Q1 2024 American Strategic Investment Co Earnings Call

Good morning, and welcome to the American strategic investment companies first quarter earnings call. After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star one on your telephone keypad I'd now like to turn the conference over to Curtis Parker Senior Vice President. Please go ahead.

Thank you good morning, everyone and thank you for joining us for our first quarter 2024 earnings call. This event is also being webcast in the Investor Relations section of our website joining me today on the call to discuss the quarters results are Michael Anderson Mexican strategic investment company.

<unk>, Chief Executive Officer, and makes the Santo the Chief Financial Officer.

It's all of the information contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. Please review the forward looking and cautionary statements section at the end of the first quarter 2024 earnings release for various factors that could cause actual results to differ materially from forward looking statements made.

During our call today.

I was wondering more of these risks or uncertainties materialize actual results may differ materially from those expressed or implied by the forward looking statements. We refer all of you to our SEC filings, including the Form 10-K filed for the year ended December 31, 2023 fell on April 1st of 2024, and all subsequent SEC filings for a more detailed.

The risk factors that could cause these differences any forward looking statements provided during this conference call are only made as of the date of this call as stated in our SEC filings the company disclaims any intent or obligation to update or revise these forward looking statements except as required by law.

So during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance.

Measure should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release, which is posted on our website at www Dot American strategic investors Dot com.

Please also refer to our earnings release for more detailed information about what we can consider to be implied investment grade tenants I turn will be used throughout today's call I will now turn the call over to Michael Anderson Chief Executive Officer. Please go ahead Michael.

Thanks, Curtis and good morning. Thank you all for joining US. This morning, we announced very positive results for the first quarter, including growth in adjusted EBITDA compared to the first quarter of 2023.

We achieved this growth through a reduction in G&A and operating expenses, coupled with our ongoing leasing success.

We also delivered a 320 basis point increase in occupancy to 87, 2% compared to the same quarter in 2023.

Additionally, as we previously announced we have started the process of diversifying the portfolio to better position the company to grow in the future as part of this broader monetization effort. We have started to market for sale our property at nine times square and will shortly begin the same process at 123, William Street, and 196 Orchard Street.

We believe that this approach will accelerate the evolution of our business.

Prior to launching the marketing of nine times square, we extended the maturity of our existing debt at that property to October 2024, with the opportunity to extend through year end in order to facilitate the sale of the property is completed we believe that the strategic disposition of this property along with 123, William Street, and 196 Orchard Street.

Well meaningfully reduce leverage on our balance sheet and generate significant cash proceeds.

We intend to use proceeds from any disposition to diversify our portfolio into higher yielding assets a strategy, we announced last year.

We are excited to be moving forward on this initiative and look forward to the opportunities that lie ahead.

While we look to the future. We are conscious that we must also maintain our focus on our current assets as of March 31, 2024, our portfolio weighted average remaining lease term was 6.3 years is over 40% of our leases extend beyond the year 2030 based on annualized straight line rent.

Which we believe enhances the stability of the real estate.

Of our top 10 tenants, 80% are investment grade or implied investment grade showing the quality of our tenant roster.

These tenants had a remaining lease term eight two years, providing further stability to our portfolio.

We believe our continued proactive asset management approach contributes to the marketability of our $726 million 1.2 million square foot portfolio of New York City Real estate at the end of the first quarter. Our portfolio consisted of seven office and retail assets all located in New York City, primarily in Manhattan.

Our New York City centric portfolio features a number of large investment grade tenants, we continue to focus our leasing efforts on securing tenants in resilient industries.

Touches well capitalized financial service companies and medical institutions.

Our core office properties are located in desirable sub markets with close proximity to major transportation hubs.

Our first quarter results once again demonstrated the effectiveness of our consistent focus on portfolio management.

We believe our long standing dedication to retaining existing tenants working to make our properties attracted to new tenants and managing our expenses have positioned us well to create value for shareholders. As we look to sell some of our Manhattan properties reduced leverage and seek new higher yielding investment opportunities with.

I'll turn it over to Michael Santo to go over the first quarter results Mike.

Thank you Michael.

First quarter 2024 revenue was relatively flat as we produced $15 5 million in both the first quarter of 2024 and 2023.

Companys GAAP net loss attributable to common stockholders was $7 6 million in the first quarter of 2024 compared to a net loss of $11 8 million in the first quarter of 2023, representing a year over year improvement of $4 2 million.

For the first quarter of 2024, adjusted EBITDA was $2 9 million compared to $2 5 million in 2023 cash net operating income increased by $21 million or 1% over $7 million compared to nearly $7 million in the first quarter of 2023.

The growth was achieved through a reduction in G&A and operating expenses, coupled with our ongoing leasing success.

Always a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release and quarterly supplemental and on our website.

At quarter end, we had a relatively conservative balance sheet on your net leverage of approximately 47% a weighted average interest rate of four 4% and three four years of weighted average debt maturity.

Subsequent to quarter end, we announced an amendment on our property at nine times square one.

Among other provisions the amendment extended the maturity date of the loan to October 31, 2024, with the option of an additional extension to January 31, 2025 in order to facilitate efforts to sell the property.

