had a non-revolving credit line for up to $3,000,000 (the “Original Line”) with a bank. The credit line provides for an interest only phase for the first eight months of the loan (“Interest-Only Phase”) after which it will automatically convert 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 will 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. Increases in interest rates during the Interest-Only Phase would increase our interest costs, which could reduce our cash flows and our ability to pay distributions to shareholders.

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On January 24, 2019, the Company amended and extended the Original Line which included extending the maturity date of the interest only phase to the earlier of January 20, 2020 (which has since been extended to April 30, 2020) or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing the earlier of January 20, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”). The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 84 months after conversion to a permanent loan. See “Business—Financing Strategy”, above, for more detailed disclosure.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship.  The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

Changes in federal tax law could adversely affect the tax treatment of distributions to our shareholders.

Legislative, regulatory or administrative changes could be enacted or promulgated at any time, either prospectively or with retroactive effect, and may adversely affect the Company and our shareholders. 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 our shareholders pro rata. Tax legislation informally known as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Cuts and Jobs Act”) was signed into law on December 22, 2017, generally effective for taxable years beginning on or after January 1, 2018. In addition to modifying income tax rates for individuals and corporations, the 2017 Tax Cuts and Jobs Act made certain changes to the tax treatment for pass-through entities, such as Gyrodyne. Shareholders are urged to consult a tax advisor regarding the implications of the 2017 Tax Cuts and Jobs Act on their shares in Gyrodyne.

Loss of key management personnel.

Our success depends to a significant extent upon the continuing efforts of Gary Fitlin, our Chief Executive Officer and Chief Financial Officer, and Peter Pitsiokos, our Chief Operating Officer. We have programs in place that have been designed to motivate, reward and retain such executive officers, including employment agreements and our Retention Bonus Plan.  Nevertheless, the loss or unavailability of either of our executive officers due to retirement, resignation or otherwise could have a material adverse effect on our business, financial condition and results of operations in general, and our efforts to position our properties to maximize values and distributions to shareholders in particular, if we are unable to retain our executive officers.

Item 1B. Unresolved Staff Comments.

None

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Item 2. Properties.

The executive office of the Company is located at 1 Flowerfield, Suite 24, St. James, New York and consists of approximately 3,256 square feet.

Real Estate Investments

The Company owns a 68-acre property located in St. James, in the Town of Smithtown on the North Shore of Suffolk County, Long Island, New York. The property currently has 127,481 square feet of rental space and is approximately 83% occupied by 30 tenants. In addition, the Company owns a medical office park which consists of seven buildings located in Cortlandt Manor, New York, just outside the city of Peekskill, New York. The property has 33,871 square feet of rental space and is currently 81% occupied by 6 tenants.

During 2019 and 2018, land entitlement costs incurred were approximately $1,422,000 and $1,261,000, respectively. The Company continues to believe the pursuit of entitlements will maximize the value of our properties and the estimated liquidating distributions.

Following the Merger, effective September 1, 2015, the Company adopted the liquidation basis of accounting and therefore reports the land and buildings on the Consolidated Statement of Net Assets at net realizable value. The net realizable value at December 31, 2019 is estimated to be $31,369,637. This value includes some but not all of the increase in value the Company believes is achievable from enhancement efforts in Flowerfield and Cortlandt Manor.

The average age of the buildings on our properties is approximately 60 years at Flowerfield and 30 years at Cortlandt Manor. All facilities continually undergo maintenance repair cycles for roofs, paved areas, and building exteriors. The general condition of internal infrastructure, HVAC, electrical and plumbing is considered average for facilities of this age. The grounds feature landscaping, are neatly groomed and well maintained.

Approximately 5 acres of the 68 acres at Flowerfield, are non-contiguous to the Flowerfield industrial park and zoned residential. The Company is actively marketing the 5-acre lot for sale.

There are four buildings in the Flowerfield Industrial Park with rental unit sizes ranging from 130 to 26,573 square feet. Given the location and size of rental units, the Flowerfield Industrial Park attracts tenants ranging in size from Stony Brook University and the Stony Brook University Hospital to many smaller companies that are not dependent on extensive material or product handling. In the five buildings located in the Cortlandt Medical Center, the rental size units range from 1,200 to 3,943 square feet and consist primarily of medical professionals.

The Company maintains a liability umbrella policy and has insured certain buildings and rent receipts predicated on an analysis of risk, exposure and loss history. It is management's opinion that the premises are adequately insured.

The following table sets forth certain information as of December 31, 2019 for each of the properties:

								Annual				Number Of
								Base				Tenants Who
	Rentable					Annual		Rent		Number		Occupy 10%
	Square		Percent			Base		Per Leased		Of		Or More Of
Property	Feet		Leased			Rent		SQ. FT.		Tenants		Rentable Sq. Ft.
Flowerfield Industrial Park		127,481		83	%	$	1,430,000	$	13.57		30		2
Cortlandt Medical Center		33,871		81	%	$	773,000	$	28.26		6		0
All Locations		161,352		82	%	$	2,203,000	$	16.60		36		2

The following table sets forth scheduled lease expirations on the properties as of December 31, 2019:

							% of Gross Annual
	Number of		Square		Total		Rental Revenues
	Leases		Feet		Annual		Represented
Fiscal Year End	Expiring		Expiring		Rent		By Such Leases
2020		27		43,000	$	637,000		36.491	%
2021		3		4,000		55,000		3.17	%
2022		4		6,000		108,000		6.19	%
2023		4		7,000		118,000		6.75	%
2024		0		-		-		0.00	%
Thereafter		5		55,000		827,000		47.40	%

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The properties are located in St. James and Cortlandt Manor, both of which are in New York State. In June 2017, the Company filed a subdivision application for the Flowerfield property along with the previously sold catering facility totaling approximately 74 acres with the Town of Smithtown. The Company has an additional 5.2 acres bordering the industrial park that is currently zoned residential and is not part of the application. Additionally, the Company filed an application with the Town of Cortlandt Manor on the development of that property on March 31, 2017 (see, “—Property Value Enhancement”, above).

Item 3. 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 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 values for such properties. As of December 31, 2019, the aggregate appraised value of our remaining unsold properties exceeded the respective 2014 appraised values for such properties. See, “Risk Factors – Stipulation of Settlement prohibits us from selling our remaining properties at prices below the December 2014 appraised values”.

General

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

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market information

The Company’s common shares began trading on the Nasdaq Capital Market under the symbol “GYRO” beginning September 1, 2015. Prior to the Merger, the Corporation’s common shares (symbol: "GYRO") were traded in the Nasdaq Capital Market, the principal market from June 10, 1948. The Company believes it is currently in compliance with all of its Nasdaq listing requirements. See, “Risk Factors -- If our common shares are delisted from Nasdaq, shareholders may find it difficult to dispose of their shares”.

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Approximate number of equity security holders of record (not including beneficial owners holding shares in street name).

Title of Class	Number of Holders of Record as of February 29, 2020
Common shares of limited liability interests		537

The Company’s strategy has been to pursue entitlement opportunities intended to increase the values of our two remaining properties so that they can be sold to one or more developers at higher prices than otherwise possible, thereby maximizing distributions to our shareholders during the liquidation process and then dissolving the Company. The value of the real estate reported in the Statement of Net Assets as of December 31, 2019 (predicated on current asset values), includes some but not all of the potential value impact that may result, if any, 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. 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.

Future special distribution declarations are at the discretion of the Board. The magnitude and timing of any special distributions will depend on our actual cash flow, proceeds generated from strategic sales of properties, our financial condition, capital requirements and such other factors as the Board deems relevant. The actual cash flow available to pay special distributions will depend on a number of factors including, among others, the factors discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report.

The Company does not have an equity compensation plan for its employees, officers or directors.

Sale of Unregistered Securities

None.

Equity Compensation Plan Information

As of December 31, 2019, there were no equity compensation plans under which securities of the Company were authorized for issuance.

Issuer Purchases of Equity Securities

  None.

Item 6. Selected Financial Data.

Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statements Concerning Forward–Looking Statements. The statements made in this Form 10-K, other materials the Company has filed or may file with the Securities and Exchange Commission, in each case that are not historical facts, contain “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, which can be identified by the use of forward-looking terminology such as “may,” “will,” “anticipates,” “expects,” “projects,” “estimates,” “believes,” “seeks,” “could,” “should,” or “continue,” the negative thereof, and other variations or comparable terminology as well as statements regarding the evaluation of strategic alternatives and liquidation contingencies.  These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements.  Such risks and uncertainties include, but are not limited to, risks and uncertainties relating to our efforts to enhance the values of our remaining properties and seek the orderly, strategic sale and liquidation of such properties as soon as reasonably practicable, 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, the potential effects of the recent COVID-19 pandemic on our business, operations and timelines for seeking entitlements and pursuing the sale of our properties and distributions to our shareholders, risks and uncertainties associated with any litigation that may develop in connection with our efforts to sell our properties strategically, including related enhancement efforts, and other risks detailed from time to time in the Company’s SEC reports. These and other matters the Company discusses in this Report, or in the documents it incorporates by reference into this Report, may cause actual results to differ from those the Company describes. The Company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

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Overview

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. We operate as a fully integrated, self-administered and self-managed real estate company focused on pursuing entitlements, owning, leasing and managing medical, commercial and industrial real estate. Our tenants include unrelated diversified entities with a recent emphasis on medical office parks and properties. Our properties are located in Suffolk and Westchester counties in New York, which are characterized by strong real estate markets.

As of December 31, 2019, the consolidated portfolio consisted of two developed properties, consisting of 10 buildings with an aggregate of 161,352 rentable square feet. The Company also owns undeveloped land parcels adjacent to developed properties for which alternative entitlement plans are currently being considered in order to enhance the value of the relevant primary property.

Factors Which May Influence Future Operations

Our operating focus is on maximizing cashflows and market value of our operating properties while we are securing entitlements with the objective of enhancing the value of our remaining properties and maximizing liquidating distributions to our shareholders as soon as reasonably practicable. As of December 31, 2019, our properties were 82% leased to 36 tenants. As of December 31, 2018, our properties were 85% leased to 40 tenants.

Our leasing strategy for 2020 includes focusing on leasing vacant space, negotiating early renewals for leases scheduled to expire through 2020 and identifying new tenants or existing tenants seeking additional space. A core part of our leasing strategy is to expand our leasing relationship with Stony Brook University (“SBU”) which borders the Flowerfield Industrial Park. We believe expanding the leasing relationship with SBU will maximize the current value of the developed portion of the Flowerfield Industrial Park and ultimately the value of Flowerfield as a whole.

The Company is actively repositioning the Cortlandt Manor property toward short-term leases to allow for a more timely and efficient transition into a development property. The Company is converting all of its Cortlandt Manor tenants upon lease expiration to short term-leases to allow prospective buyers the maximum flexibility to begin development following receipt of site approvals.

Lease Expirations

The following is a summary of lease expirations and related revenues of leases in place at December 31, 2019. This table assumes that none of the tenants exercise renewal options or early termination rights, if any, at or prior to the scheduled expirations:

							% of Gross Annual
	Number of		Square		Total		Rental Revenues
	Leases		Feet		Annual		Represented
Fiscal Year End	Expiring		Expiring		Rent		By Such Leases
2020		27		43,000	$	637,000		36.49	%
2021		3		4,000		55,000		3.17	%
2022		4		6,000		108,000		6.19	%
2023		4		7,000		118,000		6.75	%
2024		0		-		-		0.00	%
Thereafter		5		55,000		827,000		47.40	%

The success of our leasing strategy will be dependent upon the general economic conditions and more specifically real estate market conditions and trends in the United States and in our target markets of Suffolk and Westchester Counties in New York. We cannot give any assurance that leases will be renewed or that available space will be re-leased at rental rates equal to or above the current contractual rental rates.

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We actively manage the renewal process. Historically, this has resulted in a very low turnover rate with our tenants. As a result, the Company continues to actively manage lease termination dates and often approaches tenants up to one year in advance to gauge renewal interest and negotiate related leases. Where a termination is likely, the Company begins marketing the property prior to termination to timely identify the market rent for the specific space, expected vacancy period and market demanded tenant concessions and incentives.

The Company may offer tenant concessions in the form of rent abatements rather than tenant improvements to maximize its working capital position. However, tenant improvement incentives may be offered in certain cases where concessions are not effective in meeting the demands of the existing or prospective tenant.

During 2019, the Company incurred approximately $17,000 in leasing fees and commissions in exchange for revenue commitments of approximately $488,000 with leases ranging from 1 year to 3 years. The leasing fees reflect a renewal cost rate of 3.5% of the related revenue commitments. The Company has approximately 36% of its annual leasing revenue up for renewal in 2020, which compares unfavorably to 29% of leases up for renewal in 2019. General economic conditions, coupled with rental markets in which we operate, will dictate how rental rates on new leases and renewals will compare, favorably or unfavorably, to those leases that were signed in 2019.

Critical Accounting Policies

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 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 December 31, 2021.  The Company is in the process of pursuing entitlements and density, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers (Purchase and Sale Agreement entered but not yet closed/prospective purchasers). 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 or purchaser, and will continue up until such time as entitlement and density decisions are made by the relevant government entities. We hope to secure favorable decisions on entitlements, 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 and density could take through December 31, 2021 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 and or purchasers.  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.

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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 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 December 31, 2021. 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.

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 and the related timeline to complete the liquidation.

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. 

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.

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.

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 December 31, 2019, 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 Statement of Net Assets

Net assets in liquidation at December 31, 2019 would result in estimated liquidating distributions of approximately $21.16 per common share. This is an increase of $3.05 from the December 31, 2018 net assets in liquidation of $18.11 per common share. The increase in net assets in liquidation results from an increase in the real estate value of $12.1 million ($8.14 per share) of the properties that are the subject of purchase and sale agreements with BSL St. James LLC and Sound Cortlandt, LLC, respectively, and other adjustments to the remaining properties, and partially offset by an increase in the expense reserve (the estimated costs in excess of receipts) per share by $7.5 million ($5.09 per share). The increase in the expense reserve is mainly the result of an extension in the estimated liquidation timeline of 18 months attributable to the pursuit of entitlements (and the associated costs), entitlement costs and an increase to the retention bonus payments and selling costs as a result of the increase in real estate value.

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The cash balance at the end of the liquidation period (currently estimated to be December 31, 2021, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the December 31, 2019 cash balance of $2.2 million plus adjustments for the following items which are estimated through December 31, 2021:

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. Net proceeds from the sale of all the Company’s real estate holdings.

3. 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.

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

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

6. Proceeds from the draw downs on the credit facilities to fund tenant improvements and working capital 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 common area and 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 underestimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or overestimates 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 value during the liquidation process so that we can maximize distributions to our shareholders.  The Company estimates that it will incur approximately $1.8 million (included in the statements of net assets as part of the estimated liquidation and operating costs net of receipts) in land entitlement costs from January 2020 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2021, in an effort to obtain entitlements, including 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 year ended December 31, 2019, the Company incurred approximately $1.4 million of land entitlement costs, consisting primarily of engineering fees.  The Company believes the remaining balance of $1.8 million (an aggregate of approximately $556,000 which Company vendors have agreed to defer until the first post subdivision property lot is sold) will be incurred from January 2020 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 entitlements and the dynamics of the real estate market.  As a result, the Company has focused and will continue to focus its land entitlement 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 statement of net assets as of December 31, 2019 (predicated on current asset values) includes some but not all of the potential value impact that may result from the land entitlement 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.

The net assets in liquidation at December 31, 2019 ($31,369,637) and 2018 ($26,846,670) results in estimated liquidating distributions of approximately $21.16 and $18.11, respectively, per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value (predicated on current assets values including the purchase prices set forth in the purchase and sale agreements with BSL St. James LLC and Sound Cortlandt LLC, respectively, for the properties that are the subject of such agreements) which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts. Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated liquidating distributions as of December 31, 2019 because the amount of such additional value that may result from such efforts are too difficult to predict with sufficient certainty. The Company believes the land entitlement efforts will enhance estimated distributions per share through the improved values (a large amount of which has already been included in the reported value for real estate held for sale) from the sales of the Flowerfield and Cortlandt Manor properties net of the costs to achieve the improved values and other expenses. 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, change in values of the Cortlandt Manor and/or Flowerfield properties (whether market driven or 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 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.

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The following table summarizes the estimates to arrive at the Net Assets in Liquidation as of December 31, 2019 (dollars are in millions).

December 31, 2019 cash and cash equivalents balance	$	2.21
Principal payments on mortgage loan		(3.78	)
Free cash flow from rental operations		1.24		(i)
General and administrative expenses		(3.56	)	(ii)
Land entitlement costs in pursuit of the highest and best use		(1.85	)	(iii)
Gross real estate proceeds		48.27
Selling costs on real estate		(3.50	)
Retention bonus plan for directors, officers and employees		(4.68	)
Final liquidation and dissolution costs		(1.48	)
Other		(1.50	)
Net Assets in Liquidation	$	31.37		(iv)

(i) The Company estimates the cash proceeds from rental operations net commissions and rental costs, inclusive of expenditures to preserve or improve the properties at its current estimated market value will total $1.24.

(ii) The general and administrative expenses, excluding final liquidation costs, is estimated to be ($3.56).

(iii) The Company estimates that it will incur approximately $1.847 million (an aggregate of approximately $556,000 which Company vendors have agreed to defer until the first post subdivision property lot is sold) in costs over the liquidation period ending December 31, 2021 to obtain entitlements, inclusive of 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. 

(iv) The net assets in liquidation at December 31, 2019 would result in liquidating distributions of approximately $21.16 per common share ($31.37 million with 1,482,680 shares outstanding), which includes some but not all of the potential value impact, that may result directly or indirectly from the remaining $1.8 million in land entitlement costs. The Company believes the land entitlement costs will enhance estimated distributions per share through the improved values (a large amount of which has already been included in the reported value for real estate held for sale) 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 costs, the performance of the underlying assets and any changes in the underlying assumptions of the projected cash flows and the risks described above under “Risk Factors”.

Discussion of Changes in Net Assets

Gyrodyne’s strategy is to enhance the value of Flowerfield and Cortlandt Manor, by pursuing various 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 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 Consolidated Statement of Changes in Net Assets for the years ended December 31, 2019 and 2018, respectively, all of which is discussed below:

Net assets in liquidation at January 1, 2018	$	26,637,350
Changes in net assets in liquidation from January 1 through December 31, 2018:
Remeasurement of assets and liabilities in liquidation	(3,775,285)(a)
Change in value of real estate		3,984,605
Total change in net assets in liquidation		209,320
Net assets in liquidation at December 31, 2018		26,846,670
Changes in net assets in liquidation for the year ended December 31, 2019
Remeasurement of assets and liabilities in liquidation	(7,545,763)(a)
Change in value of real estate		12,068,730
Total change in net assets in liquidation		4,522,637
Net assets in liquidation at December 31, 2019	$	31,369,637

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^(a)The re-measurement of the assets and liabilities in liquidation during 2018 of ($3,775,285) is mainly driven by the increased retention bonus due to the increase in real estate values, capital improvements and the additional general and administrative and rental expenses required due to the changed timeline necessary to complete the related entitlement efforts from the end of the 2019 to June 30, 2020, offset by income from operations. The increase in net assets in liquidation during 2019 was the result of an increase of $12.1 million ($8.14 per share) in the value of the properties that are the subject of the purchase and sale agreements with BSL St. James LLC and Sound Cortlandt, LLC, respectively (see note 5), and other adjustments to the remaining properties, and partially offset by the increase in the expense reserve (the estimated costs in excess of receipts) per share by $7.5 million ($5.09 per share). The increase in the expense reserve is mainly the result of an extension in the estimated liquidation timeline of 18 months attributable to the pursuit of entitlements (and the associated costs), entitlement costs and an increase to the retention bonus payments and selling costs as a result of the increase in real estate value.

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 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, 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, supplemented by cash available under the Company’s credit facilities. We entered into a credit facility on March 21, 2018 which was amended and extended that will provide up to $3.0 million in financing for tenant improvements (the “Original Line”). The Company has drawn down approximately $2.2 million for tenant and associated common area improvements. The balance of the loan can 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.

On January 24, 2019, the Company secured a second loan evidenced by a secured non-revolving business line of credit and promissory note with the Original Line bank for up to $3,000,000 to provide access to additional working capital to fund entitlements and operations through final liquidation. Two advances totaling $1,500,000 was drawn during 2019 to fund working capital. The balance of $1,419,932 net of closing costs of $80,068 and the aforementioned advances, is available to be drawn down.

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship.  The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

We believe leveraging our capital 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.

As of December 31, 2019, the Company had cash and cash equivalents totaling approximately $2.2 million. The Company anticipates that its current cash and cash equivalent balance and access to its respective credit facilities will be adequate to fund its liquidation process and dissolution. The $2.2 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 of the highest values for Flowerfield and Cortlandt Manor may involve other investments and or other strategies to maximize the returns for our shareholders. The Company is estimating and reporting in the consolidated statements of net assets total gross cash proceeds from the sale of its assets of approximately $48.3 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 $31.4 million.    

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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

● credit facilities.

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 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 credit facilities 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 year ended December 31, 2019 were as follows:

Operating Cashflows: 

● $2,600,047 in rent and reimbursements.

● ($1,536,010) in operating costs.

Nonoperating Cashflows:

● $2,680,068 in loan proceeds.

● ($425,698) of land entitlement costs incurred for the Cortlandt Manor property.

● ($996,494) of land entitlement costs incurred for the Flowerfield property.

● ($616,230) of capital expenditures on the real estate portfolio excluding those costs incurred for land entitlement.

● ($92,926) of costs incurred to secure non-revolving credit line.

Our primary sources of non-operating cash flow for the year ended December 31, 2018 consisted of the following:

● $720,562 in net proceeds from the sale of our final building in the Port Jefferson Professional Park; and

● $921,608 net cash from the credit facility closed on March 21, 2018.

Our primary non-operating uses of cash for the year ended December 31, 2018 were as follows:

● $414,982 of costs incurred in the pursuit of entitlements for Cortlandt Manor;

● $846,066 of costs incurred in the pursuit of entitlements for Flowerfield; and

● $1,387,642 of capital expenditures on the real estate portfolio excluding those costs incurred under the land entitlement effort.

Dispositions:

Flowerfield - On August 27, 2019, the Company’s wholly-owned subsidiary GSD Flowerfield, LLC entered into a Purchase and Sale Agreement (the “BSL Agreement”) for the sale of an approximately 9.0 acre parcel of vacant land in the Flowerfield complex in Smithtown, New York for $16,800,000 to BSL St. James LLC, a Delaware limited liability company (“BSL”).

Under the BSL Agreement: (i) BSL will have the right to terminate the BSL Agreement, during an investigation period, by written notice to GSD if BSL is not fully satisfied, in its sole discretion, as to the status of title, suitability of the Premises and all factors concerning same, in which case BSL will have the right to receive a refund of its earnest money deposit; (ii) if BSL does not terminate the BSL Agreement on or prior to the end of the investigation period, BSL will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless BSL terminates the BSL Agreement on or prior to the end of the investigation period, the closing will occur on the 30th day following the earlier of (y) the Town of Smithtown’s granting of the Site Plan Approval (as defined in the BSL Agreement and as described below); or (z) BSL’s waiver of the Site Plan Approval.

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The BSL Agreement is also contingent on the receipt of Subdivision Approval (as defined in the BSL Agreement and as described below). The Subdivision Approval condition requires that GSD obtain a subdivision of the Gyrodyne/Flowerfield complex into separate parcels to create the Property (as generally depicted in the BSL Agreement) within a specified time (the “Subdivision Approval Period”) following the last day of the investigation period. If the Subdivision Approval is not obtained within the Subdivision Approval Period, each of GSD and BSL have the right to terminate the BSL Agreement. BSL will also have a limited right to terminate the BSL Agreement in the event the Subdivision Approval contains requirements specified in the BSL Agreement. If Subdivision Approval has not been denied by the Town of Smithtown at or prior to the last day of the Subdivision Approval Period, GSD shall have the right to extend its time to obtain the Subdivision Approval for a specified period of time. If Subdivision Approval is not obtained within such additional time, each of GSD and BSL have the right to terminate the BSL Agreement.

 The Site Plan Approval is specifically delineated in the BSL Agreement. If BSL fails to obtain the Site Plan Approval prior to the end of the site plan approval period, BSL may cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for a specified period upon the payment of an extension fee. If, after such extension, BSL fails to obtain the Site Plan Approval, BSL may cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for an additional specified period with a second non-refundable extension fee. 

The BSL Agreement also contains additional customary covenants, conditions, representations and warranties.

Cortlandt Manor - Gyrodyne, LLC, a New York limited liability company (the “Company”), has announced the execution by its subsidiaries GSD Cortlandt, LLC, a New York limited liability company (“GSD”), and Buttonwood Acquisition, LLC (“Buttonwood” and together with GSD, the “Cortlandt Subsidiaries”), of a Purchase and Sale Agreement (the “Agreement”) effective as of December 7, 2019 (the “Effective Date”) for the sale of  approximately 4.5 acres of its real property located in Cortlandt Manor, New York, together with the improvements thereon (the “Property”), to Sound Cortlandt, LLC, a Delaware limited liability company (“SC LLC”), for a purchase price of $5,720,000. 

The Town of Cortlandt (the “Town”) is processing a proposed zoning initiative to create a Medical Oriented District (“MOD”) that would include the entire Cortlandt property (owned by the Cortlandt Subsidiaries) within its boundaries.  Included in the Town’s initiative is the Company’s site plan to subdivide the entire property into three parcels for the development of (i) a medical office building with retail, (ii) a multi-family residential housing project and (iii) an open space, passive recreation parcel. The Property that is the subject of the Agreement consists of the medical office building with ancillary retail space and does not include the multi-family residential housing parcel or the open space, passive recreation parcel. 

The Agreement requires: (i) an inspection period that will expire after a set period, during which time SC LLC will have the right to terminate the Agreement by written notice to GSD if SC LLC will not be fully satisfied, in SC LLC’s sole discretion, as to the status of title, suitability of the Property and all factors concerning same, prior to the expiration of the inspection period, in which case SC LLC will have the right to receive a refund of its earnest money deposit; (ii) if SC LLC does not terminate the Agreement on or prior to the end of the inspection period, SC LLC will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless SC LLC terminates the Agreement on or prior to the end of the inspection period, the closing will occur on the 60th day following the earlier of (y) the applicable governmental authorities granting of the Final Project Approvals (as defined in the Agreement and as described below); or (z) SC LLC’s waiver of the Final Project Approvals.

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The Final Project Approvals are also contingent on the receipt of Subdivision Approval and Site Plan Approval (each as defined in the Agreement and as described below). The Subdivision Approval condition requires that the Cortlandt Subsidiaries obtain approval as and to the extent necessary to allow for the conveyance of the  medical office building parcel to SC LLC and the conveyance of the recreation parcel  to the owner’s association within a specified time following the last day of the inspection period. If such Subdivision Approval is not obtained within such specified time following the last day of the inspection period, SC LLC has the right to terminate the Agreement. The Agreement provides SC LLC with a limited right to terminate the Agreement in the event the Subdivision Approval contains requirements specified in the Agreement. In the event the Subdivision Approval has not been denied by the Town at or prior to the last day of the specified period, SC LLC shall have the right to extend the time to obtain the Subdivision Approval for a specified period of time.  If such Subdivision Approval is not obtained within such additional time, SC LLC has the right to terminate the Agreement.

The Site Plan Approval is specifically delineated in the Agreement. If SC LLC fails to obtain the Site Plan Approval prior to the closing date (expected to be May 4, 2021), SC LLC may cancel the Agreement, waive the Site Plan Approval contingency, or extend the closing date.

The Agreement also contains additional customary covenants, conditions, representations and warranties.

Since the commencement of our liquidation process, the Company has completed the sale of eleven properties for gross aggregate proceeds of over $22.6 million. Although we have not released or disclosed the appraised values of our individual real estate holdings so as not to put the Company in a negotiating disadvantage, the gross proceeds achieved in each such sale have been in excess of the appraised value of the respective property.

Under the terms of the Stipulation of Settlement (the "Settlement") relating to the class action litigation against the Company, Gyrodyne agreed that any sales of its properties would be effected only in arm's-length transactions at prices at or above their December 2014 appraised values. As of December 31, 2019, the value of each of the remaining unsold properties was above the respective 2014 appraised value. See, “Risk Factors -- Stipulation of Settlement prohibits us from selling our remaining properties at prices below the December 2014 appraised values”.

Port Jefferson Professional Park – In August 2018, the Company sold its final building (11 Medical Drive) in the Port Jefferson Professional Park for $800,000.

Interest Rates:

In December 2018, the U.S. Federal Reserve (the “Federal Reserve”) increased its benchmark interest rate for the fifth consecutive quarter culminating with another quarter point raise in the benchmark federal funds rate to a range between 2.25% and 2.50%.  Furthermore, at that time the Federal Reserve continued signaling that rates could continue to rise in 2019.  However, at its January 2019 Open Market Committee meeting, the Federal Reserve left the target range unchanged and indicated that it would be “patient” as it determines future adjustments to the target range. In March 2019, following its Open Market Committee meeting, the Federal Reserve announced that it was keeping the benchmark federal funds rate unchanged at a range between 2.25% and 2.50% and forecasted no interest rate hikes in 2019.  In addition, the Federal Reserve announced that it will stop shrinking its bond portfolio in September which may help hold down long-term interest rates. The favorable change in the interest rate environment could increase the amount potential purchasers are willing to pay for our properties or alternatively reduce the impact on prices from an economic slowdown.  Little in the U.S. macroeconomic data suggests that the economy is growing too rapidly, the primary symptom of trouble ahead for a business cycle. However, recent changes to tax policy, government spending and trade policy has created economic uncertainty as to whether these factors, in culmination, could adversely effect the current economic cycle. On March 3, 2020, the Federal Reserve decreased the benchmark interest rate by 50 basis points to between 1% and 1.25%.  The Federal reserve stated that the US economy remains strong, however, the coronavirus poses evolving risks to economic activity. Further stating that the Federal Reserve will use its tools and act as appropriate to support the economy. On March 15^th, 2020, the Federal Reserve announced a full percentage point cut in interest rates to a range of 0 percent to 0.25 percent.  The Federal Reserve also announced it will buy at least $500 billion in Treasury securities and $200 billion in mortgage-backed securities over the coming months under the quantitative easing program.  The Federal Reserve warned that US economic growth will likely be weak in the second quarter but said central bank policymakers will not use negative interest rates to combat the coronavirus (COVID-19) pandemic. On March 23, 2020, the Federal Reserve announced that its quantitative easing program is now open ended with no acquisition limit to the amount of Treasury securities, government backed debt, mortgage backed securities and corporate debt. 

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The uncertainty about the economic correction, it’s duration, and the temporary restrictions on businesses and individuals stemming from COVID-19 has impacted, and may continue to impact, our tenants’ businesses. For example, tenants may be reluctant to make long-term lease commitments or renew at all. In the current economic climate, we continue to follow a disciplined approach to managing our operations. In certain cases, the Company has addressed these challenges through various tenant incentives which resulted in the Company’s current market rents and related occupancy rates. 

COVID-19:

In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China. In the first several months of 2020, the virus, SARS-CoV-2, and resulting disease, COVID-19, spread to the United States, including New York State, the geographic location in which the Company operates. The Company's evaluation of the effects of these events is ongoing; however, in February and March 2020, some of our tenants began to experience decreasing demand for their products and services which may impact their ability to timely meet their lease obligations.  Furthermore, on March 21, 2020, New York Governor Andrew Cuomo issued an Executive Order entitled “New York State on PAUSE” (Policy that Assures Uniform Safety for Everyone) (the “Order”), pursuant to which, all non-essential employees (as defined by the State) must stay at home starting March 22, 2020 through April 19, 2020.  The Order also includes a 90-day moratorium on any residential or commercial evictions.

Beginning March 16, 2020, prior to the Order, the Company’s employees began temporarily working remotely to ensure the safety and well-being of our employees and their families. The Company’s technology infrastructure, for some time, has been set up to handle offsite seamless operations to address alternative disaster recovery disruption.  As a result, all employees will continue to work remotely unless they report needing sick leave or family leave pursuant to regulated benefits.

Small businesses and not-for-profit corporations, which account for approximately 39% ($834,000) of the Company’s projected annual rental revenues for 2020, are expected to be adversely affected disproportionately by the economic ramifications of COVID-19. Although it is difficult to estimate the duration and full extent of this disruption, the impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, the success of actions taken to contain or treat the coronavirus and reactions by consumers, companies, governmental entities and capital markets. We are actively working with our tenants to manage and mitigate the impact to COVID-19 on the Company’s operations, liquidity and resulting Net Asset Value.

The COVID-19 public health crisis may also adversely impact our efforts to secure entitlements and the sale of our real estate. State and local governments are prioritizing COVID-19 crisis management and, to the extent possible, re-allocating resources accordingly which may adversely impact the timeline of our entitlements and technical approvals. 

Furthermore, the real estate market is also expected to be adversely affected which could further negatively impact the timing of sales and the resulting value of our real estate.

The extent of the impact of COVID-19 on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on future developments, including the duration and spread of the outbreak and related governmental or other regulatory actions.  The Company has four employees.  As a result, the Company’s ability to operate seamlessly and limit any adverse impact on its forecasted net asset value will also depend, in part, on whether any of its key employees are infected by the Coronavirus and become ill from COVID-19.

Healthcare:

Our tenants in our Cortlandt Manor property 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 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 pursued in Cortlandt and Flowerfield, which in turn may adversely impact us. Congress may revisit ACA or Medicaid reform legislation in 2020. 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.

The Company is pursuing entitlements on the Cortlandt Manor and Flowerfield properties, the value of which may be adversely affected by the aforementioned factors.

Property Value Enhancement

See, “Business—Property Value Enhancement—Cortlandt Manor” and “—Flowerfield”, above, for more detailed disclosure. 

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Item 7A. Quantitative and Qualitative Disclosures About Material Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

See Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements commencing on the Contents page followed by Page F-1.

Consolidated Financial Statements include:

(1) Report of Independent Registered Public Accounting Firm

(2) Consolidated Statements of Net Assets as of December 31, 2019 and 2018 (liquidation basis)

(3) Consolidated Statements of Changes in Net Assets for the years ended December 31, 2019 and 2018 (liquidation basis)

(4) Notes to Consolidated Financial Statements

(5) Schedules

All other information required by the following schedules has been included in the consolidated financial statements, is not applicable, or not required:

Schedule I, III, IV, V, VI, VII, VIII, IX, X, XI, XII and XIII.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2019 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined in rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting includes those policies and procedures that:

● Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Company’s financial statements in accordance with generally accepted accounting principles in the United States of America, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of its management and directors; and

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its system of internal control over financial reporting as of December 31, 2019. In making this assessment, management used the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013. Based on the Company’s assessment and the criteria set forth by COSO, management believes that the Company did maintain effective internal control over financial reporting as of December 31, 2019.

The COSO methodology used in determining effective control over financial reporting follows the concepts in the 2013 Internal Control – Integrated Framework. The guidance demonstrates the applicability of those concepts to help smaller public companies design and implement internal controls to support the achievement of financial reporting objectives. It highlights 5 integrated components (control environment, risk assessment, control activities, information and communication and monitoring activities) and 17 key principles of the 2013 framework, providing a principles-based approach to internal control.

Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company, as a smaller reporting company, to provide only management’s report in this Annual Report. As such, this Annual Report does not include an attestation report of the Company’s public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal control over financial reporting identified with our evaluation that occurred during the fiscal year ended December 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

Subsequent Events

COVID-19.  In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China. In the first several months of 2020, the virus, SARS-CoV-2, and resulting disease, COVID-19, spread to the United States, including New York State, the geographic location in which the Company operates. The Company's evaluation of the effects of these events is ongoing; however, in February and March 2020, some of our tenants began to experience decreasing demand for their products and services which may impact their ability to timely meet their lease obligations.  Furthermore, on March 21^, 2020, New York Governor Andrew Cuomo issued an Executive Order entitled “New York State on PAUSE” (Policy that Assures Uniform Safety for Everyone) (the “Order”), pursuant to which, all non-essential employees (as defined by the State) must stay at home starting March 22, 2020 through April 19, 2020.  The Order also includes a 90-day moratorium on any residential or commercial evictions.

Beginning March 16, 2020, prior to the Order, the Company’s employees began temporarily working remotely to ensure the safety and well-being of our employees and their families.  The Company’s technology infrastructure, for some time, has been set up to handle offsite seamless operations to address alternative disaster recovery disruption.  As a result, all employees will continue to work remotely unless they report needing sick leave or family leave pursuant to regulated benefits.

Small businesses and not-for-profit corporations, which account for approximately 39% ($834,000) of the Company’s projected annual rental revenues for 2020, are expected to be adversely affected disproportionately by the economic ramifications of COVID-19.  Although it is difficult to estimate the duration and full extent of this disruption, the impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, the success of actions taken to contain or treat the coronavirus and reactions by consumers, companies, governmental entities and capital markets.  We are actively working with our tenants to manage and mitigate the impact to COVID-19 on the Company’s operations, liquidity and resulting Net Asset Value.

The COVID-19 public health crisis may also adversely impact our efforts to secure entitlements and the sale of our real estate.  State and local governments are prioritizing COVID-19 crisis management and, to the extent possible, re-allocating resources accordingly which may adversely impact the timeline of our entitlements and technical approvals. 

Furthermore, the real estate market is also expected to be adversely affected which could further negatively impact the timing of sales and the resulting value of our real estate.

The extent of the impact of COVID-19 on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on future developments, including the duration and spread of the outbreak and related governmental or other regulatory actions.  The Company has four employees.  As a result, the Company’s ability to operate seamlessly and limit any adverse impact on its forecasted net asset value will also depend, in part, on whether any of its key employees are infected by the Coronavirus and become ill from COVID-19. 

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Credit Facility. The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”). 

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

The line is secured by the Cortlandt property (approximately 14 acres) and cross collateralized by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship.  The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

(a) The following table lists the names, ages and positions of all executive officers and directors and all persons nominated or chosen to become such. Each director has been elected to the term indicated. Directors whose term of office ends in 2020 shall serve until the next Annual Meeting of Stockholders or until their successors are elected and qualified. All officers of the Company are elected by the Board to one-year terms.

Name & Principal Occupation or Employment	Age		First Became a Director of Gyrodyne, LLC		First Became a Director of Gyrodyne Company Of America, Inc.		Current Board Term Expires
Gary J. Fitlin		54		---		---		---
President, CEO CFO and Treasurer of the Company
Paul L. Lamb		74		2015		1997		2022
Partner of Lamb & Barnosky, LLP
Chairman of the Board of Directors of the Company
Elliot H. Levine		66		2015		2004		2021
CPA and Senior Member of Levine & Seltzer, LLP
Director of the Company
Ronald J. Macklin		57		2015		2003		2021
Director of the Company
Philip F. Palmedo		85		2015		1996		2020
President of Palmedo Associates
Director of the Company
Peter Pitsiokos		60		---		---		---
Executive Vice President, COO, Secretary and Chief Compliance Officer of the Company
Nader G.M. Salour		61		2015		2006		2020
Principal, Cypress Realty of Florida, LLC
Director of the Company
Richard B. Smith		65		2015		2002		2022
Mayor of the Incorporated Village of Nissequogue
Director of the Company

(b) Business Experience

Gary J. Fitlin, age 54, joined the Company in October 2009 as its Chief Financial Officer and Treasurer. From August 2012 through February 24, 2013, Mr. Fitlin served as interim President and Chief Executive Officer following the resignation of Stephen V. Maroney in August 2012. Following the separation of Frederick C Braun III, (President and Chief Executive Officer from February 2013 through April 2017), from the Company, the Board of Directors appointed Gary Fitlin as President and Chief Executive Officer effective May 1, 2017. Prior to joining the Company, he was Director of Accounting Implementation for Lexington Realty Trust, a publicly traded real estate investment trust on the NYSE, from July 2006 to March 2008, where he was responsible for mergers and acquisitions. Prior to that, Mr. Fitlin served as Vice President and Corporate Controller for Source Media (f/k/a Thomson Media), a publisher and software solution provider, from June 2005 to July 2006, where he was responsible for global accounting, management reporting, tax compliance and planning, financial systems, risk management and contract administration. Prior to that, he served as a senior financial officer for various publicly traded companies where he was responsible for mergers and acquisitions, global accounting, management reporting, tax compliance and planning, financial systems, risk management and contract administration. Mr. Fitlin also serves as Chairman of the CEO Leadership Committee for Stony Brook University. He is a Certified Public Accountant, an alumnus of Arthur Andersen & Co., and holds a BS degree in Accounting and Economics from the State University of New York at Oswego.

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Paul L. Lamb, age 74, has been a director since 1997 and became Chairman of the Board on March 14, 1999. He is a founding partner in the law firm of Lamb & Barnosky, LLP, where he has practiced law since 1984; a past President of the Suffolk County Bar Association; and a Dean of the Suffolk Academy of Law. He holds a B.A. from Tulane University, a J.D. from the University of Kentucky and an LL.M. from the University of London, England. The Board concluded that Mr. Lamb should serve as a director of the Company because he is an experienced attorney in all phases of finance and real estate development, which skill set brings extraordinary value in light of the Company’s business and structure.

