UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K10-K/A
(Amendment No. 1)
(Mark one)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 1, 2014
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 |
Commission file number 1-8546001-08546
TRINITY PLACE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | No. 22-2465228 | |
| (State or Other Jurisdiction of | (I.R.S. Employer Identification No.) | |
| Incorporation or Organization) |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code(201) 902-9600
Securities registered pursuant to Section 12(b) of the ActAct:: NONE
Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $0.01 Par Value Per Share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes¨Noþ
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¨Noþ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 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.
YesþNo¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YesþNo¨
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:
Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer¨
Smaller Reporting Companyþ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes¨ Noþ
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distributions of securities under a plan confirmed by a court.
Yesþ No¨
As of August 31, 2013, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $60,217,000.
As of May 30, 2014, 19,999,998 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Portions of the registrant’s definitive proxy statement relating to the registrant’s 2014 Annual Meeting of Shareholders to be filed hereafter are incorporated by reference into Part III of this Annual Report on Form 10-K.
FORM 10-K/A INDEX
Form 10-K Index
| PART IV | 12 | |
| Item 15. | Exhibits, Financial Statement Schedules | 12 |
| SIGNATURES | 13 | |
CERTIFICATIONS |
The Company
As further described below, the predecessor to Trinity Place Holdings Inc. (“Trinity” or the “Company”), Syms Corp. (“Syms”), together with its subsidiaries (the “Debtors”), filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code (“Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (the “Court”) on November 2, 2011. On August 30, 2012, the Court entered an order confirming the Modified Second Amended Joint Chapter 11 Plan of Reorganization of Syms Corp. and its Subsidiaries (the “Plan”). On September 14, 2012, the Plan became effective and the Debtors consummated their reorganization under Chapter 11 through a series of transactions contemplated by the Plan and emerged from bankruptcy. As part of those transactions, reorganized Syms merged with and into Trinity, with Trinity as the surviving corporation and successor issuer pursuant to Rule 12g-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Unless otherwise noted, references to the “Company”, “we” and “our” relate to Syms prior to the merger and to Trinity following the merger. The Company’s fiscal year ends on the Saturday closest to the last day of February each year.
Overview
Prior to filing for bankruptcy, Syms and its wholly-owned subsidiary, Filene’s Basement, LLC (“Filene’s,” “Filene’s, LLC” or “Filene’s Basement”), collectively owned and operated a chain of 46 “off-price” retail stores under the “Syms” name, which were owned and operated by Syms, and the “Filene’s Basement” name, which were owned and operated by Filene’s, LLC. The stores were located in the United States throughout the Northeastern and Middle Atlantic regions and in the Midwest, Southeast and Southwest. On June 18, 2009, the Company’s wholly-owned subsidiary, SYL, LLC, which became known as Filene’s Basement, LLC, acquired certain real property leases, inventory, equipment and other assets of Filene’s Basement Inc. (“Filene’s Inc.” or “Filene’s Basement Inc.”), then a Chapter 11 debtor-in-possession, pursuant to an auction conducted in accordance with section 363 of the Bankruptcy Code. As a result, Filene’s, LLC thereafter operated 21 Filene’s Basement stores then located in the Northeastern, Middle Atlantic, Midwest and Southeast regions until it became a Chapter 11 debtor itself, together with Syms, and discontinued its retail operations on or about December 31, 2011. In addition, Syms owned and operated five co-branded Syms/Filene’s Basement stores. Syms and Filene’s, LLC operated in a single operating segment, the “off-price” retail stores segment.
Trinity owns commercial real estate and a variety of intellectual property assets focused on the consumer sector. Trinity’s business plan includes the monetization of commercial real estate properties and a condominium it owned as of the effective date of the Plan, and the sale or development of 28-42 Trinity Place in Lower Manhattan, referred to as the Trinity Place Property. As described below, the Company has sold a number of its properties since the effective date of the Plan and is undertaking a review of various strategic, developmental and other value-enhancing alternatives for certain of its remaining commercial real estate properties, including the Trinity Place Property. As of May 30, 2014, the Company owns five properties.
Chapter 11 Cases
Syms and its subsidiaries filed voluntary petitions for reorganization relief under Chapter 11 in the Court on the Petition Date and were operating as debtors-in-possession through September 14, 2012, at which time the Plan became effective and reorganized Syms merged with and into Trinity. Shortly after the filing of the Chapter 11 cases, the Debtors sold virtually all of their inventory and much of their furniture, fixtures and equipment during a closing process at each of their stores. On or about December 31, 2011, the Debtors had ceased retail operations at all of their stores and vacated all their leased retail store and distribution center locations.
As
This Amendment on Form 10-K/A (this “Amendment” or this “Form 10-K/A”) amends the Annual Report on Form 10-K of Trinity Place Holdings Inc. (the “Company”) for the year ended March 1, 2014, as filed with the Securities and Exchange Commission on May 30, 2014 (the “Original Form 10-K”). This Amendment is being filed solely for the purpose of disclosing information required in Part III that the Company will not be incorporating by reference to a definitive proxy statement by the required deadline. No other Parts or disclosures from the Original Form 10-K are included in this Amendment other than Part III and Part IV below, and except as required to reflect the matters set forth in such included disclosure, this Amendment does not reflect events or developments that have occurred after the date of the Petition Date,Original Form 10-K and does not modify or update disclosures presented in the DebtorsOriginal Form 10-K in any way.
Among other things, forward-looking statements made in the Original Form 10-K have not been revised to reflect events, results, or developments that have occurred or facts that have become known to us after the date of the Original Form 10-K (other than as discussed above), and such forward-looking statements should be read in their historical context.
| Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
| A. | BOARD OF DIRECTORS |
The following are biographical summaries of our current directors:
| Name of Director | Age | Business Experience and Other Information |
Alan Cohen Director | 77 | Mr. Cohen has been a Director of the Company since September 14, 2012. Mr. Cohen was initially elected to the Board of Directors by the Official Committee of Unsecured Creditors of Syms Corp. He is the Chairman of Abacus Advisors LLC, a business advisory firm. Qualifications and Skills: Mr. Cohen is the Chairman of Abacus Advisors and has more than 30 years’ experience working with distressed businesses in all aspects of their management and operations, serving as a consultant and advisor to numerous Fortune 500 companies and many leading banks and financial institutions. He has been an active participant in seminars on turnaround management and has lectured extensively on restructuring and asset-based lending. Mr. Cohen has served as a trustee, chief restructuring officer, and consultant in various chapter 11 cases, state court proceedings, and out-of-court restructurings for companies including The Towers Financial Corporation, County Seat Stores, 47th Street Photo, Russ Togs and Aileen, Inc. |
Alexander C. Matina Director | 38 | Mr. Matina has served on the Board of Directors since April 11, 2013 and is the Chairman of the Board. Mr. Matina was initially elected to the Board to fill the vacancy created by the resignation of Andrew L. Sole. He was elected by the two Directors of the Company then serving as the directors elected by the holders of common stock pursuant to the Company’s by-laws, or the “EC Directors”. He is the Vice President of Investments for MFP Investors, LLC, the family office of Michael F. Price, which has a value-investing focus across public and private markets. Qualifications and Skills: Mr. Matina brings a strong finance background to the Company, including experience with bankruptcies and private equity. Mr. Matina serves as an adjunct professor of financial modeling at Fordham University. Prior to joining MFP Investors, LLC in 2007, Mr. Matina served in various roles at Balance Asset Management, a multi-strategy hedge fund, and as a senior associate at Altus Capital Partners, a middle market private equity fund. He was previously a principal at 747 Capital, a private equity fund-of-funds, and a financial analyst at Salomon Smith Barney in the financial sponsors group of the investment banking division. |
| Name of Director | Age | Business Experience and Other Information |
Joanne M. Minieri Director | 54 | Ms. Minieri has served on the Board of Directors since November 8, 2013. She was appointed by Third Avenue Real Estate Value Fund, a major investor in Trinity Place Holdings Inc. and she serves as the head of the Board’s audit committee. She is the Deputy County Executive of Suffolk County, New York and Commissioner for Suffolk County Economic Development and Planning. Qualifications and Skills: Previously, Ms. Minieri served as President and Chief Operating Officer of Forest City Ratner Companies (“FCRC”), a wholly owned subsidiary of Forest City Enterprises (“FCE”). She originally joined FCRC as its Chief Financial Officer in 1995, and was promoted to Executive Vice President and Chief Operating Officer in 1998 and to President and Chief Operating Officer in 2007. Ms. Minieri serves on the Board of the Suffolk County Land Bank, formed in 2014. Ms. Minieri is a certified public accountant. |
Keith Pattiz Director | 61 | Mr. Pattiz has been an Independent Director of the Company since November 5, 2013. Mr. Pattiz is a partner in the law firm of McDermott Will & Emery LLP, where he serves as head of the real estate group. Qualifications and Skills: Mr. Pattiz has experience in commercial leasing, financing, sales and acquisitions, hotel transactions and real estate workout matters. |
Marina Shevyrtalova Director | 36 | Ms. Shevyrtalova has been a Director of the Company since September 14, 2012. Ms. Shevyrtalova was initially elected to the Company’s Board of Directors by the parties that backstopped the rights offering conducted by Syms Corp. in connection with its emergence from bankruptcy. She is currently the Portfolio Manager and a member of the Investment Committee at DS Advisors, LLC. Qualifications and Skills: Prior to joining DS Advisors, Ms. Shevyrtalova was part of the investment team at Barington Capital Group, an investment firm experienced in taking active roles in assisting companies in creating and improving shareholder value. From 2003 to 2007, Ms. Shevyrtalova was a Vice President at Lehman Brothers in its Equity Capital Management Group, where she focused on investing in undervalued equities, special situations and turnarounds. Ms. Shevyrtalova is a graduate of the Harvard Business School. |
| B. | EXECUTIVE OFFICERS |
The following are biographical summaries of our current executive officers:
Name | Age | Business Experience and Other Information |
Matthew Messinger | 42 | Mr. Messinger has been the President and CEO of the Company since October 2013. Qualifications and Skills: Prior to joining, the Company, Mr. Messinger served as the Executive Vice President and Director of Investment Management at FCRC, a wholly owned subsidiary of FCE, where he served for more than 18 years. In this role, Mr. Messinger led the New York Investment Committee of FCRC and served on the Investment Committee and Executive Management Committee of FCE. Mr. Messinger brings extensive development, asset management, finance, strategic planning and tax credit structuring experience across a wide range of asset classes including retail, hotel, residential, office, arena and professional sports teams. |
| Richard G. Pyontek Chief Financial Officer, Treasurer and Secretary | 46 | Mr. Pyontek has been the Chief Financial Officer of the Company since October 10, 2012. Mr. Pyontek served as Director of Accounting and Reporting for the Company from July 2011 until his election as Chief Financial Officer. Qualifications and Skills: Before joining Syms Corp., Mr. Pyontek served as Director of Accounting and Reporting at Ashley Stewart, Inc., a women’s clothing retailer, during the time of its bankruptcy filing and turnaround from 2009 to 2011; as Controller at The Vitamin Shoppe, a retailer of health and nutrition supplements, from 2005 to 2008; and as Director of Finance at Party City Corporation, a retailer of party supplies and gifts, from 2003 to 2005. Earlier in his career, Mr. Pyontek held senior accounting and reporting roles at Linens ‘n Things and at KPMG LLP. Mr. Pyontek is a Certified Public Accountant. |
| C. | SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires the Company’s Directors and executive officers and all persons who own more than 10% of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. The Directors, executive officers and greater than 10% common stockholders are required to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms received by the Company and representations from certain reporting persons, the Company believes that during fiscal 2013 all filing requirements were lessees under 35 commercial real estate leases. On December 16, 2011,satisfied, except as follows: Alan B. Miller (one Form 3) and Richard Pyontek (one Form 3).
| D. | AUDIT COMMITTEE |
The entire Board of Directors acts as the Court entered an order that approved the Debtors’ proposed proceduresaudit committee for the marketing and disposition of their leases. The lease marketing process resultedCompany in the saleaccordance with Section 3(a)(58)(B) of the Debtors’ interestExchange Act and is responsible for fulfilling the Board’s responsibilities as they relate to the Company’s financial oversight functions such as accounting policies, internal controls and financial reporting practices. The Board of Directors has determined that Ms. Minieri is an “audit committee financial expert,” as that term is used in or consensual terminationItem 407 of certainRegulation S-K promulgated under the Exchange Act. As discussed further in Item 13, the Board has determined that Ms. Minieri is “independent” in accordance with Section 803A of the Debtors’ leases.NYSE MKT Company Guide. The Debtors rejected several other leases effective asaudit committee held four meetings from March 3, 2013 through the end of December 31, 2011. Under the Bankruptcy Code, when a debtor rejects a real estate lease,fiscal year on March 1, 2014, which were joint meetings of the rejection is considered a breach that gives rise to a claim for breach byBoard of Directors and the landlord against the debtor although the Bankruptcy Code imposes certain caps on the maximum amount of breach claims that a landlord may assert.audit committee.
| Item 11. | EXECUTIVE COMPENSATION |
Chapter 11 Plan
| A. | MANAGEMENT COMPENSATION |
Summary Compensation Table
The Plan, which was co-proposed by the Debtorsfollowing table and the Official Committee of Syms’ Equity Security Holders, was filed with the Court on May 24, 2012. The Plan was subsequently amended with the support of the Official Committee of Unsecured Creditors. On August 30, 2012, the Court entered an order confirming the Plan, and the Plan became effective on September 14, 2012.
