10-Q: Gyrodyne, LLC Reports Slight Increase in Net Assets for Q1 2025 Amid Ongoing Entitlement Efforts and Legal Challenges

Gyrodyne, LLC's net assets in liquidation increased slightly to $30.81 million in Q1 2025, driven by increased rental revenue and cost savings, while the company continues to pursue entitlements and defend against legal challenges.

Summary

• Gyrodyne, LLC reported net assets in liquidation of $30.81 million as of March 31, 2025, compared to $30.59 million as of December 31, 2024.
• The increase of $216,077 in estimated liquidating distributions is mainly attributable to an increase in rental revenue of approximately $180,000, a savings in rental expenses and general and administrative fees of approximately $16,000 and $67,000, respectively, offset by additional land development fees of $50,000.
• The company's corporate strategy is to pursue entitlements on its two remaining properties, Flowerfield and Cortlandt Manor, to maximize value and distributions to shareholders.
• Gyrodyne is currently involved in an Article 78 Proceeding related to the Flowerfield Subdivision Application, with the petitioners filing a notice of appeal.
• The company believes subdivision approval will be received in the third quarter of 2025 for Flowerfield, and could be received for Cortlandt Manor in mid-2026.
• Gyrodyne estimates it will incur approximately $1.21 million in land entitlement costs from April 2025 through the end of the liquidation period, currently estimated to conclude in 2026.
• The company's estimated distributions are approximately $14.01 per common share based on 2,199,308 shares outstanding.
• The company secured a non-revolving credit line for up to $3,000,000 with a bank, which closed on March 21, 2018.
• 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.
• On September 15, 2021, the Company, through its subsidiary GSD Cortlandt, LLC (GSD Cortlandt), secured a $4.95 million term loan (the 2021 Mortgage Loan) with Signature Bank, the proceeds of which were used to pay off the previous GSD Cortlandt debt facility of which $1,050,000 was outstanding.
• On December 27, 2023, the Company, through its subsidiaries GSD Cortlandt, LLC (GSD Cortlandt) and Buttonwood Acquisition, LLC (Buttonwood), secured a term mortgage loan (the 2023 Mortgage Loan) in the principal amount of $1,500,000 with LLYR Resources, LLC.
• The company has entered into various leasing arrangements with a not-for-profit organization of which the Companys Chairman, Paul Lamb, serves as Chairman and a director but receives no compensation or any other financial benefit.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While net assets increased slightly, the company faces ongoing legal challenges and uncertainties in the real estate market. The company is progressing as expected with its entitlement efforts and legal challenges.

Positives

• Net assets in liquidation increased slightly, leading to a higher estimated distribution per share.
• The company is actively pursuing entitlements to increase the value of its properties.
• Gyrodyne is vigorously defending against the Article 78 Proceeding.
• The company has retained JLL Capital Markets to market its properties nationally.
• The company executed one new lease and two renewals comprising approximately 2,500 square feet, annual revenue of approximately $44,000 and total commitments of approximately $100,000.

Negatives

• The Article 78 Proceeding introduces uncertainty and potential delays.
• The company is incurring significant land entitlement costs.
• The timeline for completing the liquidation process could extend into 2026.
• The company's ability to obtain required permits and authorizations is subject to factors beyond our control, including environmental concerns of governmental entities, community groups and purchasers.
• The company is affected by the fiscal and monetary policies of the United States Government and its agencies, including the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.

Risks

• The Article 78 Proceeding could delay or prevent the sale of Flowerfield.
• Delays in obtaining entitlements could increase costs and extend the liquidation timeline.
• Uncertainties in the real estate market could impact property values and sale prices.
• The company's estimates of liquidation costs and proceeds may not be accurate.
• The company is subject to risks and uncertainties generally relating to our efforts to enhance the values of our remaining properties and seek the orderly, strategic sale of such properties as soon as reasonably practicable.

Future Outlook

Gyrodyne believes that the process of negotiating purchase agreements, securing final subdivision approval and final unappealable site plan approval and consummating the sale of our properties could extend into 2026, although there can be no assurance that Gyrodyne and the Town of Smithtown will be successful in the defense of the appeal and any other motions or that other factors beyond our control will not necessitate a further extension of the timeline.

Management Comments

• Gyrodyne intends to dissolve after we complete the disposition of all of our real property assets, apply the proceeds of such dispositions first to settle any debts and claims, pending or otherwise, against Gyrodyne, and then pay liquidating distributions to holders of Gyrodyne common shares.
• We remain committed to (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.

Industry Context

The report acknowledges the impact of the COVID-19 pandemic and macroeconomic factors, such as elevated interest rates and persistent inflation, on the commercial real estate market.

Comparison to Industry Standards

• The report does not provide specific comparisons to industry standards or comparable companies.
• The report does not provide specific comparisons to industry benchmarks.
• The report does not provide specific comparisons to comparable projects.

Legal Proceedings

• The company is involved in an Article 78 Proceeding related to the Flowerfield Subdivision Application, with the petitioners filing a notice of appeal.
• The company entered a Stipulation of Settlement (the 'Settlement') providing for the settlement of a putative class action lawsuit against the Company and certain related parties.

Related Party Transactions

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

Stakeholder Impact

• Shareholders: The company's strategy aims to maximize value and distributions to shareholders.
• Tenants: The company's leasing activity impacts tenants.
• Employees: The company's retention bonus plan is designed to incentivize and retain employees.

Next Steps

• Continue pursuing entitlements for Flowerfield and Cortlandt Manor.
• Defend against the Article 78 Proceeding.
• Market the properties for sale through JLL Capital Markets.
• Seek modification of certain existing loan facilities.

Key Dates

Keywords

liquidation, entitlements, real estate, Flowerfield, Cortlandt Manor, Article 78 Proceeding, distributions, property values, subdivision, Gyrodyne