Elliot H. Levine, age 66, was appointed to the Board in October 2004. Mr. Levine is a founding member of the accounting firm Levine & Seltzer, LLP Certified Public Accountants, and a graduate (1975) of Queens College, City University of New York. He became a member of the American Institute of Certified Public Accountants in February 1978. Mr. Levine’s work experience includes five years at Arthur Young, eleven and a half years as partner and director of taxes of Leslie Sufrin & Co. P.C., one-year tenure as senior tax manager at Margolin, Winer & Evans CPAs and over 28 years as senior member of Levine & Seltzer. The Board concluded that Mr. Levine should serve as a director of the Company because of his 39 years of experience as a certified public accountant and in the real estate industry and field of taxation.

Ronald J. Macklin, age 57, was appointed to the Board in June 2003. Mr. Macklin served through April 2019 as Senior Vice President and U.S. General Counsel for National Grid and formerly Key Span Corporate Services, where he has held various positions within the Office of General Counsel since 1991. Previously, he was associated with the law firms of Rosenman & Colin and Cullen & Dykman. He received a B.A. degree from Stony Brook University and his Juris Doctorate from Union University’s Albany Law School. The Board concluded that Mr. Macklin should serve as a director of the Company because of his legal expertise, which includes his legal experience in corporate transactions, real estate matters, litigation, compliance and business ethics.

Philip F. Palmedo, age 85, was appointed to the Board in July 1996.  Mr. Palmedo has been President of the management consulting firm Palmedo Associates since 1980 and from 1988 to 1991 was Managing Director and President of Kepler Financial Management.  From 1978 to 2000, he was Chairman of International Resources Group, an international professional services firm, and from 1992 to 1997 was President of the Long Island Research Institute.  He was a founder of all four companies. In addition, Mr. Palmedo has been a director of Lixte Biotechnology Holdings, Inc. since 2005. Mr. Palmedo has shepherded numerous fledgling businesses in financial and technological markets and completed several financing agreements.  He also served as a trustee for the Stony Brook Foundation and is currently on the Planning Board for the Village of Head of the Harbor. Mr. Palmedo received his B.A degree from Williams College and M.S. and Ph.D. degrees from M.I.T. The Board concluded that Mr. Palmedo should serve as a director of the Company because of his extensive background in successfully guiding a number of entities from initial formation to value recognition.

Peter Pitsiokos, age 60, joined the Company in July 1992 as its Assistant Secretary and served as its General Counsel from 1992-2004. He has been the Company’s Executive Vice President, Chief Operating Officer and Chief Compliance Officer since 2004. He has also been Secretary of the Company for over 17 years. Mr. Pitsiokos was formerly the Executive Assistant District Attorney in Suffolk County, New York. He also served as the Assistant Director of Economic Development and the Director of Water Resources in the Town of Brookhaven. He is a former trustee of the Three Village Central School District in Setauket, New York. Mr. Pitsiokos also maintained a private law practice in which he represented several national and local owners, managers and developers of real estate. He holds a law degree from Villanova University and a BA degree from Stony Brook University. Mr. Pitsiokos is also a Counselor of Real Estate.

Nader G.M. Salour, age 61, was appointed to the Board in October 2006 and then elected by the shareholders at the Company’s annual meeting in December 2006. Mr. Salour has been a Principal of Cypress Realty of Florida since 2000. He served as President of Abacoa Development Company from June 1996 to June 2006 and has served as a Director of Abacoa Partnership for Community since December 1997 and as a Director of the Economic Council of Palm Beach County since 2004. The Board concluded that Mr. Salour should serve as a director of the Company because of his extensive experience in the real estate industry, including development, construction, project analysis and financing.

Richard B. Smith, age 65, was appointed to the Board in November 2002. Mr. Smith was Vice President in the Commercial Banking Division of the First National Bank of Long Island from February 2006 through his retirement in December 2018. He previously served as Senior Vice President for Private Banking at Suffolk County National Bank from May 2000 to February 2005. Previously, he worked for 10 years at Key Bank (Dime Savings Bank) and for three years at L.I. Trust/Apple Bank. He received an MBA in Finance from SUNY Albany in 1983. Mr. Smith serves as the Mayor of the Incorporated Village of Nissequogue. Mr. Smith served as a Trustee of the Smithtown Historical Society for 27 years prior to retiring. He is also a former Trustee for St. Catherine’s Medical Center in Smithtown, New York. The Board concluded that Mr. Smith should serve as a director of the Company because of his background in both the Long Island financial sector and his role in, and experience with, local government issues and zoning matters.

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(c) Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that the Company’s directors, executive officers, and any person holding more than ten percent (“10% Holder”) of our common shares, file with the SEC reports of ownership changes, and that such individuals furnish the Company with copies of the reports.

Based solely on the Company’s review of copies of Forms 3 and 4 and amendments thereto received by it during fiscal 2019 and Forms 5 and amendments thereto received by the Company with respect to fiscal 2019 and any written representations from certain reporting persons that no Form 5 is required, Gyrodyne believes that none of the Company’s executive officers, directors or 10% Holders failed to file on a timely basis reports required by section 16(a) of the Exchange Act during fiscal 2018.

(d)     Audit Committee Financial Expert

The Board has an Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act, which currently consists of Messrs. Smith, Levine, and Macklin. All members are “financially literate” and have been determined to be “independent” within the meaning of SEC regulations and Nasdaq rules. The Board has determined that at least one member, Mr. Levine, a CPA, qualifies as an “audit committee financial expert” as a result of relevant experience as a member in the accounting firm of Levine & Seltzer, LLP for over 28 years. In addition, Mr. Levine has 11.5 years of accounting experience as a partner and director of taxes at Leslie Sufrin & Co. P.C. as well as several other years of experience in the field of public accounting.     

(e)     Code of Ethics

The Company has adopted a written Code of Ethics that applies to all its directors, officers and employees, including the Company’s Chief Executive Officer and Chief Financial Officer. It is available on the Company’s website at www.gyrodyne.com and any person may obtain without charge a paper copy by writing to the Secretary at the address set forth on page 1. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, the provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of our Code of Ethics by posting such information on our website at www.gyrodyne.com within four business days of such amendment or waiver. The Company is not including the information contained on its website as part of, or incorporating it by reference to, this Report.   

Item 11. Executive Compensation.

(a)     Executive Compensation

The following table sets forth the total compensation awarded to, earned by or paid to each of the Company’s executive officers for services rendered during the years ended December 31, 2019 and 2018.

SUMMARY COMPENSATION TABLE

Name and principal position	Year	Salary ($)	Bonus ($)	Stock awards ($)	Option awards ($)	Non-equity incentive plan compensation ($)	Nonqualified deferred compensation earnings ($)	All other compensation ($)	Total ($)
Gary Fitlin	2019	250,000	-	-	-	2,390(A)	-	-	252,390
President, CEO, CFO and Treasurer	2018	250,000	-	-	-	14,250(A)	-	-	264,250
Peter Pitsiokos	2019	200,000	-	-	-	2,151(A)	-	-	202,151
COO and Secretary	2018	200,000	-	-	-	12,824(A)	-	-	212,824

(A) Consists of retention bonus payments vested and paid pursuant to the Retention Bonus Plan upon the sale of each of the real estate transactions closed during 2019 and 2018.

The Registrant has concluded that aggregate amounts of perquisites and other personal benefits, securities or property to any of the current executives does not exceed $10,000 and that the information set forth in tabular form above is not rendered materially misleading by virtue of the omission of such personal benefits.

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(a)     Employment Agreements

On May 17, 2013, the Company entered into a new employment agreement with Gary J. Fitlin (the “Employment Agreement”) dated May 15, 2013 and effective April 1, 2013, pursuant to which Mr. Fitlin continued to serve as President and Chief Executive Officer and as Senior Vice President and Chief Financial Officer. Pursuant to the Employment Agreement, Mr. Fitlin earns a base salary at the rate of $250,000 per year plus a discretionary bonus, as determined and approved by the Board based upon the profitability and/or performance of Gyrodyne. Additionally, Mr. Fitlin is entitled to a bonus equal to $125,000 if he is employed by the Company as of the effective date of a change-in control (the “Change-in-Control Bonus”). The Employment Agreement defines a change-in-control as the first to occur of a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as each such term is defined under Section 409A of the Code. Pursuant to the terms of the Employment Agreement, there is no required minimum period of employment, and either the Company or Mr. Fitlin may terminate at any time, with or without cause. If Mr. Fitlin is terminated without cause, the Company must provide him with at least 60 days’ prior written notice of termination and must pay him (i) the pro rata share of his base salary through those 60 days, (ii) the Change-in-Control Bonus, and (iii) severance pay equal to six months’ base salary from the date of termination. If Mr. Fitlin is terminated for cause (as defined in the Employment Agreement), he will be paid the pro rata share of his base salary through the date of termination. Mr. Fitlin may also terminate upon 60 days’ prior written notice. The foregoing description of the Employment Agreement is only a summary of its material terms, does not purport to be complete and is qualified in its entirety by reference to that agreement. A copy of the Employment Agreement was filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

On May 8, 2014, Gyrodyne entered into a new employment agreement with Peter Pitsiokos effective May 15, 2014, pursuant to which Mr. Pitsiokos continues to serve as Executive Vice-President, Chief Operating Officer, Chief Compliance Officer and Secretary. Pursuant to the agreement, Mr. Pitsiokos earns a base salary at the rate of $200,000 per year plus a discretionary bonus, as determined and approved by the Board based upon the profitability and/or performance of Gyrodyne. There is no required minimum period of employment, and either Gyrodyne or Mr. Pitsiokos may terminate at any time, with or without cause. If Mr. Pitsiokos is terminated without cause, Gyrodyne must provide him with at least 60 days’ prior written notice of termination and must pay him the pro rata share of his base salary through those 60 days and severance pay equal to six months’ base salary from the date of termination. 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.

(b)     Outstanding Equity Awards at Fiscal Year End

As of the year ended December 31, 2019, there were no unexercised options and/or stock that has not vested or equity incentive plan awards held by any of the Company’s named executive officers.

(c)     Severance and Change-in-Control Benefits

Pursuant to the Employment Agreement with Mr. Fitlin, Mr. Fitlin earns a bonus equal to $125,000 if he is employed by the Company as of the effective date of a change-in-control (the “Change-in-Control Bonus”). The Employment Agreement defines a change-in-control as the first to occur of a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as each such term is defined under Section 409A of the Code. Pursuant to the terms of the Employment Agreements, there is no required minimum period of employment, and either the Company or the executive may terminate at any time, with or without cause. If the executive is terminated without cause, the Company must provide him with at least 60 days’ prior written notice of termination and must pay him (i) the pro rata share of his base salary through those 60 days, (ii) the Change-in-Control Bonus, and (iii) severance pay equal to six months’ base salary from the date of termination. If the executive is terminated for cause (as defined in the Employment Agreements), he will be paid the pro rata share of his base salary through the date of termination. Each of the executives may also terminate upon 60 days’ prior written notice.

Pursuant to the employment agreement with Mr. Pitsiokos, Mr. Pitsiokos may be terminated at any time, with or without cause. If Mr. Pitsiokos is terminated without cause, Gyrodyne must provide him with at least 60 days’ prior written notice of termination and must pay him the pro rata share of his base salary through those 60 days and severance pay equal to six months’ base salary from the date of termination.

(d)      Retention Bonus Plan

In May 2014, the Board of Directors approved a retention bonus plan (as amended, the “Plan”) designed to recognize the nature and scope of the responsibilities of our directors, executives and employees related to the Company’s strategic plan to enhance the property values, liquidate and dissolve, 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 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 foregoing description reflects the terms set forth in in the plan as modified by three amendments. The summary appearing below reflects the terms set forth in the Plan as modified by three amendments. There were no further amendments to the terms of the Plan during the current reporting period.

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The Plan provides for a bonus pool 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 at least equal to its 2013 appraised value as designated in the bonus plan. Additional funding of the bonus pool will occur on a property-by-property basis only if the gross sales price of a property exceeds the Adjusted Appraised Value defined as the sum of (i) its 2013 appraised value, in which case additional funding will occur and (ii) land development costs incurred on a property since the date of the 2013 appraisal, 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:

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

(a) 15% for the Chairman and 50% for the directors other than the Chairman (10% for each of the other five directors).

(b) 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.

Such shares of the bonus pool are earned only upon the completion of the sale of a property at a gross selling price equal to or greater than its Adjusted Appraised Value and is paid to the named beneficiaries of the 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.

The Plan provides that no benefits are to be paid to participants from the sale of any individual post-subdivided lot from either of the Company’s Flowerfield or Cortlandt Manor properties until aggregate sale proceeds from all sales of post-subdivided lots from such property exceed a designated aggregate floor for such property. The aggregate floor for each of the Flowerfield and Cortlandt Manor properties is defined in Amendment No. 3 to the Plan as the 2013 appraisal of such property plus land development costs incurred for such property since such appraisal.

The Plan provides for vesting of benefits upon the sale of each individual post-subdivision lot at Flowerfield and Cortlandt Manor. It also provides for 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, except that a participant will only be eligible to receive a benefit to the extent that a property is sold within three years following the separation 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 and that the sale exceeded the Adjusted Appraised Value.

The payments made during the twelve months ended December 31, 2019 and 2018 under the Plan relate to the settlement of the master lease from the Sale of the Virginia Health Care Center and the sale of one building in the Port Jefferson Professional Park, respectively, were as follows:

RETENTION BONUS PLAN PARTICPANTS	2019		2018
Board of Directors	$	9,471	$	56,497
President and Chief Executive Officer		2,390		14,250
Chief Operating Officer		2,151		12,824
Other Employees		561		3,346
Total	$	14,573	$	86,917

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2019 DIRECTOR COMPENSATION

The following table shows the compensation earned by or paid in cash to each of the Company’s non-officer directors for the year ended December 31, 2019:

Name (a)	Fees earned or paid in cash (b)		Stock awards (c)		Option awards (d)		Non-equity incentive plan compensation (e)		Nonqualified deferred compensation earnings (f)		All other compensation (g)		Total (h)
Paul L. Lamb	$	120,000	$	-	$	-	$	2,186	$	-	$	-	$	122,186
Philip F. Palmedo		42,000		-		-		1,457		-		-		43,457
Elliot H. Levine		42,000		-		-		1,457		-		-		43,457
Richard B. Smith		42,000		-		-		1,457		-		-		43,457
Ronald J. Macklin		42,000		-		-		1,457		-		-		43,457
Nader G.M. Salour		42,000		-		-		1,457		-		-		43,457
Total	$	330,000	$	-	$	-	$	9,471	$	-	$	-	$	339,471

Deferred Compensation Plan.  On December 6, 2019, the Company’s Board of Directors approved the Gyrodyne, LLC Nonqualified Deferred Compensation Plan for Employees and Directors (the “DCP”) effective as of January 1, 2020. The plan is a nonqualified deferred compensation plan maintained for officers and directors of the Company. Under the DCP, officers and directors may elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of 5%. All DCP benefits will be paid in a single lump sum cash payment on December 15, 2026, unless a plan of liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP. The foregoing description of the DCP does not purport to be complete and is qualified in its entirety by reference to the full text of the DCP, which is attached hereto as Exhibit 10.12. Each of the Directors elected (under the DCP) to defer 100% of their director fees for 2020.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a) As of December 31, 2019, there were no equity compensation plans under which securities of the Company were authorized for issuance.

(e) The following table sets forth certain information as of March 25, 2020, regarding the beneficial ownership of the Company’s common shares by (i) each person who the Company believes to be the beneficial owner of more than 5% of its outstanding common shares, (ii) each present director, (iii) each person listed in the Summary Compensation Table under “Executive Compensation,” and (iv) all the Company’s present executive officers and directors as a group.

Name and address of beneficial owner	Amount and nature of beneficial ownership (1)	Percent of Class (10)
Poplar Point Capital Management, LLC 840 Hinckley Road, Suite 250 Burlingame, CA 94010	179,904(2)	12.1
Mario Gabelli /Gamco Asset Management Inc. /Gabelli Funds/GCIA/Teton Advisors One Corporate Center Rye, NY 10580	138,892 (3)	9.4
Neil Subin MILFAM LLC 3300 South Dixie Highway, Suite 1-365 West Palm Beach, FL 33405	117,151(4)	7.9
Grantham, Mayo, Van Otterloo & Co., LLC 40 Rowes Wharf Boston, MA 02110	113,088 (5)	7.6
Towerview LLC. 460 Park Avenue New York, NY 10022	101,500 (6)	6.8
MFP Investors LLC 667 Madison Avenue, 25th Floor New York, NY 10065	80,850(7)	5.5
Paul L. Lamb 1 Flowerfield, Suite 24 St. James, NY 11780	37,259(8)	2.5
Philip F. Palmedo 1 Flowerfield, Suite 24 St. James, NY 11780	16,905(9)	1.1
Nader G.M. Salour 1 Flowerfield, Suite 24 St. James, NY 11780	3,866	*
Richard B. Smith 1 Flowerfield, Suite 24 St. James, NY 11780	862	*
Ronald J. Macklin 1 Flowerfield, Suite 24 St. James, NY 11780	1,381	*
Elliot H. Levine 1 Flowerfield, Suite 24 St. James, NY 11780	113	*
Peter Pitsiokos 1 Flowerfield, Suite 24 St. James, NY 11780	0	*
Gary J. Fitlin 1 Flowerfield, Suite 24 St. James, NY 11780	0	*
All executive officers and Directors as a group (8 persons)	60,386	4.1

50

(1) Except as otherwise indicated, the beneficial owner has sole voting and investment power. Except as indicated, the beneficial owner has not pledged as security, or has any rights to acquire beneficial ownership of, any securities of the Company.

(2) On December 30, 2015, Poplar Point Capital Management, LLC filed a Schedule 13G with the Securities and Exchange Commission stating that each reporting person has shared power to vote or direct the vote and has shared power to dispose of or direct the disposition of 179,904 common shares. The Schedule 13G was jointly filed by Poplar Point Capital Management LLC, Poplar Point Capital Partners L.P., Poplar Point Capital GP LLC and Mr. Jad Fakhry, collectively, the reporting persons.

(3) On July 9, 2018, Gamco Investors Inc. filed a Schedule 13D with the Securities and Exchange Commission stating that GAMCO, a group of investment funds, beneficially owns an aggregate of 138,892 common shares. Power to dispose of and vote securities resides with Mario Gabelli, Douglas Jamieson and Kevin Handwerker. Each reporting person has the shared power to vote or direct the vote and has shared power to dispose of or direct the disposition of 138,892 common shares. The Schedule 13D was filed by Mario Gabelli, David Goldman, Douglas Jamieson and Kevin Handwerker.

(4) On January 23, 2018, Neil Subin filed a Schedule 13G with the Securities and Exchange Commission stating that he has the power to vote or direct the vote and has power to dispose of or direct the disposition of 117,151 common shares.

(5) On February 13, 2019, Grantham, Mayo, Van Otterloo & Co. LLC filed a Schedule 13G with the Securities and Exchange Commission stating that it has the power to vote or direct the vote, and the power to dispose of or direct the disposition of 113,088 common shares. The Schedule 13G was filed by Gregory Pottle.

(6) On January 8, 2020, Towerview LLC filed a Schedule 13G with the Securities and Exchange Commission stating that each reporting person has shared power to vote or direct the vote and has shared power to dispose of or direct the disposition of 101,500 common shares. The Schedule 13G was filed by Daniel R. Tisch.

(7) On February 14, 2019, MFP Investors LLC filed a Schedule 13G/A with the Securities and Exchange Commission stating that each reporting person has shared power to vote or direct the vote and has shared power to dispose of or direct the disposition of 80,850 common shares. The Schedule 13G/A was filed by Michael Price.

(8) Includes 4,368 shares held by Lamb & Barnosky, LLP Profit Sharing Trust and 32,981 shares in an Individual Retirement Account. Mr. Lamb is a trustee of the Profit-Sharing Trust.   

(9) Does not include his wife’s ownership of 4,125 shares, or 400 shares in a trust for two relatives for which he is the Trustee, in which he denies any beneficial interest.

(10) The percent of class is calculated on the basis of the number of shares outstanding, which is 1,482,680 as of March 25, 2020.

Ownership Limitation

Under Gyrodyne, LLC’s Amended and Restated Limited Liability Company Agreement, shareholders of Gyrodyne may not hold common shares representing in excess of 20% of the outstanding common shares at any time. If a shareholder of Gyrodyne exceeds 20% ownership, at any time for any reason whatsoever, including but not limited to additional contributions by shareholders, purchases or other acquisitions by shareholders, mergers, consolidations, acquisitions, or other business combinations involving the shareholder, then common shares in excess of such 20% ownership limit shall be transferred by such shareholder to an irrevocable trust formed and administered by Gyrodyne and of which such shareholder shall be the beneficiary. Such LLC Shares held in trust shall have no voting rights when held in the trust and shall be disregarded in computing any required votes under the Amended and Restated Limited Liability Company Agreement of Gyrodyne.

At the end of each fiscal quarter, or at such other earlier date as determined by the Board, the Company, on behalf of the trust, shall have the option to purchase such common shares from the trust at a price determined by an independent appraiser or to offer such common shares to third parties, including to other shareholder of Gyrodyne in proportion to their relative ownership percentage, or to other persons at the appraised price. However, in the event such a shareholder’s ownership percentage including common shares held beneficially in the trust on behalf of such shareholder, at any time becomes less than the 20% ownership limit due to the sale of common shares by such shareholder or due to additional issuances of common shares by Gyrodyne, then the trust (to the extent such shareholder’s common shares have not been sold pursuant) has an obligation to return such common shares up to the 20% ownership limit.

51

Item 13. Certain Relationships and Related Transactions and Director Independence.

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		Total Commitment (excluding remaining renewal options)		Additional Commitment (assumes two-year renewal option is exercised)
Jan 2019-Dec 2020		2,284	$	19,414	$	38,828	$	38,828
Jan 2019-Dec 2020		1,817	-(a)		-(a)		-(a)
Jan 2019-Dec 2020		1,905	$	16,193	$	32,385	$	64,770

(a) In February 2019, the Company amended the square footage under the 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 originally was for 2,130 square feet. The amended maximum annual and total lease commitment of up to $18,170 and $36,340, 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, 2019 of $18,170 and total commitments including two-year renewal option of up to $72,680.

During the twelve months ended December 31, 2019 and 2018, respectively, the Company received rental revenue of $34,720 and $47,146, respectively.

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

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 members of the Board are independent directors as defined by the listing requirements of the Nasdaq Stock Market. Such independent directors are Messrs. Lamb, Levine, Macklin, Palmedo, Salour and Smith. The Company has compensation, nominating, investment and audit committees, the members of which are also independent as defined by the listing requirements of the Nasdaq Stock Market.

Item 14. Principal Accounting Fees and Services.

The following is a summary of the fees billed to the Company by Baker Tilly Virchow Krause, LLP, its independent registered principal accountants, for professional services rendered for the years ended December 31, 2019 and 2018:

Fee Category	Fiscal December 31, 2019		Fiscal December 31, 2018
Audit Fees (1)	$	86,000	$	80,000
Audit-Related Fees (2)		5,977		3,041
Tax Fees (3)		18,800		25,500
Total Fees	$	110,777	$	108,541

(1) Audit Fees consist of aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements, review of the interim financial statements included in quarterly reports, and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2019 and 2018, respectively.

(2) Audit-Related Fees consist of aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under "Audit Fees." Such services include review of the Company’s strategic plan analysis, Form 8-K filings, proxy filings and research into various accounting issues.

(3) Tax Fees consist of aggregate fees billed for professional services rendered by the Company’s principal accountant for tax compliance, tax advice and tax planning. The amounts disclosed consist of fees paid for the preparation of federal and state income tax returns.

The Audit Committee is responsible for the appointment, compensation and oversight of the work of the principal accountants and approves in advance any services to be performed by the principal accountants, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the principal accountant’s independent auditors. The Audit Committee has determined not to adopt any blanket pre-approval policies or procedures. All of the fees shown above were pre-approved by the Audit Committee.

52

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)              Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statement of Net Assets as of December 31, 2019 and 2018 (liquidation basis)

Consolidated Statement of Changes in Net Assets for the twelve months ended December 31, 2019 and 2018, (liquidation basis)

Notes to Consolidated Financial Statements

    Schedules

                     All other information required by the following schedules has been included in the consolidated financial statements, is not applicable, or not required:

Schedule I, III, IV, V, VI, VII, VIII, IX, X, XI, XII and XIII.

(b)              Exhibits: The following exhibits are either filed as part of this report or are incorporated herein by reference as indicated:

3.1 Amended and Restated Limited Liability Company Agreement of Gyrodyne, LLC (1)

10.1 Second Amended and Restated Agreement of Limited Partnership of Callery-Judge Grove, dated as of February 9, 2005, by and among CJG Management, Ltd., as the general partner and those persons and entities whose names and addresses appear on the books and records of the Partnership as partners. (2)

10.2 Compensation of Directors (3)

10.3 Employment Agreement, with Gary J. Fitlin, dated May 15, 2013 (4)

10.4 Employment Agreement with Peter Pitsiokos dated May 8, 2014 (5)

10.5 Indemnification Agreement, dated as of February 8, 2013, between the Company and each of its directors and officers (6)

10.6 Amended and Restated Limited Liability Company Agreement of Gyrodyne Special Distribution, LLC (7)

10.7 Retention Bonus Plan (8)

10.8 Amendment No. 1 to Employment Agreement with Peter Pitsiokos (9)

10.9 Amended and Restated Retention Bonus Plan (10)

10.10 Amendment No. 2 to Retention Bonus Plan (9)

10.11 Amendment No. 3 to Retention Bonus Plan (11)

10.12 Nonqualified Deferred Compensation Plan (12)

10.13 Board Advisor Agreement dated as of May 24, 2016 with Jad Fakhary (3)

10.14 Amendment No. 1 dated as of November 24, 2017 to Board Adviser Agreement dated as of May 24, 2016 with Jad Fakhry (3)

10.15 Amendment No. 2 dated as of December 31, 2019 to Board Adviser Agreement dated as of May 24, 2016 with Jad Fakhry (3)

10.16 Purchase and Sale Agreement effective as of August 27, 2019 between GSD Flowerfield LLC and BSL St. James LLC (13)

10.17 Purchase and Sale Agreement effective as of December 7, 2019 between GSD Cortlandt LLC, Buttonwood LLC and Sound Cortlandt LLC (3) 

53

10.18	Engagement letter with a National Real Estate Finance Firm, effective February 27, 2020 (3)
21.1	List of all subsidiaries (3)
31.1	Rule 13a-14(a)/15d-14(a) Certifications (3)

32.1 CEO/CFO Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3)

101.INS** XBRL Instance 

101.SCH**XBRL Taxonomy Extension Schema 

101.CAL**XBRL Taxonomy Extension Calculation 

101.DEF**XBRL Taxonomy Extension Definition 

101.LAB**XBRL Taxonomy Extension Labels 

101.PRE**XBRL Taxonomy Extension Presentation 

(1) Incorporated herein by reference to Amendment No. 2 to Form S-4, Annex F, filed with the Securities and Exchange Commission on June 17, 2014.

(2) Incorporated herein by Reference to the Annual Report Form KSB, filed with the Securities and Exchange Commission on July 5, 2005.

(3) Filed as part of this report.

(4) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on May 23, 2013.

(5) Incorporated herein by reference to the Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 12, 2014.

(6) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on February 14, 2013.

(7) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on December 27, 2013.

(8) Incorporated herein by reference to the Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 8, 2014.

(9) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on January 31, 2018.

(10) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on May 26, 2016.

(11) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on November 2, 2018.

(12)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on December 13, 2019.
(13)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on August 30, 2019.

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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.

/S/ Gary J. Fitlin

By Gary J. Fitlin, President, Chief Executive Officer, Chief Financial Officer and Treasurer 

Date: March 26, 2020 

********************

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/S/ Richard B. Smith

By Richard B. Smith, Director

Date: March 26, 2020 

/S/ Elliot H. Levine

By Elliot H. Levine, Director

Date: March 26, 2020

/S/ Ronald J. Macklin

By Ronald J. Macklin, Director

Date: March 26, 2020 

/S/ Paul L. Lamb

By Paul L. Lamb, Director

Date: March 26, 2020 

Exhibit Index

3.1 Amended and Restated Limited Liability Company Agreement of Gyrodyne, LLC (1)

10.1 Second Amended and Restated Agreement of Limited Partnership of Callery-Judge Grove, dated as of February 9, 2005, by and among CJG Management, Ltd., as the general partner and those persons and entities whose names and addresses appear on the books and records of the Partnership as partners. (2)

10.2 Compensation of Directors (3)

10.3 Employment Agreement, with Gary J. Fitlin, dated May 15, 2013 (4)

10.4 Employment Agreement with Peter Pitsiokos dated May 8, 2014 (5)

10.5 Indemnification Agreement, dated as of February 8, 2013, between the Company and each of its directors and officers (6)

10.6 Amended and Restated Limited Liability Company Agreement of Gyrodyne Special Distribution, LLC (7)

10.7 Retention Bonus Plan (8)

10.8 Amendment No. 1 to Employment Agreement with Peter Pitsiokos (9)

10.9 Amended and Restated Retention Bonus Plan (10)

10.10 Amendment No. 2 to Retention Bonus Plan (9)

55

10.11 Amendment No. 3 to Retention Bonus Plan (11)

10.12 Nonqualified Deferred Compensation Plan (12)

10.13 Board Adviser Agreement dated as of May 24, 2016 with Jad Fakhry (3)

10.14 Amendment No. 1 dated as of November 24, 2017 to Board Adviser Agreement dated as of May 24, 2016 with Jad Fakhry (3)

10.15 Amendment No. 2 dated as of December 31, 2019 to Board Adviser Agreement dated as of May 24, 2016 with Jad Fakhry (3)

10.16 Purchase and Sale Agreement effective as of August 27, 2019 between GSD Flowerfield LLC and BSL St. James LLC (13) 

10.17 Purchase and Sale Agreement effective as of December 7, 2019 between GSD Cortlandt LLC, Buttonwood LLC and Sound Cortlandt LLC (3) 

10.18 Engagement letter with a National Real Estate Finance Firm, effective February 27, 2020 (3) 

21.1 List of all subsidiaries. (3)

31.1 Rule 13a-14(a)/15d-14(a) Certifications. (3)

32.1 CEO/CFO Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)

101.INS** XBRL Instance 

101.SCH**XBRL Taxonomy Extension Schema 

101.CAL**XBRL Taxonomy Extension Calculation 

101.DEF**XBRL Taxonomy Extension Definition 

101.LAB**XBRL Taxonomy Extension Labels 

101.PRE**XBRL Taxonomy Extension Presentation 

(1) Incorporated herein by reference to Amendment No. 2 to Form S-4, filed with the Securities and Exchange Commission on June 17, 2014.

(2) Incorporated herein by reference to the Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission on July 5, 2005.

(3) Filed as part of this report.

(4) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on May 23, 2013.

(5) Incorporated herein by reference to the Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 12, 2014.

(6) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on February 14, 2013.

(7) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on December 27, 2013.

(8) Incorporated herein by reference to the Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 8, 2014.

(9) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on January 31, 2018.

(10) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on May 26, 2016.

(11) Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on November 2, 2018.

(12)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on December 13, 2019.
(13)	Incorporated herein by reference to Form 8-K, filed with the Securities and Exchange Commission on August 30, 2019.

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

56

GYRODYNE, LLC AND SUBSIDIARIES

REPORT ON AUDITS OF CONSOLIDATED

FINANCIAL STATEMENTS

Years Ended December 31, 2019 and 2018

57

GYRODYNE, LLC

AND SUBSIDIARIES

Contents
Years Ended December 31, 2019 and 2018	Pages

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Net Assets at December 31, 2019 and 2018 (liquidation basis)	F-2
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2019 and 2018 (liquidation basis)	F-3

Notes to Consolidated Financial Statements F-4-18

58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Gyrodyne, LLC:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of net assets (liquidation basis) of Gyrodyne, LLC and Subsidiaries (the "Company") as of December 31, 2019 and 2018, and the related consolidated statements of changes in net assets (liquidation basis) for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated statements of net assets (liquidation basis) of the Company as of December 31, 2019 and 2018, and the related consolidated statements of changes in net assets (liquidation basis) for years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Baker Tilly Virchow Krause, LLP

Melville, New York

We have served as the Company's auditor since 1990.

March 26, 2020

F-1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GYRODYNE, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET ASSETS

(Liquidation Basis)

	December 31, 2019		December 31, 2018
ASSETS:
Real estate held for sale	$	48,270,000	$	36,201,270
Cash and cash equivalents		2,213,205		3,049,587
Rent receivable		63,132		57,270
Other receivables		41,460		68,743
Total Assets	$	50,587,797	$	39,376,870
LIABILITIES:
Accounts payable	$	621,538	$	769,346
Accrued liabilities		178,479		173,086
Deferred rent liability		24,316		24,825
Tenant security deposits payable		265,078		268,633
Mortgage loan payable		3,780,068		1,100,000
Estimated liquidation and operating costs net of receipts		14,348,681		10,194,310
Total Liabilities		19,218,160		12,530,200
Net assets in liquidation	$	31,369,637	$	26,846,670

See notes to consolidated financial statements

F-2

GYRODYNE, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Liquidation Basis)

	Year ended December 31,
	2019			2018
Net assets in liquidation, beginning of period	$	26,846,670		$	26,637,350
Changes in net assets in liquidation:
Change in liquidation value of real estate		12,068,730			3,984,605
Remeasurement of assets and liabilities		(7,545,763	)		(3,775,285	)
Net increase in liquidation value		4,522,967			209,320
Net assets in liquidation, end of period	$	31,369,637		$	26,846,670

See notes to consolidated financial statements

F-3

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

1. The Company

Gyrodyne, LLC (including its subsidiaries, “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 on such properties, which are located in Suffolk (“Flowerfield”) and Westchester Counties (“Cortlandt Manor”), 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.

Gyrodyne’s corporate strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing entitlement opportunities and enhancing the value of its leases. The Board believes the aforementioned strategy will improve the chances of increasing the values for such properties. The value of the real estate reported in the consolidated statement of net assets as of December 31, 2019 (predicated on current asset values) includes some, but not all of 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 pursuit of joint venture relationships, entitlements, 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 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 14 – Contingencies) and settle and pay our remaining liabilities and obligations. Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement (the “LLC 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’s remaining real estate investments, each of which is held in a single asset limited liability company wholly owned by the Company, consist of:

● the Cortlandt Manor Medical Center comprising approximately 34,000 square feet situated on approximately 13.8 acres; and

● the Flowerfield Industrial Park comprising approximately 127,000 rentable square feet. The industrial park is multi-tenanted and situated on ten acres of a 68-acre property in St. James, New York, all of which is owned by the Company.  Approximately 62 of the 68 acres are included in the subdivision application filed with the Town of Smithtown.  Approximately 5 acres of the 68-acre Flowerfield industrial park are zoned residential and non-contiguous to the Flowerfield property and are being actively marketed for sale.

2. Summary of Significant Accounting Policies

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.

F-4

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

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 statements 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 consolidated 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 December 31, 2021. The Company is in the process of pursuing entitlements and density, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers (Purchase and Sale Agreement entered but not yet closed/prospective purchasers). 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 or purchasers, and will continue up until such time as entitlement and density decisions are made by the relevant government entities. The Company hopes to secure favorable decisions on entitlements 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, density, sales, liquidation and dissolution could extend through December 31, 2021 with the ultimate timing to a certain extent managed by Gyrodyne but also dependent upon and under the control of the applicable municipality’s planning board or other governmental authority and or purchasers. 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’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 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 December 31, 2021. 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.

F-5

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

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.

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 creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

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 December 31, 2019, 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.

3. Statements of Net Assets in Liquidation

Net assets in liquidation at December 31, 2019 would result in estimated liquidating distributions of approximately $21.16 per common share. This is an increase of $3.05 from the December 31, 2018 net assets in liquidation of $18.11 per common share.

The increase in net assets in liquidation results from an increase in the real estate value of $12.1 million ($8.14 per share) of the properties that are the subject of the purchase and sale agreements with BSL St. James LLC and Sound Cortlandt, LLC (see note 5), respectively, and other adjustments to the remaining properties partially offset by an increase in the expense reserve (the estimated costs in excess of receipts) per share by $7.5 million ($5.09 per share). The increase in the expense reserve is mainly the result of an extension in the estimated liquidation timeline of 18 months attributable to the pursuit of entitlements (and the associated costs), entitlement costs and an increase to the retention bonus payments and selling costs as a result of the increase in real estate value.

The cash balance at the end of the liquidation period (currently estimated to be December 31, 2021, although the estimated completion of the liquidation period may change), excluding any interim distributions, is estimated based on the December 31, 2019 cash balance of $2.2 million with adjustments for the following items which are estimated through December 31, 2021:

1. The estimated cash receipts from the operation of the Company’s 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 properties at their estimated gross sales proceeds.

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

3. 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.

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

5. Retention bonus amounts based on the net realizable value of the real estate under the Retention Bonus Plan (See Note 12).

6. Proceeds from the draw downs on the Company’s credit facilities to fund tenant improvements and working capital 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 common area capital and 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 underestimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or overestimates forecasted cash inflows (rental revenue rates), the estimated net realizable value of its real estate assets could be overstated.

F-6

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

The Company is pursuing various avenues to maximize total value during the liquidation process so that we can maximize distributions to our shareholders.  The Company estimates that it will incur approximately $1.8 million (included in the statement of net assets as part of the estimated liquidation and operating costs net of receipts, See Note 4) in land entitlement costs from January 2020 through the end of the liquidation period, currently estimated to conclude on or about December 31, 2021, in an effort to obtain entitlements, including 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 year ended December 31, 2019, the Company incurred approximately $1.4 million of land entitlement costs, consisting predominately of engineering fees.  The Company believes the remaining balance of $1.8 million (an aggregate of approximately $556,000 which Company vendors have agreed to defer until the first post subdivision property lot is sold) will be incurred from January 2020 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 entitlements and the dynamics of the real estate market.  As a result, the Company has focused and will continue to focus its land entitlement 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 statement of net assets as of December 31, 2019 (predicated on current asset values) includes some but not all of the potential value impact that may result from the land entitlement 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.

The net assets in liquidation at December 31, 2019 ($31,369,637) and 2018 ($26,846,670) results in estimated liquidating distributions of approximately $21.16 and $18.11, respectively, per common share (based on 1,482,680 shares outstanding), based on estimates and other indications of sales value (predicated on current asset values including the purchase prices set forth in the purchase and sale agreements with BSL St. James LLC and Sound Cortlandt, LLC, respectively, for the properties that are subject of such agreements) which includes some but not all of the potential sales proceeds that may result directly or indirectly from our land entitlement efforts. Some of the additional value that may be derived from the land entitlement efforts is not included in the estimated liquidating distributions as of December 31, 2019 because the amount of such additional value that may result from such efforts are too difficult to predict with sufficient certainty. The Company believes the land entitlement efforts will enhance estimated distributions per share through the improved values (a large amount of which has already been included in the reported value for real estate held for sale) from the sales of the Flowerfield and Cortlandt Manor properties net of the costs to achieve the improved values and other expenses. 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, change in values of the Cortlandt Manor and/or Flowerfield properties (whether market driven or 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 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.

4. Estimated Liquidation and Operating Costs Net of Estimated Receipts

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 liquidation and operating costs net 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 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.

F-7

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

The change in the liability for estimated costs in excess of estimated receipts during liquidation from January 1, 2019 through December 31, 2019 is as follows:

	January 1, 2019			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			December 31, 2019
Assets:
Estimated net inflows from investment of real estate	$	3,418,285		$	(2,600,047	)	$	3,491,090		$	4,309,328
Liabilities:
Property operating costs		(2,084,955	)		1,536,010			(2,046,009	)		(2,594,954	)
Tenant improvements		(465,844	)		497,207			(31,363	)		-
Common area capital expenditures		(665,000	)		119,023			71,844			(474,133	)
Land entitlement costs		(1,468,474	)		1,422,192			(1,800,845	)		(1,847,127	)
Corporate expenditures		(4,904,367	)		2,167,814			(3,459,998	)		(6,196,551	)
Selling costs on real estate assets*		(2,437,076	)		-			(1,060,124	)		(3,497,200	)
Retention bonus payments to directors, officers and employees*		(1,984,733	)		14,573			(2,710,358	)		(4,680,518	)
Less prepaid expenses and other assets		397,854			234,620			-			632,474
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,194,310	)	$	3,391,392		$	(7,545,763	)	$	(14, 348,681	)

*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 December 31, 2021. The remeasurement is the result of the extension, entitlement costs and increased retention bonus payments and selling costs attributable to the increase in real estate values.

The change in the liability for estimated costs in excess of estimated receipts during liquidation from January 1, 2018 through December 31, 2018 is as follows:

	January 1, 2018			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			December 31, 2018
Assets:
Estimated net inflows from investment of real estate	$	4,044,202		$	(2,386,428	)	$	1,760,511		$	3,418,285
Liabilities:
Property operating costs		(2,403,872	)		1,495,664			(1,176,747	)		(2,084,955	)
Tenant improvements		(1,304,109	)		1,316,567			(478,302	)		(465,844	)
Common area capital expenditures		(500,000	)		71,075			(236,075	)		(665,000	)
Land entitlement costs		(2,516,394	)		1,261,048			(213,128	)		(1,468,474	)
Corporate expenditures		(5,650,775	)		2,213,047			(1,466,639	)		(4,904,367	)
Selling costs on real estate assets*		(1,981,000	)		79,438			(535,514	)		(2,437,076	)
Retention bonus payments to directors, officers and employees*		(642,259	)		86,917			(1,429,391	)		(1,984,733	)
Less prepaid expenses and other assets		304,294			93,560			-			397,854
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,649,913	)	$	4,230,888		$	(3,775,285	)	$	(10,194,310	)

*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 were based on the liquidation being completed by June 30, 2020.