Upon the effective date of the Plan and pursuant to its terms, Syms and its subsidiaries were reorganized and, subject to the obligations under the Plan, discharged of all claims. To effect the reorganization, Syms was reincorporated in Delaware by way of a merger with and into Trinity. As a result of the merger, each share of Syms was converted into one share of Trinity. Under the Plan, Trinity will attempt to monetize its real estate assets over time in a manner intended to maximize their valuefootnotes set forth information for the benefit of creditorsfiscal years ended March 1, 2014 and shareholders, as further described below. Under the Plan, Syms creditors holding Allowed Claims (as defined in the Plan) are entitled to payment of those claims in full. The Plan also provides for Filene’s, LLC creditors to receive recoveries from the monetization of certain of Trinity’s assets. Filene’s, LLC short-term creditors are entitled to payment in full on their Allowed Claims and Filene’s, LLC long-term creditors holding Allowed Claims are entitled to a recovery of 75% on their claims.
Claims Payment Process
A total of 3,096 proofs of claims and one motion for payment of professional fees for substantial contribution were filed in the Chapter 11 cases that asserted claims in the aggregate amount of approximately $316.6 million. When combined with the schedules of liabilities that were filed in the Chapter 11 cases, the aggregate “as filed” claims totaled approximately $320.2 million, exclusive of the amounts due under the Plan to the former Majority Shareholder, as defined below. The Company is in the process of reconciling, objecting to and resolving various claims associated with the discharge of liabilities pursuant to the Plan. In the experience of the Company’s advisors, claims filed by creditors typically exceed the amounts reflected on a company’s books and records and the amounts that are eventually allowed and actually paid.
During the period from the effective date of the Plan through March 2, 2013 concerning the Company’s first fiscal year-end following emergence from Chapter 11, the Company paid approximately $26.2 million to holderscompensation of Allowed Claims(i) each person who served as defined in and in accordance with the Plan. Duringour principal executive officer during the fiscal year ended March 1, 2014 and (ii) the Company made additional cash payments to holders of Allowed Claims, together withonly other payments required under the Plan, including to the Majority Shareholder, in an aggregate amount of approximately $33.7 million, as well as an additional $1.4 million through May 30, 2014. These payments constituted the full distributions payable to the Allowed Syms and Filene’s Class 3 (Convenience Claims) and the Allowed Syms Unsecured Creditors in Syms Class 4 General Unsecured Claims, and the Syms Class 5 Union Pension Plan, all as defined in the Plan. As a result, under the terms of the Company’s certificate of incorporation, the director designated by the holder of the Series A preferred stock did not acquire control of the sale process of the Company’s remaining unsold “near-term properties,” as defined in the Plan.
The Company expects to pay additional Syms and Filene’s convenience class claims and Syms general unsecured claims out of Net Proceeds (as defined in the Plan) as they become Allowed Claims in accordance with the terms of the Plan. As of May 30, 2014, based on the reconciliation work to date, the Company believes that the remaining estimated aggregate allowed amount of creditor claims, together with the net amount due to the former Majority Shareholder, is between $68 million and $78 million. Because holders of Allowed Filene’s, LLC Class 5(b)(General Unsecured (Long-Term) Claims) (as defined in the Plan) are entitled to a 75% recovery, the remaining estimated aggregate amount of cash distributions to creditors and the former Majority Shareholder under the Plan is between $61 million and $71 million.
The differences between the “as filed” amounts and these estimates primarily reflect duplicative claims (including identical claims filed against more than one debtor entity or in more than one priority class), amounts in the “as filed” claims that exceed the amounts for those claims shown on the Company’s books and records, and asserted claims for which the Company does not believe it has any liability.
The process of reconciling claims is different from the process of actually resolving claims. Accordingly, the above estimates are based primarily on the Company’s identification and reconciliation of the amounts of asserted claims to the Company’s books and records, and not on the negotiation or settlement of specific claims. Because of the large number of claims filed and the ongoing reconciliation and settlement processes, the ultimate amount of allowed claims and the ultimate amount of distributions under the Plan could be materially different from the Company’s current estimates.
The Plan and the Company’s certificate of incorporation provides that if the holders of Allowed Filene’s Class 4 (General Unsecured (Short-Term) Claims) and Class 5 (General Unsecured (Long-Term) Claims), as defined in the Plan, are not paid their full distributions under the Plan by October 1, 2014, then, subject to the extension of that date to April 1, 2015 under certain circumstances, the director designated by the holder of the Series A preferred stock will be entitled to direct the sale process for any remaining “near term properties” or “medium term properties,” as defined in the Plan, pursuant to a commercially reasonable process consistent with maximizing the value of those properties.
The Plan and the Company’s certificate of incorporation also provides that if there has not been a General Unsecured Claim Satisfaction, as defined in the Plan, by October 1, 2016, then the size of the Board of Directors shall automatically increase to nine members, seven of which are to be elected by the holder of the Series A preferred stock. If a General Unsecured Claim Satisfaction has occurred but the required payments to the former Majority Shareholder have not been made in full by October 16, 2016, then the size of the Board will automatically be adjusted to four members, three of whom would be elected by the former Majority Shareholder. In each case, the Board of Directors will remain controlled by the holder of the Series A preferred stock or the former Majority Shareholder, as applicable, until the required payments are made.
Rights Offering and Redemption of Former Majority Shareholder
In connection with the Plan, Syms entered into an Equity Commitment Agreement, or the ECA, among (i) Syms, (ii) Marcy Syms, (iii) the Laura Merns Living Trust, (iv) the Marcy Syms Revocable Living Trust (together with Marcy Syms and the Laura Merns Living Trust, the “former Majority Shareholder”) and (v) certain members of the Official Committee of Syms Equity Security Holders and their affiliates, referred to as the Backstop Parties. The ECA provided that, pursuant to and upon the effective date of the Plan, the former Majority Shareholder would sell all of its shares of Syms common stock to Syms at a price of $2.49 per share. Accordingly, on September 14, 2012, immediately following the effectiveness of the Plan, the former Majority Shareholder sold all of its 7,857,794 shares of common stock to Syms. Payment for the shares will be made to the former Majority Shareholder in accordance with the Plan as the Company’s real estate assets are monetized. The net amount due to the former Majority Shareholder was initially $17.8 million and was included as a liability on the Company’s Consolidated Statement of Net Assets as of March 2, 2013. On October 1, 2013, the Company met its Plan obligation to pay the former Majority Shareholder $10.7 million and has a remaining liability due to the former Majority Shareholder on the Company’s Consolidated Statement of Net Assets as of March 1, 2014 of $7.1 million, which is included in the estimated remaining distributions to creditors.
Under the terms of the Plan, the Company is restricted from making any distributions, dividends or redemptions on its common stock until after the former Majority Shareholder payments are made in full. The certificate of incorporationexecutive officer of the Company, provides for a share of Series B preferred stock owned by the former Majority Shareholder and entitling the former Majority Shareholder to control a majority of the Board of Directors if the former Majority Shareholder payments are not made by October 16, 2016, provided that and conditional upon the general unsecured claim satisfaction having occurred.
In connection with the ECA and pursuant to the Plan, Syms conducted a rights offering in which it offered to sell to all existing shareholders other than the former Majority Shareholder,principal executive officer, who qualified as “accredited investors” within the meaningreceived compensation in excess of Regulation D under the Securities Act, the right to purchase their pro rata portion of 10,040,160 new shares of the Company’s common stock at a price equal to $2.49 per share, or approximately $25 million in the aggregate (the “Rights Offering”). Pursuant to the ECA, the Backstop Parties agreed to purchase their pro rata portion of the new shares made available in the Rights Offering, as well as all shares that were not subscribed for by other shareholders in the Rights Offering. The sale of all 10,040,160 shares of common stock in the Rights Offering closed on the effective date of the Plan.
