Gyrodyne, LLC (Nasdaq: GYRO) (“Gyrodyne” or the “Company”), an
owner and manager of a diversified portfolio of real estate
properties, today issued the following letter to shareholders from
Gary Fitlin, Gyrodyne's Chief Executive Officer.
***
January 30, 2023
Dear Gyrodyne Shareholders:
As we start the new year, I would like to express my gratitude
for your investment in Gyrodyne. We have come a long way since our
founding over 70 years ago and I am proud of all that we have
accomplished. Our business strategy and focus on real estate,
particularly with medical tenants, has continued to bear fruit –
and we have distributed the majority of the value we have created
to shareholders. To put this into perspective, the Company has
passed along roughly $147 million to shareholders over the past
nearly three decades – representing more than 1,000% of our 1996
market capitalization of approximately $13 million – and we are
continuing these efforts to create even more value.
Looking ahead into 2023 and beyond, I wanted to take this
opportunity to provide some color on our engagement with
shareholders as well as specific updates on the business –
including the substantial progress we have been making to achieve
our goal of maximizing value. At the same time, we have worked to
expedite our attainment of entitlements, reduce downside risks in
our business and exploit our multiple value creation levers.
Ultimately, we remain on track to position the Company’s properties
for sale at enhanced values, distribute the maximum net asset value
possible to our shareholders and dissolve.
Corporate Governance Update
As you may know, some shareholders’ concerns about the Company
and our corporate governance were evident at the 2022 Annual
Meeting of Shareholders. The entire Board and management team take
these concerns very seriously and have been reflecting on the
voting results from the meeting. In short order, we embarked on a
listening tour and spoke with the vast majority of our major
shareholders.
We have had numerous conversations and we want you to know that
we hear you. We understand the frustrations expressed and are
working to evaluate how we can address them – while ensuring we can
successfully execute on our strategy and maintain the tax-efficient
structures we have in place. Additionally, we will be reaching out
again in the near-term to continue our engagement and
conversations. We strongly believe in the value of our business and
remain open to all potential pathways to maximize value for
shareholders.
Business Update
Despite headwinds that faced the Company and the industry in the
last year, we nevertheless made significant progress in 2022.
Please consider the following:
- We were able to successfully manage credit facilities in 2022.
We locked into fixed term loans before rates started soaring with
nothing coming due until 2025, by which point we expect our
properties to be sold. Compared to other real estate companies and
REITs, we are not looking at a cliff with regard to our credit
facilities rolling over in the near-term.
- We are working hard to maximize the value of our total real
estate assets – which is currently $42.5 million, as of the end of
the third quarter of 2022 – by pursuing additional
entitlements.
- We have successfully managed the Company’s leverage, with debt
as of the end of the third quarter of 2022 at $9.8 million.
Further, our loan to value ratio is 23%, which compares very
favorably to the average leverage ratio for the real estate
industry.
- Despite the economic pressures stemming from inflation and
higher interest rates, our attorneys and engineers continue to
defer half of their fees – reflecting strong third-party confidence
in the potential of our projects.
Next, I’d like to provide an update on the Flowerfield and
Cortlandt Manor properties.
Flowerfield
This 63-acre property, located in St. James, New York, includes
a 14-acre multi-tenanted industrial park comprising 135,000
rentable square feet and approximately 35 tenants. Stony Brook
University Hospital-affiliated offices and services constitute our
largest tenant base, occupying 26% of our square footage.
As you are likely aware, Gyrodyne submitted its subdivision
application in 2017 and received preliminary subdivision approval
in March of 2022 to divide Flowerfield into eight lots – which we
believe will allow us to get the maximum value for the entire
property.
In April 2022, certain parties commenced a special proceeding
under Article 78 of New York’s Civil Practice Law & Rules
against the Town of Smithtown, members of its Planning Board and
Gyrodyne. The Petition seeks to annul the Planning Board’s findings
statement and preliminary approval of the subdivision plan. The
Company and the Town of Smithtown have been vigorously defending
the Planning Board’s determinations and the Company remains
confident in securing final subdivision approval in the third
quarter of 2023 and consummating the sale of the Flowerfield
properties by year-end 2024.