F-8

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

5. Disposition Activities

Flowerfield - On August 27, 2019, the Company’s wholly-owned subsidiary GSD Flowerfield, LLC entered into a Purchase and Sale Agreement (the “BSL Agreement”) for the sale of an approximately 9.0 acre parcel of vacant land in the Flowerfield complex in Smithtown, New York for $16,800,000 to BSL St. James LLC, a Delaware limited liability company (“BSL”).

Under the BSL Agreement: (i) BSL will have the right to terminate the BSL Agreement, during an investigation period, by written notice to GSD if BSL is not fully satisfied, in its sole discretion, as to the status of title, suitability of the Premises and all factors concerning same, in which case BSL will have the right to receive a refund of its earnest money deposit; (ii) if BSL does not terminate the BSL Agreement on or prior to the end of the investigation period, BSL will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless BSL terminates the BSL Agreement on or prior to the end of the investigation period, the closing will occur on the 30th day following the earlier of (y) the Town of Smithtown’s granting of the Site Plan Approval (as defined in the BSL Agreement and as described below); or (z) BSL’s waiver of the Site Plan Approval.

The BSL Agreement is also contingent on the receipt of Subdivision Approval (as defined in the BSL Agreement and as described below). The Subdivision Approval condition requires that GSD obtain a subdivision of the Gyrodyne/Flowerfield complex into separate parcels to create the Property (as generally depicted in the BSL Agreement) within a specified time (the “Subdivision Approval Period”) following the last day of the investigation period. If the Subdivision Approval is not obtained within the Subdivision Approval Period, each of GSD and BSL have the right to terminate the BSL Agreement. BSL will also have a limited right to terminate the BSL Agreement in the event the Subdivision Approval contains requirements specified in the BSL Agreement. If Subdivision Approval has not been denied by the Town of Smithtown at or prior to the last day of the Subdivision Approval Period, GSD shall have the right to extend its time to obtain the Subdivision Approval for a specified period of time. If Subdivision Approval is not obtained within such additional time, each of GSD and BSL have the right to terminate the BSL Agreement.

 The Site Plan Approval is specifically delineated in the BSL Agreement. If BSL fails to obtain the Site Plan Approval prior to the end of the site plan approval period, BSL may cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for a specified period upon the payment of an extension fee. If, after such extension, BSL fails to obtain the Site Plan Approval, BSL may cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for an additional specified period with a second non-refundable extension fee.

The BSL Agreement also contains additional customary covenants, conditions, representations and warranties.

Cortlandt Manor - Gyrodyne, LLC, a New York limited liability company (the “Company”), has announced the execution by its subsidiaries GSD Cortlandt, LLC, a New York limited liability company (“GSD”), and Buttonwood Acquisition, LLC (“Buttonwood” and together with GSD, the “Cortlandt Subsidiaries”), of a Purchase and Sale Agreement (the “Agreement”) effective as of December 7, 2019 (the “Effective Date”) for the sale of  approximately 4.5 acres of its real property located in Cortlandt Manor, New York, together with the improvements thereon (the “Property”), to Sound Cortlandt, LLC, a Delaware limited liability company (“SC LLC”), for a purchase price of $5,720,000. 

The Town of Cortlandt (the “Town”) is processing a proposed zoning initiative to create a Medical Oriented District (“MOD”) that would include the entire Cortlandt property (owned by the Cortlandt Subsidiaries) within its boundaries.  Included in the Town’s initiative is the Company’s site plan to subdivide the entire property into three parcels for the development of (i) a medical office building with retail, (ii) a multi-family residential housing project and (iii) an open space, passive recreation parcel. The Property that is the subject of the Agreement consists of the medical office building with ancillary retail space, and does not include the multi-family residential housing parcel or the open space, passive recreation parcel. 

F-9

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

The Agreement requires: (i) an inspection period that will expire after a set period, during which time SC LLC will have the right to terminate the Agreement by written notice to GSD if SC LLC will not be fully satisfied, in SC LLC’s sole discretion, as to the status of title, suitability of the Property and all factors concerning same, prior to the expiration of the inspection period, in which case SC LLC will have the right to receive a refund of its earnest money deposit; (ii) if SC LLC does not terminate the Agreement on or prior to the end of the inspection period, SC LLC will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless SC LLC terminates the Agreement on or prior to the end of the inspection period, the closing will occur on the 60th day following the earlier of (y) the applicable governmental authorities granting of the Final Project Approvals (as defined in the Agreement and as described below); or (z) SC LLC’s waiver of the Final Project Approvals.

The Final Project Approvals are also contingent on the receipt of Subdivision Approval and Site Plan Approval (each as defined in the Agreement and as described below). The Subdivision Approval condition requires that the Cortlandt Subsidiaries obtain approval as and to the extent necessary to allow for the conveyance of the  medical office building parcel to SC LLC and the conveyance of the recreation parcel  to the owner’s association within a specified time following the last day of the inspection period. If such Subdivision Approval is not obtained within such specified time following the last day of the inspection period, SC LLC has the right to terminate the Agreement. The Agreement provides SC LLC with a limited right to terminate the Agreement in the event the Subdivision Approval contains requirements specified in the Agreement. In the event the Subdivision Approval has not been denied by the Town at or prior to the last day of the specified period, SC LLC shall have the right to extend the time to obtain the Subdivision Approval for a specified period of time.  If such Subdivision Approval is not obtained within such additional time, SC LLC has the right to terminate the Agreement.

The Site Plan Approval is specifically delineated in the Agreement. If SC LLC fails to obtain the Site Plan Approval prior to the closing date (expected to be May 4, 2021), SC LLC may cancel the Agreement, waive the Site Plan Approval contingency, or extend the closing date.

The Agreement also contains additional customary covenants, conditions, representations and warranties.

Port Jefferson Professional Park – In August 2018, the Company sold its final building (11 Medical Drive) in the Port Jefferson Professional Park for $800,000.

6. Loan Payable

The Company secured a non-revolving credit line for up to $3,000,000 (the “Original Line”) with a bank, which closed on March 21, 2018.  There was an interest only phase for the first eight months of the loan (“Interest-Only Phase”).  On January 24, 2019, the Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of January 20, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of January 20, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”).  The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 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), but in no event less than the initial interest rate in effect on the closing date (6.5%).  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, plus principal based on a 20-year amortization period.  The Permanent Phase interest rate currently would be 3.25%.

The first advance of $1.1 million was used to finance the tenant improvements pursuant to the amended and expanded signed lease with Stony Brook University Hospital (“SBU Hospital”). An additional advance of $1.1 million was drawn on March 29, 2019 to finance the buildouts on leases signed through December 31, 2018. The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with the State University of New York or institutions affiliated with it (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase.

F-10

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

To secure access to additional working capital through the final sale date of the Flowerfield industrial buildings, the Company secured a second loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $3,000,000, which closed on January 24, 2019. There is an interest only phase for the first twenty-four months of the loan (“Interest-Only Phase”) after which it automatically converts to a permanent loan maturing on January 20, 2028 (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), but in no event less than the initial interest rate in effect on the closing date (6.5%). 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, plus principal based on a 20-year amortization period. Permanent Phase interest rate currently would be 3.25%. Two advances of $1,000,000 and $500,000 were drawn on September 30 and December 31, 2019, respectively. The balance of $1,419,932, net of closing costs of $80,068, is available to be drawn down.

Both lines are secured by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. As of December 31, 2019, the Company is in compliance with the loan covenants. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain secured by the subdivided industrial park lot only.

The loan payable matures upon the earlier of the sale of the Flowerfield Industrial Park or as follows:

Years Ending December 31,
2020	$	66,000
2021		138,630
2022		143,204
2023		147,928
2024		152,807
Thereafter		3,131,499
Total	$	3,780,068

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

The line is secured by the Cortlandt property (approximately 14 acres) and cross collateralized by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

F-11

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

7. Real Estate

The Company reports its financial statements under the liquidation basis of accounting which reflects real estate value at net realizable value (predicated on current asset values). During 2019 and 2018, the net realizable value of real estate increased by $12,068,730 and $3,984,605, respectively. The 2019 increase is mainly attributable to the Purchase and Sale Agreements entered into in Flowerfield and Cortlandt Manor (see Note 5). The 2018 increase was primarily driven by the increase in value attributable to the entitlement process. The valuation of the remaining real estate as of December 31, 2019 was $48,270,000.

	2019		2018
Net Realizable Value at beginning of period	$	36,201,270	$	33,016,665
Increases in Net Realizable Value
Cortlandt Manor		2,010,000		1,040,000
Flowerfield		10,058,730		2,944,605
Less Property Sales
Port Jefferson Professional Park		-		(800,000	)
Net Realizable Value at December 31,	$	48,270,000	$	36,201,270

8. Accrued Liabilities

Accrued liabilities at December 31, 2019 and 2018 are as follows:

	December 31,
	2019		2018
Payroll and related taxes	$	40,011	$	34,737
Professional fees		101,468		103,349
Other		37,000		35,000
Total	$	178,479	$	173,086

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.

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: a) bear any tax liability resulting from such audit, or b) elect to push out the tax audit adjustments to the respective shareholders once it has been calculated at the company level.

10. Credit Quality of Rents Receivable

The Company’s standard lease terms include rent due on the first of the month. The Company credit terms extend a standard ten-day grace period across its tenant portfolio and in no event are credit terms extended beyond one year.

The Company manages its billing and collection process internally to enable timely identification of collection issues. The controls and related processes enable the Company to timely identify and establish payment plans to minimize material losses from defaults.

F-12

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

As of December 31, 2019 and 2018, respectively, the Company’s allowance for doubtful accounts reflected the following activity:

Allowance for Doubtful Accounts	December 31, 2019			December 31, 2018
Beginning balance	$	13,000		$	34,000
Accounts receivable (written off)		(13,000	)		(21,000	)
Ending Balance	$	-		$	13,000

11. 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 December 31, 2019 and 2018. As the Company executes on the sale of its assets, its regional concentration in tenants will lessen thereby resulting in the increased credit risk from exposure of the local economies.

For the year ended December 31, 2019 rental income from the Company’s three largest tenants represented approximately 23%, 20% and 7% of total rental income. The three largest tenants by revenue as of December 31, 2019 consist of a state agency located in the industrial park, a medical tenant in the Cortlandt Manor Medical Center and a tenant in the industrial park that recently expanded its space. During the year ended December 31, 2018 we increased the space leased to the state agency, by approximately 93%, which increased the concentration of credit risk respectively.

The current economic challenges facing state and local budgets impacted most of the Company’s largest tenants. In addition, the current economic challenges stemming from the coronavirus are disproportionately impacting small businesses which comprise 39% of our expected 2020 rental revenue. There can be no assurance that the Company’s leases will renew for the same square footage, at favorable rates net of tenant improvements, if at all.

12. Commitments

As of December 31, 2019 and 2018, other commitments and contingencies are summarized in the below table:

	2019		2018
Management Employment agreements with bonus* and severance commitment contingencies	$	350,000	$	350,000
Other employee severance commitment contingencies		81,716		81,716
Total	$	431,716	$	431,716

*Excludes Retention Bonus Payments

Employment agreements - The Company has an employment agreement with its Chief Executive Officer. The agreement provides for a bonus of $125,000 payable upon a change of control as defined in the agreement. In addition, each agreement provides for severance equivalent 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 (“COO”) executed on May 8, 2014 which provides for severance on a termination without cause equal to 6 months of base salary. On January 25, 2018, Gyrodyne entered into an amendment to the employment agreement with the COO to define with greater specificity the COO’s 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.

F-13

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

Retention Bonus Plan- In May 2014, the Board of Directors approved a retention bonus plan (as amended, the “Plan”) designed to recognize the nature and scope of the responsibilities of our directors, executives and employees related to the Company’s strategic plan to enhance the property values, liquidate and dissolve, 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 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 summary appearing below reflects the terms set forth in the Plan as modified by three amendments. There were no further amendments to the terms of the Plan during the current reporting period.

The Plan provides for a bonus pool 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 at least equal to its 2013 appraised value as designated in the bonus plan. Additional funding of the bonus pool will occur on a property-by-property basis only if the gross sales price of a property exceeds the Adjusted Appraised Value defined as the sum of (i) its 2013 appraised value, in which case additional funding will occur and (ii) land development costs incurred on a property since the date of the 2013 appraisal, 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:

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

(a) 15% for the Chairman and 50% for the directors other than the Chairman (10% for each of the other five directors).

(b) 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.

Such shares of the bonus pool are earned only upon the completion of the sale of a property at a gross selling price equal to or greater than its Adjusted Appraised Value and is paid to the named beneficiaries of the 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.

The Plan provides that no benefits are to be paid to participants from the sale of any individual post-subdivided lot from either of the Company’s Flowerfield or Cortlandt Manor properties until aggregate sale proceeds from all sales of post-subdivided lots from such property exceed a designated aggregate floor for such property. The aggregate floor for each of the Flowerfield and Cortlandt Manor properties is defined in Amendment No. 3 to the Plan as the 2013 appraisal of such property plus land development costs incurred for such property since such appraisal.

The Plan provides for vesting of benefits upon the sale of each individual post-subdivision lot at Flowerfield and Cortlandt Manor. It also provides for 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, except that a participant will only be eligible to receive a benefit to the extent that a property is sold within three years following the separation 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 and that the sale exceeded the Adjusted Appraised Value.

F-14

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

The payments made during the twelve months ended December 31, 2019 and 2018 under the Plan relate to the settlement of the master lease from the Sale of the Virginia Health Care Center and the sale of one building in the Port Jefferson Professional Park, respectively, were as follows:

RETENTION BONUS PLAN PARTICPANTS	2019		2018
Board of Directors	$	9,471	$	56,497
President and Chief Executive Officer		2,390		14,250
Chief Operating Officer		2,151		12,824
Other Employees		561		3,346
Total	$	14,573	$	86,917

Deferred Compensation Plan - On December 6, 2019, the Company’s Board of Directors approved the Gyrodyne, LLC Nonqualified Deferred Compensation Plan for Employees and Directors (the “DCP”) effective as of January 1, 2020. The plan is a nonqualified deferred compensation plan maintained for officers and directors of the Company.  Under the DCP, officers and directors may elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of 5%.  All DCP benefits will be paid in a single lump sum cash payment on December 15, 2026, unless a plan of liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP. Each of the Directors elected (under the DCP) to defer 100% of their director fees for 2020.

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 underestimates 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.

F-15

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

14. 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.

As of December 31, 2019 and 2018, the value of the remaining unsold properties exceeded the respective 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.

15. 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		Total Commitment (excluding renewal options)		Additional Commitment (assumes two-year renewal option is exercised)
Jan 2019	-	Dec 2020		2,284	$	19,414	$	38,828	$	38,828
Jan 2019	-	Dec 2020		1,817	-(a)		-(a)		-(a)
Jan 2019	-	Dec 2020		1,905	$	16,193	$	32,385	$	32,385

(a) In February 2019, the Company amended the square footage under the 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 originally was for 2,130 square feet. The amended maximum annual and total lease commitment of up to $18,170 and $36,340, 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, 2019 of $18,170 and total commitments including two-year renewal option of up to $72,680.

F-16

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

During the twelve months ended December 31, 2019 and 2018, respectively, the Company received rental revenue of $34,720 and $47,146, respectively.

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

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.

16. Subsequent Events

COVID-19.  In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China. In the first several months of 2020, the virus, SARS-CoV-2, and resulting disease, COVID-19, spread to the United States, including New York State, the geographic location in which the Company operates. The Company's evaluation of the effects of these events is ongoing; however, in February and March 2020, some of our tenants began to experience decreasing demand for their products and services which may impact their ability to timely meet their lease obligations.  Furthermore, on March 21^, 2020, New York Governor Andrew Cuomo issued an Executive Order entitled “New York State on PAUSE” (Policy that Assures Uniform Safety for Everyone) (the “Order”), pursuant to which, all non-essential employees (as defined by the State) must stay at home starting March 22, 2020 through April 19, 2020.  The Order also includes a 90-day moratorium on any residential or commercial evictions.

Beginning March 16, 2020, prior to the Order, the Company’s employees began temporarily working remotely to ensure the safety and well-being of our employees and their families.  The Company’s technology infrastructure, for some time, has been set up to handle offsite seamless operations to address alternative disaster recovery disruption.  As a result, all employees will continue to work remotely unless they report needing sick leave or family leave pursuant to regulated benefits.

Small businesses and not-for-profit corporations, which account for approximately 39% ($834,000) of the Company’s projected annual rental revenues for 2020, are expected to be adversely affected disproportionately by the economic ramifications of COVID-19.  Although it is difficult to estimate the duration and full extent of this disruption, the impact of COVID-19 on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, the success of actions taken to contain or treat the coronavirus and reactions by consumers, companies, governmental entities and capital markets.  We are actively working with our tenants to manage and mitigate the impact to COVID-19 on the Company’s operations, liquidity and resulting Net Asset Value.

The COVID-19 public health crisis may also adversely impact our efforts to secure entitlements and the sale of our real estate. State and local governments are prioritizing COVID-19 crisis management and, to the extent possible, re-allocating resources accordingly which may adversely impact the timeline of our entitlements and technical approvals. 

Furthermore, the real estate market is also expected to be adversely affected which could further negatively impact the timing of sales and the resulting value of our real estate.

The extent of the impact of COVID-19 on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on future developments, including the duration and spread of the outbreak and related governmental or other regulatory actions.  The Company has four employees.  As a result, the Company’s ability to operate seamlessly and limit any adverse impact on its forecasted net asset value will also depend, in part, on whether any of its key employees are infected by the Coronavirus and become ill from COVID-19.
 

F-17

GYRODYNE, LLC

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

Credit Facility.  The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of April 30, 2020 or upon drawing down a total of $3,000,000 after which it automatically converts to a permanent loan maturing on the earlier of April 30, 2027 or 84 months after conversion to a permanent loan (the “Permanent Phase”). 

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a third loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to $2,500,000, which is scheduled to close in the second quarter of 2020.  The term is 24 months, with an option to extend for an additional 12 months.  The interest rate 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), but in no event less than four and three quarters percent (4.75%).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for one or both Lots.

The line is secured by the Cortlandt property (approximately 14 acres) and cross collateralized by approximately 31.8 acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective February 27, 2020, the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to one percent (1%) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

F-18

EX-10.13

Exhibit 10.13

BOARD ADVISER AGREEMENT

BOARD ADVISER AGREEMENT (this "Agreement") is made effective as of May 24, 2016, by and between GYRODYNE, LLC, a New York limited liability company (the "Company"), and JAD FAKHRY, an individual residing at 840 Hinckley Road, Suite 250, Burlingame, CA 94010, California (the "Adviser").

WHEREAS, the Company's Board of Directors (the "Board") desires to obtain the advice and counsel of the Adviser with respect to the Company's strategic goal of selling its properties opportunistically and liquidating; and

WHEREAS, the Board would like to engage the Adviser to act as an adviser to the Board, and the Adviser is willing to provide advice to the Board, on the terms and conditions of this Agreement; and

WHEREAS, the Company has spent significant time, effort and money to develop certain Confidential Information (as defined herein) which the Company considers vital to its business and goodwill; and

WHEREAS, the Company wishes to protect and preserve the confidentiality of such Confidential Information and protect it from misuse.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.     Service as an Adviser. The Adviser shall serve as an adviser to the Board on a non-exclusive basis for the term of this Agreement. The Adviser shall perform services hereunder as an independent contractor and not as an employee, agent, joint venturer or partner of the Company. The Adviser shall have no power or authority to act for, represent or bind the Company or its affiliates in any manner whatsoever, except as may be expressly agreed on each occasion, in writing, by the Company and the Board. The Adviser agrees to take no action that expresses or implies that the Adviser has such power or authority.

2.     Duties. During the term of this Agreement, the Adviser will provide advice and counsel to the Board as may be reasonably requested from time to time, and shall attend and participate one meeting of the Board per quarter, generally to be held at the Company’s headquarters in St. James, New York or at a location in New York City to be determined by the Board. The Adviser’s status at such Board meetings will be as an observer, without any right to vote on matters submitted to a vote of the Board. The Adviser will report directly to the members of the Board in the course of performing the Adviser's duties hereunder, unless otherwise expressly directed by the members of the Board.

3.     Term. This Agreement shall have a term of 18 months commencing the date hereof, provided that either party may terminate the Agreement, with or without reason, by written notice to the other, and provided further that the provisions of Section 4.2, Section 6 and Section 7 shall survive any termination or expiration of this Agreement. In the event this Agreement is terminated by either party, pro rata fees and unpaid expenses through the termination date shall be paid to the Adviser promptly thereafter.

4.     Fees.

4.1      As the exclusive compensation for the Adviser's services under this Agreement, the Company shall pay to the Adviser a fee of Two Thousand Five Hundred Dollars ($2,500) per each fiscal quarter hereunder, which shall be paid on or about March 31, June 30, September 30, December 31 during the term hereof for services provided during the quarter just ended. Without limiting the generality of the foregoing, the Adviser hereby acknowledges that he is not eligible to participate in the Company’s Incentive Compensation Plan or Retention Bonus Plan, pursuant to the respective terms of such plans, and shall not have the right to receive any bonus or any other payments thereunder.

4.2      The Company shall not be responsible for withholding or paying any income, payroll, Social Security or other federal, state or local taxes, making any insurance contributions, including unemployment or disability, or obtaining worker's compensation insurance on the Adviser's behalf. However, the Company may file informational returns with the appropriate federal and state agencies regarding such payments. The Adviser is solely responsible for the payment of all taxes and contributions on the Adviser's behalf and agrees to pay all federal, state and local taxes applicable to any compensation paid to the Adviser pursuant to this Agreement. The terms and provisions of this Section 4.2 shall survive termination or expiration of this Agreement.

5.     Expenses. The Company agrees to promptly reimburse the Adviser for reasonable out-of-pocket expenses incurred in connection with the Adviser's attendance at Board meetings on a quarterly basis, and the Adviser shall provide appropriate documentation of all expenses.

6.     Indemnification. In the performance of services hereunder, the Adviser shall be obligated to act only in good faith, and shall not be liable to the Company for errors in judgment that are not the result of willful misconduct. The Company agrees to indemnify and hold harmless the Adviser from and against any and all losses, claims, expenses, damages or liabilities, joint or several, to which the Adviser may become subject (including the costs of any investigation and all reasonable attorneys' fees and costs) or incurred by the Adviser, to the fullest extent lawful, in connection with any pending or threatened litigation, legal claim or proceeding arising out of or in connection with the services rendered by the Adviser under this Agreement; provided, however, that the foregoing indemnity shall not apply to any such losses, claims, related expenses, damages or liabilities arising out of or in connection with the Adviser's willful misconduct or fraud, or material breach of this Agreement. The terms and provisions of this Section 6 shall survive termination or expiration of this Agreement.

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7.     Confidential Information; Trading.

7.1      As used in this Agreement, "Confidential Information" means any and all confidential or proprietary technical, trade and business information furnished, in any medium, or disclosed in any form or method, including orally, by the Company to the Adviser, or discovered by the Adviser through any means, including observation, including, but not limited to, information about the Company's employees, officers, directors, suppliers, customers, affiliates, businesses, business relationships, sales, profits, pricing, other financial data and know-how, financial projections, business plans, marketing plans, marketing materials, research, current and future developments, capabilities, drawings, specifications, methods and trade secrets, databases, computer programs, architectures, structures, other trade secrets and such other information normally understood to be confidential or otherwise designated as such in writing by the Company, as well as information discerned from, based on or relating to any of the foregoing which may be prepared or created by the Adviser. Confidential Information shall not include:

(i) information that is publicly available as of the date of this Agreement; or

(ii) information that subsequently becomes publicly available or generally known in the industry through no fault of the Adviser, provided that such information shall be deemed Confidential Information until such time as it becomes publicly available or generally known.

7.2     The Adviser shall retain all Confidential Information in trust for the sole benefit of the Company, its successors and assigns, and shall comply with any and all procedures adopted from time to time to protect and preserve the confidentiality of any Confidential Information. The Adviser shall not at any time, during or after the term of this Agreement, directly or indirectly, divulge, use or permit the use of any Confidential Information, except as required by the Adviser's services under this Agreement. Adviser agrees to employ reasonable steps to protect Confidential Information from unauthorized or inadvertent disclosure, but at a minimum to the same extent as the Adviser protects the Adviser's own confidential information. Upon expiration or termination of this Agreement and upon the Company's request during the term of this Agreement, the Adviser shall promptly return any and all tangible Confidential Information (whether written or electronic) to the Company, including all copies, abstracts or derivatives thereof.

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7.3     Adviser recognizes that in the course of his duties hereunder, Adviser may receive from the Company information that may be considered "material, nonpublic information" concerning a public company that is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. The Adviser specifically agrees to comply at all times with the Company’s Securities Trading Policy (the “Policy”), a copy of which has been delivered to the Adviser, and that solely for the purpose of such compliance the Adviser shall be deemed as if he is a director thereunder.

7.4     The Adviser acknowledges that the Company competes with other companies that are or could be located anywhere; that the provisions of this Agreement are reasonable and necessary to protect and preserve the Company's business interests; and that the unauthorized disclosure, use or disposition of any Confidential Information in breach of this Agreement may cause irreparable harm and significant injury for which there is no adequate remedy at law. Accordingly, the parties agree the Company shall have the right to immediate injunctive relief in the event of any breach or threatened breach of the obligations in this Section 7, without security or bond, in addition to any other remedies that may be available to the Company at law or in equity. The terms and provisions of this Section 7 shall survive termination or expiration of this Agreement.

8.     No Conflicts. The Adviser represents and warrants to the Company that the Adviser is free to enter into this Agreement and the services to be provided pursuant to this Agreement are not in conflict with any other contractual or other obligation to which the Adviser is bound.

9.     Notices. Any notice required or permitted to be delivered hereunder shall be in writing and shall be sent to the respective mailing addresses set forth in the preamble to this Agreement, to Jad@poplarpointcapital.com if sent electronically to Adviser or to FBraun@gyrodyne.com if sent electronically to the Company, or to such other address as may be given by each party from time to time under this Section. Notices shall be deemed properly given upon personal delivery, the day following deposit by overnight carrier, three (3) days after deposit in the U.S. mail, or when sent by confirmed electronic mail if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day.

10.     Parties in Interest. This Agreement is made solely for the benefit of the Adviser and of the Company, its shareholders, directors and officers. No other person shall acquire or have any right under or by virtue of this Agreement.

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11.     Entire Agreement; Amendments; Severability; Counterparts. This Agreement constitutes the entire agreement and understanding of the parties, and supersedes any and all previous agreements and understandings, whether oral or written, between the parties with respect to the matters set forth in this Agreement. No provision of this Agreement may be amended, modified or waived, except in a writing signed by the parties. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision, and if any restriction in this Agreement is found by a court to be unreasonable or unenforceable, then such court may amend or modify the restriction so it can be enforced to the fullest extent permitted by law. The section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement. This Agreement may be executed by electronic signature in any number of counterparts, each of which together shall constitute one and the same instrument.

12.     Applicable Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of law principles. Any action arising out of this Agreement shall be brought exclusively in a court of competent jurisdiction located in Suffolk County, New York.

13.     Authority. This Agreement has been duly authorized, executed and delivered by and on behalf of the Company and the Adviser.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

COMPANY:

GYRODYNE, LLC

By: ___________________________

Name:

Title:

ADVISER:

_____________________________

Jad Fakhry

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EX-10.14

Exhibit 10.14

AMENDMENT NO. 1

TO

BOARD ADVISER AGREEMENT

AMENDMENT NO. 1 TO BOARD ADVISER AGREEMENT (this “Amendment”) dated as of November 24, 2017 (the “Amendment Date”) by and between GYRODYNE, LLC, a New York limited liability company (the “Company”) and JAD FAKHRY, an individual residing at 840 Hinckley Road, Suite 250, Burlingame, California 94010 (the "Adviser").

WHEREAS, the Adviser and the Company are parties to that certain board adviser agreement dated as of May 24, 2016 (the “Original Agreement”, and as amended from time to time, the “Agreement”);

WHEREAS, the term of the Original Agreement expires November 24, 2017; and

WHEREAS, the Adviser and the Company wish to supplement and amend the Agreement upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     Effective Date. This Amendment shall be effective as of the Amendment Date.

2.     Definitions. For purposes of this Amendment, any capitalized term not otherwise defined herein shall have the meaning set forth in the Agreement.

3.     Amendments.

a.     Section 2 of the Agreement is hereby amended by restating the first sentence thereof to read as follows:

“During the term of this Agreement, the Adviser shall consult with the Board and with management of the Company on an as needed basis, attend and participate in all Board meetings to which he is invited to attend, generally to be held at the Company’s headquarters in St. James, New York or at another location to be determined by the Board, and advise the Board on the strategic process of liquidating the Company and maximizing shareholder value at any board meetings he is invited to attend.”

b.     Section 3 of the Agreement is hereby amended by restating the first sentence thereof to read in its entirety as follows:

” This Agreement shall commence on the date hereof and expire on November 24, 2018, provided that either party may terminate the Agreement, with or without reason, by written notice to the other, and provided further that the provisions of Section 4.2, Section 6 and Section 7 shall survive any termination or expiration of this Agreement.”

c.     Section 4.1 of the Agreement is hereby amended by restating the first sentence thereof to read in its entirety as follows:

“As the exclusive compensation for the Adviser's services under this Agreement, the Company shall pay to the Adviser a fee of Seven Thousand Five Hundred Dollars ($7,500) per each fiscal quarter hereunder, which shall be paid on or about February 28, May 31, August 30, and November 30 during the term hereof commencing February 28, 2018 for services provided during the quarter just ended.”

4.     Entire Agreement; Ratification. This Amendment supersedes all previous agreements, and constitutes the entire agreement of whatsoever kind or nature existing between the parties, relating to the subject matter within. As between the parties, no oral statement or prior written material not specifically incorporated herein shall be of any force and effect. Except as specifically amended herein, the Agreement is to remain in full force and effect, and, as amended by this Amendment, is hereby ratified and confirmed in all respects.

5.     Amendments. No further changes in or additions to the Agreement shall be recognized unless and until made in writing and signed by both the Company and the Adviser.

6.     Captions Not Controlling. The divisions of this Amendment into sections and the use of captions and headings in connection therewith are solely for convenience and shall have no legal effect in construing the provisions of this Amendment.

7.     Governing Law. This Amendment shall be construed and enforced in accordance with the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule thereof.

8.     Successors and Assigns. The parties hereto agree that the covenants and agreements herein contained shall be binding on and shall inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns.

9.     This Amendment may be executed in counterparts, each of which will be deemed to be an original copy of this Amendment and both of which, when taken together, will be deemed to constitute one and the same agreement. The exchange of copies of this Amendment and of signature pages by facsimile or other electronic transmission shall constitute effective execution and delivery of this Amendment as to the parties and may be used in lieu of the original Amendment for all purposes.

[signatures appear on next page]

IN WITNESS WHEREOF, this Amendment has been executed by the parties as of the date and year first above written.

COMPANY:

GYRODYNE, LLC

By: ___________________________

Name:

Title:

ADVISER:

_____________________________

Jad Fakhry

EX-10.15

Exhibit 10.15

AMENDMENT NO. 2

TO

BOARD ADVISER AGREEMENT

AMENDMENT NO. 2 TO BOARD ADVISER AGREEMENT (this “Amendment”) dated as of December 31, 2019 (the “Amendment Date”) by and between GYRODYNE, LLC, a New York limited liability company (the “Company”) and JAD FAKHRY, an individual residing at 840 Hinckley Road, Suite 250, Burlingame, California 94010 (the "Adviser").

WHEREAS, the Adviser and the Company are parties to that certain board adviser agreement dated as of May 24, 2016 (the “Original Agreement”, and as amended from time to time, the “Agreement”); and

WHEREAS, the Original Agreement was amended by Amendment No. 1 thereto dated as of November 24, 2017; and

WHEREAS, the term of the Agreement as amended by Amendment No. 1 thereto expired by its terms November 24, 2018; and

WHEREAS, the Adviser and the Company wish to supplement and amend the Agreement upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     Effective Date. This Amendment shall be effective as of the Amendment Date.

2.     Definitions. For purposes of this Amendment, any capitalized term not otherwise defined herein shall have the meaning set forth in the Agreement.

3.     Amendments.

a.     Section 3 of the Agreement is hereby amended by restating the first sentence thereof to read in its entirety as follows:

” This Agreement shall commence on the date hereof and expire on November 24, 2020, provided that either party may terminate the Agreement, with or without reason, by written notice to the other, and provided further that the provisions of Section 4.2, Section 6 and Section 7 shall survive any termination or expiration of this Agreement.”

b.     Section 4.1 of the Agreement is hereby amended by restating the first sentence thereof to read in its entirety as follows:

“As the exclusive compensation for the Adviser's services under this Agreement, the Company shall pay to the Adviser a fee (the “Adviser Fee”) of Seven Thousand Five Hundred Dollars ($7,500) per each fiscal quarter hereunder, which shall be paid on or about January 15, April 15, July 15 and October 15 during the term hereof commencing January 15, 2018 for services provided during the quarter just ended; provided, however, that the Adviser agrees that all Adviser Fee payments otherwise payable hereunder on or following January 15, 2020 shall accrue and only be payable on December 15, 2026 or such earlier date as the Company may make payment following termination of all aggregated nonqualified deferred compensation arrangements in accordance with Code Section 409A (the “Payment Date”); and provided further, however, that such deferred Adviser Fee amounts shall accrue interest at the rate of Five Percent (5%) per annum and be payable on the Payment Date.”

4.     Entire Agreement; Ratification. This Amendment supersedes all previous agreements, and constitutes the entire agreement of whatsoever kind or nature existing between the parties, relating to the subject matter within. As between the parties, no oral statement or prior written material not specifically incorporated herein shall be of any force and effect. Except as specifically amended herein, the Agreement is to remain in full force and effect, and, as amended by this Amendment, is hereby ratified and confirmed in all respects.

5.     Amendments. No further changes in or additions to the Agreement shall be recognized unless and until made in writing and signed by both the Company and the Adviser.

6.     Captions Not Controlling. The divisions of this Amendment into sections and the use of captions and headings in connection therewith are solely for convenience and shall have no legal effect in construing the provisions of this Amendment.

7.     Governing Law. This Amendment shall be construed and enforced in accordance with the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule thereof.

8.     Successors and Assigns. The parties hereto agree that the covenants and agreements herein contained shall be binding on and shall inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns.

9.     This Amendment may be executed in counterparts, each of which will be deemed to be an original copy of this Amendment and both of which, when taken together, will be deemed to constitute one and the same agreement. The exchange of copies of this Amendment and of signature pages by facsimile or other electronic transmission shall constitute effective execution and delivery of this Amendment as to the parties and may be used in lieu of the original Amendment for all purposes.

[signatures appear on next page]

IN WITNESS WHEREOF, this Amendment has been executed by the parties as of the date and year first above written.

COMPANY:

GYRODYNE, LLC

By: ___________________________

Name:

Title:

ADVISER:

_____________________________

Jad Fakhry

EX-10.17

Exhibit 10.17

**** THE SYMBOL “[****]” DENOTES PLACES WHERE CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL, AND (ii) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED ****

AGREEMENT OF PURCHASE AND SALE

This Agreement of Purchase and Sale (“Agreement”) is made and entered into by and between Purchaser and Seller.

RECITALS

A. GSD (defined in Section 1.1) is the owner of certain real property located in the Town of Cortlandt, County of Westchester and State of New York (the “GSD Land”), together with the improvements thereon, if any (the “GSD Improvements”), as more particularly described on Exhibit A-1 annexed hereto and made a part hereof.

B. Buttonwood (defined in Section 1.1) is the owner of certain real property located in the Town of Cortlandt, County of Westchester and State of New York (the “Buttonwood Land” and, together with the GSD Land, the “Seller Land”), together with the improvements thereon, if any (the “Buttonwood Improvements” and, together with the GSD Improvements, the “Seller Land Improvements”), as more particularly described on Exhibit A-2 annexed hereto and made a part hereof.

C. Seller has heretofore made applications to the Town of Cortlandt (the “Town”) for a zoning amendment petitioning to rezone the Seller Land into a Town Medical Oriented District (“MOD”) and seeking approval for a unified site plan approval (collectively, the “Existing Site Plan Application”) in accordance with the site plan annexed hereto and made a part hereof as Exhibit F (the “Existing Site Plan”) which, among other things, and following subdivision of the Seller Land and the Municipal Parcels (defined in Section 12.1.2) into three (3) parcels, would generally provide for the development of a medical office building (with retail) on a portion of the subdivided Seller Land (the “MOB Lot”), a multi-family residential housing project on a portion of the subdivided Seller Land (the “Residential Lot”) and an open space, passive recreation parcel on a portion of the subdivided Seller Land and Municipal Parcels (the “Recreation Lot”).

D. Following obtainment of Final Project Approvals (defined in Section 12.1.2) as provided in this Agreement, Seller desires to sell a portion of the Seller Land and the Seller Land Improvements thereon, if any, consisting of the MOB Lot (as approved in accordance with the Final Project Approvals), and Purchaser desires to purchase the MOB Lot (as approved in accordance with the Final Project Approvals) and the Seller Land Improvements thereon, if any, from Seller, on the terms and conditions set forth in this Agreement.

E. [****].

NOW, THEREFORE, in consideration of the mutual terms, provisions, covenants and agreements set forth herein, as well as the sums to be paid by Purchaser to Seller, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Purchaser and Seller agree as follows:

ARTICLE 1 - Basic Information

1.1     Certain Basic Terms. The following defined terms shall have the meanings set forth below:

1.1.1     Seller:                                  GSD Cortlandt, LLC (“GSD”) and Buttonwood Acquisition, LLC (“Buttonwood”), each a New York limited liability company

1.1.2     Purchaser:                            Sound Cortlandt, LLC, a Delaware limited liability company

.

1.1.3     Purchase Price:                    $5,720,000.00, subject to adjustment in

accordance with Article 12

1.1.4     Earnest Money:                   [****] (the Initial Earnest Money and the Additional Earnest Money, together with any accrued interest thereon, herein individually and collectively referred to as the “Earnest Money”), to be deposited in accordance with Section 3.1 below

1.1.5     Title Company:                    First American Title Insurance Company

National Commercial Services

1850 K Street NW, Suite 1050

Washington, DC 20006

Attention: ER “Tripp” Piotrowski

Telephone: (202) 530-1812

Email: epiotrowski@firstam.com

1.1.6     Escrow Agent:                     First American Title Insurance Company

National Commercial Services

666 Third Avenue, 5^th Floor

New York, New York 10017

Attention: Aneta Skotnicka, Esq.

Telephone: (212) 551-9471

Email: askotnicka@firstam.com

1.1.7     Broker:                                [****]

1.1.8     Effective Date:                    The date on which this Agreement is executed by the latter to sign of Purchaser or Seller, as indicated on the signature page of this Agreement

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1.1.9     Property

             Information

             Delivery Date:                     Five (5) business days after the Effective Date

1.1.10   Inspection Period:               The period commencing on the Effective Date and ending on the date that is [****]

1.1.11   Closing Date:                      The date that is sixty (60) days after the satisfaction or written waiver of all conditions precedent set forth in Section 7.2 but in no event later than sixty (60) days after the earlier of: (i) the satisfaction of Purchaser’s Permitting Contingency (defined in Section 12.1.1); and (ii) the Outside Date (defined in Section 12.1.1) (as may be extended pursuant to the terms hereof).

Other defined terms used in this Agreement shall have the meaning set forth herein, whether or not such terms are used before or after the definitions are set forth. The Recitals to this Agreement are incorporated herein by this reference.

1.2     Closing Costs. Closing costs shall be allocated and paid as follows:

Cost	Responsible Party
Title Commitment	Purchaser
Premium for standard form title policy	Purchaser
Premium for any upgrade of title policy for extended or additional coverage and any endorsements desired by Purchaser, any inspection fee charged by the Title Company, tax searches, municipal searches, and any other Title Company charges	Purchaser
Costs of Survey and/or any revisions, modifications or recertifications thereto	Purchaser
Costs for UCC Searches	Purchaser
Recording Fees for Deed Recording Fees to release any existing mortgage encumbering the Property	Purchaser Seller
Mortgage taxes	Purchaser
NYS Real Property Transfer Tax (Section 1402(a) of the Tax Law)	Seller
NYS Real Property Transfer Tax (Section 1402-a of the Tax Law)	Purchaser
Any escrow fee charged by Escrow Agent for holding the Earnest Money or conducting the Closing	Purchaser ½ Seller ½
Real Estate Sales Commission to Broker	Seller
All other closing costs, expenses, charges and fees	Purchaser or Seller, as is customary in the locality in which the Real Property is located

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1.3     Notice Addresses:

Purchaser:                          Sound Cortlandt, LLC

c/o Sound Development Group, LLC

[****]

Copy to:                             [****]

Seller:                                GSD Cortlandt, LLC

Buttonwood Acquisition, LLC 

c/o Gyrodyne, LLC

One Flowerfield, Suite 24

St. James, New York 11780

Attention: Peter Pitsiokos, EVP, COO, CCO and Corporate Secretary

Telephone: (631) 584-5400

E-mail: ppitsiokos@gyrodyne.com

Copy to:                             Cuddy & Feder LLP

445 Hamilton Avenue, 14^th Floor

White Plains, New York 10601

Attention: Michael L. Katz, Esq.