The foregoing descriptions of certain transactions, payments and other matters contemplated by the Plan are summaries only and do not purport to be complete and are qualified in all respects by the actual provisions of the Plan and related documents.
General Business Plan
Trinity owns commercial real estate properties and a variety of intellectual property assets focused on the consumer sector. Trinity’s business plan includes the monetization of its remaining commercial real estate properties and the sale or development of the Trinity Place Property.
During the period from the effective date of the Plan through$100,000 during the fiscal year ended March 1, 2014 the Company sold 10 of its properties which were located in Houston, Texas, Fairfield, Connecticut, Southfield, Michigan, Marietta, Georgia, Ft. Lauderdale, Florida, Elmsford, New York (after having previously leased it), Cherry Hill, New Jersey, Addison, Illinois, and Norcross, Georgia, as well(collectively referred to as the condominium, which was located in Secaucus, New Jersey. In addition, the Company’s property in Miami, Florida was sold shortly before the effective date of the Plan. Subsequent to the period ended March 1, 2014, the Company sold its property located in Berwyn, Pennsylvania and closed on the sale of its lease for the Secaucus, New Jersey property (the “Secaucus Lease”“named executive officers”).
The Company is undertaking a review of various strategic, developmental and other value-enhancing alternatives for certain of its commercial real estate properties, including the Trinity Place Property. To date, no specific course of action has been determined. The Company has retained advisors, including architects, construction experts and attorneys to assist it in its evaluation and review of cost estimates and monetization strategies. There remains a range of estimated values that may be realized for the Company’s properties.
The Company also plans to explore the licensing of its intellectual property assets, including its rights to the Filene’s Basement trademark, the Stanley Blacker and Maine Bay brands, and the intellectual property associated with the Running of the Brides event and An Educated Consumer is Our Best Customer slogan.
The Company expects to continue evaluating the best way in which to monetize its remaining assets for the benefit of stockholders and creditors.
Operating Reserves
Under the Plan, the Company’s corporate budget is composed of certain operating reserves to fund working capital and the Company’s operations. Pursuant to the Plan, these reserves were initially funded from the proceeds realized by the Company from the sale of assets, settlements or any other sources in the first year following the Plan effective date on September 14, 2012. For the two year period from September 14, 2012 through September 13, 2014, the amounts to be funded and used in these reserves were set under the Plan as follows: (i) a corporate overhead reserve of $5.0 million in the aggregate, (ii) a $3.8 million pension fund reserve (of which $2.0 million is to fund the minimum annual payments due under the Syms pension plan and $1.8 million is to fund the minimum quarterly payments due to Local 1102 for the allowed amount of the claims for pension withdrawal liability), (iii) a carry cost/repair/tenant improvement reserve of $9.0 million in the aggregate, and (iv) a reserve for carry costs of the Trinity Place Property of $3.0 million in the aggregate. After September 14, 2014, additional amounts are to be funded to those four reserves plus a discretionary reserve and an emergency fund reserve of $0.5 million each.
The Company’s $5 million corporate overhead reserve initially contemplated by the Plan was depleted prior to the end of the two-year period following the Plan effective date, primarily due to greater than expected professional fees. In January 2014, the holder of the Company’s Series A Preferred Stock, which has the sole authority to approve an increase in the operating reserves, consented to an increase in the corporate overhead reserve to $11 million, subject to certain limitations and a reduction of up to approximately $0.8 million if certain anticipated expenses are not incurred. Up to $2.5 million of corporate overhead expenses previously paid by the Company from generally available cash will count toward and be reimbursed from the increased corporate overhead reserve following receipt of net cash proceeds from future property sales.
Under the Plan, the consent of the holder of the Series A preferred stock is required for an increase in the aggregate cap for any reserve and the use of funds in a reserve for expenses designated to be paid from another reserve, except that, (i) by a majority vote of the Board of Directors, amounts in the corporate overhead reserve may be reallocated to the carry cost/repair/tenant improvement reserve and (ii) by a majority vote of the Board of Directors, and with the consent of the “Independent Director,” as described in the Plan, amounts in the corporate overhead reserve may be reallocated to the Trinity Place Property carry reserve (see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources, for additional discussion).
Certain Historical Financial Information
Syms changed its basis of accounting from the going concern basis to the liquidation basis of accounting effective October 30, 2011 and merged into Trinity on September 14, 2012. Under the liquidation basis of accounting, assets are stated at their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation are accrued to the extent reasonably determinable.
Sold Properties
Certain information about the Company’s properties as of May 30, 2014 is set forth in Item 2 “Properties”. Certain information about the properties of the Company that have been sold, including the net proceeds generated by the sold properties, net of brokerage commissions and sale costs, are set forth below:
| Property Location | Type of Property | Building Size (square feet) | Net Proceeds ($ in millions) | Date of Sale | ||||||||
| Miami, FL | Short term property | 53,000 | $ | 4.1 | September, 2012 | |||||||
| Houston, TX | Short term property | 42,000 | $ | 3.6 | November, 2012 | |||||||
| Fairfield, CT | Short term property | 43,000 | $ | 5.5 | December, 2012 | |||||||
| Secaucus, NJ (Condo) | Short term property | 2,000 | $ | 0.3 | January, 2013 | |||||||
| Southfield, MI | Short term property | 60,000 | $ | 2.5 | April, 2013 | |||||||
| Marietta, GA | Short term property | 77,000 | $ | 2.9 | July, 2013 | |||||||
| Ft. Lauderdale, FL | Short term property | 55,000 | $ | 1.9 | August, 2013 | |||||||
| Elmsford, NY | Medium term property | 59,000 | $ | 22.0 | August, 2013 | |||||||
| Cherry Hill, NJ | Short term property | 150,000 | $ | 4.5 | September, 2013 | |||||||
| Addison, IL | Short term property | 68,000 | $ | 1.9 | December, 2013 | |||||||
| Norcross, GA | Short term property | 69,000 | $ | 1.1 | February, 2014 | |||||||
| Berwyn, PA | Short term property | 69,000 | $ | 3.0 | April, 2014 | |||||||
| Secaucus, NJ (1) | Short term property | 340,000 | $ | 28.0 | May, 2014 | |||||||
| Total | 1,087,000 | $ | 81.3 | |||||||||
(1) On May 20, 2014, the Company closed on the sale of the Secaucus Lease to ASG. See Item 3, Legal Proceedings, for additional information.
Brokerage Agreements
The Company has engaged commercial real estate brokers to coordinate the sale and/or rental of its remaining properties, other than the Trinity Place Property. While terms may vary, the agreements generally provide for commissions ranging from 1% to 5% of the sale price in the case of sales, and 2% to 6% of the base rent on the primary term in the case of rentals, payable only upon closing of a sale transaction or execution of a lease agreement, as applicable.
