American Strategic Investment Co. Q3 FY2024 earnings call

• Achieved 70 basis point occupancy expansion to 85.8% compared to third quarter 2023.
• Entered into a definitive agreement to sell 9 Times Square for $63.5 million, expected to close in Q4 2024, reducing leverage and strengthening cash position; incurred a $1.9 million noncash impairment for this property in the quarter.
• Successfully extended debt on 9 Times Square through year-end while working to close the sale.
• Actively marketing 123 William Street and 196 Orchard for sale, with proceeds to be used to diversify into higher-yielding assets.
• Portfolio has a weighted average remaining lease term of 5.9 years as of September 30, 2024, with 45% of leases extending beyond 2030; 81% of tenants are investment-grade or implied investment-grade.
• Third quarter data shows positive net absorption in the New York City office market, reversing a long-running trend.

Third quarter 2024 revenue was $15.4 million compared to $16 million in the third quarter of 2023. Cash net operating income grew to $6.8 million from $6.5 million in the third quarter of 2023, driven by ongoing leasing success and occupancy gains. Occupancy expanded by 70 basis points to 85.8% compared to the third quarter of 2023. Revenue contribution details aren't explicitly broken down by product segments as the focus is on the overall portfolio.

• Sale of 9 Times Square at $63.5 million expected to close in Q4 2024, generating net proceeds of approx. $13.5 million, reducing leverage and strengthening cash position.
• Proceeds from sale of 123 William Street and 196 Orchard will be used to diversify portfolio into higher-yielding assets.
• Anticipates generating significant cash proceeds from divestitures to expand into new higher-yielding opportunities.

• Forward-looking statements subject to risks and uncertainties as per SEC filings; actual results may differ materially from forward-looking statements. Reference to SEC filings for detailed risk factors.

Q: On the properties that you're marketing for sale, can you tell me kind of how you're going about doing that? Do your brokers engaged? What type of buyers are looking at these properties? And how would you gauge the level of interest in 123 and Orchard?

A: Sure. Thanks, Bryan. We do have brokers engaged on both of those properties. We're seeing different types of buyers on those 2 properties. 196 is attracting interest from more family office type investors to fully occupied retail condo whereas 123 is attracting more institutional interest. We are seeing some traction. We think interest rates will help, particularly with 196 Orchard. And we've got some interest in leasing that we're optimistic will be executed in the coming months on 123 that we think will drive value there and remain confident that we'll transact on both those assets.

Q: To date, you have been a little coy on how you plan to redeploy those dollars? Are you in a position to give us any more color on where those proceeds might be reinvested?

A: Yes, we're still beginning, I would say, to look at opportunities, given that we've got the transaction on 9 Time Square closing in this quarter, but we see a lot of interesting opportunity in core iconic real estate outside of the New York City market really looking in kind of New England area with kind of hospitality, operating business mix where we would control the real estate and also the operations of the businesses and think that we can drive value there. Given that we've let go of the REIT status, it gives us some more flexibility in how we own and operate those assets in the underlying operations of the businesses, whereas we were hamstrung by REIT restrictions and what we could do with the operations of those sorts of assets previously.

Q: I think you touched upon improvements in leasing trends in New York City. Can you give us a little more detail there. What are the types of tenants? What's their motivation? Is it return to office? Is it something else?

A: Sure. Yes, we're certainly seeing return to office being the norm. I think put graphic in the markets where we own office properties has increased markedly year-over-year. I think we're also seeing a lot of groups that may have taken smaller space on a shorter-term basis during COVID given opportunistic leasing and work from home that are now returning to office with a full workforce. And so they're looking to expand their footprint. So we're seeing a lot of subtenants looking to convert into direct leases and a lot of new tenants looking into the markets that we're operating and owning assets in. And it's largely driven by that return to office mandate.