Telephone: (914) 761-1300

Facsimile: (914) 761-5372

E-Mail: mkatz@cuddyfeder.com

ARTICLE 2 - Property

2.1     Subject to the terms and conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, the following property (collectively, the “Property”):

2.1.1     Real Property. All of Seller’s right, title and interest, if any, in and to the following: (i) the MOB Lot (as approved in accordance with the Final Project Approvals), together with (ii) the Seller Land Improvements located thereon, if any (the “Improvements”), (iii) all and singular the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anywise appertaining to thereto, and (iv)  all strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining the MOB Lot, if any (collectively, the “Real Property”).

2.1.2     Development Rights. Any and all development rights with respect to the Real Property.

2.2     Conceptual Plan. A conceptual plan showing the overall boundaries of the combined Seller Land and Municipal Parcels, the proposed Residential Lot, the proposed MOB Lot and the proposed Recreation Lot is annexed hereto and made a part hereof as Exhibit I (the “Conceptual Plan”). As more particularly described in Article 12, during the [****] period following the Inspection Period, the parties will, among other things, reasonably cooperate to mutually agree on the boundaries of the Residential Lot, the MOB Lot and the Recreation Lot, which shall be substantially consistent with the Conceptual Plan. [****]. If the parties are unable to agree on the boundaries of the Residential Lot, the MOB Lot and the Recreation Lot as above provided by the end of the [****] period following the Inspection Period, this Agreement shall automatically terminate as more particularly set forth in Article 12. The parties agree to cooperate reasonably following Purchaser’s submission of Purchaser’s Approvals (defined in Section 12.1.2) to make such non-material modifications to the boundaries of the Residential Lot, the MOB Lot and the Recreation Lot as may be reasonably recommended by the engineering firm employed by Purchaser to process Purchaser’s Approvals (“Purchaser’s Engineer”), as confirmed to Seller by Cameron (defined in Section 12.7) if Cameron is not Purchaser’s Engineer, [****]. [****].

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2.3     Conveyance Description. The parties agree that the Deed (defined in Section 7.3.1) to be delivered at the Closing (defined in Section 7.1) conveying the Real Property to Purchaser will describe the Real Property either: (i) if the subdivision of the Seller Land is accomplished by filing a subdivision plat, by reference to the MOB Lot on the filed subdivision plat; or (ii) if the subdivision of the Seller Land is accomplished administratively, by metes and bounds pursuant to a description prepared by Purchaser’s surveyor, at Purchaser’s expense, in accordance with the Survey and certified by said surveyor to Seller in form and substance reasonably satisfactory to Seller.

ARTICLE 3 - Earnest Money

3.1     Deposit and Investment of Earnest Money. [****]. Each of the Initial Earnest Money and the Additional Earnest Money is collectively referred to as the “Earnest Money”. Escrow Agent shall invest the Earnest Money in government insured interest-bearing accounts satisfactory to Seller and Purchaser, shall not commingle the Earnest Money with any funds of Escrow Agent or others, and shall promptly provide Purchaser and Seller with confirmation of the investments made. Such account shall have no penalty for early withdrawal. The interest thereon shall accrue to the benefit of the party receiving the Earnest Money pursuant to the terms of this Agreement, and Purchaser agrees to provide its Federal Tax Identification Number to Escrow Agent upon the opening of escrow.

3.2     Form; Failure to Deposit. The Earnest Money shall be in the form of a wire transfer to Escrow Agent of immediately available U.S. federal funds. If Purchaser fails to timely deposit any portion of the Initial Earnest Money within the time period required, Seller may terminate this Agreement by written notice to Purchaser, and thereafter the parties hereto shall have no further rights or obligations hereunder, except for rights and obligations which, by their terms, survive the termination hereof.

3.3     Disposition of Earnest Money. [****].

3.3.1     By executing the joinder annexed to this Agreement, Escrow Agent accepts its designation as Escrow Agent under this Agreement and agrees to hold and disburse the Earnest Money as provided in this Agreement. The provisions hereof will constitute joint instructions to Escrow Agent to consummate the purchase in accordance with the terms and provisions hereof; provided, however, that the parties shall execute such additional escrow instructions, not inconsistent with the provisions hereof, as may be deemed reasonably necessary to carry out the intentions of the parties as expressed herein.

3.3.2     Upon delivery of the Earnest Money to either Seller, Purchaser or a court of competent jurisdiction in accordance with this Agreement, Escrow Agent shall be relieved of all liability hereunder. Escrow Agent shall deliver the Earnest Money at the election of the party entitled to receive the same by a bank wire transfer to an account designated by such party.

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3.3.3     Seller and Purchaser acknowledge that Escrow Agent is serving solely as an accommodation to the parties hereto, and except for the gross negligence or willful misconduct of Escrow Agent, Escrow Agent shall have no liability of any kind whatsoever arising out of or in connection with its activity as Escrow Agent. Seller and Purchaser jointly and severally agree to and do hereby indemnify and hold harmless Escrow Agent from all suits, actions, loss, costs, claims, damages, liabilities, and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) which may be incurred by reason of its acting as Escrow Agent, in each case, except in the case of Escrow Agent’s gross negligence or willful misconduct, and such indemnity shall survive the termination of this Agreement.

3.3.4     In its capacity as Escrow Agent, Escrow Agent shall not be responsible for the genuineness or validity of any instrument, document or item deposited with it, and shall have no responsibility other than to faithfully follow the instructions contained herein. The parties hereto agree that Escrow Agent is fully protected in acting in accordance with any written instrument given to it hereunder by any of the parties hereto believed by Escrow Agent to have been signed by the proper person. Escrow Agent may assume that any person purporting to give any notice hereunder has been duly authorized to do so. Escrow Agent shall have no obligation to review or confirm that actions taken pursuant to such notice in accordance with this Agreement comply with any other agreement or document. Escrow Agent shall have no duties or responsibilities except those set forth herein. Escrow Agent shall not be bound by any modification of this Agreement unless the same is in writing and signed by Purchaser and Seller, and, if Escrow Agent’s duties hereunder are affected, Escrow Agent.

3.3.5     Escrow Agent hereunder may resign at any time on giving five (5) business days prior notice to that effect to each of Seller and Purchaser. In such event, a successor Escrow Agent shall be selected by Seller and Purchaser. Escrow Agent shall then deliver to the successor Escrow Agent the Earnest Money to be held by the successor Escrow Agent pursuant to the terms of this Agreement. If no successor Escrow Agent is designated and qualified within five (5) business days after Escrow Agent’s resignation is effective, Escrow Agent may apply to a qualified court for the appointment of a successor Escrow Agent. The expenses thereof shall be equally borne by Seller and Purchaser.

3.3.6     Escrow Agent shall have no duty to enforce any obligation of any person to make any payment or delivery or to enforce any obligation of any person to perform any other act. Escrow Agent shall have no liability to the other parties hereto or to anyone else by reason of any failure on the part of any party hereto or any maker, guarantor, endorser or other signatory of any document or any other person to perform such person’s obligations under such document.

3.3.7     Escrow Agent shall have fulfilled its duties with regard to safeguarding of the Earnest Money upon depositing the funds into an FDIC-insured (to the maximum extent available) interest-bearing escrow account of Escrow Agent at First American Trust (the “Bank”). In no event shall Escrow Agent be responsible for the failure of the banking institution or the failure of the insurance, including, but not limited to, the failure of the FDIC protecting the Earnest Money. The parties further acknowledge that should a party have an account with the Bank, it may impact the FDIC coverage protecting the Earnest Money.

ARTICLE 4 - Due Diligence

4.1     Due Diligence Materials To Be Delivered. To the extent such items presently exist and are in Seller’s possession and have not been previously delivered to Purchaser or Purchaser’s agents, Seller shall make available to Purchaser, electronically, the following (the “Property Documents”) on or before the Property Information Delivery Date:

4.1.1     Environmental Reports. The most recent final third party environmental reports or site assessments related to the Property and the Rec Lot Portion prepared for the benefit of Seller;

6

4.1.2     Title and Survey. Seller’s most current title insurance information and survey of the Seller Land and the Seller Land Improvements;

4.1.3     Plans and Drawings. Plans and drawings with respect to the Improvements;

4.1.4     Existing Site Plan Application. A copy of the Existing Site Plan Application, any other applications for development and any development permits and approvals with respect to the Property and the Rec Lot Portion; and

4.1.5     Other Reports. Seller’s most recent, final, third-party geotechnical, architectural and engineering reports.

4.2     Physical Due Diligence. Commencing on the Effective Date and continuing until the Closing, Purchaser and its authorized representatives or agents shall have reasonable access to the Property and the Rec Lot Portion (defined in Section 11.1), and solely for the purpose of obtaining Purchaser’s Approvals (as defined in Section 12.1.1), any other portion of the Seller Land, at all reasonable times during normal business hours, to inspect the Property and the Rec Lot Portion, to perform due diligence and for the purpose of conducting tests, including surveys and architectural, engineering, geotechnical and environmental inspections and tests, provided that (A) Purchaser must give Seller twenty-four (24) hours’ prior telephone or written notice (via e-mail to ppitsiokos@gyrodyne.com and plara@gyrodyne.com) of any such access and inspection or testing (and Seller shall have the right to be present during all such testing and inspections), and with respect to any intrusive inspection or test (e.g., soil, water, air or core sampling) must obtain Seller’s prior written consent including as to contractor, location, scope, methodology and sequencing, such consent not to be unreasonably withheld, conditioned or delayed; it being understood and agreed, however, that any such request for intrusive environmental testing is to be based on the recommendations of a reputable contractor with respect to one or more RECs identified in a Phase I Environmental Site Investigation performed by Purchaser’s environmental contractor, a copy of which shall be delivered to Seller together with Purchaser’s request; and (B) prior to any access, Purchaser must deliver a certificate of insurance to Seller evidencing that Purchaser and its contractors, agents and representatives have in place workers compensation insurance and commercial general liability insurance on an “occurrence” basis, covering the activities of Purchaser and its agents, contractors, affiliates and representatives on or about the Property and the Rec Lot Portion, including (i) Protective Liability, (ii) Products/Completed Operations Liability, (iii) Broad Form Property Damage Liability, and (iv) Contractual Liability (which includes, without limitation, coverage for the indemnity and hold harmless agreement set forth in Section 4.9), against claims for bodily injury, personal injury (with employee and contractual exclusions deleted), property damage and death, with a combined single limit of not less than [****] per occurrence and [****] in the aggregate, with aggregate limits of liability applying separately to Products/Completed Operations and all other general liability coverages combined, covering any accident arising in connection with the presence of Purchaser, its contractors, agents and representatives on or about the Property and the Rec Lot Portion, which insurance shall name Seller as additional insured thereunder and which shall remain in place until the Closing Date or earlier termination of this Agreement, and (iii) all such tests shall be conducted by Purchaser in compliance with Purchaser’s responsibilities set forth in Section 4.8 below. Purchaser shall bear the cost of all such inspections or tests and shall be responsible for and act as the generator with respect to any wastes generated by those tests. Purchaser shall not have the right to interview or otherwise have any communications with any tenants of the Property. Notwithstanding the preceding sentence, Seller agrees that Purchaser shall have the right to meet with the tenants of the Seller Land, other than Arno Physical Therapy and Dr. Paul Taxin, so long as each such meeting between Purchaser and a tenant is coordinated by Seller and a Seller representative is present during the meeting.

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4.3     [****].

4.4     Return of Documents and Reports. If this Agreement terminates for any reason other than Seller’s default hereunder, Purchaser shall promptly return and/or deliver to Seller (or certify to Seller that the same have been destroyed) copies of all Property Documents. Additionally, if this Agreement terminates for any reason other than Seller’s default, then Purchaser must deliver to Seller, at no cost to Seller, copies of all third party reports, investigations and studies, other than economic analyses or other proprietary sales, leasing and marketing information (collectively, the “Reports” and, individually, a “Report”) prepared for Purchaser in connection with its due diligence review of the Property. The Reports shall be delivered to Seller without any representation or warranty as to the completeness or accuracy of the Reports or any other matter relating thereto, and Seller shall have no right to rely on any Report without the written consent of the party preparing same. Purchaser’s obligation to deliver the Property Documents and the Reports to Seller shall survive the termination of this Agreement. Purchaser agrees that all Reports that concern the portion of the Seller Land that will be conveyed to the Association (defined in Section 12.10) will be prepared for the benefit of both Purchaser and the Association.

4.5     [Intentionally deleted.]

4.6     Proprietary Information; Confidentiality. Purchaser acknowledges that the Property Documents are proprietary and confidential and will be delivered to Purchaser solely to assist Purchaser in determining the feasibility of purchasing the Property. Purchaser shall not use the Property Documents for any purpose other than as set forth in the preceding sentence. Purchaser shall not disclose the contents to any person other than to those persons who are responsible for determining the feasibility of Purchaser’s acquisition of the Property; provided, however, it is understood and agreed that Purchaser may disclose such data and information to its employees, consultants, lenders, potential lenders, accountants, investors, potential investors, members, agents and attorneys of Purchaser who have a need to know so that they can assist Purchaser with its due diligence and acquisition of the Property provided that such persons have agreed to preserve the confidentiality of such information as required hereby (collectively, “Permitted Outside Parties”). At any time and from time to time, within two (2) business days after Seller’s request, Purchaser shall deliver to Seller a list of all parties to whom Purchaser has provided any Property Documents or any information taken from the Property Documents. Purchaser shall not divulge the contents of the Property Documents and other information except in strict accordance with the confidentiality standards set forth in this Section 4.6. In permitting Purchaser to review the Property Documents or any other information, Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third party benefits or relationships of any kind, either express or implied, have been offered, intended or created.

4.7     No Representation or Warranty by Seller. Purchaser acknowledges that, except as expressly set forth in this Agreement, Seller has not made and does not make any warranty or representation regarding the truth, accuracy or completeness of the Property Documents or the source(s) thereof. Purchaser further acknowledges that some if not all of the Property Documents were prepared by third parties other than Seller. Seller expressly disclaims any and all liability for representations or warranties, express or implied, statements of fact and other matters contained in such information, or for omissions from the Property Documents, or in any other written or oral communications transmitted or made available to Purchaser. Except for Seller’s representations as expressly set forth in this Agreement, Purchaser shall rely solely upon its own investigation with respect to the Property and the Rec Lot Portion, including, without limitation, the Property’s and the Rec Lot Portion’s physical, environmental or economic condition, compliance or lack of compliance with any ordinance, order, permit or regulation or any other attribute or matter relating thereto. Seller has not undertaken any independent investigation as to the truth, accuracy or completeness of the Property Documents and is providing the Property Documents solely as an accommodation to Purchaser. The provisions of this Section 4.7 shall survive the termination of this Agreement and shall survive the Closing.

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4.8     Purchaser’s Responsibilities. In conducting any inspections, investigations or tests of the Property, the Rec Lot Portion and/or Property Documents, Purchaser and its agents and representatives shall: (i) not disturb the tenants or materially interfere with their use of the Property or the Rec Lot Portion; (ii) not materially interfere with the operation and maintenance of the Property or the Rec Lot Portion; (iii) not damage any part of the Property or the Rec Lot Portion or any personal property owned or held by any tenant or any third party; (iv) not injure or otherwise cause bodily harm to Seller, its agents, guests, invitees, contractors and employees or any tenants or their guests or invitees; (v) comply with all applicable laws; (vi) promptly pay when due the cost of all tests, investigations, and examinations done with regard to the Property and the Rec Lot Portion; (vii) not permit any liens to attach to the Real Property or the Rec Lot Portion by reason of the exercise of its rights hereunder; (viii) immediately repair any damage to the Real Property and the Rec Lot Portion resulting directly or indirectly from any such inspection or tests; and (ix) not reveal or disclose prior to Closing any information obtained during the Inspection Period concerning the Property, the Rec Lot Portion and the Property Documents to anyone other than the Permitted Outside Parties, in accordance with the confidentiality standards set forth in Section 4.6 above, or except as may be otherwise required by law. The provisions of this Section 4.8 shall survive the termination of this Agreement and shall survive the Closing.

4.9     Purchaser’s Agreement to Indemnify. Purchaser indemnifies and holds Seller harmless from and against any and all losses, obligations, liens, claims, causes of action, damages, judgments, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) arising out of Purchaser’s inspections or tests permitted under this Agreement or any violation of the provisions of Sections 4.2 and 4.8 or the action or inaction of Purchaser or its contractors, agents, employees or representatives while on the Property or the Rec Lot Portion or any other portion of the Seller Land; provided, however, the indemnity shall not extend to protect Seller from (i) the negligence or willful misconduct of Seller or its officers, directors, agents, contractors or employees; and/or (ii) any pre-existing liabilities for matters merely discovered by Purchaser (e.g., latent environmental contamination) so long as Purchaser makes reasonable effort not to aggravate any such pre-existing liability of Seller once discovered by Purchaser. Purchaser’s obligations under this Section 4.9 shall survive the termination of this Agreement and shall survive the Closing.

4.10     Environmental Studies. As additional consideration for the transaction contemplated in this Agreement, Purchaser must provide to Seller, at no cost to Seller, immediately following the receipt of a final, approved version (or in the event that the report is not finalized or approved prior to the termination of this Agreement by Purchaser, the most recent version) of same by Purchaser, copies of any and all reports, tests or studies involving contamination of or other environmental concerns relating to the Property or the Rec Lot Portion; provided, however, Purchaser shall have no obligation to cause any such tests or studies to be performed on the Property or the Rec Lot Portion. Seller acknowledges that Purchaser has not made and does not make any warranty or representation regarding the truth or accuracy of any such studies or reports. Notwithstanding Section 4.9 above, Purchaser shall have no liability or culpability of any nature as a result of having provided such information to Seller or as a result of Seller’s reliance thereon or arising out of the fact that Purchaser merely conducted such tests or studies, so long as Purchaser makes reasonable effort not to aggravate any pre-existing liability of Seller once discovered by Purchaser.

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ARTICLE 5 - Title and Survey

5.1     Title Commitment. Seller shall deliver to Purchaser its existing title policy or commitment in accordance with Section 4.1 hereof. Purchaser shall have the right during the Inspection Period to order from the Title Company: (i) a current commitment for title insurance or preliminary title report for the Real Property and the Rec Lot Portion (the “Title Commitment”), and (ii) copies of all documents of record referred to in the Title Commitment as exceptions to title to the Property and/or the Rec Lot Portion, and Purchaser shall deliver such Title Commitment to Seller within five (5) business days following the date on which Purchaser receives the Title Commitment.

5.2     New or Updated Survey. Seller shall deliver to Purchaser its existing survey in accordance with Section 4.1 hereof (the “Existing Survey”). If Purchaser desires to have the Existing Survey updated or re-certified, Purchaser will coordinate such revisions and/or recertification with the surveyor directly or Purchaser may have a new survey of the Property and the Rec Lot Portion (or portion thereof) completed, in any case with the costs of said revised or re-certified survey or new survey (such revised and/or recertified Existing Survey new survey, the “Survey”) to be allocated as set forth in Section 1.2 hereof. Purchaser agrees to cause the Survey to be certified to, among others, Seller.

5.3     Title Review. [****]. The failure of Purchaser to provide such Purchaser’s Initial Title Objection Notice to Seller prior to the expiration of the Initial Title Objections Period shall constitute a waiver of all of Purchaser’s rights under this Section 5.3, except with respect to Subsequent Title Objections (defined below). Within five (5) days after receipt of any updates or revisions to the Title Commitment or Survey, as the case may be, but in no event later than the Closing Date, Purchaser shall furnish copies thereof to Seller’s counsel, together with Purchaser’s notice (“Purchaser’s Subsequent Title Objection Notice”; and, together with Purchaser’s Initial Title Objection Notice, a “Title Objection Notice”) setting forth any further Title Objections based on the updated Title Commitment or Survey, excepting, however, matters that are Permitted Exceptions (“Subsequent Title Objections”). Seller shall have [****], to advise Purchaser in writing whether or not Seller will remedy any Title Objection set forth in a Title Objection Notice. Notwithstanding anything to the contrary contained herein, Seller shall be required to remove all Mandatory Cure Items at or prior to Closing. If Seller fails to respond within the Seller Response Period, Seller shall be deemed to have timely notified Purchaser as of the last day of the Seller Response Period that Seller will not remedy the Title Objection at issue. In the event Seller notifies (or is deemed to have notified) Purchaser it does not intend to remedy any Title Objection, Purchaser shall have the right to terminate this Agreement by giving written notice of Purchaser’s election to so terminate (in which case the Earnest Money shall be returned to Purchaser, and Seller and Purchaser shall have no further obligations under this Agreement except for obligations that expressly survive such termination) not later than the earlier of: (x) five (5) business days following Seller’s notice (or deemed notice) that it will not remedy the Title Objection at issue; and (y) the Closing Date, time being of the essence, failing which the Title Objection at issue shall be and be deemed to be a Permitted Exception. If Seller is unable by the Closing Date to arrange for the Title Company to agree to omit from Purchaser’s Title Commitment any Title Objection that Seller agreed in writing to remedy, then Seller may adjourn the Closing from time to time for a reasonable period of time (the “adjournment period”) not in excess of [****] in the aggregate in order to attempt to arrange for omission of any Title Objection. If the Title Company shall not agree during the adjournment period to omit any Title Objection that Seller agreed in writing to remedy and shall not agree to provide affirmative insurance without additional premium, Seller will be in default of this Agreement. The term “Permitted Exceptions” shall mean: the matters set forth on Exhibit J annexed hereto and made a part hereof; matters set forth in the Title Commitment as of the effective date thereof; matters created by, through or under Purchaser; items shown on the Survey which have not been removed as of the end of the Inspection Period; the Declaration (defined in Section 12.10); any documents required to be recorded as a condition of Final Project Approvals and any subdivision plat required to be recorded to create the Residential Lot, the MOB Lot and the Recreation Lot; and real estate taxes not yet due and payable (or for which Purchaser is otherwise responsible in accordance with Section 8.1). For avoidance of doubt, it is acknowledged and agreed that nothing in this Section 5.3 shall affect Purchaser’s rights under Section 4.3.

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5.4     Mandatory Cure Items. Notwithstanding anything contained in this Agreement to the contrary, Seller shall take, without notice by Purchaser to Seller objecting to the same, such actions as may be required so that the Title Company is willing to issue a standard form title policy to Purchaser without exception for (collectively, “Mandatory Cure Items”): (i)  exceptions relating to Seller’s authority to enter into and consummate the transaction; (ii) standard printed exceptions relating to parties in possession; (iii) any unpaid real estate taxes and assessments for any fiscal year or period prior to the fiscal year or period in which occurs the Closing; (iv) mechanic’s and materialmen’s liens first arising after the Effective Date for work performed (or alleged to have been performed) by or on behalf of Seller; (v) any exception related to any existing mortgage encumbering the Property or the Rec Lot Portion created by Seller including related financing instruments; (vi) any encumbrances created, consented to or affirmatively permitted by Seller after the Effective Date that are not Permitted Exceptions; and (vii) any other monetary lien or judgment entered against Seller (and not caused by Purchaser) that can be discharged of record by the payment of a liquidated sum of money not to exceed [****]. Should Seller so elect, Mandatory Cure Items shall be deemed “removed from title” upon the deposit by Seller (which may be from proceeds of the Purchase Price) with the Title Company at Closing of funds sufficient to pay the underlying obligation relating to such Mandatory Cure Items, provided that the Title Company is willing to omit the title encumbrance relating thereto without any additional cost or premium to Purchaser. Seller shall have the right, at Closing, to use the balance of the Purchase Price to be paid at Closing to cure any Mandatory Cure Item to be cured pursuant to this Section 5.4.

ARTICLE 6 - Operations and Risk of Loss

6.1     Ongoing Operations. From the Effective Date through Closing:

6.1.1     [Intentionally deleted.]

6.1.2     Contracts. Seller will not enter into any contract that will be an obligation affecting the Property or the Rec Lot Portion subsequent to the Closing.

6.1.3     Maintenance of Improvements. Purchaser agrees that Seller shall have no obligation to maintain the Property in any particular condition or state of repair, except that Seller agrees to maintain the Property in such condition and state of repair as is consistent with Seller’s past practices, but without any obligation to make capital repairs, replacements or improvements, shall have no obligation to cure and/or remedy any open permits or violations that may exist as of the Effective Date or arise thereafter or to make any improvements to the Property, and that the Property shall be conveyed to and accepted by Purchaser in such condition and state of repair as may exist on the Effective Date, subject to such reasonable wear, tear and deterioration as may occur between the Effective Date and the Closing Date. Seller agrees to keep in place until the Closing its existing policies of insurance with respect to the Property and the Rec Lot Portion. Notwithstanding anything to the contrary in this Section 6.1.3, Seller agrees to cure and/or remedy on or prior to the Closing any violations arising in respect of the Property and/or the Rec Lot Portion after the Effective Date so long as the aggregate cost to cure all such violations does not exceed [****] (the “Violations Cap”). In the event the aggregate cost to cure all such violations exceeds the Violations Cap and Seller does not agree to cure and/or remedy the same within ten (10) days following Purchaser’s written request, Purchaser shall have the right to terminate this Agreement by giving Seller written notice of such election not later than five (5) days after the end of said ten (10) day period, whereupon Escrow Agent shall deliver the Earnest Money and accrued interest thereon, if any, to Purchaser (less any portion thereof that has become non-refundable in accordance with Section 12.8) and this Agreement shall terminate and cease to be of further force and effect and neither party shall have any further obligation or liability hereunder to the other, except as expressly set forth in this Agreement to the contrary. If Purchaser fails to terminate this Agreement as provided in this Section 6.1.3, Purchaser will be deemed to have waived its right to terminate under this Section 6.1.3 and shall accept the Property subject to all violations, this Agreement shall continue in full force and effect without modification whatsoever, except that, at Closing, Seller shall credit against the balance of the Purchase Price then due the sum of [****], less any sums theretofore incurred or paid by Seller to cure and/or remedy violations in accordance with this Section 6.1.3. If there occurs any violation that Seller is otherwise required to cure and/or remedy under this Section 6.1.3 the existence of which causes any Governmental Authority (defined below) to decline to process Purchaser’s applications for Purchaser’s Approvals (defined below) (an “Impeding Violation”), Seller agrees to spend, in advance of the Closing, such sums not in excess of the Violations Cap to promptly cure the Impeding Violation.

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6.1.4     [****].

6.1.5     Notices. Seller shall promptly furnish to Purchaser copies of any material notices that it receives from any governmental agency with respect to the Property and/or the Rec Lot Portion.

6.1.6     Zoning. Seller shall not consent to any zoning change, variance, subdivision, lot line adjustment or similar change with respect to the Property and/or the Rec Lot Portion, except as contemplated in Article 12.

6.1.7     Exclusivity. From the date of this Agreement until the Closing and so long as Purchaser is not in default hereunder, Seller shall not cause the Broker to continue to market the Property and/or the Rec Lot Portion, engage in negotiations to sell the Property and/or the Rec Lot Portion, solicit any parties to bid on the Property and/or the Rec Lot Portion or enter into any other contract to sell the Property and/or the Rec Lot Portion.

6.2     Damage. The provisions of the Uniform Vendor and Purchaser Risk Act (§5-1311 of the General Obligations Law) shall not apply to this Agreement. If, prior to the Closing, the Property, or any part thereof, is damaged as the result of fire or other casualty (a “Casualty”), then Seller shall promptly notify Purchaser thereof, but Purchaser shall nevertheless purchase the Property in its “as is” condition and close the transaction as provided herein without any deduction from the Purchase Price. The parties agree that in the event of any casualty, Seller shall retain the right to receive any and all insurance proceeds that may be payable as a result of such casualty and the same shall not be assigned to Purchaser at Closing, nor shall Purchaser receive any credit therefor.

6.3     Condemnation. The provisions of the Uniform Vendor and Purchaser Risk Act (§5-1311 of the General Obligations Law) shall not apply to this Agreement. If, prior to the Closing, the Property, the Rec Lot Portion or any part thereof (other than an immaterial portion of the Property or the Rec Lot Portion determined as hereinafter provided), is taken by condemnation or similar proceeding or action (or is the subject of a pending or contemplated condemnation or similar proceeding or action which has not been consummated) (a “Taking”), then Seller shall promptly notify Purchaser thereof, and Purchaser shall have the right, in its sole determination, to terminate this Agreement by written notice to Seller given not later than thirty (30) days after the date Seller notifies Purchaser of the Taking. If Seller shall fail to give such notice, Purchaser shall nevertheless have the right to terminate this Agreement by written notice to Seller given not later than thirty (30) days after Purchaser shall have learned of such Taking. If, prior to the Closing Date, a Taking occurs in respect of an immaterial portion of the Property or the Rec Lot Portion or, if a Taking occurs in respect of a material portion of the Property but Purchaser does not exercise Purchaser’s right to cancel as aforesaid, then, in either case, Purchaser shall purchase the Property in its “as is” condition and close the transaction as provided herein without any deduction from the Purchase Price, and Seller shall assign to Purchaser at Closing Seller’s interest, if any, in any condemnation award in respect of such Taking. So long as this Agreement has not been terminated and Purchaser is not in default of this Agreement beyond any cure period set forth in Section 10.2, Seller shall not settle or compromise any claim for such award without the prior written consent of Purchaser, such consent not to be unreasonably withheld, conditioned or delayed. So long as this Agreement has not been terminated and Purchaser is not in default of this Agreement beyond any cure period set forth in Section 10.2, Purchaser shall have the right to participate in any condemnation proceeding. For purposes of this Section 6.3 an “immaterial” portion of the Property or the Rec Lot Portion shall mean any portion of the Property or the Rec Lot Portion the taking of which does not materially and adversely affect Purchaser’s ability to develop the Property for the Project (defined in Section 12.1.1). In the event Purchaser shall elect to terminate this Agreement as provided in this Section 6.3, this Agreement shall terminate, the Earnest Money and accrued interest thereon, if any, promptly shall be returned to Purchaser, and neither party shall have any further obligations to the other hereunder except any obligations expressly provided in this Agreement to survive termination. Purchaser acknowledges that the Bus Stop Taking (defined in Section 9.1.4) and/or any similar takings are takings in respect of an immaterial portion of the Property.

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6.4     Tax Grievances. Seller shall not withdraw, settle or otherwise compromise any protest or reduction proceeding (each, herein referred as a “Tax Proceeding”) affecting real estate taxes assessed against the Property and/or the Rec Lot Portion for any fiscal period in which the Closing is to occur or any subsequent fiscal period without the prior written consent of Purchaser in Purchaser’s reasonable discretion. Real estate tax refunds and credits received after the Closing Date, which are attributable to the fiscal tax year during which the Closing Date occurs shall be apportioned between Seller and Purchaser, after deducting the expenses of collection thereof, which obligation shall survive the Closing. Real estate tax refunds and credits which are attributable to fiscal tax years prior to the fiscal tax year during which the Closing Date occurs shall be received and retained solely by Seller. Upon the Closing, Seller shall remain solely responsible for the continued prosecution of any protest or reduction proceeding filed for the fiscal year(s) in which the Closing occurs. The obligations in this Section 6.4 shall survive the Closing.

6.5     [****]

6.5.1     [****].

6.5.2     [****].

6.5.3     [****].

6.5.4     [****].

6.5.5     For purposes of this Section 6.5: (i) “Base Remediation Cost Cap” shall mean [****]; (ii) “Remediation Cost Cap” means the Base Remediation Cost Cap; provided, however, [****]; and (iii) “Required Escrow Amount” means: (1) if Seller delivers Seller’s Nullification Notice following Purchaser’s election to terminate in accordance with clause (A) of Section 6.5.4, an amount equal to one hundred twenty five percent (125%) of the estimated amount required to remediate the Non-Required Environmental Cure Item(s), such estimated amount to be determined in the same manner as the estimated cost of a Required Environmental Remediation Cure Item; or (2) if Purchaser elects to proceed in accordance with clause (B) of Section 6.5.4, an amount equal to the lesser of one hundred twenty five percent (125%) of the Aggregate Estimated Remediation Costs and the Remediation Cost Cap.

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6.5.6     [****].

6.6     [****].

ARTICLE 7 - Closing

7.1     Closing. The consummation of the transaction contemplated herein (“Closing”) shall occur on the Closing Date “via the mails” using the services of Escrow Agent (or at a location as may be mutually agreed upon by Seller and Purchaser). Funds shall be deposited into and held by Escrow Agent in a closing escrow account with a bank designated by Escrow Agent. Upon satisfaction or completion of all closing conditions and deliveries, the parties shall direct Escrow Agent to record and deliver the closing documents to the appropriate parties and make disbursements according to the closing statements executed by Seller and Purchaser. Anything contained herein to the contrary notwithstanding, Purchaser shall have the one time right following the satisfaction of Purchaser’s Permitting Contingency to extend the Closing Date for up to [****] upon written notice to Seller given not later than five (5) days prior to the then Closing Date so long as Purchaser, at the time it gives Seller its extension notice as aforesaid, pays to Seller in immediately available federal funds, pursuant to wire transfer instructions provided by Seller, [****], which sum shall be and be deemed to be fully earned and non-refundable, except in the event this Agreement is terminated in accordance with Section 10.2 (in which event Seller shall be obligated to return such sum to Purchaser), but shall be credited against the balance of the Purchase Price due at Closing. Anything contained herein to the contrary notwithstanding, either party shall have the one time right to extend the Closing Date for up to one hundred eighty (180) days upon written notice to the other given not later than three (3) days prior to the then Closing Date if the closing condition set forth in Section 7.2.5 has not been satisfied as of such date.

7.2     Conditions to Parties’ Obligation to Close. In addition to all other conditions set forth herein, the obligation of Seller, on the one hand, and Purchaser, on the other hand, to consummate the transactions contemplated hereunder are conditioned upon the following:

7.2.1     Representations and Warranties. The other party’s representations and warranties contained herein shall be true and correct in all material respects as required by this Agreement;

7.2.2     Deliveries. As of the Closing Date, the other party shall have tendered all deliveries to be made at Closing and shall have performed all other material obligations to be performed by such party at or prior to Closing;

7.2.3     Actions, Suits, etc. The other party shall not be a party to or the subject of any pending or threatened actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, that would materially and adversely affect the other party’s ability to perform its obligations under this Agreement;

7.2.4     Title Obligations. Seller shall have complied with its obligations set forth in Article 5;

7.2.5     [****]. [****];

7.2.6     Service Contracts. As of the Closing Date, there shall be no service contracts in effect with respect to the Property or the Rec Lot Portion;

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7.2.7     Municipal Parcels Approval. (i) The Municipal Parcels Approval shall have been obtained and all applicable appeals periods shall have expired without any legal challenge having been made or, if made, such challenge was finally resolved in favor of issuance of the Municipal Parcels Approval, and (ii) the Town shall have conveyed (or contemporaneously with the closing convey) the Municipal Parcels to the Association for consideration of not more than [****] ([****]);

7.2.8     Purchaser’s Permitting Contingency. Purchaser’s Permitting Contingency (defined in Section 12.1.1) shall have been satisfied (or deemed satisfied) by the Outside Date (defined in Section 12.1.1) or waived as provided in Article 12; and

7.2.9     Association Disclaimer and Release. The Association shall have executed and delivered to Seller the Association Disclaimer and Release substantially in the form annexed hereto and made a part hereof as Exhibit O.

For avoidance of doubt, the conditions set forth in Sections 7.2.4, 7.2.5, 7.2.6 and 7.2.8 are for Purchaser’s benefit, the conditions set forth in Sections 7.2.1, 7.2.2, 7.2.3 and 7.2.7 are for each of the parties’ respective benefit and the condition set forth in Section 7.2.9 is for Seller’s benefit.

So long as a party is not in default hereunder, if any condition to such party’s obligation to proceed with the Closing hereunder has not been satisfied as of the Closing Date (or such earlier date as is provided herein), such party may, in its sole discretion and as its sole and exclusive remedy if the provisions of Article 10 do not apply, terminate this Agreement by delivering written notice to the other party on or before the Closing Date (or such earlier date as is provided herein), or elect to close (or to permit any such earlier termination deadline to pass) notwithstanding the non-satisfaction of such condition, in which event such party shall be deemed to have waived any such condition. In the event the party benefiting from the condition elects to close (or to permit any such earlier termination deadline to pass), notwithstanding the non-satisfaction of the condition, said party shall be deemed to have waived the condition, and there shall be no liability on the part of any other party hereto for breaches of representations and warranties of which the party electing to close had knowledge at the Closing. In the event any of the conditions set forth in this Section 7.2 are neither waived nor satisfied on the Closing Date and the provisions of Article 10 do not apply, Seller or Purchaser (as applicable) may elect to terminate this Agreement and, except as otherwise set forth in this Agreement to the contrary, the Earnest Money shall be returned to Purchaser, and thereafter, neither party shall have any further rights or obligations hereunder except for obligations which expressly survive termination of this Agreement.

7.3     Seller’s Deliveries in Escrow. As of or prior to the Closing Date, Seller shall deliver in escrow to Escrow Agent the following:

7.3.1     Deed. A bargain and sale deed in the form attached hereto as Exhibit B and otherwise acceptable for recordation under the law of the state where the Property is located, executed and acknowledged by Seller, conveying to Purchaser Seller’s interest in the Real Property (the “Deed”);

7.3.2     [Intentionally deleted.];

7.3.3     Conveyancing or Transfer Tax Forms or Returns. Such conveyancing or transfer tax forms or returns, if any, as are required to be delivered or signed by Seller by applicable state and local law in connection with the conveyance of the Real Property (i.e., forms RP-5217 and TP-584);

7.3.4     FIRPTA. A Foreign Investment in Real Property Tax Act affidavit executed by Seller;

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7.3.5     Authority. Evidence of the existence, organization and authority of Seller and of the authority of the persons executing documents on behalf of Seller, reasonably satisfactory to the Title Company;

7.3.6     Title Affidavit. A title affidavit in the form of Exhibit D attached hereto and made a part hereof;

7.3.7      Declaration. To the extent not theretofore recorded, the Declaration (defined in Section 12.10), executed and acknowledged by Seller, which Declaration will be recorded immediately prior to the Deed and the Recreation Lot Deed (defined below);

7.3.8     [Intentionally deleted.]

7.3.9     Recreational Lot Deed and Transfer Tax Forms. A bargain and sale deed in the form attached hereto as Exhibit B and otherwise acceptable for recordation under the law of the state where the Property is located, executed and acknowledged by Seller, conveying to the Association Seller’s interest in the Rec Lot Portion, subject only to the Permitted Exceptions (the “Recreation Lot Deed”). Seller will also execute and deliver such conveyancing or transfer tax forms or returns, if any, as are required to be delivered or signed by Seller by applicable state and local law in connection with the conveyance of Seller’s interest in the portion of the Seller Land comprising a portion of the Recreational Lot (i.e., forms RP-5217 and TP-584). To the extent any NYS Real Property Transfer Tax is due in connection with the conveyance described in this Section 7.3.9, the same shall be paid by the parties in the same manner as NYS Real Property Transfer Tax is paid in respect of the Property, as if Purchaser and not the Association were acquiring the Recreation Lot. Counterparts of the conveyance and/or transfer tax forms for the Recreation Lot shall be signed by an authorized signatory of the Association and deposited in escrow with Escrow Agent at or prior to the Closing. The documents in this Section 7.3.9 need not be delivered at Closing to the extent the Association has theretofore acquired title to the Rec Lot Portion; and

7.3.10     Certificate of Representations and Warranties. A certificate, dated as of the Closing Date, executed by Seller, stating that the representations and warranties of Seller contained in Section 9.1 hereof are true, correct and complete in all material respects as of the Closing Date, except to the extent any such representation or warranty is stated to be made as of the Effective Date or another date, in which case such representation or warranty shall continue to be true, correct and complete in all material respects as of the Effective Date or such other date.

7.4     Purchaser’s Deliveries in Escrow. As of or prior to the Closing Date, Purchaser shall deliver in escrow to Escrow Agent the following:

7.4.1     [Intentionally deleted.];

7.4.2     Authority. Evidence of the existence, organization and authority of Purchaser and of the authority of the persons executing documents on behalf of Purchaser, reasonably satisfactory to Seller;

7.4.3     Conveyancing or Transfer Tax Forms or Returns. Such conveyancing or transfer tax forms or returns, if any, as are required to be delivered or signed by Purchaser by applicable state and local law in connection with the conveyance of Real Property (i.e., forms RP-5217 and TP-584);

7.4.4     [Intentionally deleted.]; and

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7.4.5     Certificate of Representations and Warranties. A certificate, dated as of the Closing Date, executed by Purchaser, stating that the representations and warranties of Purchaser contained in Section 9.2 hereof are true, correct and complete in all material respects as of the Closing Date.

7.5     Closing Statements. As of or prior to the Closing Date, Seller and Purchaser shall deposit with Escrow Agent an executed closing statement consistent with this Agreement in the form required by Escrow Agent.