Competition
The markets in which the Company’s properties are located are inherently competitive. In some of these markets, principally the smaller markets, the Company expects there may be more limited buyer or tenant prospects for the Company’s property, while larger markets may in general offer more attractive supply and demand characteristics to the Company.
Competitive factors with respect to the Company’s Trinity Place Property may have a more material effect on the Company as it is likely the Company’s most valuable real estate asset. Various municipal entities are making and have indicated an intent to continue to make significant investments in the immediate vicinity of the Trinity Place Property in order to continue to support the growth of the neighborhood as a vibrant 24/7 community to work, visit and live. Several privately funded commercial and residential developments are being built or are proposed to take advantage of the increasing desirability of the neighborhood. The impact of these changing supply and demand characteristics is uncertain, and they could positively or negatively impact the Company’s evolving plan to maximize the value of its Trinity Place Property.
Environmental Compliance
Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property, and may be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by the parties in connection with the contamination. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous or toxic substances. The presence of contamination or the failure to remediate contamination may adversely affect the owner’s ability to sell or lease real estate or to borrow using the real estate as collateral.
Other federal, state and local laws, ordinances and regulations require abatement or removal of asbestos-containing materials in the event of demolition or certain renovations or remodeling, the cost of which may be substantial for certain redevelopment projects that a potential purchaser would want to undertake with respect to any particular parcel of real estate owned by the Company. Such laws, ordinances and regulations also govern emissions of and exposure to asbestos fibers in the air. Federal and state laws also regulate the operation and removal of underground storage tanks. In connection with the ownership and management of certain properties, the Company could be held liable for the costs of remedial action with respect to these regulated substances or related claims.
Based on a 2012 Phase 1 Environmental Assessment for the Trinity Place Property, the following conditions were noted for further investigation: an underground storage tank, asbestos containing materials and lead based paint. The Company estimates it will incur a minimum of $0.5 million to $0.75 million in fees and abatement related to the Trinity Place Property. The Company estimates that it will incur approximately $0.1 million in fees for Phase 1, Phase 2 and asbestos studies when selling its remaining properties.
Employees
As of March 1, 2014, the Company had approximately ten full time employees staffed in management, accounting, administration and information technology capacities.
General Information about Syms and Trinity
Syms was incorporated in New Jersey in 1983. Trinity was incorporated in Delaware immediately prior to the effective date of the Plan. Syms maintained its headquarters at One Syms Way, Secaucus, New Jersey 07094, and the telephone number was (201) 902-9600. Trinity is currently using the same headquarters and telephone number pursuant to a short term lease following the recent sale of the Secaucus Lease and will move its headquarters to midtown Manhattan in June 2014.
Available Information
The Company makes available on its website at www.tphs.com under “Financials” free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after the Company electronically files such materials with, or furnishes such materials to, the SEC. On the website, the Company also offers a link to all of the Company’s SEC filings and to all beneficial ownership reports filed by the Company’s directors and executive officers, via the SEC’s EDGAR filing system.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Below is certain information regarding the Company’s commercial real estate properties remaining at May 30, 2014, all of which are former sites of Syms or Filene’s retail facilities. Each property is owned in fee. “Near term properties” and “medium term properties” have the meanings given them under the Plan.
Near Term Properties
| Name and Principal Position | Fiscal Year | Salary | Bonus | Stock Award | All Other Compensation | Total | ||||||||||||||||||
| Matthew Messinger | 2013 | $ | 296,154 | $ | - | $ | 1,250,000 | (1) | $ | 14,500 | (2) | $ | 1,560,654 | |||||||||||
| President and Chief Executive Officer | 2012 | - | ||||||||||||||||||||||
| Richard Pyontek | 2013 | 160,000 | 53,333 | 84,375 | (1) | - | 297,708 | |||||||||||||||||
| Chief Financial Officer, Treasurer and Secretary | 2012 | 160,000 | 67,500 | - | - | 227,500 | ||||||||||||||||||
| Mark Ettenger (3) | 2013 | 204,809 | 767,113 | (4) | - | 297,957 | (5) | 1,269,879 | ||||||||||||||||
| Former Chairman and Acting Principal Executive Officer | 2012 | 87,500 | - | 25,000 | (6) | 112,500 | ||||||||||||||||||
| (1) |
| (2) | Represents amounts reimbursed to Mr. Messinger for legal services regarding his employment contract. |
| (3) |
| (4) | Represents amounts paid to Mr. Ettenger as performance fees in connection with the sale of certain properties. |
| (5) |
| (6) | ||||
| Represents amounts paid to Mr. Ettenger for his services as Director. | ||||
Medium Term Properties
The Trinity Place Property consists of a vacant 6-story commercial building of 57,000 square feet, yielding approximately 174,000 square feet of zoning floor area as-of-right. The Company also has ownership of approximately 60,000 square feet of development rights from adjacent tax lots, one of which is owned in fee by the Company which is improved with a 4-story landmark building which cannot be demolished.
The Company is a party to routine legal proceedings, which are primarily incidental to its former business. Some of the actions to which the Company is a party are covered by insurance and are being defended or reimbursed by the Company’s insurance carriers. Additionally, as discussed in Item 1, the Company operates under the Plan that was approved in connection with the resolution of the Chapter 11 cases involving Syms and its subsidiaries.
On May 8, 2012, the Company filed a motion with the Court for the entry of an order by the Court approving the Company’s assumption of the lease for the property locatedOutstanding Equity Awards at One Syms Way, Secaucus, New Jersey. The landlord asserted a cure claim of approximately $3.5 million, plus attorneys’ fees and costs. The Company contested all but approximately $5,000 of that amount. On February 19, 2013, the Court ruled that the cure claim should be reduced and allowed at approximately $1.25 million, but reserved ruling on the claims for attorneys’ fees and a relatively minor rent issue. Based on an agreement with the landlord in July 2013, the Company established a reserve of $1.25 million for the potential payment of cure claims associated with assumption of the lease, which reserve had been accrued as a liability as of March 2, 2013.
On March 24, 2014, the Company filed a motion to assume, assign, and sell the Secaucus Lease to ASG, which offer was subsequently increased by ASG Equities Secaucus LLC (“ASG”) to $29 million plus the release of the cure claims reserve held by the Company on account of a dispute with the Company’s landlord (the “ASG Motion”). As a result of the ASG Motion, the liability was removed as of March 1, 2014. On April 29, 2014, over the objection of the Company’s landlord, the Bankruptcy Court approved the Company’s decision to assume, assign, and sell the Secaucus Lease to ASG, as the highest and best offer for the Secaucus Lease (the “Approval Order”), subject to certain conditions. On April 30, 2014, the landlord filed a motion requesting the Bankruptcy Court to reconsider the Approval Order. Following additional negotiations, the Company, the landlord, and ASG settled the landlord’s objections to the Approval Order. As a consequence, on May 16, 2014, the Bankruptcy Court entered an amended Approval Order (the “Amended Approval Order”) approving the settlement and the sale of the Secaucus Lease to ASG. Pursuant to the Amended Approval Order, the sale of the Secaucus Lease to ASG closed on May 20, 2014.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s Common Stock is quoted in the OTCQB marketplace, operated by OTC Markets Group Inc. Prior to the conclusion of the Chapter 11 cases in the third quarter of the fiscal year ended March 2, 2013, the trading symbol of the Company’s Common Stock was “SYMSQ”, after which it was changed to “TPHS”.Fiscal Year-End
The following table summarizessets forth certain information relating to outstanding equity awards for each named executive officer as of March 1, 2014.
| Named Executive Officer | Number of Units of Stock that have not Vested | Market Value of Units of Stock that have not Vested ($) (2) | ||||||
| Matthew Messinger | - | $ | - | |||||
| Richard Pyontek | 12,500 | (1) | $ | 85,625 | ||||
| Mark Ettenger | - | $ | - | |||||
(1) Granted pursuant to a restricted stock unit agreement dated as of March 20, 2014, effective as of January 6, 2014.