As we have previously discussed all of our debt is fixed rate or swapped to fixed rate. After we locked in interest rates, while they were broadly at historic lows now.

I'll now turn the call back to Michael for some closing remarks. Thanks.

Michael Anderson: Thanks, Mike and thank you all for joining us today.

<unk> been seeing cash NOI growth, we accomplished this quarter can be attributed to our ongoing commitment to portfolio management as we begin the divestment process for certain of our assets in Manhattan.

The reduction in leverage and significant cash proceeds of these sales are expected to generate if sales are completed are expected to fuel the diversification of our portfolio into new and higher yielding assets.

We believe that now is the right time to execute on this strategy and look forward to keeping you updated on our successful execution of this strategy operator. Please open the line for questions.

Thank you. Our first question comes from Brian Moore Your line is open.

Thank you and good morning, hopefully my math.

I could barely hear the operator there.

Yeah.

Couple of questions. This morning.

I know you talked about slightly and our use of proceeds, but I mean, okay, youre going to pay down debt with some of these asset sales.

Michael Anderson: And I suspect to redeploy some do you expect that to redeploy capital would stay in the greater New York area or do you anticipate going out to other regions and I know in the past you've talked about other asset types like can you give us a little more color on what you're thinking.

Michael Anderson: Sure.

Nice to see I think this morning, Brian we are certainly looking at.

Michael Anderson: Everywhere.

Certainly not tied to the New York region.

Our focus is on real estate.

Real estate adjacent assets.

Looking at opportunities outside.

Outside of New York.

Michael Anderson: Included real estate acquisitions, along with operating business acquisitions that we were not able to invest in under the prior contract.

So I would say that the focus is probably outside of New York, but looking for the right opportunities with the right yield for this company.

Okay and can you talk about why those three specific assets right now.

The market opened up is there demand.

GAAP rates I mean, what is it about right now and be about those three assets in particular.

Sure we think that there are.

Similar types of buyers for the assets nine times square as well as at 123 William Street.

We have had some unsolicited interest in recent months on <unk>.

Times square.

I think that there will be similar interest at 123, William as we take the property to market.

We do think that there is.

Michael Anderson: And strong market for assets like 196, Orchard, which are net.

That lease condo assets.

But we think there are there are a lot of buyers out there looking to deploy capital in that sort of investment.

And is there a cap rate range that you're comfortable sharing on any or all of those.

I don't know that were prepared to share a range at this point, but as we get closer to that.

Closer to entering into deals and certainly as we get further down the <unk>.

Investment.

Disposition process I think we can.

And share with you at this point.

Okay, and maybe shifting gears to 11 40 Avenue of the Americas I mean, that's a nice property up toward that with your team. It's been a great location. What is the hang up there and kind of getting the occupancy back nicely up into the Eighty's.

I think we are seeing a lot of interest in foot traffic at that property.

We have some some larger floors full floors that are available, but we have seen some increased lease.

Leasing interest have a tenant that just recently took possession of partial floor in that building and so that property is certainly.

The high focus for us as we work on this leasing.

Initiative in.

Yes, I think we're still seeing some interest from.

Financial institutions, and financial services groups, which tend to be better.

The right tenant base for that asset.

Okay, just two more quick ones why not Brooklyn.

When I look at the portfolio, we've been covering the company for a couple of years, it's always seemed like kind of a fish out of water or is there some reasons for hanging on to that particular asset.

We don't think the time is right on Brooklyn at this point we have.

Michael Anderson: We have leased that building up entirely.

Hum.

Michael Anderson: <unk> done some some renewal and re leasing work there in recent years and so we think that that certainly is a property that we will look to dispose of it doesn't necessarily fit our go forward business plan, but just not the right time for disposing in that market.

Okay and last for me and I don't know, if you're going be able to answer it or not but.

Obviously, we all saw the Bellevue tender I think it was earlier this week a little bit of an elephant in the room, another big slug of shares coming out and lower liquidity in the stock.

Michael Anderson: Can you share any thoughts on what's going on there I mean, it almost feels like an eventual take private.

Yes, I think.

To the extent that we can speak of it and we believe that.

Michael Anderson: There is another indication of <unk>.

Support from Bellevue.

In the company and in particularly in the long term vision for the company and the growth plan that we have outlined to the market and so.

And the board will undergo its process too.

And then it gets recommendations as it's required to but.

Michael Anderson: We see it as a sign up there.

Support for the company in the direction.

Yeah.

Speaker Change: Right I mean look for sure and as we've written if you looked at the book value of the company, maybe you can get anywhere near.

Where those assets are being traded for relative to book value I mean, they're even.

Some haircut the book value in a decent way you know the stock is grossly undervalued, but it's just been a weird couple a couple of quarters a couple of years. So anyway. Thank you for taking my questions.

Speaker Change: Thanks, Brian.

And with that I'll hand, the floor over to management for closing remarks.

Thank you operator, and thank you all for joining us as we outlined earlier, we're excited about the direction of the company, we're very pleased with our expense control.

<unk> that we've put into place and starting to see the results of those.

And we will.

Look forward to continuing to share updates as we make progress to our.

Right.

Speaker Change: Revised business plan that we've outlined today. Thanks.

Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect.

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