7.6     Purchase Price. At or before 2:00 p.m. local time on the Closing Date, Purchaser shall deliver to Escrow Agent the Purchase Price, less the Earnest Money, plus or minus applicable prorations and other adjustments as provided in this Agreement, in immediate, same-day U.S. federal funds wired for credit into Escrow Agent’s escrow account, which funds must be delivered in a manner to permit Escrow Agent to deliver good funds to Seller or its designee on the Closing Date (and, if requested by Seller, by wire transfer).

7.7     Possession. Seller shall deliver possession of the Property to Purchaser at the Closing, subject only to the Permitted Exceptions.

7.8     Delivery of Books, Records and Keys. Upon the Closing, Seller or Seller’s property manager, to the extent not previously delivered to Purchaser, shall make available to Purchaser at Seller’s or its property manager’s offices to the extent in Seller’s or its property manager’s possession or control: (i) maintenance records and warranties; (ii) plans and specifications; and (iii) keys and other access control devices.

ARTICLE 8 - Prorations, Deposits, Commissions

8.1     Prorations. At Closing, the following items shall be prorated as of 11:59 p.m. on the date immediately preceding the date of Closing with all items of income and expense for the Property being borne by Purchaser from and after (but including) the date of Closing: real estate taxes and assessments (each, a “Tax” and, collectively, “Taxes”) for the then-current fiscal period in which the Closing occurs, and utilities. Specifically, the following shall apply to such prorations:

8.1.1     Taxes. Taxes shall be apportioned on the basis of the fiscal period for which assessed. If Closing shall occur before a new tax rate is fixed, the apportionment of taxes shall be upon the basis of the tax rate for the immediately preceding fiscal period applied to the latest assessed valuation. If, on the Closing Date, the Property or any part thereof shall be or shall have been affected by assessments which are or which may become payable in annual installments of which the first installment is then a charge or lien or has been paid, then, for the purposes of this Agreement, all of the unpaid installments (except the installment, if any, that covers the period during which the closing occurs which shall be apportioned between Seller and Purchaser as of the Closing Date based on the number of days in said period) of any such assessments, including those which are to become due and payable after the Closing Date, shall be deemed Permitted Exceptions and shall be paid and discharged by Purchaser after the Closing Date. Notwithstanding anything contained herein to the contrary, for purposes of the adjustment to be made under this Section 8.1 with respect to real estate taxes, it is agreed that the real estate tax adjustments for the Property shall be calculated and adjusted as if the entire Seller Land and Seller Land Improvements were being conveyed to Purchaser, but, once so calculated and adjusted, Purchaser shall be responsible for paying and/or receive the benefit of Purchaser’s Share (defined below) of the adjustment. [****]. The obligations in this Section shall survive the Closing. For purposes of this Article 8: (i) “Purchaser’s Share” means the quotient obtained after dividing the square footage of the MOB Lot by the Square footage of the Residential Lot and the MOB Lot, expressed as a percentage; and (ii) “Seller’s Share” means the quotient obtained after dividing the square footage of the Residential Lot by the Square footage of the Residential Lot and the MOB Lot, expressed as a percentage.

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8.1.2     Utilities. Purchaser shall take all steps necessary to effectuate the transfer of all utilities to its name as of the Closing Date, and where necessary, post deposits with the utility companies. Seller shall ensure that all utility meters are read not later than one (1) day prior to the Closing Date. Seller shall pay all utility charges owing through and including 11:59 p.m. on the date immediately preceding the date of Closing (and unfixed charges, if any, shall be apportioned on the basis of the last reading), such obligation to survive the Closing. Seller shall be entitled to recover any and all deposits held by any utility company as of the Closing Date. Notwithstanding anything herein to the contrary, it is the intention of the parties that Seller terminate all contracts and accounts it has with the applicable utility provider as of the Closing Date and that Purchaser will establish its own contracts and accounts with such providers and that adjustments for utilities shall only be made where the Seller’s account or contract with a utility provider cannot be terminated as of the Closing Date.

8.2     Closing Costs. Closing costs shall be allocated between Seller and Purchaser in accordance with Section 1.2. Each of Seller and Purchaser agrees to indemnify, defend and hold harmless the other from and against any and all loss, liability, damage, obligation, judgment, claim, suit, action, proceeding, cost and/or expenses including, without limitation, reasonable attorneys’ fees and disbursements, incurred by such party arising out of or in any way related to the indemnifying party’s failure to pay any NYS Real Property Transfer Tax it is required to pay under this Agreement, such obligation to survive Closing.

8.3     Final Adjustment After Closing. If final bills are not available or cannot be issued prior to Closing for any item being prorated under Section 8.1, then Purchaser and Seller agree to allocate such items on a fair and equitable basis as soon as such bills are available, final adjustment to be made as soon as reasonably possible after the Closing, but in any event not more than six (6) months after Closing. Payments in connection with the final adjustment shall be due within thirty (30) days of written notice. All such rights and obligations shall survive the Closing for a period of six (6) months. The parties also agree to readjust post-Closing for any errors in apportionments, such obligation to survive the Closing for a period of ninety (90) days.

ARTICLE 9 - Representations and Warranties

9.1     Seller’s Representations and Warranties. Seller represents and warrants to Purchaser that:

9.1.1     Organization and Authority. Seller has been duly organized, is validly existing, and is in good standing in the state in which it was formed. Seller has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Seller at the Closing will be, authorized and executed and constitute, or will constitute, as appropriate, the valid and binding obligation of Seller, enforceable in accordance with their terms.

9.1.2     Conflicts and Pending Actions. There is no agreement to which Seller is a party or, to Seller’s knowledge, that is binding on Seller which is in conflict with this Agreement. To Seller’s knowledge, there is no action or proceeding pending or threatened against Seller or relating to the Property or the Rec Lot Portion, which, if adversely determined, could reasonably be expected to impair Seller’s ability to execute or perform its obligations under this Agreement.

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9.1.3     [Intentionally deleted].

9.1.4     Notices from Governmental Authorities. To Seller’s knowledge, as of the Effective Date, Seller has not received from any governmental authority written notice of any material violation of any laws applicable (or alleged to be applicable) to the Real Property, the Rec Lot Portion or any part thereof, that has not been corrected, except as may be reflected by the Property Documents or otherwise disclosed in writing to Purchaser. In addition, as of the Effective Date: (i) Seller has not received from any governmental authority written notice of any condemnation proceeding pending against the Property or the Rec Lot Portion; and (ii) to Seller’s knowledge, no condemnation proceeding is threatened against the Property or the Rec Lot Portion; provided, however, Purchaser acknowledges that Seller has advised Purchaser that the State of New York and/or the County of Westchester has advised Seller that there will likely be a taking of a portion of the Seller Land fronting on Crompond Road for purposes of road widening and creating a bus stop, the cost of construction of which is to be borne by the owner of the MOB Lot (the “Bus Stop Taking”).

9.1.5     FIRPTA. Seller is not a "foreign person" as such term is defined under Section 1445(f)(3) of the Internal Revenue Code, as amended (the "Code"), relating to the transfer of U.S. real property interests by foreign persons.

9.1.6     [****].

9.1.7     Environmental. To Seller’s knowledge, as of the Effective Date, except as may be set forth in the Property Documents, Seller has received no written notice that the Property or the Rec Lot Portion is in violation of or subject to any existing, pending or threatened investigation, action, litigation or inquiry by any governmental authority or to any remedial obligations to governmental authorities or private parties under any applicable federal, state or local laws, regulations or ordinances pertaining to health or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the laws of the State of New York. Except as may be set forth in the Property Documents, as of the Effective Date, Seller is not aware of the current or past presence of any Hazardous Materials (defined in Section 11.4) in, on, or under the Property or the Rec Lot Portion in violation of applicable laws. To Seller’s knowledge, Seller has delivered or made available to Purchaser all material third-party environmental reports or assessments with respect to the Property and the Rec Lot Portion in Seller’s possession.

9.1.8     Bankruptcy. No petition has been filed by Seller, nor has Seller received written notice of any petition filed against Seller under the Federal Bankruptcy Code or any similar laws.

9.1.9     Employees. As of the Closing Date, Seller shall have no employees at the Property or the Rec Lot Portion.

9.1.10     ERISA. Seller is not, and is not acting on behalf of (i) an “employee benefit plan” as defined in Section 3(3) of ERISA, that is subject to Title I of ERISA, (ii) a “plan” as defined in and subject to Section 4975 of the Internal Revenue Code, or (iii) an entity deemed to hold “plan asset” of any of the foregoing within the meaning of 29 C.F.R. Section 2510.3 101, as modified by Section 3(42) of ERISA. None of the transactions contemplated by this Agreement are in violation of any state statutes applicable to Seller regulating investments of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

9.1.11     Prohibited Persons. Neither Seller nor any of its respective officers, directors, shareholders, partners, members or affiliates (including without limitation indirect holders of equity interests in Seller) is or will be an entity or person (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”), (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf), (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO3224, (iv) is subject to sanctions of the United States government or is in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations relating to terrorism or money laundering, including, without limitation, EO13224 and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or (v) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) – (v) above are herein referred to as a “Prohibited Person”). Seller covenants and agrees that neither Seller nor any of its respective officers, directors, shareholders, partners, members or affiliates (including without limitation indirect holders of equity interests in Seller) shall (aa) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person, or (bb) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224.

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9.1.12     [****].

9.2     Purchaser’s Representations and Warranties. Purchaser represents and warrants to Seller that:

9.2.1     Organization and Authority. Purchaser has been duly organized and is validly existing as a limited liability company in good standing in the State of Delaware (and any assignee of Purchaser pursuant to Section 13.1 has been duly organized and is validly existing as the type of entity stated in its signature block and is in good standing in its state of organization and is or will be as of the Closing Date qualified to do business in the state in which the Real Property is located). Purchaser has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Purchaser at the Closing will be, authorized and properly executed and constitute, or will constitute, as appropriate, the valid and binding obligation of Purchaser, enforceable in accordance with their terms.

9.2.2     Conflicts and Pending Action. There is no agreement to which Purchaser is a party or to Purchaser’s knowledge binding on Purchaser which is in conflict with this Agreement. There is no action or proceeding pending or, to Purchaser’s knowledge, threatened against Purchaser, which challenges or impairs Purchaser’s ability to execute or perform its obligations under this Agreement.

9.2.3     Prohibited Persons. Neither Purchaser nor any of its respective officers, directors, shareholders, partners, members or affiliates (including without limitation indirect holders of equity interests in Purchaser) is or will be an entity or person (i) that is listed in the Annex to, or is otherwise subject to the provisions of EO13224, (ii) whose name appears on the OFAC most current list of “Specifically Designated National and Blocked Persons”, (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO3224, (iv) is subject to sanctions of the United States government or is in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations relating to terrorism or money laundering, including, without limitation, EO13224 and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or (v) who is otherwise affiliated with any Prohibited Person. Purchaser covenants and agrees that neither Purchaser nor any of its respective officers, directors, shareholders, partners, members or affiliates (including without limitation indirect holders of equity interests in Purchaser) shall (aa) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person, or (bb) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224.

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9.2.4     Bankruptcy. No petition has been filed by Purchaser, nor has Purchaser received written notice of any petition filed against Purchaser under the Federal Bankruptcy Code or any similar laws.

9.2.5     [****].

The foregoing representations shall be automatically remade by any assignee of this Agreement pursuant to Section 13.1.

9.3     Survival of Representations and Warranties; Limitation of Liability. The representations and warranties set forth in this Article 9 are made as of the date of this Agreement and, except where expressly made as of the Effective Date, are remade as of the Closing Date and shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing for a period of six (6) months (the “Survival Period”). If any representation or warranty made by Seller in this Agreement is not true and correct in all material respects as a result of a matter, event or circumstance beyond Seller’s reasonable control, Purchaser may not consider same as an event of default or breach hereunder; but rather, in such case, and following written notice from Seller of such materially untrue or incorrect representation or warranty, which notice Seller shall give to Purchaser not later than five (5) days after Seller learns of the same, Purchaser may, at Purchaser’s option and as Purchaser’s sole and exclusive remedy, not later than five (5) days after Seller’s notice as above provided, proceed as set forth in the last grammatical paragraph of Section 7.2. Terms such as “to Seller’s knowledge,” “to the best of Seller’s knowledge” or like phrases mean the actual present and conscious awareness or knowledge of Peter Pitsiokos (“Seller’s Employee”), without any duty of inquiry or investigation; provided that so qualifying Seller’s knowledge shall in no event give rise to any personal liability on the part of Seller’s Employee or any other officer or employee of Seller, on account of any breach of any representation or warranty made by Seller herein. Said terms do not include constructive knowledge, imputed knowledge, or knowledge Seller or such persons do not have but could have obtained through further investigation or inquiry. No broker, agent, or party other than Seller is authorized to make any representation or warranty for or on behalf of Seller. Each party shall have the right to bring an action against the other on the breach of a representation or warranty hereunder, but only on the following conditions: (i) the party bringing the action for breach first learns of the breach after Closing and files such action within the Survival Period, and (ii) neither party shall have the right to bring a cause of action for a breach of a representation or warranty unless the damage to such party on account of such breach (individually or when combined with damages from other breaches) equals or exceeds [****]. Neither party shall have any liability after Closing for the breach of a representation or warranty hereunder of which the other party hereto had knowledge as of Closing or that was contained in the Property Documents. Furthermore, Purchaser agrees that the aggregate maximum liability of Seller for the alleged breach of any or all representations or warranties set forth in this Agreement is limited to Purchaser’s actual damages incurred as a direct result of Seller’s breach of any or all representations or warranties under this Agreement, up to, but not to exceed, [****]. In no event shall Seller or Purchaser be liable to the other for incidental, consequential, or punitive damages as a result of the breach of any or all representations or warranties set forth in this Agreement. The provisions of this Section 9.3 shall survive the Closing. Any breach of a representation or warranty that occurs prior to Closing shall be governed by Article 10.

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ARTICLE 10 - Default and Remedies

10.1     Seller’s Remedies. If (i) Purchaser fails to perform its obligations pursuant to this Agreement at or prior to Closing for any reason except failure by Seller to perform hereunder, or (ii) if prior to Closing any one or more of Purchaser’s representations or warranties are breached in any material respect, and in either case are not cured [****] from receipt of notice (which written notice shall describe all defaults and breaches with reasonable specificity) from Seller of such breach, provided the Closing Date shall in no way be delayed as a result of any cure period, then Seller shall be entitled, as its sole remedy (except as provided in Sections 4.9, 10.3, 10.4 and 12.4 hereof), to terminate this Agreement and recover the Earnest Money as liquidated damages and not as penalty, in full satisfaction of claims against Purchaser hereunder. Seller and Purchaser agree that Seller’s damages resulting from Purchaser’s default are difficult, if not impossible, to determine and the Earnest Money is a fair estimate of those damages which has been agreed to in an effort to cause the amount of such damages to be certain. If Closing is consummated, Seller shall have all remedies available at law or in equity in the event Purchaser fails to perform any obligation of Purchaser under this Agreement that survives the Closing. Purchaser agrees to give Seller written notice of any breach of a Purchaser representation not later than five (5) days following Purchaser becoming aware of the breach.

10.2     Purchaser’s Remedies. [****].

10.3     Attorneys’ Fees. In the event either party hereto employs an attorney in connection with claims by one party against the other arising from the operation of this Agreement, the non-prevailing party shall pay the prevailing party all reasonable fees and expenses, including attorneys’ fees, incurred in connection with such transaction.

10.4     Other Expenses. If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees or charges due to Escrow Agent for holding the Earnest Money as well as any escrow cancellation fees or charges and any fees or charges due to the Title Company for preparation and/or cancellation of the Title Commitment.

ARTICLE 11 – Disclaimers and Release

11.1     Disclaimers By Seller. Except as expressly set forth in this Agreement and in any document executed by Seller and delivered to Purchaser at Closing, it is understood and agreed that Seller has not at any time made and is not now making, and it specifically disclaims, any warranties or representations of any kind or character, express or implied, with respect to the Property or the portion of the Seller Land that will comprise a portion of the Recreation Lot (the “Rec Lot Portion”), including, but not limited to, warranties or representations as to (i) matters of title, (ii) environmental matters relating to the Property, the Rec Lot Portion or any portion thereof, including, without limitation, the presence of Hazardous Materials in, on, under or in the vicinity of the Property or the Rec Lot Portion, (iii) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, limitations regarding the withdrawal of water, and geologic faults and the resulting damage of past and/or future faulting, (iv) whether, and to the extent to which the Property, the Rec Lot Portion or any portion thereof is affected by any stream (surface or underground), body of water, wetlands, flood prone area, flood plain, floodway or special flood hazard, (v) drainage, (vi) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any undershoring, (vii) the presence of endangered species or any environmentally sensitive or protected areas, (viii) zoning or building entitlements to which the Property, the Rec Lot Portion or any portion thereof may be subject, (ix) the availability of any utilities to the Property, the Rec Lot Portion or any portion thereof including, without limitation, water, sewage, gas and electric, (x) usages of adjoining property, (xi) access to the Property, the Rec Lot Portion or any portion thereof, (xii) the value, compliance with the plans and specifications, size, location, age, use, design, quality, description, suitability, structural integrity, operation, title to, or physical or financial condition of the Property, the Rec Lot Portion or any portion thereof, or any income, expenses, charges, liens, encumbrances, rights or claims on or affecting or pertaining to the Property, the Rec Lot Portion or any part thereof, (xiii) the condition or use of the Property or the Rec Lot Portion or compliance of the Property or the Rec Lot Portion with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws, (xiv) the existence or non-existence of underground storage tanks, surface impoundments, or landfills, (xv) the merchantability of the Property or the Rec Lot Portion or fitness of the Property or the Rec Lot Portion for any particular purpose, (xvi) the truth, accuracy or completeness of the Property Documents, (xvii) tax consequences, or (xviii) any other matter or thing with respect to the Property or the Rec Lot Portion.

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11.2     Sale “As Is, Where Is.” Purchaser acknowledges and agrees that upon Closing, Seller shall sell and convey to Purchaser and Purchaser shall accept the Property “AS IS, WHERE IS, WITH ALL FAULTS,” except to the extent expressly provided otherwise in this Agreement and any document executed by Seller and delivered to Purchaser at Closing. Except as expressly set forth in this Agreement and in any document executed by Seller and delivered to Purchaser at Closing, Purchaser has not relied and will not rely on, and Seller has not made and is not liable for or bound by, any express or implied warranties, guarantees, statements, representations or information pertaining to the Property or the Rec Lot Portion or relating thereto (including specifically, without limitation, information packages distributed with respect to the Property and/or the Rec Lot Portion) made or furnished by Seller, or any real estate broker, agent or third party representing or purporting to represent Seller, to whomever made or given, directly or indirectly, orally or in writing. Purchaser represents that it is a knowledgeable, experienced and sophisticated purchaser of real estate and that, except as expressly set forth in this Agreement, it is relying solely on its own expertise and that of Purchaser’s consultants in purchasing the Property and becoming a member in the Association (defined below) and shall make an independent verification of the accuracy of any documents and information provided by Seller. Purchaser will conduct such inspections and investigations of the Property and the Rec Lot Portion as Purchaser deems necessary, including, but not limited to, the physical and environmental conditions thereof, and shall rely upon same. By failing to terminate this Agreement prior to the expiration of the Inspection Period, Purchaser acknowledges that Seller has afforded Purchaser a full opportunity to conduct such investigations of the Property and the Rec Lot Portion as Purchaser deemed necessary to satisfy itself as to the condition of the Property and the Rec Lot Portion and the existence or non-existence or curative action to be taken with respect to any Hazardous Materials on or discharged from the Property or the Rec Lot Portion, and will rely solely upon same and not upon any information provided by or on behalf of Seller or its agents or employees with respect thereto, other than such representations, warranties and covenants of Seller as are expressly set forth in this Agreement. Upon Closing, Purchaser shall assume the risk that adverse matters, including, but not limited to, adverse physical or construction defects or adverse environmental, health or safety conditions, may not have been revealed by Purchaser’s inspections and investigations.

11.3     Seller Released from Liability. Purchaser acknowledges that it will have the opportunity to inspect the Property and the Rec Lot Portion during the Inspection Period, and during such period, observe its physical characteristics and existing conditions and the opportunity to conduct such investigation and study on and of the Property and the Rec Lot Portion and adjacent areas as Purchaser deems necessary, and upon the occurrence of the Closing Purchaser hereby FOREVER RELEASES AND DISCHARGES Seller from all responsibility, obligations, claims, demands and liability whatsoever regarding the physical condition, valuation, salability or utility of the Property and the Rec Lot Portion, or its suitability for any purpose whatsoever, past, present and future, including, but not limited to, with respect to the presence in the soil, air, structures and surface and subsurface waters, of Hazardous Materials or other materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Property or the Rec Lot Portion under current or future federal, state and local laws, regulations or guidelines, and any structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Property, and further including, but not limited to, liabilities under the Comprehensive Environmental Response, Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.), as amended (“CERCLA”). Further, by Closing this transaction Purchaser will be deemed to have WAIVED any and all objections and complaints (including, but not limited to, federal, state and local statutory and common law based actions, and any private right of action under any federal, state or local laws, regulations or guidelines to which the Property or the Rec Lot Portion is or may be subject, including, but not limited to, CERCLA) concerning the physical characteristics and any existing conditions of the Property or the Rec Lot Portion. Upon the occurrence of the Closing, Purchaser further assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Property and the Rec Lot Portion and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of Hazardous Materials or other contaminants, may not have been revealed by its investigation. Notwithstanding the foregoing, the foregoing release and waiver is not intended and shall not be construed as affecting or impairing any rights or remedies that Purchaser may have against Seller with respect to (i) a breach of any of Seller’s representations and warranties set forth in this Agreement, but subject to any limitation on survival after the Closing set forth in this Agreement, (ii) any of the obligations of Seller under this Agreement that expressly survive Closing, but subject to any limitation on survival after the Closing set forth in this Agreement, or (iii) any acts constituting fraud by Seller, as determined by a court of competent jurisdiction in a non-appealable decision.

11.4     “Hazardous Materials” Defined. For purposes hereof, “Hazardous Materials” means “Hazardous Material,” “Hazardous Substance,” “Pollutant or Contaminant,” and “Petroleum” and “Natural Gas Liquids,” as those terms are defined or used in Section 101 of CERCLA, and any other substances regulated because of their effect or potential effect on public health and the environment, including, without limitation, PCBs, lead paint, asbestos, urea formaldehyde, radioactive materials, putrescible materials, and infectious materials.

11.5     Survival. The terms and conditions of this Article 11 shall expressly survive the Closing and shall not merge with the provisions of any closing documents.

Purchaser acknowledges and agrees that the disclaimers and other agreements set forth in this Article 11 are an integral part of this Agreement and that Seller would not have agreed to sell the Property to Purchaser for the Purchase Price without the disclaimers and other agreements set forth above.

ARTICLE 12 – Permitting Contingency

12.1     Purchaser’s Project.

12.1.1     [****].

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12.1.2     For purposes of this Agreement, “Final Project Approvals” shall mean: (A) the obtainment by Purchaser of: (i) all approvals from Governmental Authorities (defined below) as Purchaser reasonably requires to develop, use and operate the Project including, without limitation: (1) Town site plan approval for the Project, together with any deviations, exceptions, design waivers, bulk variances or the like (collectively, a “Variance”), provided, however, Purchaser shall not request a Variance without Seller’s consent, which shall not be unreasonably withheld, conditioned or delayed (“Site Plan Approval”); (2) Town approval of a zoning amendment to incorporate the Property into the MOD permitting the Project; (3) Town subdivision approval or internal property subdivision (“Subdivision Approval”) as permitted in the MOD zoning regulations as and to the extent necessary to allow for: (x) the conveyance of the MOB Lot to Purchaser; and (y) the conveyance of the Recreation Lot to the Association; and (4) Town approval to convey to the Association for consideration of not more than [****] ([****]), as part of the creation of the Recreation Lot above mentioned, the following lots identified on the Town Tax Map: Section 33.11, Block 3, Lots 6, 7 and 8 (herein, the “Municipal Parcels”) as and to the extent and subject to and in accordance with said Town approval (the “Municipal Parcels Approval”), but as to the approvals described in this Section 12.1.2(A)(i), expressly excluding any zoning amendment (other than as described in clause (2) of Section 12.1.2(A)(i) or building permit; and (ii) [****]; and (B) the expiration of any applicable appeals period with respect to the approvals described in Section 12.1.2(A) without any appeals or legal challenges having been made or, if made, such appeals or legal challenges have resulted in a final determination in favor of the issuance of same; provided, however, the parties agree that the appeals period for the zoning amendment described in clause (2) of Section 12.1.2(A)(i) shall not exceed one hundred twenty (120) days (the approvals described in Section 12.1.2(A)(i) and (ii) herein referred to collectively as “Purchaser’s Approvals”). In addition, for purposes of this Agreement, “Governmental Authority” and “Governmental Authorities” means each and every federal, state, county and/or local governmental or quasi-governmental authority, agency, bureau, board, commission and body having jurisdiction over the Project.

12.1.3     The parties agree that Purchaser’s Permitting Contingency shall not be deemed to have been satisfied if the conditions of Final Project Approvals would require the aggregate expenditure of more than [****] for on-site improvements (including improvements to the Residential Lot, the MOB Lot and the Recreation Lot) not included in or contemplated by Purchaser’s Proposed Approval and/or the Residential Lot Approvals (and expressly excluding sums that are the subject of Section 12.9) and/or require the performance of work or are subject to conditions not typical of: (x) the Project to be undertaken by Purchaser; or (y) the Town for projects similar to the Project including as to use, size, density, traffic and environmental impacts, parking, landscaping, and infrastructure irrespective of the cost thereof including, without limitation, impact fees, below market rate fees, recreation fees and the like. For avoidance of doubt, the parties agree that any condition of Final Project Approvals that conditions the: (i) development of the MOB Lot on the prior or simultaneous commencement, continuation or completion of the development of the Residential Lot; or (ii) issuance of a Certificate of Occupancy for the Project on the commencement or completion of the development of the Residential Lot shall, at Purchaser’s election, render Purchaser’s Permitting Contingency not to have been satisfied.

12.2     Purchaser’s Proposed Approval.

12.2.1     Purchaser, as soon as practicable, but in no event later than [****] after the expiration of the Inspection Period, shall, at Purchaser’s sole cost and expense, apply for Purchaser’s Approvals, other than those of Purchaser’s Approvals for which Site Plan Approval is required in order to process an application, which may be deferred until after Site Plan Approval (all of which shall be materially consistent with Purchaser’s Proposed Approvals (defined below)) from applicable Governmental Authorities including, without limitation, the Town, and Purchaser shall thereafter diligently, in good faith and using commercially reasonable efforts, pursue such application(s) to completion. Purchaser agrees that the Existing Site Plan and the Conceptual Plan are generally acceptable to Purchaser and that Purchaser’s Approvals shall be substantially in accordance with the Existing Site Plan and the Conceptual Plan, subject to such modifications as Purchaser may reasonably require to allow for the Project as contemplated by this Agreement, taking into account nevertheless the unified nature of the Existing Site Plan. Purchaser shall, promptly following the end of the Inspection Period, submit to Seller draft applications for Site Plan Approval, Subdivision Approval and the Municipal Parcels Approval (including, without limitation, all drawings, studies, reports and maps (collectively, “Purchaser’s Proposed Approval”) for Seller’s reasonable approval (the revision/submission, review, approval/disapproval and request for revisions process described in this Section 12.2 herein referred to as the “Review Process”).

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12.2.2     Purchaser agrees that Purchaser’s Approvals and Purchaser’s Proposed Approval shall be in accordance with the Zoning Ordinance and the MOD zoning regulations, each as then in effect or, as to the MOD zoning regulations, if not yet adopted, as then proposed, subject to Purchaser’s right to seek a Variance in accordance with Section 12.1.2. [****]. Seller shall have twenty (20) days after receipt of any request of Purchaser for approval of Purchaser’s Proposed Approvals to approve or disapprove the same and, if Seller fails to approve Purchaser’s Proposed Approvals, it shall provide a reasonably detailed description of the reasons therefor (herein referred to as “Seller’s Request for Revisions”). Seller agrees it would be unreasonable for Seller to raise objection to any portion of Purchaser’s Proposed Approvals that is substantially consistent with the Conceptual Plan. Purchaser shall thereupon have ten (10) days to revise Purchaser’s Proposed Approvals to address the issues raised in Seller’s Request for Revisions and resubmit the revised Purchaser’s Proposed Approvals to Seller for approval. Seller shall have seven (7) days after receipt of any request of Purchaser for approval of Purchaser’s revised Purchaser’s Proposed Approvals to approve or disapprove the same and, if Seller fails to approve Purchaser’s revised Purchaser’s Proposed Approvals, it shall provide Purchaser with a Seller’s Request for Revisions. The Review Process shall continue, with each party having seven (7) days to revise/resubmit, review and approve/disapprove, until Seller approves Purchaser’s Proposed Approvals. If Seller has not approved Purchaser’s Proposed Approvals by the end of the [****] period following the Inspection Period, this Agreement shall automatically terminate and, following Escrow Agent’s return of the Earnest Money to Purchaser, neither party shall have any further obligation hereunder, except for such obligations as are herein expressly stated to survive termination.

12.2.3     Purchaser shall provide Seller with a copy of Purchaser’s applications for Purchaser’s Approvals and copies of any and all material submissions and/or material written communications with Governmental Authorities, in all cases promptly following Purchaser’s submission thereof to each Governmental Authority. Seller agrees, upon request of Purchaser, at Purchaser’s expense (including, without limitation, reasonable attorneys’ fees), to cooperate with Purchaser in all reasonable ways regarding the processing of Purchaser’s Approvals including, without limitation, the timely execution of applications for Purchaser’s Approvals upon Purchaser’s reasonable request. Purchaser shall keep Seller reasonably informed as to the status of Purchaser’s applications for Purchaser’s Approvals and further shall provide Seller with copies of all material communications received by Purchaser from each Governmental Authority promptly following receipt thereof by Purchaser. Seller [****] shall have the right to attend all public and private meetings with Governmental Authorities concerning Purchaser’s Approvals and Purchaser shall provide Seller with notice of each such meeting. Purchaser shall promptly provide Seller with a copy of Purchaser’s Approvals promptly following receipt by Purchaser thereof.

12.3     Purchaser’s Right to Extend/Terminate.

12.3.1     [****].

12.3.2     In the event Purchaser shall have duly elected to extend the Outside Date for the Outside Date Extension Period and Purchaser’s Permitting Contingency shall not have been satisfied or waived by the Outside Date as extended (i.e., by the last day of the Outside Date Extension Period), then, in that event, Purchaser shall only have the right, by written notice to Seller given not later than the Outside Date (as previously extended for the Outside Date Extension Period), TIME BEING OF THE ESSENCE, to cancel this Agreement, whereupon Escrow Agent shall deliver the Earnest Money and accrued interest thereon, if any, to Purchaser (less any portion thereof that has become non-refundable in accordance with Section 12.8) and this Agreement shall terminate and cease to be of further force and effect and neither party shall have any further obligation or liability hereunder to the other, except as expressly set forth in this Agreement to the contrary. In the event Purchaser fails to notify Seller of Purchaser’s election to cancel this Agreement in accordance with the immediately preceding sentence, Purchaser shall be deemed to have elected not to cancel this Agreement pursuant to this Section 12.3.2 and Purchaser’s Permitting Contingency shall be deemed satisfied.

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12.3.3     [****].

12.4     Purchaser’s Project Contracts and Documents. If this Agreement terminates for any reason other than Seller’s default hereunder (but including in the case of Seller’s default where Seller has complied with its obligations under Section 10.2), anything in this Agreement to the contrary notwithstanding, Purchaser shall, not later than ten (10) days after any such termination, deliver to Seller: (i) legible copies of all Purchaser Project Documents and Purchaser Project Contracts (each as defined below); and (ii) evidence reasonably satisfactory to Seller that all Purchaser Project Documents and Purchaser Project Contracts have been paid for in full or that all sums owing for work and or services performed to date have been paid in full. Purchaser, in such event, agrees that all rights it may have with respect to such Purchaser Project Documents and Purchaser Project Contracts are released in favor of Seller and that, in so far as Purchaser is concerned, Seller shall have the right to the use thereof without obligation to Purchaser. Seller shall have the right to provide a copy of this Agreement (redacted to omit financial or economic information as reasonably agreed to by the parties) to any party to a Purchaser Project Contract as evidence of the foregoing release. For purposes of this Section 12.4: (x) “Purchaser Project Contracts” means, as of any date, all contracts and agreements of every kind and nature entered into at any time by Purchaser and pertaining in any way to the planning, design and/or construction of the Project, whether executory, in whole or in part, or completed; and (y) “Purchaser Project Documents” means, as of any date, the most recent draft of the following: plans, drawings, specifications, third party reports, studies and/or assessments, title reports, surveys, proposals, undertakings and other documents of every kind and nature commissioned or created at any time and in any fashion by Purchaser or by others for Purchaser and pertaining in any way to the Property and/or the Project. Notwithstanding anything to the contrary contained herein, Seller acknowledges and agrees that all Purchaser Project Contracts and all Purchaser Project Documents shall be provided to Seller on an “as is,” “where is,” “with all faults” basis, and without representation or warranty. Any reliance on or use of such materials, data or information by Seller shall be at the sole risk of Seller. The obligations of the parties set forth in this Section 12.4 shall survive the termination of this Agreement.

12.5     [****].

12.6     [****].

12.7     Project Engineer. Purchaser understands that Seller is presently using Cameron Engineering & Associates, LLP (“Cameron”) to process the Existing Site Plan Application and will continue to use Cameron for such purpose until the end of the Inspection Period. Upon the expiration of the Inspection Period, Seller will cease all efforts to process the Existing Site Plan including efforts by Cameron on behalf of Seller with respect to the same. Seller will be responsible for all costs and expenses of Cameron for work Cameron performed or performs at Seller’s request pursuant to Seller’s agreement with Cameron and until Closing Seller shall retain all rights to Cameron’s work product prepared for Seller (and after Closing Seller shall retain such rights on a non-exclusive basis with [****]). Seller agrees that Purchaser shall have the non-exclusive right to use Cameron, at Purchaser’s sole cost and expense and pursuant to Purchaser’s separate agreement with Cameron, to process Purchaser’s Approvals and if Purchaser does so Purchaser acknowledges and agrees that Seller may nevertheless retain Cameron as a consultant for Seller with respect to Purchaser’s Approvals and/or the Residential Lot Approvals and/or [****]. Purchaser further understands, acknowledges and agrees that any use it may make of the Existing Site Plan, the materials comprising the Existing Site Plan Application and/or any other materials, plans, information and/or documents prepared by Cameron or any other third-party shall be at Purchaser’s sole risk and that Seller expressly disclaims any representations or warranties with respect thereto. In the event Seller continues to process the Residential Lot Approvals, the parties agree to reasonably cooperate with each other and, if either uses a consultant other than Cameron, to cause their respective consultants processing Final Project Approvals and the Residential Lot Approvals, to coordinate their efforts and likewise reasonably cooperate to obtain said Approvals. [****]. [****].

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12.8     Earnest Money Non-Refundable. Purchaser agrees that: (i) upon the later of: (a) the expiration of the Inspection Period; and (b) the date the Final Project Approval described in Section 12.1.2(A)(i)(2) is obtained, [****]; and (ii) at such time as the Final Project Approval described in Section 12.1.2(A)(i)(1) is obtained, [****], shall, in case of either clause (i) and/or (ii) of this Section 12.8, be deemed fully earned and non-refundable in all cases whatsoever, except in the event this Agreement is terminated in accordance with Section 10.2 due to Seller’s uncured default.

12.9     [****].

12.10     Declaration. Promptly following the Effective Date, Seller and Purchaser shall jointly begin drafting a form of Declaration of Covenants, Restrictions, Easements and Agreements (the “Declaration”), the final approved form of which, to the extent not theretofore executed and recorded by Seller, shall be executed and delivered by Seller at Closing and thereafter recorded at Purchaser’s expense in the Westchester County Clerk’s Office prior to the recording of the Deed. Among other things, the Declaration will address the relative responsibilities of the owners of the Residential Lot and the MOB Lot for compliance with the conditions of Final Project Approvals and the Residential Lot Approvals including, without limitation, bonding obligations, construction, landscaping and maintenance of shared infrastructure and cost responsibility therefor as well as cross-easements required by each of said Lot owners to allow for the development, construction, use and occupancy of the Residential Lot and the MOB Lot and required access, utilities and drainage. The Declaration will also provide for the creation of an owners’ association (the “Association”) to take title to the Recreation Lot, perpetual, non-transferable membership of each of the Residential Lot and the MOB Lot in the Association as the sole members, and the development, use, maintenance, management, repair and operation of the Recreation Lot, as well as allocation of the costs associated therewith between the members [****]. Notwithstanding anything contained in this Agreement to the contrary, and for avoidance of doubt, the parties agree that the Declaration will be subject to and incorporate by reference conditions of the Final Project Approvals and the Residential Lot Approvals that the parties reasonably agree are required to be included in the Declaration and the parties agree to incorporate such other reasonable changes to the Declaration as may be required due to the Final Project Approvals and the Residential Lot Approvals including, without limitation, conditions of the Final Project Approvals and the Residential Lot Approvals that affect the joint development of the Property, the Residential Lot and/or the Recreation Lot. To the extent the Association requires approval by the New York State Attorney General, Purchaser shall be obligated to obtain such approval at its sole cost and expense and as a condition to Seller’s obligation to convey its interest in the Seller Land to the Association as herein set forth.

ARTICLE 13 - Miscellaneous

13.1     Parties Bound; Assignment. This Agreement, and the terms, covenants, and conditions herein contained, shall inure to the benefit of and be binding upon the heirs, personal representatives, successors, and assigns of each of the parties hereto. Purchaser may assign its rights under this Agreement in whole and not in part only upon the following conditions: (i) the assignee of Purchaser must be an affiliate of Purchaser or an entity controlling, controlled by, or under common control with Purchaser or a joint venture that includes Purchaser or an affiliate of Purchaser, (ii) all of the Earnest Money must have been delivered in accordance herewith, (iii) the Inspection Period shall be deemed to have ended, (iv) the assignee of Purchaser shall assume all obligations of Purchaser hereunder, but Purchaser shall remain primarily liable for the performance of Purchaser’s obligations, and (v) a copy of the fully executed written assignment and assumption agreement shall be delivered to Seller at or prior to Closing. Upon any such assignment and/or conveyance of the Property or any portion thereof to the assignee of Purchaser, all disclaimers, waivers, releases, indemnities and other protections afforded Seller by the terms of this Agreement, including, without limitation, those set forth in Article 4 and Article 11, and all covenants, representations, warranties and obligations of Purchaser hereunder, shall apply to and be binding on said assignee.

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13.2     Headings. The article, section, subsection, paragraph and/or other headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof.

13.3     Invalidity and Waiver. If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and, to the greatest extent legally possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The failure by either party to enforce against the other any term or provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future.

13.4     Governing Law. This Agreement shall, in all respects, be governed, construed, applied, and enforced in accordance with the law of the state in which the Real Property is located.

13.5     Survival. The provisions of this Agreement that expressly contemplate performance after the Closing shall survive the Closing (subject to any limitation on survival in this Agreement) and shall not be deemed to be merged into or waived by the instruments of Closing.

13.6     Entirety and Amendments. This Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings relating to the Property. This Agreement may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought.

13.7     Time. Time is of the essence in the performance of this Agreement.

13.8     Confidentiality. Neither Seller nor Purchaser shall make any public announcement or disclosure of any information related to or contained in this Agreement, nor provide a copy of this Agreement (in whole or in part), to outside brokers or third parties other than Broker, before or after the Closing, without the prior written specific consent of the other party; provided, however, that Purchaser may, subject to the provisions of Section 4.6, make disclosure of this Agreement to its Permitted Outside Parties, and each of the parties may make disclosure of this Agreement to its lenders, investors, attorneys, accountants and other professional advisors as necessary to perform its obligations hereunder or otherwise, pursuant to court order or judicial process, as may be required under laws or regulations applicable to the party and as reasonably necessary to enforce the terms and provisions of this Agreement. The obligations set forth in this Section 13.8 shall survive the Closing or the termination of this Agreement. [****].

13.9     Notices. All notices required or permitted hereunder shall be in writing and shall be served on the parties at the addresses set forth in Section 1.3. Any such notices shall, unless otherwise provided herein, be given or served (i) by depositing the same in the United States mail, postage paid, certified and addressed to the party to be notified, with return receipt requested, (ii) by overnight delivery using a nationally recognized overnight courier or (iii) by personal delivery. Notice deposited in the mail in the manner hereinabove described shall be effective on the third (3rd) business day after such deposit. Notice given in any other manner shall be effective only if and when received (or upon refusal to accept such notice) by the party to be notified between the hours of 8:00 a.m. and 5:00 p.m. of any business day with delivery made after such hours to be deemed received the following business day. A party’s address may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of such notice. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice. Notices given by counsel to Purchaser shall be deemed given by Purchaser and notices given by counsel to Seller shall be deemed given by Seller.

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13.10     Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and agree that the normal rule of construction - to the effect that any ambiguities are to be resolved against the drafting party - shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

13.11     Calculation of Time Periods. Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday for national banks in the location where the Property is located, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday, or legal holiday (each such day, a “business day”). The last day of any period of time described herein shall be deemed to end at 5:00 p.m. local time in the state in which the Real Property is located.