(2) Calculated based on $6.85 per share, which was the quarterly high and low bid quotations pricesclosing market price per share of the Company’s Common Stock as reported inon the OTCQB for the periods provided. The OTCQB quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The quotations during the first and second quarters of the fiscal year ended March 2, 2013 are for periods prior to the conclusion of the chapter 11 cases.
| Fiscal Year Ended March 1, 2014 | Fiscal Year Ended March 2, 2013 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
| First Quarter | $ | 5.75 | $ | 4.15 | $ | 11.25 | $ | 8.95 | ||||||||
| Second Quarter | $ | 5.50 | $ | 4.15 | $ | 9.10 | $ | 2.60 | ||||||||
| Third Quarter | $ | 5.75 | $ | 3.62 | $ | 4.45 | $ | 2.91 | ||||||||
| Fourth Quarter | $ | 7.20 | $ | 5.25 | $ | 5.45 | $ | 4.04 | ||||||||
HoldersOTC Market on February 28, 2014.
As of May 30, 2014, there were approximately 358 record holders of the Company’s Common Stock.Executive Compensation in Context
Dividends
No dividends were paid in fiscal 2013 or 2012. The payment of any dividends on the Common Stock is strictly limited by the terms of the Plan,Matthew Messinger, President and the Company has no intention of and is unable to pay dividends to the holders of Common Stock until at least such time as the Company’s distribution obligations under the Plan have been satisfied.
Recent Sales of Unregistered Securities
From January 2014 through April 2014, the Company granted an aggregate of 76,000 restricted stock units to four employees of the Company. These grants were undertaken in reliance upon the exemption from registration requirements available under Rule 701 of the Securities Act of 1933, as amended (the “Securities Act”).
Repurchases
There were no repurchases by the Company of its equity securities in fiscal 2013.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
This Annual Report, including but not limited to factors discussed below as well as those discussed elsewhere in this report, includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 and information relating to the Company that are based on the beliefs of management of the Company as well as assumptions made by and information currently available to management. When used in this Annual Report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” and similar expressions, as they relate to the Company or the management of the Company, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events, the outcome of which is subject to certain risks, including among others, the restrictions contained in the Plan, the influence of certain majority stockholders, the ability of the Company to lease, renew leases or relet space in its properties, competition in the real estate business, the ability of the Company to comply with environmental or other laws, the risk of potential uninsured losses and/or claims, asset values, the outcome of litigation, general economic and market conditions, higher than anticipated costs, unanticipated difficulties which may arise with respect to the Company and other factors which may be outside the Company’s control or that are not currently known to the Company. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those contemplated by any forward looking statements. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere described in this Annual Report and other reports filed with the SEC.
Liquidation Basis of Accounting
Under the liquidation basis of accounting, assets are stated at their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation are accrued to the extent reasonably determinable.
The Company does not believe itwould qualify for fresh start accounting if it were to emerge from liquidation. Under fresh-start accounting, assets and liabilities are adjusted to fair value. Since fresh-start accountingwould likely not apply if the company were to emerge from liquidation, the Company’s accounting basis could revert back to the going concern basis of accounting, resulting in all remaining assets and liabilities at that date being adjusted to their net book value less an adjustment for depreciation and / or amortization calculated from the date the Company entered liquidation through the date it emerged from liquidation. Accordingly, if a change in accounting basis were to occur, it would likely result in a decrease in the reporting basis of the respective assets and liabilities. The Company can provide no guarantee that it will emerge from liquidation as a going concern entity, nor can it guarantee the method of accounting that would be adopted upon emergence from liquidation.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in the consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from the Company’s estimates. Such differences could be material to the consolidated financial statements.
The Company believes that its application of accounting policies, and the estimates inherently required by the policies, are reasonable. These accounting policies and estimates are reevaluated periodically, and adjustments are made when facts and circumstances dictate a change. Historically, the Company has found the application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.
The Company has identified certain significant accounting policies that have been applied to the Company’s financial reporting after the adoption of liquidation basis of accounting. These policies are described below.
Results of Operations
For an entity reporting under the liquidation basis of accounting, the entity is required to present a statement of net assets (which replaces a balance sheet), whereby the assets are reported at estimated realizable amounts and the liabilities are reported at estimated settlement amounts; and a statement of changes in net assets in liquidation (which replaces the statement of operations), which reports changes in estimated fair value and other adjustments recognized during the fiscal year.
Operating Activities for the Twelve Months Ended March 1, 2014
Certain information about the properties of the Company sold during fiscal 2013, including the proceeds generated, net of brokerage commissions and sale costs, is set forth below:
| Property Location | Type of Property | Building Size (square feet) | Net Proceeds ($ in millions) | Date of Sale | ||||||||
| Southfield, MI | Short term property | 60,000 | $ | 2.5 | April, 2013 | |||||||
| Marietta, GA | Short term property | 77,000 | $ | 2.9 | July, 2013 | |||||||
| Ft. Lauderdale, FL | Short term property | 55,000 | $ | 1.9 | August, 2013 | |||||||
| Elmsford, NY | Medium term property | 59,000 | $ | 22.0 | August, 2013 | |||||||
| Cherry Hill, NJ | Short term property | 150,000 | $ | 4.5 | September, 2013 | |||||||
| Addison, IL | Short term property | 68,000 | $ | 1.9 | December, 2013 | |||||||
| Norcross, GA | Short term property | 69,000 | $ | 1.1 | February, 2014 | |||||||
| Total | 538,000 | $ | 36.8 | |||||||||
The liquidation basis of accounting requires management to make significant estimates and judgments. The Company adjusts its real estate assets to reflect the estimated net realizable value of the owned property. The net realizable value is estimated, by considering a number of factors and the views of multiple parties from various vantage points, including input from a third party valuation expert. As a result of an aggregate increase in certain properties values by $53.7 million partially offset by the above sales transactions, the value of the Company’s real estate assets increased from $142.6 million as of March 2, 2013 to $157.7 million as of March 1, 2014. During the same twelve-month period, the Company used the aggregate net proceeds from asset sales to pay $33.7 million of allowed claims and the former Majority Shareholder in accordance with the terms of the Plan, reducing the Company’s liabilities under the Plan.