We are full steam ahead in terms of completing final subdivision
approval from numerous state and local governmental agencies and
this process will continue no matter the result of the Article 78
proceeding.
We have also been encouraged by the environmental bond issue
that was recently passed in the state of New York. This gives local
residents and the state the ability to buy the vacant land at
Flowerfield. Of course, we do not know if a sale stemming from this
legislation will occur, but we are encouraged to know there is
money now available to environmental groups if they want to buy our
property. We have worked hard to be able to get to this position
and we are one step closer to maximizing the value of this property
for our shareholders.
Cortlandt Manor
Moving to our Cortlandt Manor property, we are encouraged with
the current progress we have made to date. As you likely know, this
property comprises 13.8 acres in Cortlandt Manor, New York, and
includes the 31,000 square foot Cortlandt Manor Medical Center. The
big news here is the degree to which we have been leveling up the
tenant base in recent months, which, in turn, increases the value
of the property.
Importantly, NewYork-Presbyterian Hospital, one of the largest
medical institutions in the country, has increased its occupancy
from 63% to 72%. The Cortlandt Manor property now has approximately
92% occupancy based on leases signed and more than of 90% of those
leases are with investment grade tenants.
All of this stems from our work over a number of years with the
town on creating a Medical Oriented District (“MOD”). Based on
indications from town officials, we expect that the MOD will be
approved in the first quarter of this year, with our property
achieving MOD campus designation shortly thereafter. As a result of
the MOD, we were able to identify and purchase two additional
properties that would maximize the density in which we could get
approved for a medical office. We now own all the land directly
across the street from the hospital that is included in the MOD. We
were able to re-tenant the property with New York-Presbyterian
through a long-term lease. We were also able to convince the other
investment grade tenant on the property to extend and enter into a
long-term lease.
We are confident this progress will allow us to sell the
property at a much lower cap rate than under its old tenant
occupancy. We believe that we have sufficiently reduced our
downside risk from any market decline and from potential
unfavorable density approvals from the town regarding the MOD.
In Closing
We are working hard to enhance property values, liquidate and
distribute proceeds and dissolve the Company, which we expect to
occur by the end of 2024. We believe that our fortified balance
sheet strongly positions Gyrodyne to continue executing on our
corporate strategy and we will continue to focus on the pursuit of
expedited entitlements and taking the necessary steps to increase
the value of our operating properties.
We are confident the steps we are taking will deliver enhanced
value for our shareholders and look forward to communicating
further with you in the coming months.
Sincerely,
Gary Fitlin President and Chief Executive Officer
***
About Gyrodyne, LLC
Gyrodyne, LLC owns and manages a diversified portfolio of real
estate properties comprising medical office, industrial and
service-oriented properties in the New York metropolitan area.
Gyrodyne owns a 63-acre site approximately 50 miles east of New
York City on the north shore of Long Island, which includes
industrial and office buildings and undeveloped property which is
the subject of plans to seek value-enhancing entitlements. Gyrodyne
also owns a medical office park in Cortlandt Manor, New York which
is also the subject of a subdivision application. Gyrodyne's common
shares are traded on the Nasdaq Stock Market under the symbol GYRO.
Additional information about Gyrodyne may be found on its web site
at www.gyrodyne.com.
Forward-Looking Statement
The statements made in this letter 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 of such properties as soon as
reasonably practicable, risks associated with the Article 78
Proceeding against Gyrodyne and any other litigation that may
develop in connection with our efforts to enhance the value of and
sell our properties, ongoing community activism, regulatory
enforcement, 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
ongoing COVID-19 pandemic, the risk of inflation, rising interest
rates, recession and supply chain constraints or disruptions, and
other risks detailed from time to time in the Company’s SEC
reports. These and other matters the Company discusses in this
letter 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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version on businesswire.com: https://www.businesswire.com/news/home/20230130005175/en/
Longacre Square Partners Joe Germani / Aaron Rabinovich
jgermani@longacresquare.com / arabinovich@longacresquare.com
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