13.12     Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Agreement. To facilitate execution of this Agreement, the parties may execute and exchange by telephone facsimile or electronic mail counterparts of the signature pages, which shall be considered originals for all purposes.

13.13     Further Assurances. In addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by either party at Closing, each party agrees to perform, execute and deliver, but without any obligation to incur any additional liability or expense, on or after the Closing any further deliveries and assurances as may be reasonably necessary to consummate the transactions contemplated hereby or to further perfect the conveyance, transfer and assignment of the Property to Purchaser.

13.14     Discharge of Obligations. The acceptance of the Deed by Purchaser shall be deemed to be a full performance and discharge of every representation and warranty made by Seller herein and every agreement and obligation on the part of Seller to be performed pursuant to the provisions of this Agreement, except those which are herein specifically stated to survive Closing.

13.15     No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

13.16     Broker. Seller and Purchaser expressly acknowledge that the Broker has acted as the exclusive broker with respect to the transaction contemplated in this Agreement. Seller shall pay any brokerage commission due to the Broker in accordance with the separate agreement between Seller and the Broker. Seller agrees to hold Purchaser harmless and indemnify Purchaser from and against any and all liabilities (including reasonable attorneys’ fees, expenses and disbursements) suffered or incurred by Purchaser as a result of any claims by the Broker or any other party claiming to have represented Seller as broker in connection with this transaction. Purchaser agrees to hold Seller harmless and indemnify Seller from and against any and all liabilities (including reasonable attorneys’ fees, expenses and disbursements) suffered or incurred by Seller as a result of any claims by any party claiming to have represented Purchaser as broker in connection with this transaction. The provisions of this Section 13.16 shall survive Closing (and not be merged therein) or the earlier termination of this Agreement and shall not be subject to the cap amount in Section 9.3.

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13.17     Non-Recourse. The obligations of Seller under this Agreement shall be limited to Seller’s interest in the Property and Rec Lot Portion and the proceeds therefrom and neither Purchaser, nor any party claiming through or by Purchaser, shall have any claim against any other assets of Seller or any shareholder, director, member or manager of Seller or any of their respective principals, employees, agents, advisors and/or consultants.

13.18     Tax Free Exchange. The parties hereto hereby consent to the consummation of the sale or purchase, as the case may be, of the Property as part of a so-called like kind exchange (in either case, an "Exchange") pursuant to Section 1031 of the Internal Revenue Code, and each of Seller and Purchaser agree to cooperate with each other in all reasonable ways, but without cost, expense or liability to the cooperating party, to allow the other party to accomplish an Exchange, provided that: (i) the party engaging in an Exchange shall notify the other party thereof not later than five (5) days prior to the Closing; (ii) the Closing shall in no way be delayed as a result of any party engaging in an Exchange; (iii) the party engaging in an Exchange shall pay all costs and expenses associated with such Exchange including any costs of the other party that would not have been incurred by such party but for the party engaging in the Exchange engaging in such Exchange; (iv) the party not engaging in an Exchange shall in no way have its rights under this Agreement affected or diminished in any way by reason of the other party engaging in an Exchange; (v) neither party shall be required to take an assignment of the purchase agreement for relinquished or replacement property or be required to acquire or hold title to any real property for purposes of consummating an Exchange desired by the other party; and (vi) the party engaging in an Exchange shall and hereby does indemnify, defend and save the other harmless from and against any and all loss, liability, obligation, damage, claim, suit, action, proceeding, cost and/or expense including, without limitation, reasonable attorneys' fees which the other party may suffer or incur as a result of the indemnifying party engaging in an Exchange. The provisions of this Section 13.18 shall survive the Closing.

13.19     Lead Paint Disclosure. Pursuant to 42 U.S.C. 4852(d), attached hereto and made a part of this Agreement as Exhibit M is a form of Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards. Purchaser acknowledges having received the EPA Booklet which corresponds to such form of Disclosure.

13.20     Property Condition Disclosure Statement. Purchaser acknowledges that Seller has elected not to provide Purchaser with a Property Condition Disclosure Statement prior to the signing and delivery of this Agreement nor any subsequent Disclosure Statements in either case as may be required under Article 14 of the Real Property Law (effective March 1, 2002). In consequence thereof, Seller shall credit Purchaser against the Purchase Price at Closing the sum of $500.00. Purchaser agrees that Purchaser shall not bring any action or proceeding including, without limitation, an action for rescission of this Agreement by reason of Seller electing not to provide Purchaser with a Property Condition Disclosure Statement as aforesaid or by reason of Seller failing to comply with any statute. The provisions of this Section 13.20 shall survive the Closing.

13.21     Seller Jointly and Severally Liable. For purposes of this Agreement, the entities comprising Seller are jointly and severally liable.

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13.22     Recordation. Without the prior written consent of Seller, there shall be no recordation of either this Agreement or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Agreement or memorandum or affidavit by Purchaser without the prior written consent of Seller shall constitute a default hereunder by Purchaser, whereupon Seller shall have the remedies set forth in Section 10.1 hereof. Notwithstanding anything herein contained to the contrary, promptly following the expiration of the Inspection Period, Seller and Purchaser shall, upon the request of the other, execute, acknowledge and deliver to each other a memorandum of this Agreement (the “Memorandum”) in the form attached hereto as Exhibit P, together with such other instruments as may be reasonably necessary to record such memorandum in the Westchester County Clerk’s Office (the “Recording Office”). Purchaser agrees to be responsible for recording the Memorandum and for paying any recording fees in connection therewith. Purchaser shall also, simultaneously with the execution of the Memorandum, execute and deliver to Seller’s counsel, and Seller’s counsel shall hold in escrow, a Termination of Memorandum of Agreement in the form of Exhibit Q annexed hereto and made a part hereof (the “Termination”), together with such other instruments as may be reasonably necessary to record the Termination in the Recording Office. Upon termination of this Agreement, Seller’s counsel may, upon not less than thirty (30) days prior written notice to Purchaser’s counsel, and provided Purchaser or its counsel does not within such thirty (30) day period commence litigation seeking to enjoin Seller and/or Seller’s counsel from releasing the Termination from escrow and recording the same in the Recording Office, without further notice to or action by either party, release the Termination from escrow, fill in any required recording information and dates and deliver the same to Seller, who may record the Termination in the Recording Office.

[SIGNATURE PAGES AND EXHIBITS TO FOLLOW]

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SIGNATURE PAGE TO AGREEMENT OF

PURCHASE AND SALE

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year written below.

SELLER:

GSD Cortlandt, LLC, a New York limited liability company

By:                                                                                                  

Name:                                                                                             

Title:                                                                                               

Date signed:                                                                                    

Buttonwood Acquisition, LLC, a New York limited liability company

By:                                                                                                  

Name:                                                                                             

Title:                                                                                               

Date signed:                                                                                    

PURCHASER:

Sound Cortlandt, LLC, a Delaware limited liability company

By:                                                                                                  

Name:                                                                                             

Title:                                                                                               

Date signed:                                                                                    

JOINDER BY ESCROW AGENT

Escrow Agent has executed this Agreement in order to confirm that Escrow Agent has received and shall hold the Earnest Money required to be deposited under this Agreement and the interest earned thereto, in escrow, and shall disburse the Earnest Money, and the interest earned thereon, pursuant to the provisions of this Agreement.

Date executed by Escrow Agent:     First American Title Insurance Company, a Nebraska corporation     By:                                                                                                   Name:                                                                                              Title:                                                                                               

LIST OF EXHIBITS

A-1	-	Legal Description of GSD Land
A-2	-	Legal Description of Buttonwood Land
B	-	Form of Deed
C	-	[Intentionally deleted.]
D	-	Form of Title Affidavit
E	-	Pending Tax Protest Proceedings
F	-	Existing Site Plan
G	-	[Intentionally deleted.]
H	-	List of Tenants/Occupants
I	-	Conceptual Plan
J	-	Permitted Exceptions
K	-	[Intentionally deleted.]
L	-	Parameters for Real Property Tax Abatement
M	-	Form of Disclosure re: Lead Based Paint
N	-	[Intentionally deleted.]
O	-	Form of Association Disclaimer and Release
P	-	Form of Memorandum
Q	-	Form of Termination

EXHIBIT A-1

LEGAL DESCRIPTION OF GSD LAND

PARCEL I:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK, SHOWN AND DESIGNATED AS PART OF LOT NO. 3 ON A CERTAIN MAP ENTITLED, "SUBDIVISION OF PROPERTY KNOWN AS PINE TREE ACRES, TOWN OF CORTLANDT, WESTCHESTER COUNTY, NEW YORK" DATED MAY 15, 1981, PREPARED BY JOHN SALVATORE ROMEO, C.E. & L.S., FILED IN WESTCHESTER COUNTY CLERK'S OFFICE, DIVISION OF LAND RECORDS, OCTOBER 7, 1981 AS MAP NO. 20752 AND BEING MORE PARTICULARLY BOUNDED AND DESCRIBED ACCORDING TO SAID MAP AS FOLLOWS:

BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE WESTERLY SIDE OF LAFAYETTE AVENUE AND THE SOUTHERLY SIDE OF CROMPOND ROAD (ROUTE 202), AS SAME PRESENTLY EXISTS;

RUNNING THENCE ALONG THE WESTERLY SIDE OF LAFAYETTE AVENUE SOUTH 30° 20' 10" WEST, 244.06 FEET, TO THE DIVISION LINE BETWEEN LOTS NOS. 2 AND 3 ON THE AFORESAID MAP;

THENCE ALONG SAID DIVISION LINE THE FOLLOWING THREE (3) COURSES AND DISTANCES:

1) NORTH 62° 14' 00" WEST, 215.00 FEET; AND,

2) NORTH 05° 03' 45" EAST, 41.22 FEET; AND,

3) NORTH 29° 44' 00" WEST, 130.00 FEET, TO THE DIVISION LINE BETWEEN LOTS NOS. 1 AND 3 ON THE AFOREMENTIONED MAP;

THENCE ALONG SAID DIVISION LINE NORTH 27° 46' 00" EAST, 86.92 FEET, TO THE SOUTHERLY SIDE OF CROMPOND ROAD (ROUTE 202), AS SAME PRESENTLY EXISTS;

THENCE ALONG SAID SOUTHERLY SIDE OF CROMPOND ROAD (ROUTE 202), AS SAME PRESENTLY EXISTS, THE FOLLOWING FOUR (4) COURSES AND DISTANCES:

1) SOUTH 78° 35' 42" EAST, 29.17 FEET; AND,

2) SOUTH 72° 05' 50" EAST, 211.36 FEET; AND,

3) SOUTH 55° 25' 40" EAST, 36.05 FEET; AND,

4) SOUTH 68° 35' 40" EAST, 80.00 FEET, TO THE CORNER FIRST ABOVE MENTIONED, THE POINT OR PLACE OF BEGINNING.

TOGETHER WITH AN EASEMENT OVER, ACROSS AND THROUGH LOT NO. 1 ON THE AFORESAID FILED MAP NO. 20752 PROVIDING PERMANENT AND UNOBSTRUCTED VEHICULAR ACCESS TO CROMPOND ROAD BY WAY OF SAID LOT NO. 1 OR ANY LAWFUL USE THEREOF AS RESERVED TO SAMUEL AND JOSEPHINE SCHEIBER IN DEED DATED 12/9/81, RECORDED IN WESTCHESTER COUNTY CLERK'S LIBER 7755 CP. 187 ON 12/14/81.

A-1-1

TOGETHER WITH THE BENEFITS AND SUBJECT TO THE BURDENS OF A DRIVEWAY EASEMENT RECORDED IN LIBER 7933 PAGE 781.

SAID PREMISES KNOWN AS 1989 CROMPOND ROAD, CORTLAND MANOR, NEW YORK, SECTION 33.12, BLOCK 1, LOT 1.

PARCEL II:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, WESTCHESTER COUNTY, NEW YORK, SHOWN AS LOT 2 ON "SUBDIVISION OF PROPERTY KNOWN AS PINE TREE ACRES, TOWN OF CORTLANDT, WESTCHESTER COUNTY, NEW YORK", DATED MAY 15, 1981 PREPARED BY JOHN SALVATORE ROMEO, ENGINEER AND SURVEYOR AND FILED OCTOBER 7, 1981 IN THE WESTCHESTER COUNTY CLERK'S OFFICE, DIVISION OF LAND RECORDS AS MAP NO. 20752 AND BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE POINT ON THE WESTERLY SIDE OF LAFAYETTE AVENUE WHERE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOTS 1 AND 2 ON SAID MAP;

THENCE ALONG SAID DIVISION LINE NORTH 62° 14' 00" WEST 257.35 FEET, NORTH 17° 14' 00" WEST 110 FEET AND NORTH 27° 46' 00" EAST 200.00 FEET TO THE DIVISION LINE BETWEEN LOTS 2 AND 3 ON SAID MAP;

THENCE ALONG SAID DIVISION LINE SOUTH 29° 44' 00" EAST, 130 FEET, SOUTH 05° 03' 45" WEST 41.22 FEET AND SOUTH 62° 14' 00" EAST 215 FEET TO THE WESTERLY SIDE OF LAFAYETTE AVENUE; THENCE ALONG SAID SIDE OF LAFAYETTE AVENUE, SOUTH 30° 20' 10" WEST 58.66 FEET AND SOUTH 29° 10' 50" WEST 111.34 FEET TO THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS 1987 CROMPOND ROAD, CORTLAND MANOR, NEW YORK, SECTION 33.12, BLOCK 1, LOT 2.

PARCEL III:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK, KNOWN AND DESIGNATED AS PART OF LOT NO. 1 AS SHOWN ON A CERTAIN MAP ENTITLED, "SUBDIVISION OF PROPERTY KNOWN AS PINE TREE ACRES, TOWN OF CORTLANDT, WESTCHESTER COUNTY, N.Y." AND FILED IN THE OFFICE OF THE WESTCHESTER COUNTY CLERK, DIVISION OF LAND RECORDS ON OCTOBER 7, 1981 AS MAP NO. 20752.

SAID LOT BEING MORE PARTICULARLY BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ALONG THE SOUTH SIDE OF CROMPOND ROAD, ALSO KNOWN AS ROUTE 202, SAID POINT BEING THE NORTHEAST CORNER OF LANDS SHOWN ON A CERTAIN MAP ENTITLED, "ORCHARD GARDENS SECTION A" SAID MAP WAS FILED IN THE OFFICE OF THE WESTCHESTER COUNTY CLERK, DIVISION OF LAND RECORDS ON OCTOBER 29, 1943 AS MAP NO. 6691;

A-1-2

THENCE ALONG SAID SOUTH SIDE OF CROMPOND ROAD AND THE NORTH SIDE OF SAID LOT NO. 1, SOUTH 76° 27' 20" EAST 103.16 FEET TO THE NORTHWEST CORNER OF LOT NO. 3 AS SHOWN ON THE AFORESAID FILED MAP;

THENCE ALONG THE WEST SIDE OF SAID LOT NO. 3, SOUTH 27° 46' 00" WEST 90.00 FEET TO THE NORTHWEST CORNER OF LOT NO. 2 AS SHOWN ON SAID FILED MAP;

THENCE ALONG THE WEST SIDE OF SAID LOT NO. 2, SOUTH 27° 46' 00" WEST 200.00 FEET AND SOUTH 17° 14' 00" EAST 110.00 FEET TO THE SOUTH LINE OF SAID LOT NO. 2;

THENCE ALONG SAID SOUTH LINE OF LOT NO. 2, SOUTH 62° 14' 00" EAST 257.39 FEET TO THE WEST SIDE OF LAFAYETTE AVENUE, A TOWN HIGHWAY;

THENCE ALONG SAID WEST SIDE OF LAFAYETTE AVENUE, SOUTH 29° 10' 50" WEST 22.50 FEET, SOUTH 29° 37' 50" WEST 119.89 FEET, SOUTH 31° 32' 50" WEST 162.60 FEET AND SOUTH 29° 56' 00" WEST 1.73 FEET TO THE NORTHEAST CORNER OF LANDS NOW OR FORMERLY OF BLANCHARD;

THENCE ALONG THE NORTH SIDE OF SAID LANDS OF BLANCHARD, NORTH 67° 10' 20" WEST 29.57 FEET AND NORTH 64° 54' 00" WEST 385.77 FEET TO THE CENTERLINE OF A STONE WALL;

THENCE ALONG THE SAID CENTERLINE OF SAID STONE WALL, NORTH 27° 36' 10" EAST 121.65 FEET AND NORTH 23° 05' 50" EAST 27.00 FEET TO THE EAST SIDE OF LANDS SHOWN ON SAID MAP NO. 6609;

THENCE ALONG SAID EAST SIDE OF LANDS SHOWN ON SAID FILED MAP NO. 6609, NORTH 27° 46' 00" EAST 624.00 FEET TO THE POINT OR PLACE OF BEGINNING.

EXCEPTING THEREFROM THAT PORTION OF THE ABOVE DESCRIBED PREMISES TO BE TAKEN BY THE STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK BEING BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWESTERLY CORNER OF LANDS NOW OR FORMERLY OF CORTLANDT MEDICAL BUILDING ASSOCIATES (LIBER 7887 PAGE 245), SAID POINT BEING ALONG THE SOUTHERLY LINE OF N.Y.S. ROUTE 202 (A.K.A CROMPOND ROAD) AS IT CURRENTLY SITUATED;

THENCE FROM SAID POINT ALONG N.Y.S. ROUTE 202 AS IT IS CURRENTLY SITUATED, 76° 27' 20" EAST A DISTANCE OF 103.16 FEET TO THE NORTHEASTERLY CORNER OF THE HEREIN DESCRIBED PARCEL;

THENCE ALONG THE EASTERLY LINE OF SAID LANDS SOUTH 27° 46' 00" WEST A DISTANCE OF 3.06 FEET;

A-1-3

THENCE THROUGH SAID LANDS OF CORTLANDT MEDICAL BUILDING ASSOCIATES SOUTH 56° 51' 20" WEST A DISTANCE OF 40.21 FEET, SOUTH 77° 50' 10" WEST A DISTANCE OF 26.84 FEET, NORTH 31° 20' 00" WEST A DISTANCE OF 28.06 FEET AND SOUTH 77° 53' 50" WEST A DISTANCE OF 31.70 FEET TO A POINT IN THE WESTERLY LINE OF SAID LANDS;

THENCE ALONG SAID WESTERLY LINE NORTH 27° 46' 00" EAST A DISTANCE OF 14.22 FEET TO THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS 1985 CROMPOND ROAD, CORTLAND MANOR, NEW YORK, SECTION 33.12, BLOCK 1, LOT 3.

A-1-4

EXHIBIT A-2

LEGAL DESCRIPTION OF BUTTONWOOD LAND

PARCEL IV:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK, AND MORE PARTICULARLY BEING BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE SOUTHWESTERLY SIDE OF BUTTONWOOD AVENUE WITH THE SOUTHEASTERLY SIDE OF BUTTONWOOD AVENUE, WHICH POINT IS THE INTERSECTION OF THE NORTHEASTERLY CORNER OF THE SUBJECT PREMISES WITH THE SOUTHWESTERLY CORNER OF LOT 9 AS SHOWN ON MAP OF ORCHARD GARDENS FILED AS MAP # 6691, (LAND NOW OR FORMERLY OF BRODY).

RUNNING THENCE ALONG SAID LAND NOW OR FORMERLY OF BRODY, THE FOLLOWING 2 COURSES AND DISTANCES:

1. SOUTH 20° 39' 10'' EAST, 96.26 FEET;

2. SOUTH 4° 50' 20'' EAST, 53.71 FEET TO LAND SHOWN AS LOT 1 ON FILED MAP # 20752, LAND NOW OR FORMERLY OF GSD CORTLAND LLC;

THENCE ALONG SAID LAST MENTIONED LAND, SOUTH 27° 16' 20'' WEST, 66.00 FEET TO LAND NOW OR FORMERLY OF THE TOWN OF CORTLAND;

THENCE ALONG SAID LAST MENTIONED LAND THE FOLLOWING 8 COURSES AND DISTANCES:

1. SOUTH 42° 33' 00'' WEST, 223.37 FEET;

2. SOUTH 59° 44' 40'' WEST, 55.57 FEET;

3. SOUTH 36° 25' 50'' WEST, 52.20 FEET;

4. SOUTH 28° 33' 30'' WEST, 40.77 FEET;

5. SOUTH 24° 53' 50'' WEST, 153.45 FEET;

6. SOUTH 30° 03' 10'' WEST, 101.67 FEET;

7. SOUTH 6° 03' 20'' WEST, 66.37 FEET;

8. SOUTH 25° 15' 30'' WEST, 93.21 FEET TO LAND NOW OR FORMERLY OF RICCHIUTTI;

THENCE ALONG SAID LAST MENTIONED LAND, SOUTH 58° 42' 30'' WEST, 117.37 FEET TO LAND NOW OR FORMERLY OF CASTORO;

THENCE ALONG SAID LAST MENTIONED LAND AND PARTLY ALONG A PARCEL SHOWN AS A ROADWAY ON FILED MAP # 6692, LAND NOW OR FORMERLY OF BEHAR, NORTH 64° 14' 50'' WEST, 137.44 FEET TO LAND NOW OR FORMERLY OF COLETTI;

THENCE ALONG SAID LAST MENTIONED LAND AND LANDS NOW OR FORMERLY OF NU, FITZGERALD, AND JALAN, NORTH 31° 10' 00'' EAST, 301.09 FEET (299.62 FEET, FILED MAP);

THENCE, STILL ALONG LAND NOW OR FORMERLY OF JALAN AND LANDS NOW OR FORMERLY OF EMELUMADO, CASSIDY, WELCH AND KELLY, NORTH 27° 00' 20'' EAST, 342.41 FEET (344.54 FEET, FILED MAP) TO LAND NOW OR FORMERLY OF NORTON.

A-2-1

THENCE ALONG SAID LAST MENTIONED LAND NORTH 37° 50' 10'' EAST, 82.43 FEET (82.44 FEET FILED MAP) TO LAND NOW OR FORMERLY OF PESANTEZ;

THENCE ALONG SAID LAST MENTIONED LAND, THE FOLLOWING 4 COURSES AND DISTANCES:

1. SOUTH 64° 14' 50'' EAST, 9.66 FEET;

2. NORTH 73° 50' 30'' EAST, 92.23 FEET;

3. NORTH 56° 48' 30'' WEST, 118.00 FEET;

4. NORTH 27° 57' 20'' WEST, 21.90 FEET TO THE SOUTHEASTERLY SIDE OF BUTTONWOOD AVENUE;

THENCE ALONG THE SOUTHEASTERLY SOUTHERLY AND SOUTHWESTERLY SIDES OF BUTTONWOOD AVENUE, THE FOLLOWING 4 COURSES AND DISTANCES:

1. NORTH 62° 02' 40'' EAST, 89.72 FEET;

2. NORTH 24° 36' 20'' EAST, 65.05 FEET;

3. SOUTHEASTERLY, ALONG THE ARC OF A CURVE, BEARING TO THE RIGHT, HAVING A RADIUS OF 110.00 FEET, A DISTANCE OF 149.11 FEET;

4. SOUTH 46° 53' 10'' EAST, 65.49 FEET TO THE CORNER, THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS RESERVED LAKE AREA OFF BUTTONWOOD AVENUE, CORTLAND MANOR, NEW YORK, SECTION 33.11, BLOCK 3, LOT 36.

PARCEL V:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, LYING AND BEING IN THE TOWN OF CORTLAND MANOR, COUNTY OF WESTCHESTER, AND STATE OF NEW YORK, BEING KNOWN AS LOT NO. 9 ON MAP ENTITLED: "MAP OF ORCHARD GARDENS, SECTION 'A', SITUATE IN THE TOWN OF CORTLAND, WESTCHESTER COUNTY, N.Y." FILED IN THE WESTCHESTER COUNTY CLERK'S OFFICE ON OCTOBER 29, 1948 AS MAP NO.

6691.

BEGINNING AT A POINT ON THE EASTERLY SIDE OF BUTTONWOOD AVENUE, WHERE SAME INTERSECTS LOTS 8 & 9 AS SHOWN ON FILED MAP NO. 6691, AND RUNNING THENCE;

1. SOUTH 62°- 43'- 40" EAST, ALONG SAID DIVISION LINE, FOR A DISTANCE OF 100.00 FEET, TO THE WESTERLY LINE OF LANDS NOW OR FORMERLY OF SAMUEL SCHEIBER, THENCE;

2. SOUTH 27°-16'-20" WEST, ALONG LANDS OF SCHEIBER, FOR A DISTANCE OF 200.00 FEET TO A POINT, THENCE;

3. NORTH 04°-50'-50" WEST, ALONG “RESERVED AREA FOR ORCHARD LAKE”, FOR A DISTANCE OF 53.71 FEET TO A POINT, THENCE;

4. NORTH 20°-39'-10" WEST, ALONG SAME, FOR A DISTANCE OF 96.26 FEET TO A POINT IN THE EASTERLY SIDE OF BUTTONWOOD AVENUE, THENCE;

A-2-2

5. NORTH 27°-16'-20" EAST, ALONG SAME, FOR A DISTANCE OF 90.00 FEET TO THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS 206 BUTTONWOOD AVENUE, CORTLAND MANOR, NEW YORK, SECTION 33.11, BLOCK 3, LOT 5.

A-2-3

EXHIBIT B

FORM OF DEED

BARGAIN AND SALE DEED 

WITH COVENANT AGAINST GRANTOR’S ACTS

THIS INDENTURE is made this ______ day of _________, 2019, between [                    ], LLC, a New York limited liability company having an address at One Flowerfield, Suite 24, St. James, New York 11780 (“Grantor”), and [                    ], a [                    ] having an address at [                     ] (“Grantee”).

W I T N E S S E T H:

That Grantor, in consideration of Ten Dollars ($10.00) and other good and valuable consideration, lawful money of the United States, paid by the Grantee, the receipt and sufficiency of which are hereby acknowledged, does hereby covenant, grant and release unto Grantee, its heirs and successors and assigns, forever, all right, title and interest of Grantor in and to the following:

[ADD LEGAL DESCRIPTION]

TOGETHER with all right, title and interest, if any, of Grantor in and to any streets and roads abutting the above described premises to the center lines thereof;

TOGETHER with the appurtenances and all the estate and rights of Grantor in and to said premises;

SUBJECT to all matters of public record including but not limited to all covenants, restrictions, easements and rights of way;

TO HAVE AND TO HOLD the premises herein granted unto Grantee, its heirs and successors and assigns, forever.

AND the party of the first part covenants that the party of the first part has not done or suffered anything whereby the said premises have been encumbered in any way whatsoever, except as aforesaid.

AND Grantor, in compliance with Section 13 of the Lien Law, covenants that Grantor will receive the consideration for this conveyance and will hold the right to receive such consideration as a trust fund to be applied first for the purpose of paying the cost of the improvement and will apply the same first to the payment of the cost of the improvement before using any part of the total of the same for any other purpose.

B-1

IN WITNESS WHEREOF, Grantor has duly executed this deed the day and year first above written.

[                                         ], LLC, a New York limited liability company

By:                                                                                  

Name:                                                                             

Title:                                                                               

STATE OF NEW YORK	)
	)ss.:

COUNTY OF ___________ )

On the ___ day of _________ in the year 201_, before me, the undersigned, a Notary Public in and for said state, personally appeared ____________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her capacity, and that by her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

______________________________

Notary Public

RECORD & RETURN TO:

B-2

EXHIBIT C

[Intentionally deleted.]

C-1

EXHIBIT D

TITLE AFFIDAVIT

OWNER'S title affidavit1

Escrow No.                                               

Title Order No. _________________________

The undersigned, being the __________ of __________, a __________ (“Owner’) hereby represents and warrants as follows to and for the benefit of First American Title Insurance Company (the “Title Company”):

1. I am fully familiar with the business of the Owner, I am a citizen of the United States and at least eighteen (18) years old.

2. The Owner is the only owner of the property located in the Town of Cortlandt, County of Westchester, State of New York, and described on Schedule 1 annexed hereto (the “Property”). The Property is today being conveyed by the Owner to [ ], a Delaware limited liability company (“Purchaser”). This action and the making of this Title Affidavit have been duly authorized. The Owner is a limited liability company duly formed and existing under and by virtue of the laws of New York State, and currently in good standing in that state. The Owner has not been dissolved.

3. I have reviewed the preliminary report/commitment for the Property issued by the Title Company with an effective date of                              , 201__, and revised through the date hereof (the “Title Report”).

4. To the knowledge of the Owner, there are no unrecorded leases or occupancy agreements affecting the Property or other parties in possession of the Property.

5. To the knowledge of the Owner, there has been no violation of any covenants, conditions or restrictions of record affecting the Property.

6. The Owner has owned the Property since __________. To the knowledge of the Owner, the Owner’s enjoyment of the Property has been peaceful and undisturbed and its interest in the Property has never been disputed or questioned.

7. To the knowledge of the Owner, there are no tenants or occupants in possession of all or any portion of the Property. Except for its agreement with Purchaser, it has not signed any contracts which remain in effect to sell the Property to any third party, nor has it given anyone else rights concerning the purchase of the Property.

8. No proceeding in bankruptcy has ever been instituted by or against the Owner, nor has the Owner ever made an assignment for the benefit of creditors.

9. Except as may be set forth in the Title Report, to the knowledge of Owner there is no action or proceeding relating to the Property in any state or federal court in the United States nor do I know of any state or federal judgment or any federal lien of any kind or nature whatever which now constitutes a lien or charge upon the Property and which are not reflected in the public records.

¹ To the extent the Property as defined in this Affidavit is owned by more than one (1) Seller, this Affidavit will be modified accordingly to reflect the ownership of the Property.

D-1

10. To the knowledge of Owner, except as may be set forth in the Title Report, there are no unpaid real property taxes, special (district) assessments or charges, water and/or sewer rents or charges, not shown as liens in the public records.

All references herein to the “knowledge” of Owner or words of similar import shall refer only to the actual knowledge of, the undersigned in his/her capacity as the __________ of Owner, and shall not be construed to refer to the knowledge of any other officer, owner, manager, director, shareholder, employee, adviser, agent or representative of Owner, its owners, or any affiliate of any of the foregoing, or to impose or have imposed upon such individual any duty to investigate the matters to which such knowledge, or the absence thereof, pertains. There shall be no personal liability on the part of the aforementioned individual arising out of any representations or warranties made herein.

This affidavit is made for the purpose of aiding the Title Company in determining the insurability of title to the Property, and to induce the Title Company to issue its policy of title insurance. This affidavit may be relied upon by the Title Company but may not be relied upon by any other person or entity.

[signature page follows]

D-2

IN WITNESS WHEREOF, Owner has executed this affidavit as of _______ __, 201_

OWNER:

[                                          ], LLC,

a New York limited liability company

By:                                                                                  

Name:                                                                             

Title:                                                                               

D-3

SCHEDULE 1

(the Property)

[to be inserted prior to execution]

D-4

EXHIBIT E

PENDING TAX PROTEST PROCEEDINGS

None.

E-1

EXHIBIT F

EXISTING SITE PLAN

F-1

F-2

F-3

EXHIBIT G

[Intentionally deleted.]

G-1

EXHIBIT H

LIST OF TENANTS/OCCUPANTS

None, other than site caretaker.

H-1

EXHIBIT I

CONCEPTUAL PLAN

I-1

EXHIBIT J

PERMITTED EXCEPTIONS

1. The lien of any and all real estate taxes, water charges, sewer rents or charges and/or vault rents or charges for the fiscal tax period and/or real estate tax year in which the closing occurs, subject to apportionment at the Closing as provided herein.

2. Encroachments, if any, upon the Property of any buildings, structures or improvements located on adjoining premises.

3. Encroachments, if any, of any building or retaining walls, foundations, fences or appurtenances belonging to the Property upon any street or right of way or upon any adjoining premises.

4. Riparian rights and easements of others over lakes and streams.

As to GSD Land only:

5. Driveway Easement made by and among Samuel Scheiber and Josephine Scheiber and Mark Howard Hittman and Elizabeth White Hittman dated 6/26/1984 and recorded 6/29/1984 in Liber 7933 Cp 781.

6. Sewer Easement made by and among Mark Howard Hittman and Elizabeth White Hittman and the Town of Cortlandt dated 5/22/1992 and recorded 8/31/1992 in Liber 10397 Cp 39.

7. Notes and easements as shown on “Subdivision of Property Known as Pine Tree Acres, Town of Cortlandt, Westchester County, New York” and filed in the Westchester County Clerk’s Office on 10/7/1981 as Map #20752.

8. Water Main Easement made by and among Martin H. Jackson and Amanda Jackson, his wife, Enoch J. Tompkins and Jeannette Tompkins, his wife and Montrose Water District of the Town of Cortlandt, Westchester County, State of New York dated 3/15/1933 and recorded 8/11/1933 in Liber 3329 Cp 405.

9. Reservation of Easement in Deed made by Samuel Scheiber and Josephine Scheiber to Dr. Julio E. DeMarchena, Dr. Philip A. Freedman, Dr. Michael Sparago, Dr. Jay H. Kalinsky, Dr. Theodore M. Beck, and Dr. Wiji Ratnathtcam dated 12/9/1981 and recorded 12/14/1981 in Liber 7741 Cp 676, and rerecorded in Liber 7755 Cp 187.

10. Sewer Easement made by and between Cortlandt Medical Building Associates and the Town of Cortlandt dated 5/7/1992 and recorded 7/17/1992 in Liber 10358 Cp 169.

11. Sewer Easement made by and between Cortlandt Medical Building Associates and the Town of Cortlandt dated 11/10/1992 and recorded 2/25/1994 in Liber 10786 Cp 33.

12. Sewer Easement made by and between Cortlandt Medical Building Associates and the Town of Cortlandt dated 6/20/2002 and recorded 10/3/2002 in Document Control # 422670852.

J-1

As to Buttonwood Land only:

13. Right of way reserved in deed made by Marie E. Patterson to White Plains Hospital Association dated 12/1/1941 and recorded 12/4/1941 in Liber 3966 Cp 406 and repeated in subsequent deeds.

14. Rights to tap into a water main, right of way and rights to use the lake reserved in deed made by Max Kasenetz to Fortunato Palumbo dated 5/18/1954 and recorded 5/19/1954 in Liber 5329 Cp 480 and repeated in subsequent deeds.

15. Telephone and Electric Easement made by and among Fortunato Palumbo, Consolidated Edison Company of New York, Inc. and New York Telephone Company dated 10/2/1954 and recorded 1/6/1955 in Liber 5410 Cp 478. (Also affects Municipal Parcels.)

16. Declaration of Covenants and Restrictions made by Palumbo Bros., Inc. dated 6/15/1959 and recorded 7/27/1959 in Liber 5932 Cp 3.

17. Rights reserved in deed made by Fortunato Palumbo to Palumbo Bros., Inc. dated 6/24/1955 and recorded 6/30/1955 in Liber 5473 Cp 270.

18. Permanent Right of Way Easement in Deed made by Max Kasenetz to Anton Wollschlaeger and Margarete Wollschlaeger dated 1/7/1955 and recorded on 1/13/1955 in Liber 5413 Cp 197 and repeated in subsequent deeds.

19. The rights of others in and to the natural and unobstructed flow of the lake and streams crossing the Property.

20. Riparian rights and easements of others over lake and streams.

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EXHIBIT K

[Intentionally deleted.]

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EXHIBIT L

PARAMETERS FOR REAL PROPERTY TAX ABATEMENT

60% abatement on County, Town and School taxes beginning the first fiscal year after completion of the Project, which abatement will thereafter decrease by 3% per fiscal year for the next nineteen (19) years, at which time the abatement will end.

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EXHIBIT M

FORM OF DISCLOSURE RE: LEAD BASED PAINT

Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards

Lead Warning Statement

Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller's possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase.

Seller's Disclosure (initial)

____  (a) Presence of lead-based paint and/or lead-based paint hazards (check one below):

☐ Known lead-based paint and/or lead-based paint hazards are present in the housing (explain).

☐ Seller has no actual knowledge of lead-based paint and/or lead-based paint hazards in the housing.

____	(b)	Records and reports available to the seller (check one below):
	☐	Seller has provided the purchaser with all available records and reports pertaining to lead-based paint and/or lead-based paint hazards in the housing (list documents below).

☐ Seller has no reports or records pertaining to lead-based paint and/or lead-based paint hazards in the housing.

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Purchaser's Acknowledgment (initial)

____	(c)	Purchaser has received copies of all information listed above.
____	(d)	Purchaser has received the pamphlet Protect Your Family from Lead in Your Home.
____	(e)	Purchaser has (check one below):
	☐	Received a 10-day opportunity (or mutually agreed upon period) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards; or

☐ Waived the opportunity to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards.

Certification of Accuracy

The following parties have reviewed the information above and certify, to the best of their knowledge, that the information provided by the signatory is true and accurate.

SELLER:	PURCHASER:
By:_______________________________ Name: Title	Sound Development Group, LLC By:_______________________________ Name: Title:
	_________________________________

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EXHIBIT N

[Intentionally deleted.]

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EXHIBIT O

FORM OF ASSOCIATION DISCLAIMER AND RELEASE

DISCLAIMER AND RELEASE

The undersigned (the “Association”) hereby acknowledges and agrees with GSD Cortlandt, LLC and Buttonwood Acquisition, LLC (herein, “Seller”), for itself, its members and its and their respective successors and/or assigns, as follows:

1. Sale “As Is, Where Is.” The Association acknowledges and agrees that upon the date hereof, Seller has conveyed to the Association and the Association has accepted, the Association Property (defined below), “AS IS, WHERE IS, WITH ALL FAULTS”. The Association has not relied and will not rely on, and Seller has not made and is not liable for or bound by, any express or implied warranties, guarantees, statements, representations or information pertaining to the Association Property or relating thereto (including specifically, without limitation, information packages distributed with respect to the Association Property) made or furnished by Seller, or any real estate broker, agent or third party representing or purporting to represent Seller, to whomever made or given, directly or indirectly, orally or in writing. The Association represents that it is relying solely on its own expertise and that of the Association’s consultants in acquiring the Association Property and shall make an independent verification of the accuracy of any documents and information provided by Seller. The Association has conducted such inspections and investigations of the Association Property as the Association deems necessary, including, but not limited to, the physical and environmental conditions thereof, and shall rely upon same. The Association acknowledges that Seller has afforded the Association a full opportunity to conduct such investigations of the Association Property as the Association deemed necessary to satisfy itself as to the condition of the Association Property and the existence or non-existence or curative action to be taken with respect to any Hazardous Materials on or discharged from the Association Property, and will rely solely upon same and not upon any information provided by or on behalf of Seller or its agents or employees with respect thereto. As of the date hereof, the Association shall assume the risk that adverse matters, including, but not limited to, adverse physical or construction defects or adverse environmental, health or safety conditions, may not have been revealed by the Association’s inspections and investigations. For purposes of this Disclaimer and Release, the “Association Property” means so much of the Seller Land as is included in the Recreation Lot.

2. Seller Released from Liability. The Association hereby FOREVER RELEASES AND DISCHARGES Seller from all responsibility, obligations, claims, demands and liability whatsoever regarding the physical condition, valuation, salability or utility of the Association Property, or its suitability for any purpose whatsoever, past, present and future, including, but not limited to, with respect to the presence in the soil, air, structures and surface and subsurface waters, of Hazardous Materials or other materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Association Property under current or future federal, state and local laws, regulations or guidelines, and any structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Association Property, and further including, but not limited to, liabilities under the Comprehensive Environmental Response, Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.), as amended (“CERCLA”). The Association further hereby WAIVES (and by acquiring the Association Property will be deemed to have WAIVED) any and all objections and complaints (including, but not limited to, federal, state and local statutory and common law based actions, and any private right of action under any federal, state or local laws, regulations or guidelines to which the Association Property is or may be subject, including, but not limited to, CERCLA) concerning the physical characteristics and any existing conditions of the Association Property. The Association further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Association Property and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of Hazardous Materials or other contaminants, may not have been revealed by its investigation. For purposes hereof, “Hazardous Materials” means “Hazardous Material,” “Hazardous Substance,” “Pollutant or Contaminant,” and “Petroleum” and “Natural Gas Liquids,” as those terms are defined or used in Section 101 of CERCLA, and any other substances regulated because of their effect or potential effect on public health and the environment, including, without limitation, PCBs, lead paint, asbestos, urea formaldehyde, radioactive materials, putrescible materials, and infectious materials.

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3. Capitalized words used but not defined in this Disclaimer and Release have the meanings ascribed to them in that certain Agreement of Purchase and Sale dated as of [ ], 2019 between Seller, as seller, and [ ], as purchaser, as may be amended (the “Sale Agreement”).

4. Anything herein contained to the contrary notwithstanding, the Association shall be a third party beneficiary of the representations and warranties of Seller set forth in Section 9.1 of the Sale Agreement with respect to the Rec Lot Portion, subject to the limitations on survival of such representations and warranties after the Closing and to the limitations on liability set forth in the Sale Agreement including any cap on Seller’s liability as set forth in Section 9.3 of the Sale Agreement which cap shall apply to and be inclusive of any and all claims made by either Purchaser or the Association.

5. The terms and conditions of this Disclaimer and Release shall expressly survive the conveyance of the Association Property to the Association and shall not merge with the provisions of any conveyance documents.