In addition to the sale transactions, the Company received an additional $0.9 million in rents and other income during the fiscal year ended March 1, 2014. Subsequent to March 1, 2014, the Company sold the Berwyn, Pennsylvania property for net proceeds of approximately $3.0 million and sold the Secaucus Lease for net proceeds of approximately $28.0 million plus the release of a reserve held by the Company on account of a dispute with the Company’s landlord.
The Company’s cash operating costs and expenses for the fiscal year ended March 1, 2014 were approximately $16.4 million, of which approximately $10.0 million pertained to real estate related costs, $3.9 million related to professional fees, $2.2 million related to payroll costs and $0.3 million related to other expenditures. As previously noted, overhead expenses have exceeded the original projections and are outpacing the budgeted reserves, primarily due to professional fees; however the Company has obtained the consent of its Series A stockholder to an increase in operating reserves.
As of March 1, 2014, the net assets of the Company available to Common Shareholders was $88.5 million, an increase from $24.8 million as of March 2, 2013, primarily due to an increase in the estimated fair value of the Company’s real estate properties of $53.7 million, the $13.0 million cash raised net of $0.5 million offering costs from the issuance of stock to Third Avenue Trust (“Third Avenue”), and a decrease in the estimated claims distributions. Total assets increased from $159.1 million at the end of fiscal 2012 to $175.4 million at the end of fiscal 2013 primarily as a result of updated real estate values, net of realized sales, and liabilities decreased approximately $47.4 million primarily as a result of payments made in accordance with the Plan. The capital raised during the year ended March 1, 2014 from the stock sale provided the Company with additional liquidity necessary to satisfy obligations during the end of fiscal 2013.
The Company reviews, on a quarterly basis, the estimated fair value of its assets and all other remaining operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, professional fees, alternative minimum income taxes and other outside services in order to determine the estimated costs to be incurred during the remaining liquidation period.
Operating Activities for the Twelve Months Ended March 2, 2013
Certain information about the properties of the Company sold during fiscal 2012, including the proceeds generated, net of brokerage commissions and sale costs, is set forth below:
| Property Location | Type of Property | Building Size (square feet) | Net Proceeds ($ in millions) | Date of Sale | ||||||||
| Miami, FL | Short term property | 53,000 | $ | 4.1 | September, 2012 | |||||||
| Houston, TX | Short term property | 42,000 | $ | 3.6 | November, 2012 | |||||||
| Fairfield, CT | Short term property | 43,000 | $ | 5.5 | December, 2012 | |||||||
| Secaucus, NJ (Condo) | Short term property | 2,000 | $ | 0.3 | January, 2013 | |||||||
| Total | 140,000 | $ | 13.5 | |||||||||
During December 2012, the Company received a $0.9 million settlement on its Marietta, GA location. This was the result of the second and final payment regarding the 2011 partial condemnation.
During December 2012, the Company entered into an agreement to lease its unoccupied space at its Elmsford, NY property. The carrying value of this property as of March 2, 2013 was adjusted to reflect the impact of this transaction.
In addition to the above transactions, the Company received an additional $2.9 million in rents and other income during the fiscal year ended March 2, 2013, $1.1 million of which was received after September 14, 2012. The Company’s operating costs and expenses in the fiscal year ended March 2, 2013 were $19.9 million, with $8.1 million of that amount incurred after September 14, 2012. Overhead expenses during the period exceeded the original projections and outpaced the budgeted reserves, primarily due to professional fees.
As of March 2, 2013, the net assets of the Company available to Common Shareholders was $24.8 million, up from $21.2 million as of February 25, 2012, primarily due to an increase in the estimated fair value of the Company’s real estate properties and a decrease in the estimated claims distributions partially offset by a reduction of $12.9 million in the amount of cash and cash equivalents, which was spent on the prosecution of the Plan and the Company’s operating expenses, and the inclusion of the Company’s obligation to pay $17.8 million to the former Majority Shareholder in exchange for its shares in Syms.
Liquidity and Capital Resources
As of March 1, 2014 and March 2, 2013, the Company had cash and cash equivalents of $9.7 million and $8.4 million, respectively. At March 1, 2014 and March 2, 2013, the Company’s restricted cash of $5.6 million and $5.1 million, respectively. Prior to September 14, 2012, the Company used its cash and cash equivalents primarily for the payment of professional fees related to the Chapter 11 cases, as well as its daily operations. After September 14, 2012, the Company has used its cash and equivalents primarily for the payment of professional fees and claims related to the Chapter 11 cases, as well as its daily operations and to fund reserves under the Plan.
On October 1, 2013, the Company entered into an employment agreement with Matthew Messinger to serve as President and Chief Executive Officer of the Stock Purchase Agreement with Third Avenue pursuantCompany. Under the terms of the employment agreement, Mr. Messinger receives an initial annual base salary of $700,000. In addition, Mr. Messinger is entitled to whichgrants of restricted stock units (the “RSU Awards”) that the Company sold to Third Avenue 3,369,444expects will result in Mr. Messinger holding approximately 1,500,000 shares of the Company’s common stock for $13.5 million, or $4.00 per share. Upon the effectivenessCommon Stock after settlement of an amended and restated certificate of incorporation that was approved by a majorityall of the Company’s stockholders, one share of special stock, par value $.01, was issuedRSU Awards and soldnetting for taxes. The RSU Awards were or will be granted as follows:
| · | a restricted stock unit award covering 250,000 shares of Common Stock was granted upon the effectiveness of the Company’s filing of the Amended Certificate with the Secretary of State of Delaware; |
| · | a restricted stock unit award covering 476,190 shares of Common Stock was granted on March 31, 2014, upon Mr. Messinger’s delivery of a favorable resolution regarding the payment or deferral of payment to Syms and Filene’s Class 3 (Convenience Claims) and the Syms Unsecured Creditors in Syms Class 4 General Unsecured Claims (each as defined in the Modified Second Amended Joint Chapter 11 Plan of Reorganization of Syms Corp. and its Subsidiaries (the “Plan”) and a credible plan with regard to the development, lease or sale of each of the Company’s Westbury and Paramus properties and any financing related to any such plan; |
| · | a restricted stock unit award covering 363,095 shares of Common Stock was granted on March 31, 2014, upon Mr. Messinger’s delivery of a credible plan with regard to the development, lease or sale of the Company’s Trinity Place property and any financing related to any such plan; |
| · | a restricted stock unit award covering 363,095 shares of Common Stock on or prior to December 31, 2014, provided Mr. Messinger has delivered a favorable resolution regarding the payment or deferral of certain claims of Filene’s Class 4A and B General Unsecured (Short-Term) Claims and Filene’s Class 5A and B General Unsecured (Long-Term) Claims (each as defined in the Plan), a credible plan with regard to the development, lease or sale of the Company’s West Palm and Secaucus properties and any financing related to any such plan, and a progress report on the resolutions of the Trinity Place property; |
| · | a restricted stock unit award covering 363,095 shares of Common Stock on or prior to March 31, 2015; and |
| · | a restricted stock unit award covering 363,095 shares of Common Stock upon payments of the Initial Majority Shareholder Payment and the Subsequent Majority Shareholder Payment (each as defined in the Plan) on or prior to December 31, 2015. |
The RSU Awards (other than the first RSU Award covering 250,000 shares which immediately vested) will vest in three equal annual installments and be subject to Third Avenue forother conditions, including Mr. Messinger’s continued employment on the par value of such share. The share of special stock enables Third Avenue or its affiliated designee to elect one member ofapplicable vesting dates, as set forth in the Board of Directors. The sale of shares of the common stockemployment agreement and the shareform of special stock were made in private placement transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.RSU Award agreement.