Dated as of:           , 20     

[                                                                     ]

By:                                                                 

Name:

Title:

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EXHIBIT P

FORM OF MEMORANDUM

MEMORANDUM OF AGREEMENT OF PURCHASE AND SALE

     THIS MEMORANDUM OF AGREEMENT OF PURCHASE AND SALE (this "Memorandum") is made as of the [     ] day of [          ], 20__, between GSD Cortlandt, LLC and Buttonwood Acquisition, LLC, each a New York limited liability company having an address at c/o Gyrodyne, LLC, One Flowerfield, Suite 24, St. James, New York 11780 (hereinafter collectively referred to as “Seller”), and Sound Development Group, LLC, a       limited liability company having an address at 5520 Park Avenue, Trumbull, Connecticut 06611 (hereinafter referred to as “Purchaser”).

WITNESSETH:

Seller has agreed to sell and convey to Purchaser, and Purchaser has agreed to purchase from Seller, fee title to the premises (the "Premises") described on Schedule A annexed hereto and made a part hereof.

     This sale and conveyance of the Premises is to be made pursuant to the terms, covenants and conditions contained in that certain Agreement of Purchase and Sale dated as of [          ], 20__ made by and between Seller and Purchaser (the "Agreement").

Pursuant to and in accordance with the Agreement, the conveyance of title to the Premises is scheduled to occur sixty (60) days after the satisfaction or written waiver of all conditions precedent set forth in Section 7.2 of the Agreement but in no event later than sixty (60) days after the earlier of: (i) the satisfaction of Purchaser’s Permitting Contingency (as defined in the Agreement); and (ii) the Outside Date (as defined in the Agreement)(as the same may be extended in accordance with the terms of the Agreement).

Pursuant to the Agreement, Purchaser has paid Seller the sum of $400,000.00 as a deposit on account of the purchase price.

Purchaser is not entitled to possession, use or occupancy of the Premises prior to the closing date.

This Memorandum may be terminated unilaterally by Purchaser’s execution of a Termination of Memorandum of Agreement of Purchase and Sale and the recordation thereof in the Westchester County Clerk’s Office.

This Memorandum is being executed and delivered for the purpose of recording a memorandum of the Agreement and shall not be construed so as to in any way modify, change, vary or interpret the Agreement or any term, covenant or condition thereof. This Memorandum may be signed in counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

signatures appear on next page

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IN WITNESS WHEREOF, Purchaser and Seller have caused this instrument to be executed as of the date first above written.

Seller:	GSD Cortlandt, LLC By:                                                                                        Name:       Title: Buttonwood Acquisition, LLC By:                                                                                        Name:       Title:
Purchaser:	Sound Development Group, LLC By:                                                                                       Name:      Title:

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STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

     On the            day of           , 2019, before me, the undersigned, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

     On the            day of           , 2019, before me, the undersigned, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

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Schedule A

LEGAL DESCRIPTION OF GSD LAND

PARCEL I:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK, SHOWN AND DESIGNATED AS PART OF LOT NO. 3 ON A CERTAIN MAP ENTITLED, "SUBDIVISION OF PROPERTY KNOWN AS PINE TREE ACRES, TOWN OF CORTLANDT, WESTCHESTER COUNTY, NEW YORK" DATED MAY 15, 1981, PREPARED BY JOHN SALVATORE ROMEO, C.E. & L.S., FILED IN WESTCHESTER COUNTY CLERK'S OFFICE, DIVISION OF LAND RECORDS, OCTOBER 7, 1981 AS MAP NO. 20752 AND BEING MORE PARTICULARLY BOUNDED AND DESCRIBED ACCORDING TO SAID MAP AS FOLLOWS:

BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE WESTERLY SIDE OF LAFAYETTE AVENUE AND THE SOUTHERLY SIDE OF CROMPOND ROAD (ROUTE 202), AS SAME PRESENTLY EXISTS;

RUNNING THENCE ALONG THE WESTERLY SIDE OF LAFAYETTE AVENUE SOUTH 30° 20' 10" WEST, 244.06 FEET, TO THE DIVISION LINE BETWEEN LOTS NOS. 2 AND 3 ON THE AFORESAID MAP;

THENCE ALONG SAID DIVISION LINE THE FOLLOWING THREE (3) COURSES AND DISTANCES:

1) NORTH 62° 14' 00" WEST, 215.00 FEET; AND,

2) NORTH 05° 03' 45" EAST, 41.22 FEET; AND,

3) NORTH 29° 44' 00" WEST, 130.00 FEET, TO THE DIVISION LINE BETWEEN LOTS NOS. 1 AND 3 ON THE AFOREMENTIONED MAP;

THENCE ALONG SAID DIVISION LINE NORTH 27° 46' 00" EAST, 86.92 FEET, TO THE SOUTHERLY SIDE OF CROMPOND ROAD (ROUTE 202), AS SAME PRESENTLY EXISTS;

THENCE ALONG SAID SOUTHERLY SIDE OF CROMPOND ROAD (ROUTE 202), AS SAME PRESENTLY EXISTS, THE FOLLOWING FOUR (4) COURSES AND DISTANCES:

1) SOUTH 78° 35' 42" EAST, 29.17 FEET; AND,

2) SOUTH 72° 05' 50" EAST, 211.36 FEET; AND,

3) SOUTH 55° 25' 40" EAST, 36.05 FEET; AND,

4) SOUTH 68° 35' 40" EAST, 80.00 FEET, TO THE CORNER FIRST ABOVE MENTIONED, THE POINT OR PLACE OF BEGINNING.

TOGETHER WITH AN EASEMENT OVER, ACROSS AND THROUGH LOT NO. 1 ON THE AFORESAID FILED MAP NO. 20752 PROVIDING PERMANENT AND UNOBSTRUCTED VEHICULAR ACCESS TO CROMPOND ROAD BY WAY OF SAID LOT NO. 1 OR ANY LAWFUL USE THEREOF AS RESERVED TO SAMUEL AND JOSEPHINE SCHEIBER IN DEED DATED 12/9/81, RECORDED IN WESTCHESTER COUNTY CLERK'S LIBER 7755 CP. 187 ON 12/14/81.

TOGETHER WITH THE BENEFITS AND SUBJECT TO THE BURDENS OF A DRIVEWAY EASEMENT RECORDED IN LIBER 7933 PAGE 781.

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SAID PREMISES KNOWN AS 1989 CROMPOND ROAD, CORTLAND MANOR, NEW YORK, SECTION 33.12, BLOCK 1, LOT 1.

PARCEL II:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, WESTCHESTER COUNTY, NEW YORK, SHOWN AS LOT 2 ON "SUBDIVISION OF PROPERTY KNOWN AS PINE TREE ACRES, TOWN OF CORTLANDT, WESTCHESTER COUNTY, NEW YORK", DATED MAY 15, 1981 PREPARED BY JOHN SALVATORE ROMEO, ENGINEER AND SURVEYOR AND FILED OCTOBER 7, 1981 IN THE WESTCHESTER COUNTY CLERK'S OFFICE, DIVISION OF LAND RECORDS AS MAP NO. 20752 AND BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE POINT ON THE WESTERLY SIDE OF LAFAYETTE AVENUE WHERE SAME IS INTERSECTED BY THE DIVISION LINE BETWEEN LOTS 1 AND 2 ON SAID MAP;

THENCE ALONG SAID DIVISION LINE NORTH 62° 14' 00" WEST 257.35 FEET, NORTH 17° 14' 00" WEST 110 FEET AND NORTH 27° 46' 00" EAST 200.00 FEET TO THE DIVISION LINE BETWEEN LOTS 2 AND 3 ON SAID MAP;

THENCE ALONG SAID DIVISION LINE SOUTH 29° 44' 00" EAST, 130 FEET, SOUTH 05° 03' 45" WEST 41.22 FEET AND SOUTH 62° 14' 00" EAST 215 FEET TO THE WESTERLY SIDE OF LAFAYETTE AVENUE; THENCE ALONG SAID SIDE OF LAFAYETTE AVENUE, SOUTH 30° 20' 10" WEST 58.66 FEET AND SOUTH 29° 10' 50" WEST 111.34 FEET TO THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS 1987 CROMPOND ROAD, CORTLAND MANOR, NEW YORK, SECTION 33.12, BLOCK 1, LOT 2.

PARCEL III:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK, KNOWN AND DESIGNATED AS PART OF LOT NO. 1 AS SHOWN ON A CERTAIN MAP ENTITLED, "SUBDIVISION OF PROPERTY KNOWN AS PINE TREE ACRES, TOWN OF CORTLANDT, WESTCHESTER COUNTY, N.Y." AND FILED IN THE OFFICE OF THE WESTCHESTER COUNTY CLERK, DIVISION OF LAND RECORDS ON OCTOBER 7, 1981 AS MAP NO. 20752.

SAID LOT BEING MORE PARTICULARLY BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ALONG THE SOUTH SIDE OF CROMPOND ROAD, ALSO KNOWN AS ROUTE 202, SAID POINT BEING THE NORTHEAST CORNER OF LANDS SHOWN ON A CERTAIN MAP ENTITLED, "ORCHARD GARDENS SECTION A" SAID MAP WAS FILED IN THE OFFICE OF THE WESTCHESTER COUNTY CLERK, DIVISION OF LAND RECORDS ON OCTOBER 29, 1943 AS MAP NO. 6691;

THENCE ALONG SAID SOUTH SIDE OF CROMPOND ROAD AND THE NORTH SIDE OF SAID LOT NO. 1, SOUTH 76° 27' 20" EAST 103.16 FEET TO THE NORTHWEST CORNER OF LOT NO. 3 AS SHOWN ON THE AFORESAID FILED MAP;

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THENCE ALONG THE WEST SIDE OF SAID LOT NO. 3, SOUTH 27° 46' 00" WEST 90.00 FEET TO THE NORTHWEST CORNER OF LOT NO. 2 AS SHOWN ON SAID FILED MAP;

THENCE ALONG THE WEST SIDE OF SAID LOT NO. 2, SOUTH 27° 46' 00" WEST 200.00 FEET AND SOUTH 17° 14' 00" EAST 110.00 FEET TO THE SOUTH LINE OF SAID LOT NO. 2;

THENCE ALONG SAID SOUTH LINE OF LOT NO. 2, SOUTH 62° 14' 00" EAST 257.39 FEET TO THE WEST SIDE OF LAFAYETTE AVENUE, A TOWN HIGHWAY;

THENCE ALONG SAID WEST SIDE OF LAFAYETTE AVENUE, SOUTH 29° 10' 50" WEST 22.50 FEET, SOUTH 29° 37' 50" WEST 119.89 FEET, SOUTH 31° 32' 50" WEST 162.60 FEET AND SOUTH 29° 56' 00" WEST 1.73 FEET TO THE NORTHEAST CORNER OF LANDS NOW OR FORMERLY OF BLANCHARD;

THENCE ALONG THE NORTH SIDE OF SAID LANDS OF BLANCHARD, NORTH 67° 10' 20" WEST 29.57 FEET AND NORTH 64° 54' 00" WEST 385.77 FEET TO THE CENTERLINE OF A STONE WALL;

THENCE ALONG THE SAID CENTERLINE OF SAID STONE WALL, NORTH 27° 36' 10" EAST 121.65 FEET AND NORTH 23° 05' 50" EAST 27.00 FEET TO THE EAST SIDE OF LANDS SHOWN ON SAID MAP NO. 6609;

THENCE ALONG SAID EAST SIDE OF LANDS SHOWN ON SAID FILED MAP NO. 6609, NORTH 27° 46' 00" EAST 624.00 FEET TO THE POINT OR PLACE OF BEGINNING.

EXCEPTING THEREFROM THAT PORTION OF THE ABOVE DESCRIBED PREMISES TO BE TAKEN BY THE STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK BEING BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWESTERLY CORNER OF LANDS NOW OR FORMERLY OF CORTLANDT MEDICAL BUILDING ASSOCIATES (LIBER 7887 PAGE 245), SAID POINT BEING ALONG THE SOUTHERLY LINE OF N.Y.S. ROUTE 202 (A.K.A CROMPOND ROAD) AS IT CURRENTLY SITUATED;

THENCE FROM SAID POINT ALONG N.Y.S. ROUTE 202 AS IT IS CURRENTLY SITUATED, 76° 27' 20" EAST A DISTANCE OF 103.16 FEET TO THE NORTHEASTERLY CORNER OF THE HEREIN DESCRIBED PARCEL;

THENCE ALONG THE EASTERLY LINE OF SAID LANDS SOUTH 27° 46' 00" WEST A DISTANCE OF 3.06 FEET;

THENCE THROUGH SAID LANDS OF CORTLANDT MEDICAL BUILDING ASSOCIATES SOUTH 56° 51' 20" WEST A DISTANCE OF 40.21 FEET, SOUTH 77° 50' 10" WEST A DISTANCE OF 26.84 FEET, NORTH 31° 20' 00" WEST A DISTANCE OF 28.06 FEET AND SOUTH 77° 53' 50" WEST A DISTANCE OF 31.70 FEET TO A POINT IN THE WESTERLY LINE OF SAID LANDS;

THENCE ALONG SAID WESTERLY LINE NORTH 27° 46' 00" EAST A DISTANCE OF 14.22 FEET TO THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS 1985 CROMPOND ROAD, CORTLAND MANOR, NEW YORK, SECTION 33.12, BLOCK 1, LOT 3.

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LEGAL DESCRIPTION OF BUTTONWOOD LAND

PARCEL IV:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE TOWN OF CORTLANDT, COUNTY OF WESTCHESTER AND STATE OF NEW YORK, AND MORE PARTICULARLY BEING BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE CORNER FORMED BY THE INTERSECTION OF THE SOUTHWESTERLY SIDE OF BUTTONWOOD AVENUE WITH THE SOUTHEASTERLY SIDE OF BUTTONWOOD AVENUE, WHICH POINT IS THE INTERSECTION OF THE NORTHEASTERLY CORNER OF THE SUBJECT PREMISES WITH THE SOUTHWESTERLY CORNER OF LOT 9 AS SHOWN ON MAP OF ORCHARD GARDENS FILED AS MAP # 6691, (LAND NOW OR FORMERLY OF BRODY).

RUNNING THENCE ALONG SAID LAND NOW OR FORMERLY OF BRODY, THE FOLLOWING 2 COURSES AND DISTANCES:

1. SOUTH 20° 39' 10'' EAST, 96.26 FEET;

2. SOUTH 4° 50' 20'' EAST, 53.71 FEET TO LAND SHOWN AS LOT 1 ON FILED MAP # 20752, LAND NOW OR FORMERLY OF GSD CORTLAND LLC;

THENCE ALONG SAID LAST MENTIONED LAND, SOUTH 27° 16' 20'' WEST, 66.00 FEET TO LAND NOW OR FORMERLY OF THE TOWN OF CORTLAND;

THENCE ALONG SAID LAST MENTIONED LAND THE FOLLOWING 8 COURSES AND DISTANCES:

1. SOUTH 42° 33' 00'' WEST, 223.37 FEET;

2. SOUTH 59° 44' 40'' WEST, 55.57 FEET;

3. SOUTH 36° 25' 50'' WEST, 52.20 FEET;

4. SOUTH 28° 33' 30'' WEST, 40.77 FEET;

5. SOUTH 24° 53' 50'' WEST, 153.45 FEET;

6. SOUTH 30° 03' 10'' WEST, 101.67 FEET;

7. SOUTH 6° 03' 20'' WEST, 66.37 FEET;

8. SOUTH 25° 15' 30'' WEST, 93.21 FEET TO LAND NOW OR FORMERLY OF RICCHIUTTI;

THENCE ALONG SAID LAST MENTIONED LAND, SOUTH 58° 42' 30'' WEST, 117.37 FEET TO LAND NOW OR FORMERLY OF CASTORO;

THENCE ALONG SAID LAST MENTIONED LAND AND PARTLY ALONG A PARCEL SHOWN AS A ROADWAY ON FILED MAP # 6692, LAND NOW OR FORMERLY OF BEHAR, NORTH 64° 14' 50'' WEST, 137.44 FEET TO LAND NOW OR FORMERLY OF COLETTI;

THENCE ALONG SAID LAST MENTIONED LAND AND LANDS NOW OR FORMERLY OF NU, FITZGERALD, AND JALAN, NORTH 31° 10' 00'' EAST, 301.09 FEET (299.62 FEET, FILED MAP);

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THENCE, STILL ALONG LAND NOW OR FORMERLY OF JALAN AND LANDS NOW OR FORMERLY OF EMELUMADO, CASSIDY, WELCH AND KELLY, NORTH 27° 00' 20'' EAST, 342.41 FEET (344.54 FEET, FILED MAP) TO LAND NOW OR FORMERLY OF NORTON.

THENCE ALONG SAID LAST MENTIONED LAND NORTH 37° 50' 10'' EAST, 82.43 FEET (82.44 FEET FILED MAP) TO LAND NOW OR FORMERLY OF PESANTEZ;

THENCE ALONG SAID LAST MENTIONED LAND, THE FOLLOWING 4 COURSES AND DISTANCES:

1. SOUTH 64° 14' 50'' EAST, 9.66 FEET;

2. NORTH 73° 50' 30'' EAST, 92.23 FEET;

3. NORTH 56° 48' 30'' WEST, 118.00 FEET;

4. NORTH 27° 57' 20'' WEST, 21.90 FEET TO THE SOUTHEASTERLY SIDE OF BUTTONWOOD AVENUE;

THENCE ALONG THE SOUTHEASTERLY SOUTHERLY AND SOUTHWESTERLY SIDES OF BUTTONWOOD AVENUE, THE FOLLOWING 4 COURSES AND DISTANCES:

1. NORTH 62° 02' 40'' EAST, 89.72 FEET;

2. NORTH 24° 36' 20'' EAST, 65.05 FEET;

3. SOUTHEASTERLY, ALONG THE ARC OF A CURVE, BEARING TO THE RIGHT, HAVING A RADIUS OF 110.00 FEET, A DISTANCE OF 149.11 FEET;

4. SOUTH 46° 53' 10'' EAST, 65.49 FEET TO THE CORNER, THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS RESERVED LAKE AREA OFF BUTTONWOOD AVENUE, CORTLAND MANOR, NEW YORK, SECTION 33.11, BLOCK 3, LOT 36.

PARCEL V:

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, LYING AND BEING IN THE TOWN OF CORTLAND MANOR, COUNTY OF WESTCHESTER, AND STATE OF NEW YORK, BEING KNOWN AS LOT NO. 9 ON MAP ENTITLED: "MAP OF ORCHARD GARDENS, SECTION 'A', SITUATE IN THE TOWN OF CORTLAND, WESTCHESTER COUNTY, N.Y." FILED IN THE WESTCHESTER COUNTY CLERK'S OFFICE ON OCTOBER 29, 1948 AS MAP NO.

6691.

BEGINNING AT A POINT ON THE EASTERLY SIDE OF BUTTONWOOD AVENUE, WHERE SAME INTERSECTS LOTS 8 & 9 AS SHOWN ON FILED MAP NO. 6691, AND RUNNING THENCE;

1. SOUTH 62°- 43'- 40" EAST, ALONG SAID DIVISION LINE, FOR A DISTANCE OF 100.00 FEET, TO THE WESTERLY LINE OF LANDS NOW OR FORMERLY OF SAMUEL SCHEIBER, THENCE;

2. SOUTH 27°-16'-20" WEST, ALONG LANDS OF SCHEIBER, FOR A DISTANCE OF 200.00 FEET TO A POINT, THENCE;

3. NORTH 04°-50'-50" WEST, ALONG “RESERVED AREA FOR ORCHARD LAKE”, FOR A DISTANCE OF 53.71 FEET TO A POINT, THENCE;

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4. NORTH 20°-39'-10" WEST, ALONG SAME, FOR A DISTANCE OF 96.26 FEET TO A POINT IN THE EASTERLY SIDE OF BUTTONWOOD AVENUE, THENCE;

5. NORTH 27°-16'-20" EAST, ALONG SAME, FOR A DISTANCE OF 90.00 FEET TO THE POINT OR PLACE OF BEGINNING.

SAID PREMISES KNOWN AS 206 BUTTONWOOD AVENUE, CORTLAND MANOR, NEW YORK, SECTION 33.11, BLOCK 3, LOT 5.

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EXHIBIT Q

FORM OF TERMINATION

TERMINATION OF MEMORANDUM

OF AGREEMENT OF PURCHASE AND SALE

KNOW ALL MEN BY THESE PRESENTS, that Sound Development Group, LLC, a            limited liability company having an address at 5520 Park Avenue, Trumbull, Connecticut 06611, for and on behalf of itself and its permitted successors and/or assigns, does hereby TERMINATE that certain Memorandum of Agreement of Purchase and Sale, a copy of which is annexed hereto and made a part hereof as Exhibit 1, which Memorandum of Agreement of Purchase and Sale was recorded in the Office of the Clerk of the County of Westchester on                 2019 under Control No.                , and consents that the same be discharged of record.

Dated:                , 20__

Sound Development Group, LLC 

By:                                                                                                                                                                                 

      Name:

      Title:

STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

On the            day of ______, 20__, before me, the undersigned, personally appeared                     , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

Notary Public

Q-1

EXHIBIT 1

Q-2

EX-10.18

Exhibit 10.18

**** THE SYMBOL “[****]” DENOTES PLACES WHERE CERTAIN IDENTIFIED

INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (i)

NOT MATERIAL, AND (ii) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE

COMPANY IF PUBLICLY DISCLOSED ****

Exclusive Capital Services Engagement Agreement

Thank you for engaging [****] to provide you with the Capital Markets Services indicated below. The purpose of this Agreement is to define the scope of that representation, how our services will be provided to you, and the fees associated with such services.

Services to be Provided:

[****] will assist you, the undersigned Borrower, in seeking financing with prospective lenders and in negotiating the terms of financing with prospective lenders for the following assets (the “Asset”):

Flowerfield Park: 1 Flowerfield, St. James, New York

Cortlandt Medical Park: 1985 Crompond Road, Cortlandt Manor, New York

To that end, [****] will create and structure a financing request package, and shall submit that package to lenders in an attempt to generate competitive offers. [****] will consult with you in connection with its preparation of the financing request memorandum package. In performing these services, you understand that [****] is not acting as your agent or the agent of any lender and is not responsible for performing any investigation or due diligence of the Asset or the underlying investment, or for providing professional tax or legal advice.

You are granting to [****] the right and authority for 180 days from the Effective Date to work on your behalf to obtain debt financing on the Asset.

Lenders not eligible for [****] to represent are the following lenders you already have relationships with (defined as “Excluded Lenders”): [****]. 

Fees for Services Provided:

You agree to pay [****] an Origination Fee (the “Fee”) equal to One Percent (1.0%) of the final loan amount upon the occurrence of any of the following events: (1) Loan is closed with an [****] proposed lender other than an Excluded Lender; or (2) You obtain any debt financing on these Assets within 12 months of executing the agreement (“12-Month Period”) from any lender disclosed or introduced to you by [****] other than an Excluded Lender. Gyrodyne has the right to terminate for any reason with a 30 day notice.

The Fee is due to [****] upon closing, and [****] will be entitled to make demand of any closing agent for payment from the proceeds of the financing, and you shall approve instructions directing that the closing agent pay [****] the Fee. In no event shall [****] be paid later than 30 days after any of the events resulting in the Fee.

This Fee is in addition to all other third-party processing and report costs, and you agree to pay any expenses that may be required or incurred by a lender to complete the debt financing, including, but not limited to, title insurance, application fees, legal fees, appraisal costs, commitment fees, survey costs, documentation fees, and environmental audits.

Other Terms:

●    You understand that [****]is not the lender, and that [****] does not guarantee that financing can be obtained. If [****] obtains a commitment or proposed note or mortgage, you agree to review it promptly. Gyrodyne has the ultimate decision to accept or reject any proposed loan.   ●    You agree to defend, indemnify and hold [****] harmless from any and all claims, demands, liabilities and damages arising from or related to any untrue statement of a material fact on the part of Gyrodyne in connection with the financing request package or the omission to state in the financing request package a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.   ●    Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by final binding arbitration administered before a single arbitrator with a minimum of ten years’ experience in commercial real estate by the American Arbitration Association (“AAA”), or another administrator chosen by the parties, under AAA’s Commercial Arbitration Rules. Judgment on the award rendered by the arbitrator may be entered in any court of competent jurisdiction. The Parties shall be permitted to engage in discovery, and the arbitrator shall decide pre-hearing dispositive motions. By signing below you consent to binding arbitration and give up your rights to have the dispute litigated in court or jury trial.   ●    In any litigation, arbitration, or other legal proceeding which may arise out of or relating to this Agreement, the prevailing party shall be entitled to recover its costs, including reasonable attorneys' fees.   ●   This Agreement is binding upon and inures to the benefit of the parties and their legal representatives, successors and assigns. The Agreement may not be assigned without the consent of both parties. ●   You understand and acknowledge that the closing of the financing contemplated under this Agreement could be delayed by factors outside of [****] control. If delayed, you may realize a taxable event or suffer other tax and financial penalties. You hereby release and hold [****] harmless from any and all liability or other financial consequences arising out of or related to delay caused by factors outside of [****] control.   ●   You acknowledge that [****] is relying on information provided by you and has not made an independent investigation, determination, assessment, analysis, warranty or representation of, among other things, the value of the Asset, the financial, legal, title, physical, geological or environmental condition of the Asset, the financial condition or business prospects of any tenant, or such tenant’s intent to continue or renew its tenancy in the Asset, or the suitability of the Asset for your contemplated use. You agree that investigation and analysis of the foregoing matters is your sole responsibility and that you will hold [****] harmless from any liability therefore.   ●    This Agreement shall be governed and construed in accordance with the laws of the State of New York. Venue of any federal or state court in Suffolk County.   ●   [****] makes no representation as to the legal effect or validity of any provision of this Agreement. If you desire legal, financial, or tax advice, consult your attorney, accountant, or tax advisor.   ●    This Agreement contains our entire understanding. There are no other written or oral agreements that affect this Agreement.   ●   You agree to provide lender required information to MMCC to help achieve loan approval and closing, limited to proposed loans that Gyrodyne has agreed to pursue.   ●    The terms of this agreement and the information provided by Gyrodyne to [****] shall be subject to The January 27^th, 2020 Confidentiality Agreement.

Page 2

By signing below you authorize [****] to disclose this information to prospective lenders and authorize [****] and/or lenders to investigate your credit and financial histories as well as those of any entity or individual related to this Agreement, and to verify information from any source. If the borrower is a corporation, company, or partnership, you represent that by signing below you are authorized to execute on behalf of and bind the corporation, company, or partnership.
Gyrodyne, LLC:	[****]
Your Name: Gary J. Fitlin	By: [****]
Your Address: One Flowerfield, Suite 24 St. James, NY 11780	Our Address: [****]
Your Phone Number: (631) 584-5400 x316	Our Phone Number: [****]
Your Email: gfitlin@gyrodyne.com	Our Email: [****]
Signature:	Signature:
Effective Date:

Page 3

EX-21.1

Exhibit 21.1

List of Subsidiaries

1. Flowerfield Realty, Inc.

2. Flowerfield Properties, Inc.

3. Virginia Healthcare Center, LLC

4. GSD Flowerfield, LLC

5. GSD Port Jefferson, LLC

6. GSD Cortlandt, LLC

7. Buttonwood Acquisition, LLC

EX-31.1

Exhibit 31.1

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

I, Gary Fitlin, certify that:

1. I have reviewed this annual report on Form 10-K 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: March 26, 2020                                                                                                                  

/s/ GARY FITLIN

By Gary Fitlin,

President and Chief Executive Officer

Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CEO 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 annual report of Gyrodyne, LLC (the “Company”) on Form 10-K for the year ended December 31, 2019, 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: March 26, 2020

/s/ GARY FITLIN                                 

By Gary Fitlin,

President and Chief Executive Officer

Chief Financial Officer and Treasurer

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Note 10 - Credit Quality of Rents Receivable (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Summary of Valuation Allowance [Table Text Block]

Allowance for Doubtful Accounts	December 31, 2019			December 31, 2018
Beginning balance	$	13,000		$	34,000
Accounts receivable (written off)		(13,000	)		(21,000	)
Ending Balance	$	-		$	13,000

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Note 4 - Estimated Liquidation and Operating Costs Net of Estimated Receipts (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

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

	January 1, 2019			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			December 31, 2019
Assets:
Estimated net inflows from investment of real estate	$	3,418,285		$	(2,600,047	)	$	3,491,090		$	4,309,328
Liabilities:
Property operating costs		(2,084,955	)		1,536,010			(2,046,009	)		(2,594,954	)
Tenant improvements		(465,844	)		497,207			(31,363	)		-
Common area capital expenditures		(665,000	)		119,023			71,844			(474,133	)
Land entitlement costs		(1,468,474	)		1,422,192			(1,800,845	)		(1,847,127	)
Corporate expenditures		(4,904,367	)		2,167,814			(3,459,998	)		(6,196,551	)
Selling costs on real estate assets*		(2,437,076	)		-			(1,060,124	)		(3,497,200	)
Retention bonus payments to directors, officers and employees*		(1,984,733	)		14,573			(2,710,358	)		(4,680,518	)
Less prepaid expenses and other assets		397,854			234,620			-			632,474
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,194,310	)	$	3,391,392		$	(7,545,763	)	$	(14, 348,681	)

	January 1, 2018			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			December 31, 2018
Assets:
Estimated net inflows from investment of real estate	$	4,044,202		$	(2,386,428	)	$	1,760,511		$	3,418,285
Liabilities:
Property operating costs		(2,403,872	)		1,495,664			(1,176,747	)		(2,084,955	)
Tenant improvements		(1,304,109	)		1,316,567			(478,302	)		(465,844	)
Common area capital expenditures		(500,000	)		71,075			(236,075	)		(665,000	)
Land entitlement costs		(2,516,394	)		1,261,048			(213,128	)		(1,468,474	)
Corporate expenditures		(5,650,775	)		2,213,047			(1,466,639	)		(4,904,367	)
Selling costs on real estate assets*		(1,981,000	)		79,438			(535,514	)		(2,437,076	)
Retention bonus payments to directors, officers and employees*		(642,259	)		86,917			(1,429,391	)		(1,984,733	)
Less prepaid expenses and other assets		304,294			93,560			-			397,854
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,649,913	)	$	4,230,888		$	(3,775,285	)	$	(10,194,310	)

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Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)		12 Months Ended
	Sep. 01, 2015	Dec. 31, 2019
The Corporation [Member]
Maximum Value of Asset to Effect Dissolution	$ 1,000,000	$ 1,000,000

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Note 12 - Commitments (Details Textual) - USD ($)	Dec. 06, 2019	Jan. 01, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018	May 31, 2014
Other Commitment, Total			$ 431,716		$ 431,716
Bonus Pool Funding as Percentage of Appraised Value of Contributed Properties						5.00%
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%
Director Fees, Deferred, Percentage	100.00%
Subsequent Event [Member]
Deferred Compensation Arrangement Fixed Interest Rate		$ 5
Chief Executive Officer [Member] | Bonus Payable [Member]
Other Commitment, Total				$ 125,000
Other Employees [Member]
Supplemental Unemployment Benefits, Severance Benefits				$ 81,716
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						1.75%

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Note 14 - Contingencies (Details Textual)	1 Months Ended
	Apr. 30, 2016 USD ($)
Putative Class Action Lawsuit [Member]
Litigation Settlement, Amount Awarded to Other Party	$ 650,000

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Note 3 - Statements of Net Assets in Liquidation

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Liquidation Basis of Accounting [Text Block]

3. Statements of Net Assets in Liquidation

Net assets in liquidation at

December 31, 2019

would result in estimated liquidating distributions of approximately

$21.16

per common share. This is an increase of

$3.05

from the

December 31, 2018

net assets in liquidation of

$18.11

per common share.

The increase in net assets in liquidation results from an increase in the real estate value of

$12.1

million (

$8.14

per share) of the properties that are the subject of the purchase and sale agreements with BSL St. James LLC and Sound Cortlandt, LLC (see note

5

), respectively, and other adjustments to the remaining properties partially offset by an increase in the expense reserve (the estimated costs in excess of receipts) per share by

$7.5

million (

$5.09

per share). The increase in the expense reserve is mainly the result of an extension in the estimated liquidation timeline of

18

months attributable to the pursuit of entitlements (and the associated costs), entitlement costs and an increase to the retention bonus payments and selling costs as a result of the increase in real estate value.

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

December 31, 2021,

although the estimated completion of the liquidation period

may

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

December 31, 2019

cash balance of

$2.2

million with adjustments for the following items which are estimated through

December 31, 2021:

1. The estimated cash receipts from the operation of the Company’s 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 properties at their estimated gross sales proceeds.

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

3. 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.

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

5. Retention bonus amounts based on the net realizable value of the real estate under the Retention Bonus Plan (See Note 12 ).

6. Proceeds from the draw downs on the Company’s credit facilities to fund tenant improvements and working capital 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 common area capital and 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 underestimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or overestimates 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 value during the liquidation process so that we can maximize distributions to our shareholders.  The Company estimates that it will incur approximately

$1.8

million (included in the statement of net assets as part of the estimated liquidation and operating costs net of receipts, See Note

4

) in land entitlement costs from

January 2020

through the end of the liquidation period, currently estimated to conclude on or about

December 31, 2021,

in an effort to obtain entitlements, including 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 year ended

December 31, 2019,

the Company incurred approximately

$1.4

million of land entitlement costs, consisting predominately of engineering fees.  The Company believes the remaining balance of

$1.8

million (an aggregate of approximately

$556,000

which Company vendors have agreed to defer until the

first

post subdivision property lot is sold) will be incurred from

January 2020

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 entitlements and the dynamics of the real estate market.  As a result, the Company has focused and will continue to focus its land entitlement 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 statement of net assets as of

December 31, 2019 (

predicated on current asset values) includes some but

not

all of the potential value impact that

may

result from the land entitlement 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.

The net assets in liquidation at

December 31, 2019 (

$31,369,637

) and

2018

(

$26,846,670

) results in estimated liquidating distributions of approximately

$21.16

and

$18.11,

respectively, per common share (based on

1,482,680

shares outstanding), based on estimates and other indications of sales value (predicated on current asset values including the purchase prices set forth in the purchase and sale agreements with BSL St. James LLC and Sound Cortlandt, LLC, respectively, for the properties that are subject of such agreements) which includes some but

not

all of the potential sales proceeds that

may

result directly or indirectly from our land entitlement efforts. Some of the additional value that

may

be derived from the land entitlement efforts is

not

included in the estimated liquidating distributions as of

December 31, 2019

because the amount of such additional value that

may

result from such efforts are too difficult to predict with sufficient certainty. The Company believes the land entitlement efforts will enhance estimated distributions per share through the improved values (a large amount of which has already been included in the reported value for real estate held for sale) from the sales of the Flowerfield and Cortlandt Manor properties net of the costs to achieve the improved values and other expenses. 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, change in values of the Cortlandt Manor and/or Flowerfield properties (whether market driven or 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 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.

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Consolidated Statements of Net Assets (Liquidation Basis) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
ASSETS:
Real Estate Held-for-sale	$ 48,270,000	$ 36,201,270
Cash and cash equivalents	2,200,000
LIABILITIES:
Accrued liabilities	178,479	173,086
Net assets in liquidation	31,369,637
Basis of Accounting, Liquidation [Member]
ASSETS:
Real Estate Held-for-sale	48,270,000	36,201,270
Cash and cash equivalents	2,213,205	3,049,587
Rent receivable	63,132	57,270
Other receivables	41,460	68,743
Total Assets	50,587,797	39,376,870
LIABILITIES:
Accounts payable	621,538	769,346
Accrued liabilities	178,479	173,086
Deferred rent liability	24,316	24,825
Tenant security deposits payable	265,078	268,633
Mortgage loan payable	3,780,068	1,100,000
Estimated liquidation and operating costs net of receipts	14,348,681	10,194,310	[1]
Total Liabilities	19,218,160	12,530,200
Net assets in liquidation	$ 31,369,637	$ 26,846,670

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

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Note 10 - Credit Quality of Rents Receivable - Allowance for Doubtful Accounts (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Beginning balance	$ 13,000	$ 34,000
Accounts receivable (written off)	(13,000)	(21,000)
Ending Balance		$ 13,000

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Note 3 - Statements of Net Assets in Liquidation (Details Textual) - USD ($)	12 Months Ended	27 Months Ended	36 Months Ended
	Dec. 31, 2019	Dec. 31, 2021	Dec. 31, 2021	Dec. 31, 2018	Dec. 31, 2017
Liquidation Basis of Accounting, Common Stock Per Share	$ 21.16
Liquidation Basis of Accounting, Net Increase (Decrease) in Liquidation Value Per Share	$ 3.05
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 2,200,000
Liquidation Basis of Accounting, Land Entitlement Costs Incurred	1,400,000
Liquidation Basis of Accounting, Land Entitlement Costs Incurred, Amount Deferred	556,000
Net Assets, Ending Balance	31,369,637
Basis of Accounting, Liquidation [Member]
Liquidation Basis of Accounting, Common Stock Per Share				$ 18.11
Increase in Real Estate Value	$ 12,100,000
Increase in Real Estate Value, Per Share	$ 8.14
Increase in Expense Reserve	$ 7,500,000
Increase in Expense Reserve, Per Share	$ 5.09
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 2,213,205			$ 3,049,587
Net Assets, Ending Balance	$ 31,369,637			$ 26,846,670	$ 26,637,350
Common Stock, Shares, Outstanding, Ending Balance	1,482,680
Forecast [Member]
Liquidation Basis of Accounting, Land Entitlement Costs		$ 1,800,000
Liquidation Basis of Accounting, Land Entitlement Costs Incurred			$ 1,800,000

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Note 6 - Loan Payable - Loan Maturity (Details)	Dec. 31, 2019 USD ($)
2020	$ 66,000
2021	138,630
2022	143,204
2023	147,928
2024	152,807
Thereafter	3,131,499
Total	$ 3,780,068

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Note 14 - Contingencies

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Contingencies Disclosure [Text Block]

14. 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.

As of

December 31, 2019

and

2018,

the value of the remaining unsold properties exceeded the respective

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 10 - Credit Quality of Rents Receivable

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

10. Credit Quality of Rents Receivable

The Company’s standard lease terms include rent due on the

first

of the month. The Company credit terms extend a standard

ten

-day grace period across its tenant portfolio and in

no

event are credit terms extended beyond

one

year.

The Company manages its billing and collection process internally to enable timely identification of collection issues. The controls and related processes enable the Company to timely identify and establish payment plans to minimize material losses from defaults.

As of

December 31, 2019

and

2018,

respectively, the Company’s allowance for doubtful accounts reflected the following activity:

Allowance for Doubtful Accounts	December 31, 2019			December 31, 2018
Beginning balance	$	13,000		$	34,000
Accounts receivable (written off)		(13,000	)		(21,000	)
Ending Balance	$	-		$	13,000

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Note 4 - Estimated Liquidation and Operating Costs Net of Estimated Receipts

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

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

4. Estimated Liquidation and Operating Costs Net of Estimated Receipts

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 liquidation and operating costs net 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 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, 2019

through

December 31, 2019

is as follows:

	January 1, 2019			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			December 31, 2019
Assets:
Estimated net inflows from investment of real estate	$	3,418,285		$	(2,600,047	)	$	3,491,090		$	4,309,328
Liabilities:
Property operating costs		(2,084,955	)		1,536,010			(2,046,009	)		(2,594,954	)
Tenant improvements		(465,844	)		497,207			(31,363	)		-
Common area capital expenditures		(665,000	)		119,023			71,844			(474,133	)
Land entitlement costs		(1,468,474	)		1,422,192			(1,800,845	)		(1,847,127	)
Corporate expenditures		(4,904,367	)		2,167,814			(3,459,998	)		(6,196,551	)
Selling costs on real estate assets*		(2,437,076	)		-			(1,060,124	)		(3,497,200	)
Retention bonus payments to directors, officers and employees*		(1,984,733	)		14,573			(2,710,358	)		(4,680,518	)
Less prepaid expenses and other assets		397,854			234,620			-			632,474
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,194,310	)	$	3,391,392		$	(7,545,763	)	$	(14, 348,681	)

*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

December 31, 2021.

The remeasurement is the result of the extension, entitlement costs and increased retention bonus payments and selling costs attributable to the increase in real estate values.

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

January 1, 2018

through

December 31, 2018

is as follows:

	January 1, 2018			Expenditures/ (Receipts)			Remeasurement of Assets and Liabilities			December 31, 2018
Assets:
Estimated net inflows from investment of real estate	$	4,044,202		$	(2,386,428	)	$	1,760,511		$	3,418,285
Liabilities:
Property operating costs		(2,403,872	)		1,495,664			(1,176,747	)		(2,084,955	)
Tenant improvements		(1,304,109	)		1,316,567			(478,302	)		(465,844	)
Common area capital expenditures		(500,000	)		71,075			(236,075	)		(665,000	)
Land entitlement costs		(2,516,394	)		1,261,048			(213,128	)		(1,468,474	)
Corporate expenditures		(5,650,775	)		2,213,047			(1,466,639	)		(4,904,367	)
Selling costs on real estate assets*		(1,981,000	)		79,438			(535,514	)		(2,437,076	)
Retention bonus payments to directors, officers and employees*		(642,259	)		86,917			(1,429,391	)		(1,984,733	)
Less prepaid expenses and other assets		304,294			93,560			-			397,854
Liability for estimated costs in excess of estimated receipts during liquidation**	$	(10,649,913	)	$	4,230,888		$	(3,775,285	)	$	(10,194,310	)

*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 were based on the liquidation being completed by

June 30, 2020.

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Consolidated Statements of Changes in Net Assets (Liquidation Basis) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Basis of Accounting, Liquidation [Member]
Net assets in liquidation, beginning of period	$ 26,846,670	$ 26,637,350
Change in liquidation value of real estate	12,068,730	3,984,605
Liability for estimated costs in excess of estimated receipts during liquidation**	(7,545,763)	(3,775,285)	[1]
Net increase in liquidation value	4,522,967	209,320
Net assets in liquidation, end of period	31,369,637	$ 26,846,670
Net assets in liquidation, end of period	$ 31,369,637

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

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Note 4 - Estimated Liquidation and Operating Costs Net of Estimated Receipts - Changes in Liability for Estimated Costs in Excess of Estimated Receipts (Details) - Basis of Accounting, Liquidation [Member] - USD ($)		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Estimated net inflows from investment of real estate		$ 3,418,285	$ 4,044,202
Estimated net inflows from investment of real estate		(2,600,047)	(2,386,428)
Estimated net inflows from investment of real estate		3,491,090	(1,760,511)
Property operating costs		(2,084,955)	(2,403,872)
Property operating costs		1,536,010	1,495,664
Property operating costs		(2,046,009)	(1,176,747)
Tenant improvements		(465,844)	(1,304,109)
Tenant improvements		497,207	1,316,567
Tenant improvements		(31,363)	(478,302)
Common area capital expenditures		(665,000)	(500,000)
Common area capital expenditures		119,023	71,075
Common area capital expenditures		71,844	(236,075)
Land entitlement costs		(1,468,474)	(2,516,394)
Land entitlement costs		1,422,192	1,261,048
Land entitlement costs		(1,800,845)	(213,128)
Corporate expenditures		(4,904,367)	(5,650,775)
Corporate expenditures		2,167,814	2,213,047
Corporate expenditures		(3,459,998)	(1,466,639)
Selling costs on real estate assets*		(2,437,076)	(1,981,000)
Selling costs on real estate assets*			79,438
Selling costs on real estate assets*		(1,060,124)	(535,514)
Retention bonus payments to directors, officers and employees*	[1]	(1,984,733)	(642,259)
Retention bonus payments to directors, officers and employees*		14,573	86,917	[1]
Retention bonus payments to directors, officers and employees*		(2,710,358)	(1,429,391)	[1]
Less prepaid expenses and other assets		397,854	304,294
Less prepaid expenses and other assets		234,620	93,560
Liability for estimated costs in excess of estimated receipts during liquidation**	[2]	(10,194,310)	(10,649,913)
Liability for estimated costs in excess of estimated receipts during liquidation**		3,391,392	4,230,888	[2]
Liability for estimated costs in excess of estimated receipts during liquidation**		(7,545,763)	(3,775,285)	[2]
Estimated net inflows from investment of real estate		(3,491,090)	1,760,511
Estimated net inflows from investment of real estate		4,309,328	3,418,285
Property operating costs		(2,594,954)	(2,084,955)
Tenant improvements			(465,844)
Common area capital expenditures		(474,133)	(665,000)
Land entitlement costs		(1,847,127)	(1,468,474)
Corporate expenditures		(6,196,551)	(4,904,367)
Selling costs on real estate assets*		(3,497,200)	(2,437,076)
Retention bonus payments to directors, officers and employees*		(2,710,358)	(1,429,391)	[1]
Retention bonus payments to directors, officers and employees*		(4,680,518)	(1,984,733)	[1]
Less prepaid expenses and other assets		632,474	397,854
Liability for estimated costs in excess of estimated receipts during liquidation**		(7,545,763)	(3,775,285)	[2]
Liability for estimated costs in excess of estimated receipts during liquidation**		$ (14,348,681)	$ (10,194,310)	[2]

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

XML

Note 7 - Real Estate (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Real Estate Held-for-sale, Period Increase (Decrease)	$ 12,068,730	$ 3,984,605
Real Estate Held-for-sale	48,270,000	36,201,270	$ 33,016,665
Port Jefferson Professional Park [Member]
Real Estate Held-for-sale, Period Increase (Decrease)		$ (800,000)
Real Estate Held-for-sale	$ 48,270,000

XML

Note 11 - Concentration of Credit Risk (Details Textual)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
State Agency [Member]
Increase in Space Leased, Percentage		93.00%
Rental Income [Member]
Number of Major Customers		3
Customer Concentration Risk [Member] | Rental Income [Member] | Customer 1 [Member]
Concentration Risk, Percentage		23.00%
Customer Concentration Risk [Member] | Rental Income [Member] | Customer 2 [Member]
Concentration Risk, Percentage		20.00%
Customer Concentration Risk [Member] | Rental Income [Member] | Customer 3 [Member]
Concentration Risk, Percentage		7.00%
Customer Concentration Risk [Member] | Rental Income [Member] | Small Business [Member] | Forecast [Member]
Concentration Risk, Percentage	39.00%

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Note 13 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2019

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 underestimates 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 9 - Income Taxes

12 Months Ended

Dec. 31, 2019

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.

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: a) bear any tax liability resulting from such audit, or b) elect to push out the tax audit adjustments to the respective shareholders once it has been calculated at the company level.

XML

Note 1 - The Company (Details Textual)		12 Months Ended
	Sep. 01, 2015 USD ($)	Dec. 31, 2019 USD ($) ft² a
Flowerfield Industrial Park [Member]
Area of Real Estate Property | ft²		127,000
Multi-Tenant Industrial Park [Member]
Area of Real Estate Property		10
St. James, New York [Member] | Controlled by Parent Company [Member]
Area of Real Estate Property		68
Flowerfield Complex in Smithtown, New York [Member]
Area of Real Estate Property		62
Cortlandt Manor Medical Center [Member]
Area of Real Estate Property | ft²		34,000
Area of Land		13.8
The Corporation [Member]
Maximum Value of Asset to Effect Dissolution | $	$ 1,000,000	$ 1,000,000

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Note 8 - Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	December 31,
	2019		2018
Payroll and related taxes	$	40,011	$	34,737
Professional fees		101,468		103,349
Other		37,000		35,000
Total	$	178,479	$	173,086

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of

C

onsolidation -

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 and the consolidated statements 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 consolidated 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

December 31, 2021.

The Company is in the process of pursuing entitlements and density, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers (Purchase and Sale Agreement entered but

not

yet closed/prospective purchasers). 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 or purchasers, and will continue up until such time as entitlement and density decisions are made by the relevant government entities. The Company hopes to secure favorable decisions on entitlements 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, density, sales, liquidation and dissolution could extend through

December 31, 2021

with the ultimate timing to a certain extent managed by Gyrodyne but also dependent upon and under the control of the applicable municipality’s planning board or other governmental authority and or purchasers. 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’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 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

December 31, 2021.

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.

Cash and Cash Equivalents, Policy [Policy Text Block]

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.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

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 creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

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

December 31, 2019,

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 12 - Commitments - Other Commitments (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Contractual obligation	$ 431,716	$ 431,716
Management Employment Agreements with Bonus and Severance Commitment Contingencies [Member]
Contractual obligation	350,000	350,000
Other Employee Severance Commitment Contingencies [Member]
Contractual obligation	$ 81,716	$ 81,716

XML

Note 15 - Related Party Transactions (Details Textual) - Not-for-profit Corporation [Member]	1 Months Ended	12 Months Ended
	Feb. 28, 2019 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Aug. 31, 2016 ft²
Operating Leases, Income Statement, Lease Revenue, Total		$ 34,720	$ 47,146
Lease Term August 2016 Through December 2018 [Member]
Rent Amount Per Square Foot Per Month, Maximum	10
Area of Real Estate Property | ft²				2,130
Annual Rent	$ 18,170
Operating Leases, Maximum Total Lease Commitment	36,340
Payments for Tenant Improvements	$ 3,500
Commitments, Fair Value Disclosure		$ 18,170
Lessor, Operating Lease, Renewal Term		2 years
Operating Leases, Additional Commitment		$ 72,680

XML

Note 2 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2. Summary of Significant Accounting Policies

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

C

onsolidation -

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 statements 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 consolidated 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

December 31, 2021.

The Company is in the process of pursuing entitlements and density, and our ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers (Purchase and Sale Agreement entered but

not

yet closed/prospective purchasers). 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 or purchasers, and will continue up until such time as entitlement and density decisions are made by the relevant government entities. The Company hopes to secure favorable decisions on entitlements 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, density, sales, liquidation and dissolution could extend through

December 31, 2021

with the ultimate timing to a certain extent managed by Gyrodyne but also dependent upon and under the control of the applicable municipality’s planning board or other governmental authority and or purchasers. 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’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 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

December 31, 2021.

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.

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.

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 creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

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

December 31, 2019,

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.

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2019	Mar. 26, 2020	Jun. 30, 2019
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	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		1,482,680
Entity Public Float			$ 13,394,333
Entity Shell Company	false
Document Type	10-K
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Note 6 - Loan Payable

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

6. Loan Payable

The Company secured a non-revolving credit line for up to

$3,000,000

(the “Original Line”) with a bank, which closed on

March 21, 2018. 

There was an interest only phase for the

first

eight

months of the loan (“Interest-Only Phase”).  On

January 24, 2019,

the Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of

January 20, 2020

or upon drawing down a total of

$3,000,000

after which it automatically converts to a permanent loan maturing on the earlier of

January 20, 2027

or

84

months after conversion to a permanent loan (the “Permanent Phase”).  The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of

April 30, 2020

or upon drawing down a total of

$3,000,000

after which it automatically converts to a permanent loan maturing on the earlier of

April 30, 2027

or

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), but in

no

event less than the initial interest rate in effect on the closing date (

6.5%

).  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, plus principal based on a

20

-year amortization period.  The Permanent Phase interest rate currently would be

3.25%.

The

first

advance of

$1.1

million was used to finance the tenant improvements pursuant to the amended and expanded signed lease with Stony Brook University Hospital (“SBU Hospital”). An additional advance of

$1.1

million was drawn on

March 29, 2019

to finance the buildouts on leases signed through

December 31, 2018.

The balance of the loan can be drawn upon for improvements to be completed by the Company, as landlord, pursuant to future leases with the State University of New York or institutions affiliated with it (or other tenants subject to the bank’s approval) anytime during the Interest-Only Phase.

To secure access to additional working capital through the final sale date of the Flowerfield industrial buildings, the Company secured a

second

loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to

$3,000,000,

which closed on

January 24, 2019.

There is an interest only phase for the

first

twenty-four

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

January 20, 2028 (

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), but in

no

event less than the initial interest rate in effect on the closing date (

6.5%

). 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, plus principal based on a

20

-year amortization period. Permanent Phase interest rate currently would be

3.25%.

Two advances of

$1,000,000

and

$500,000

were drawn on

September 30

and

December 31, 2019,

respectively. The balance of

$1,419,932,

net of closing costs of

$80,068,

is available to be drawn down.

Both lines are secured by approximately

31.8

acres of the Flowerfield Industrial Park including the related buildings and leases. As of

December 31, 2019,

the Company is in compliance with the loan covenants. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain secured by the subdivided industrial park lot only.

The loan payable matures upon the earlier of the sale of the Flowerfield Industrial Park or as follows:

Years Ending December 31,
2020	$	66,000
2021		138,630
2022		143,204
2023		147,928
2024		152,807
Thereafter		3,131,499
Total	$	3,780,068

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a

third

loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to

$2,500,000,

which is scheduled to close in the

second

quarter of

2020.

  The term is

24

months, with an option to extend for an additional

12

months.  The interest rate 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), but in

no

event less than

four

and

three

quarters percent (

4.75%

).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for

one

or both Lots.

The line is secured by the Cortlandt property (approximately

14

acres) and cross collateralized by approximately

31.8

acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective

February 27, 2020,

the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to

one

percent (

1%

) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

XML

Note 11 - Concentration of Credit Risk

12 Months Ended

Dec. 31, 2019

Credit Concentration Risk [Member]

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

11. 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

December 31, 2019

and

2018.

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

For the year ended

December 31, 2019

rental income from the Company’s

three

largest tenants represented approximately

23%,

20%

and

7%

of total rental income. The

three

largest tenants by revenue as of

December 31, 2019

consist of a state agency located in the industrial park, a medical tenant in the Cortlandt Manor Medical Center and a tenant in the industrial park that recently expanded its space. During the year ended

December 31, 2018

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

93%,

which increased the concentration of credit risk respectively.

The current economic challenges facing state and local budgets impacted most of the Company’s largest tenants. In addition, the current economic challenges stemming from the coronavirus are disproportionately impacting small businesses which comprise

39%

of our expected

2020

rental revenue. There can be

no

assurance that the Company’s leases will renew for the same square footage, at favorable rates net of tenant improvements, if at all.

XML

Note 7 - Real Estate

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Real Estate Disclosure [Text Block]

7. Real Estate

The Company reports its financial statements under the liquidation basis of accounting which reflects real estate value at net realizable value (predicated on current asset values). During

2019

and

2018,

the net realizable value of real estate increased by

$12,068,730

and

$3,984,605,

respectively. The

2019

increase is mainly attributable to the Purchase and Sale Agreements entered into in Flowerfield and Cortlandt Manor (see Note

5

). The

2018

increase was primarily driven by the increase in value attributable to the entitlement process. The valuation of the remaining real estate as of

December 31, 2019

was

$48,270,000.

	2019		2018
Net Realizable Value at beginning of period	$	36,201,270	$	33,016,665
Increases in Net Realizable Value
Cortlandt Manor		2,010,000		1,040,000
Flowerfield		10,058,730		2,944,605
Less Property Sales
Port Jefferson Professional Park		-		(800,000	)
Net Realizable Value at December 31,	$	48,270,000	$	36,201,270

XML

Note 15 - Related Party Transactions

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

15. 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		Total Commitment ( excluding renewal options)		Additional Commitment (assumes two-year renewal option is exercised)
Jan 2019	-	Dec 2020		2,284	$	19,414	$	38,828	$	38,828
Jan 2019	-	Dec 2020		1,817	-(a)		-(a)		-(a)
Jan 2019	-	Dec 2020		1,905	$	16,193	$	32,385	$	32,385

(a) In February 2019, the Company amended the square footage under the 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 originally was for 2,130 square feet. The amended maximum annual and total lease commitment of up to $18,170 and $36,340, 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, 2019 of $18,170 and total commitments including two -year renewal option of up to $72,680.

During the

twelve

months ended

December 31, 2019

and

2018,

respectively, the Company received rental revenue of

$34,720

and

$47,146,

respectively.

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

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.

XML

Note 6 - Loan Payable (Details Textual)	Mar. 26, 2020 USD ($) a	Feb. 27, 2020	Feb. 21, 2020 USD ($)	Dec. 31, 2019 USD ($) ft² a	Sep. 30, 2019 USD ($)	Mar. 29, 2019 USD ($)	Feb. 21, 2019 USD ($)	Jan. 24, 2019 USD ($)	Mar. 21, 2018 USD ($)
Subsequent Event [Member] | National Mortgage Banking Firm [Member]
Debt Instrument, Origination Fee, Percentage		1.00%
Cortlandt Manor Medical Center [Member]
Area of Real Estate Property | ft²				34,000
Real Estate Securing Mortgage Loan [Member] | Flowerfield Industrial Park [Member]
Area of Real Estate Property | a				31.8
Real Estate Securing Mortgage Loan [Member] | Cortlandt Manor Medical Center [Member] | Subsequent Event [Member]
Area of Real Estate Property | a	14
Non-revolving Credit Line [Member]
Line of Credit Facility, Maximum Borrowing Capacity							$ 3,000,000	$ 3,000,000	$ 3,000,000
Debt Instrument, Interest Only Phase, Term									240 days
Debt Instrument, Interest and Principal Phase, Term							7 years	7 years
Proceeds from Lines of Credit, Total						$ 1,100,000		$ 1,100,000
Non-revolving Credit Line [Member] | Interest Only Period of Payments [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage								6.50%
Non-revolving Credit Line [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Interest Rate, Effective Percentage								3.25%
Debt Instrument, Amortization Period								20 years
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%
Non-revolving Credit Line 2 [Member]
Line of Credit Facility, Maximum Borrowing Capacity								$ 3,000,000
Debt Instrument, Interest Only Phase, Term								2 years
Debt Instrument, Interest and Principal Phase, Term								7 years
Proceeds from Lines of Credit, Total				$ 500,000	$ 1,000,000
Line of Credit Facility, Current Borrowing Capacity				$ 1,419,932
Debt Issuance Costs, Line of Credit Arrangements, Gross								$ 80,068
Non-revolving Credit Line 2 [Member] | Interest Only Period of Payments [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage								6.50%
Non-revolving Credit Line 2 [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Interest Rate, Effective Percentage								3.25%
Debt Instrument, Amortization Period								20 years
Non-revolving Credit Line 2 [Member] | Prime Rate [Member] | Interest Only Period of Payments [Member]
Debt Instrument, Basis Spread on Variable Rate								1.00%
Non-revolving Credit Line 2 [Member] | Federal Home Loan Bank Rate [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Basis Spread on Variable Rate								2.00%
Non-revolving Credit Line 3 [Member] | Subsequent Event [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 2,500,000		$ 3,000,000
Debt Instrument, Interest Only Phase, Term	2 years
Debt Instrument, Interest and Principal Phase, Term			7 years
Non-revolving Credit Line 3 [Member] | Minimum [Member] | Subsequent Event [Member]
Debt Instrument, Interest Rate, Effective Percentage	4.00%
Non-revolving Credit Line 3 [Member] | After Interest Only Payment Period [Member] | Subsequent Event [Member]
Debt Instrument, Basis Spread on Variable Rate	0.0475%
Non-revolving Credit Line 3 [Member] | Prime Rate [Member] | Interest Only Period of Payments [Member] | Subsequent Event [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Non-revolving Credit Line 3 [Member] | Prime Rate [Member] | After Interest Only Payment Period [Member] | Subsequent Event [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Non-revolving Credit Line 3 [Member] | Federal Home Loan Bank Rate [Member] | After Interest Only Payment Period [Member] | Subsequent Event [Member]
Debt Instrument, Basis Spread on Variable Rate	0.0475%

XML

Note 8 - Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Payroll and related taxes	$ 40,011	$ 34,737
Professional fees	101,468	103,349
Other	37,000	35,000
Total	$ 178,479	$ 173,086

XML

Note 12 - Commitments (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Other Commitments [Table Text Block]

	2019		2018
Management Employment agreements with bonus* and severance commitment contingencies	$	350,000	$	350,000
Other employee severance commitment contingencies		81,716		81,716
Total	$	431,716	$	431,716

Schedule of Allocation of Bonus Pool Percentage [Table Text Block]

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

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]

RETENTION BONUS PLAN PARTICPANTS	2019		2018
Board of Directors	$	9,471	$	56,497
President and Chief Executive Officer		2,390		14,250
Chief Operating Officer		2,151		12,824
Other Employees		561		3,346
Total	$	14,573	$	86,917

XML

Note 6 - Loan Payable (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

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

Years Ending December 31,
2020	$	66,000
2021		138,630
2022		143,204
2023		147,928
2024		152,807
Thereafter		3,131,499
Total	$	3,780,068

XML

Note 12 - Commitments - Payments Under Retention Bonus Plan (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Distributions paid	$ 14,573	$ 86,917
Board Members [Member]
Distributions paid	9,471	56,497
Chief Executive Officer [Member]
Distributions paid	2,390	14,250
Chief Operating Officer [Member]
Distributions paid	2,151	12,824
Other Employees [Member]
Distributions paid	$ 561	$ 3,346

XML

Note 16 - Subsequent Events (Details Textual)				12 Months Ended
	Mar. 26, 2020 USD ($) a	Feb. 27, 2020	Feb. 21, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 ft² a
Cortlandt Manor Medical Center [Member]
Area of Real Estate Property | ft²					34,000
Real Estate Securing Mortgage Loan [Member] | Flowerfield Industrial Park [Member]
Area of Real Estate Property | a					31.8
Subsequent Event [Member] | National Mortgage Banking Firm [Member]
Debt Instrument, Origination Fee, Percentage		1.00%
Subsequent Event [Member] | Real Estate Securing Mortgage Loan [Member] | Cortlandt Manor Medical Center [Member]
Area of Real Estate Property | a	14
Non-revolving Credit Line 3 [Member] | Subsequent Event [Member]
Line of Credit Facility, Maximum Borrowing Capacity | $	$ 2,500,000		$ 3,000,000
Debt Instrument, Interest and Principal Phase, Term			7 years
Debt Instrument, Interest Only Phase, Term	2 years
Non-revolving Credit Line 3 [Member] | Subsequent Event [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage	4.00%
Non-revolving Credit Line 3 [Member] | Subsequent Event [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Basis Spread on Variable Rate	0.0475%
Non-revolving Credit Line 3 [Member] | Subsequent Event [Member] | Prime Rate [Member] | After Interest Only Payment Period [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Forecast [Member] | Small Businesses and Not-for-Profit Corporations [Member]
Operating Lease, Lease Income, Total | $				$ 834,000
Forecast [Member] | Customer Concentration Risk [Member] | Rental Income [Member] | Small Businesses and Not-for-Profit Corporations [Member]
Concentration Risk, Percentage				39.00%

XML

Note 15 - Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

Term			Square Feet		Annual Rent		Total Commitment ( excluding renewal options)		Additional Commitment (assumes two-year renewal option is exercised)
Jan 2019	-	Dec 2020		2,284	$	19,414	$	38,828	$	38,828
Jan 2019	-	Dec 2020		1,817	-(a)		-(a)		-(a)
Jan 2019	-	Dec 2020		1,905	$	16,193	$	32,385	$	32,385

XML

Note 7 - Real Estate (Tables)

12 Months Ended

Dec. 31, 2019

Notes Tables

Schedule of Real Estate Properties [Table Text Block]

	2019		2018
Net Realizable Value at beginning of period	$	36,201,270	$	33,016,665
Increases in Net Realizable Value
Cortlandt Manor		2,010,000		1,040,000
Flowerfield		10,058,730		2,944,605
Less Property Sales
Port Jefferson Professional Park		-		(800,000	)
Net Realizable Value at December 31,	$	48,270,000	$	36,201,270

XML

Note 12 - Commitments - Allocation of Retention Bonus (Details)	Dec. 31, 2019
Bonus pool percentage	100.00%
Board Members [Member]
Bonus pool percentage	65.00%	[1]
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%	[2]
Other Employees [Member]
Bonus pool percentage	3.85%

[1] 15% for the Chairman and 50% for the directors other than the Chairman (10% for each of the other five directors).

[2] 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.

XML

Note 15 - Related Party Transactions - Summary of Leasing Arrangements (Details) - Not-for-profit Corporation [Member]	12 Months Ended
	Dec. 31, 2019 USD ($) a
Lease Term Jan 2019 Through December 2020 [Member]
Square Feet (Acre) | a	2,284
Annual Rent	$ 19,414
Total Commitment	$ 38,828
Lease Term Jan 2019 Through December 2020 1 [Member]
Square Feet (Acre) | a	1,817
Annual Rent		[1]
Total Commitment		[1]
Lease Term Jan 2019 Through December 2020 2 [Member]
Square Feet (Acre) | a	1,905
Annual Rent	$ 16,193
Total Commitment	$ 32,385

[1] In February 2019, the Company amended the square footage under the 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 originally was for 2,130 square feet. The amended maximum annual and total lease commitment of up to $18,170 and $36,340, 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, 2019 of $18,170 and total commitments including two-year renewal option of up to $72,680.

XML

Note 5 - Disposition Activities

12 Months Ended

Dec. 31, 2019

Basis of Accounting, Liquidation [Member]

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

5. Disposition Activities

Flowerfield -

On

August 27, 2019,

the Company’s wholly-owned subsidiary GSD Flowerfield, LLC entered into a Purchase and Sale Agreement (the “BSL Agreement”) for the sale of an approximately

9.0

acre parcel of vacant land in the Flowerfield complex in Smithtown, New York for

$16,800,000

to BSL St. James LLC, a Delaware limited liability company (“BSL”).

Under the BSL Agreement: (i) BSL will have the right to terminate the BSL Agreement, during an investigation period, by written notice to GSD if BSL is

not

fully satisfied, in its sole discretion, as to the status of title, suitability of the Premises and all factors concerning same, in which case BSL will have the right to receive a refund of its earnest money deposit; (ii) if BSL does

not

terminate the BSL Agreement on or prior to the end of the investigation period, BSL will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless BSL terminates the BSL Agreement on or prior to the end of the investigation period, the closing will occur on the

30th

day following the earlier of (y) the Town of Smithtown’s granting of the Site Plan Approval (as defined in the BSL Agreement and as described below); or (z) BSL’s waiver of the Site Plan Approval.

The BSL Agreement is also contingent on the receipt of Subdivision Approval (as defined in the BSL Agreement and as described below). The Subdivision Approval condition requires that GSD obtain a subdivision of the Gyrodyne/Flowerfield complex into separate parcels to create the Property (as generally depicted in the BSL Agreement) within a specified time (the “Subdivision Approval Period”) following the last day of the investigation period. If the Subdivision Approval is

not

obtained within the Subdivision Approval Period, each of GSD and BSL have the right to terminate the BSL Agreement. BSL will also have a limited right to terminate the BSL Agreement in the event the Subdivision Approval contains requirements specified in the BSL Agreement. If Subdivision Approval has

not

been denied by the Town of Smithtown at or prior to the last day of the Subdivision Approval Period, GSD shall have the right to extend its time to obtain the Subdivision Approval for a specified period of time. If Subdivision Approval is

not

obtained within such additional time, each of GSD and BSL have the right to terminate the BSL Agreement.

 The Site Plan Approval is specifically delineated in the BSL Agreement. If BSL fails to obtain the Site Plan Approval prior to the end of the site plan approval period, BSL

may

cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for a specified period upon the payment of an extension fee. If, after such extension, BSL fails to obtain the Site Plan Approval, BSL

may

cancel the BSL Agreement, waive the Site Plan Approval contingency, or extend the site plan period for an additional specified period with a

second

non-refundable extension fee.

The BSL Agreement also contains additional customary covenants, conditions, representations and warranties.

Cortlandt Manor -

Gyrodyne, LLC, a New York limited liability company (the “Company”), has announced the execution by its subsidiariesGSD Cortlandt, LLC, a New York limited liability company (“GSD”), and Buttonwood Acquisition, LLC (“Buttonwood” and together with GSD, the “Cortlandt Subsidiaries”), of a Purchase and Sale Agreement (the “Agreement”) effective as of

December 7, 2019 (

the “Effective Date”) for the sale of  approximately

4.5

acres of its real property located in Cortlandt Manor, New York, together with the improvements thereon (the “Property”), to Sound Cortlandt, LLC, a Delaware limited liability company (“SC LLC”), for a purchase price of

$5,720,000.

 

The Town of Cortlandt (the “Town”) is processing a proposed zoning initiative to create a Medical Oriented District (“MOD”) that would include the entire Cortlandt property (owned by the Cortlandt Subsidiaries) within its boundaries.  Included in the Town’s initiative is the Company’s site plan to subdivide the entire property into

three

parcels for the development of (i) a medical office building with retail, (ii) a multi-family residential housing project and (iii) an open space, passive recreation parcel. The Property that is the subject of the Agreement consists of the medical office building with ancillary retail space, and does

not

include the multi-family residential housing parcel or the open space, passive recreation parcel. 

The Agreement requires: (i) an inspection period that will expire after a set period, during which time SC LLC will have the right to terminate the Agreement by written notice to GSD if SC LLC will

not

be fully satisfied, in SC LLC’s sole discretion, as to the status of title, suitability of the Property and all factors concerning same, prior to the expiration of the inspection period, in which case SC LLC will have the right to receive a refund of its earnest money deposit; (ii) if SC LLC does

not

terminate the Agreement on or prior to the end of the inspection period, SC LLC will be obligated to deliver an additional earnest money deposit to the escrow agent, which together with the initial earnest money deposit will be applied toward the purchase price at closing; (iii) unless SC LLC terminates the Agreement on or prior to the end of the inspection period, the closing will occur on the

60th

day following the earlier of (y) the applicable governmental authorities granting of the Final Project Approvals (as defined in the Agreement and as described below); or (z) SC LLC’s waiver of the Final Project Approvals.

The Final Project Approvals are also contingent on the receipt of Subdivision Approval and Site Plan Approval (each as defined in the Agreement and as described below). The Subdivision Approval condition requires that the Cortlandt Subsidiaries obtain approval as and to the extent necessary to allow for the conveyance of the  medical office building parcel to SC LLC and the conveyance of the recreation parcel  to the owner’s association within a specified time following the last day of the inspection period. If such Subdivision Approval is

not

obtained within such specified time following the last day of the inspection period, SC LLC has the right to terminate the Agreement. The Agreement provides SC LLC with a limited right to terminate the Agreement in the event the Subdivision Approval contains requirements specified in the Agreement. In the event the Subdivision Approval has

not

been denied by the Town at or prior to the last day of the specified period, SC LLC shall have the right to extend the time to obtain the Subdivision Approval for a specified period of time.  If such Subdivision Approval is

not

obtained within such additional time, SC LLC has the right to terminate the Agreement.

The Site Plan Approval is specifically delineated in the Agreement. If SC LLC fails to obtain the Site Plan Approval prior to the closing date (expected to be

May 4, 2021),

SC LLC

may

cancel the Agreement, waive the Site Plan Approval contingency, or extend the closing date.

The Agreement also contains additional customary covenants, conditions, representations and warranties.

Port Jefferson Professional Park

–

In

August 2018,

the Company sold its final building (

11

Medical Drive) in the Port Jefferson Professional Park for

$800,000.

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Note 1 - The Company

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

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

1. The Company

Gyrodyne, LLC (including its subsidiaries, “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 on such properties, which are located in Suffolk (“Flowerfield”) and Westchester Counties (“Cortlandt Manor”), 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.

Gyrodyne’s corporate strategy is to enhance the value of Flowerfield and Cortlandt Manor by pursuing entitlement opportunities and enhancing the value of its leases. The Board believes the aforementioned strategy will improve the chances of increasing the values for such properties. The value of the real estate reported in the consolidated statement of net assets as of

December 31, 2019 (

predicated on current asset values) includes some, but

not

all of 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 pursuit of joint venture relationships, entitlements, 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 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

14

– Contingencies) and settle and pay our remaining liabilities and obligations. Under Gyrodyne’s Amended and Restated Limited Liability Company Agreement (the “LLC 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’s remaining real estate investments, each of which is held in a single asset limited liability company wholly owned by the Company, consist of:

● the Cortlandt Manor Medical Center comprising approximately 34,000 square feet situated on approximately 13.8 acres; and

● the Flowerfield Industrial Park comprising approximately 127,000 rentable square feet. The industrial park is multi-tenanted and situated on ten acres of a 68 -acre property in St. James, New York, all of which is owned by the Company.  Approximately 62 of the 68 acres are included in the subdivision application filed with the Town of Smithtown.  Approximately 5 acres of the 68 -acre Flowerfield industrial park are zoned residential and non-contiguous to the Flowerfield property and are being actively marketed for sale.

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Note 16 - Subsequent Events

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

16. Subsequent Events

COVID-

19.

 

In

December 2019,

a novel strain of coronavirus was reported in Wuhan, Hubei province, China. In the

first

several months of

2020,

the virus, SARS-CoV-

2,

and resulting disease, COVID-

19,

spread to the United States, including New York State, the geographic location in which the Company operates. The Company's evaluation of the effects of these events is ongoing; however, in

February

and

March 2020,

some of our tenants began to experience decreasing demand for their products and services which

may

impact their ability to timely meet their lease obligations.  Furthermore, on

March 21

,

2020,

New York Governor Andrew Cuomo issued an Executive Order entitled “New York State on PAUSE” (Policy that Assures Uniform Safety for Everyone) (the “Order”), pursuant to which, all non-essential employees (as defined by the State) must stay at home starting

March 22, 2020

through

April 19, 2020. 

The Order also includes a

90

-day moratorium on any residential or commercial evictions.

Beginning

March 16, 2020,

prior to the Order, the Company’s employees began temporarily working remotely to ensure the safety and well-being of our employees and their families.  The Company’s technology infrastructure, for some time, has been set up to handle offsite seamless operations to address alternative disaster recovery disruption.  As a result, all employees will continue to work remotely unless they report needing sick leave or family leave pursuant to regulated benefits.

Small businesses and

not

-for-profit corporations, which account for approximately

39%

(

$834,000

) of the Company’s projected annual rental revenues for

2020,

are expected to be adversely affected disproportionately by the economic ramifications of COVID-

19.

  Although it is difficult to estimate the duration and full extent of this disruption, the impact of COVID-

19

on our future results could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which

may

emerge concerning the severity of the coronavirus, the success of actions taken to contain or treat the coronavirus and reactions by consumers, companies, governmental entities and capital markets.  We are actively working with our tenants to manage and mitigate the impact to COVID-

19

on the Company’s operations, liquidity and resulting Net Asset Value.

The COVID-

19

public health crisis

may

also adversely impact our efforts to secure entitlements and the sale of our real estate. State and local governments are prioritizing COVID-

19

crisis management and, to the extent possible, re-allocating resources accordingly which

may

adversely impact the timeline of our entitlements and technical approvals. 

Furthermore, the real estate market is also expected to be adversely affected which could further negatively impact the timing of sales and the resulting value of our real estate.

The extent of the impact of COVID-

19

on the Company's operational and financial performance and ultimately its Net Asset Value, will depend on future developments, including the duration and spread of the outbreak and related governmental or other regulatory actions.  The Company has

four

employees.  As a result, the Company’s ability to operate seamlessly and limit any adverse impact on its forecasted net asset value will also depend, in part, on whether any of its key employees are infected by the Coronavirus and become ill from COVID-

19.

 

Credit Facility

.  The Company amended and extended the Original Line which included extending the maturity date of the Interest-Only Phase to the earlier of

April 30, 2020

or upon drawing down a total of

$3,000,000

after which it automatically converts to a permanent loan maturing on the earlier of

April 30, 2027

or

84

months after conversion to a permanent loan (the “Permanent Phase”). 

To secure access to additional working capital through the final sale date of the Cortlandt Property lots (“Lots”),  the Company, through its subsidiary GSD Cortlandt, LLC (“GSD Cortlandt”) signed a commitment letter for a

third

loan evidenced by a non-revolving business line of credit agreement and promissory note with the Original Line bank for up to

$2,500,000,

which is scheduled to close in the

second

quarter of

2020.

  The term is

24

months, with an option to extend for an additional

12

months.  The interest rate 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), but in

no

event less than

four

and

three

quarters percent (

4.75%

).  The ability to draw upon the line is limited to certain amounts, contingent upon whether GSD Cortlandt delivered signed contracts for

one

or both Lots.

The line is secured by the Cortlandt property (approximately

14

acres) and cross collateralized by approximately

31.8

acres of the Flowerfield Industrial Park including the related buildings and leases. The Company anticipates modifying the terms of the loans following the completion of the subdivision so that the loans remain cross collateralized by the subdivided industrial park lot only.

Effective

February 27, 2020,

the Company entered into an engagement letter with a national real estate finance firm (the “Firm”) pursuant to which the Firm agreed to assist the Company secure financing with prospective lenders, and the Company agreed to pay the Firm an origination fee equal to

one

percent (

1%

) of any loan secured by the Company with any lender introduced to the Company by the Firm other than designated excluded lenders with whom the Company has a preexisting relationship. The intended use of this facility is to finance tenant improvements on new leases, if any, and a reserve for additional working capital.

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Note 12 - Commitments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Commitments Disclosure [Text Block]

12. Commitments

As of

December 31, 2019

and

2018,

other commitments and contingencies are summarized in the below table:

	2019		2018
Management Employment agreements with bonus* and severance commitment contingencies	$	350,000	$	350,000
Other employee severance commitment contingencies		81,716		81,716
Total	$	431,716	$	431,716

*Excludes Retention Bonus Payments

Employment agreements -

The Company has an employment agreement with its Chief Executive Officer. The agreement provides for a bonus of

$125,000

payable upon a change of control as defined in the agreement. In addition, each agreement provides for severance equivalent 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 (“COO”) executed on

May 8, 2014

which provides for severance on a termination without cause equal to

6

months of base salary. On

January 25, 2018,

Gyrodyne entered into an amendment to the employment agreement with the COO to define with greater specificity the COO’s 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 (as amended, the “Plan”) designed to recognize the nature and scope of the responsibilities of our directors, executives and employees related to the Company’s strategic plan to enhance the property values, liquidate and dissolve, 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 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 summary appearing below reflects the terms set forth in the Plan as modified by

three

amendments. There were

no

further amendments to the terms of the Plan during the current reporting period.

The Plan provides for a bonus pool 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 at least equal to its

2013

appraised value as designated in the bonus plan. Additional funding of the bonus pool will occur on a property-by-property basis only if the gross sales price of a property exceeds the Adjusted Appraised Value defined as the sum of (i) its

2013

appraised value, in which case additional funding will occur and (ii) land development costs incurred on a property since the date of the

2013

appraisal, 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:

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

(a) 15% for the Chairman and 50% for the directors other than the Chairman ( 10% for each of the other five directors).

(b) 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.

Such shares of the bonus pool are earned only upon the completion of the sale of a property at a gross selling price equal to or greater than its Adjusted Appraised Value and is paid to the named beneficiaries of the 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.

The Plan provides that

no

benefits are to be paid to participants from the sale of any individual post-subdivided lot from either of the Company’s Flowerfield or Cortlandt Manor properties until aggregate sale proceeds from all sales of post-subdivided lots from such property exceed a designated aggregate floor for such property. The aggregate floor for each of the Flowerfield and Cortlandt Manor properties is defined in Amendment

No.

3

to the Plan as the

2013

appraisal of such property plus land development costs incurred for such property since such appraisal.

The Plan provides for vesting of benefits upon the sale of each individual post-subdivision lot at Flowerfield and Cortlandt Manor. It also provides for 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, except that a participant will only be eligible to receive a benefit to the extent that a property is sold within

three

years following the separation 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 and that the sale exceeded the Adjusted Appraised Value.

The payments made during the

twelve

months ended

December 31, 2019

and

2018

under the Plan relate to the settlement of the master lease from the Sale of the Virginia Health Care Center and the sale of

one

building in the Port Jefferson Professional Park, respectively, were as follows:

RETENTION BONUS PLAN PARTICPANTS	2019		2018
Board of Directors	$	9,471	$	56,497
President and Chief Executive Officer		2,390		14,250
Chief Operating Officer		2,151		12,824
Other Employees		561		3,346
Total	$	14,573	$	86,917

Deferred Compensation Plan

-

On

December 6, 2019,

the Company’s Board of Directors approved the Gyrodyne, LLC Nonqualified Deferred Compensation Plan for Employees and Directors (the “DCP”) effective as of

January 1, 2020.

The plan is a nonqualified deferred compensation plan maintained for officers and directors of the Company.  Under the DCP, officers and directors

may

elect to defer a portion of their compensation to the DCP and receive interest on such deferred payments at a fixed rate of

5%.

  All DCP benefits will be paid in a single lump sum cash payment on

December 15, 2026,

unless a plan of liquidation is established for Gyrodyne before the distribution date in which case all benefits will be paid in a single lump sum cash payment after execution of an amendment to terminate the DCP. Each of the Directors elected (under the DCP) to defer

100%

of their director fees for

2020.

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Note 8 - Accrued Liabilities

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Other Liabilities Disclosure [Text Block]

8. Accrued Liabilities

Accrued liabilities at

December 31, 2019

and

2018

are as follows:

	December 31,
	2019		2018
Payroll and related taxes	$	40,011	$	34,737
Professional fees		101,468		103,349
Other		37,000		35,000
Total	$	178,479	$	173,086

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Note 5 - Disposition Activities (Details Textual)			1 Months Ended
	Dec. 07, 2019 USD ($) a	Aug. 27, 2019 USD ($) a	Aug. 30, 2018 USD ($)
Flowerfield Complex in Smithtown, New York [Member]
Area of Land | a		9
Flowerfield Complex in Smithtown, New York [Member] | BSL St. James LLC [Member]
Proceeds from Sale of Property, Plant, and Equipment, Total		$ 16,800,000
Cortlandt Manor Property In New York [Member]
Area of Land | a	4.5
Proceeds from Sale of Property, Plant, and Equipment, Total	$ 5,720,000
Port Jefferson Professional Park [Member]
Proceeds from Sale of Property, Plant, and Equipment, Total			$ 800,000

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Note 7 - Real Estate - Real Estate Disclosure (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Net Realizable Value at beginning of period	$ 36,201,270	$ 33,016,665
Increase (decrease) in net realizable value	12,068,730	3,984,605
Net Realizable Value at December 31,	48,270,000	36,201,270
Cortlandt Manor Medical Center [Member]
Increase (decrease) in net realizable value	2,010,000	1,040,000
Flowerfield Properties, Inc. [Member]
Increase (decrease) in net realizable value	10,058,730	2,944,605
Port Jefferson Professional Park [Member]
Increase (decrease) in net realizable value		$ (800,000)
Net Realizable Value at December 31,	$ 48,270,000