The Company believes that itagreed under the employment agreement to reimburse Mr. Messinger’s reasonable legal fees and expenses associated with review and negotiation of the employment agreement up to $14,500.
In the event Mr. Messinger’s employment is terminated by the Company other than for cause, death or disability or if Mr. Messinger terminates his employment for good reason (as such terms are defined in the employment agreement), subject to his execution of a release of claims, he would be ableentitled to fundthe following: (i) a lump sum payment of six months base salary for each full 12-month period employed under the employment agreement, subject to a minimum and a maximum amount of $350,000 and $1,400,000, respectively, (ii) acceleration of vesting of any unvested RSU Award and any other equity awards that have been granted as of the date of termination, (iii) to the extent Mr. Messinger has not been granted all the RSU Awards, the grant and immediate vesting of restricted stock units covering 363,095 shares (839,285) shares if such termination occurs prior to March 31, 2014) and (iv) payment of the monthly premium for COBRA continuation coverage under the Company’s health, dental and vision plans for eighteen (18) months. If such termination of employment occurs within 60 days prior to or within 12 months following a change of control (as that term is defined in the employment agreement), Mr. Messinger will also be entitled to the grant and immediate vesting of any RSU Awards that have not been granted as of the date of termination.
In the event of Mr. Messinger’s death or disability, he would be entitled to acceleration of vesting of that portion of any outstanding RSU Awards granted prior to the date of termination that would have vested during the 12-month period immediately termination by reason of his death or disability.
The employment agreement also contains covenants addressing post-employment non-competition, non-solicitation of employees and customers provisions.
Richard Pyontek, Chief Financial Officer, Treasurer and Secretary
On October 12, 2012, the Board promoted Richard G. Pyontek from Director of Accounting and Reporting to Chief Financial Officer and Treasurer. He was also paid a bonus of $67,500 in fiscal 2012 under the Company’s Key Employee Incentive Plan, which was adopted to encourage certain executives to stay at Syms Corp. during its operations throughbankruptcy proceedings. On March 20, 2014, the Company entered into a restricted stock unit agreement with Mr. Pyontek, effective as of January 6, 2014, pursuant to which Mr. Pyontek was granted an award of 12,500 restricted stock units, with one-half of the restricted stock units vesting on each of January 6, 2015 and January 6, 2016, subject to Mr. Pyontek’s continued employment on the applicable vesting dates. In the event that Mr. Pyontek’s employment is terminated by the Company without cause (as defined in the restricted stock unit agreement), all of the unvested restricted stock units will vest immediately.
Mark Ettenger, Former Chairman and Acting Principal Executive Officer
The Board of Directors elected Mark D. Ettenger as Chairman of the Board in January 2013, a role in which he began serving as the Company’s principal executive officer. When Mr. Ettenger was elected as Chairman and designated as the Company’s principal executive officer, the Board determined to pay him a retainer of $50,000 per month in addition to any amounts that he may be entitled to receive for his service as a Director.
Following the end of fiscal 2012, on April 22, 2013, the Company and Mr. Ettenger executed an Engagement Agreement providing for Mr. Ettenger to serve as the Company’s Chairman, President and Chief Executive Officer. The Engagement Agreement provided for Mr. Ettenger to receive an annual fee of $400,000, retroactive to March 11, 2013. The Engagement Agreement also entitled him to receive certain incentive fees and performance fees in connection with the sale or other monetization of the Company’s real estate properties based on pre-established threshold amounts for each of the properties. The incentive fees and performance fees were also generally payable on entity-level (rather than property-level) transactions based on the net cash proceeds from property sales; however, the Plan imposes restrictions ontransaction relative to the amount of operating expenses thataggregate threshold amounts for all remaining unsold properties. For the fiscal year ended March 1, 2014, the Company is allowed to incur and pay from such net cash proceeds. As previously discussed,paid Mr. Ettenger $41,945 as a performance bonus in connection with the Company’s $5 million corporate overhead reserve initially contemplatedsale by the Plan has been depleted, primarilyCompany of the Southfield, Michigan property.Mr. Ettenger received no benefits from the Company, but the Engagement Agreement provided for the Company to reimburse him for the actual cost of his health insurance and for up to $15,000 in legal fees associated with the negotiation of the Engagement Agreement.
On August 30, 2013, the Company and Mr. Ettenger mutually agreed to end his service as Chairman of the Board and principal executive officer, and he relinquished all of his officer titles and duties. Mr. Ettenger remained a director of the Company until September 25, 2013. In connection with this separation, the Company and Mr. Ettenger entered into a separation agreement, which provided that Mr. Ettenger would provide transition services until September 25, 2013 at the reasonable request of the Company. The Company paid Mr. Ettenger $1,000,000 in full satisfaction of any amounts that may be due or that may have become due to greater than expected professionalhim, which included $725,168 in performance fees related to the sales of certain properties and the Company has obtained the consent of the$274,832 as a severance payment. The holder of the Company’s Series A Preferred Stock who has the sole authority to approveapproved an increase in the operating reserves, to increase the corporateCompany’s overhead reserve to $11 million, subject to certain limitationsmake this payment. The Company and a reductionMr. Ettenger exchanged mutual general releases of up to approximately $0.8 million if certain anticipated expenses are not incurred. Up to $2.5 million of corporate overhead expenses previously paid by the Company from generally available cash will count towardany and be reimbursedall claims in connection with Mr. Ettenger’s separation from the increased corporate overhead reserve following receipt of net cash proceeds from future property sales. In addition, during fiscal 2013, the Company raised $13.0 million, net of $0.5 million in offering costs, from the issuance of stock (as previously discussed), which can be used to fund overhead and other expenses. The Company believes through the sale of its assets and cash on hand, along with the possibility of additional equity and/or debt financing, it has the cash necessary to satisfy its required claims distributions and operating activities.
Under the Plan, the proceeds of a common equity financing can be used to fund operating expenses in excess of the reserves and for other uses, while the proceeds of a debt financing generally must be used to pay creditor claims.Company.
Pursuant to the Plan, with limited exceptions, any excess cash from property sales not applied to fund operating expenses must be distributed in accordance with the priorities established in the Plan. The payments to creditors and the former Majority Shareholder during the year ended March 1, 2014 aggregating $33.7 million were made pursuant to the Plan.
| B. | DIRECTOR COMPENSATION |
Net Operating LossesFiscal 2013 Director Compensation
The Company believes thatfollowing table sets forth certain information relating to Director compensation for fiscal 2013:
| Name | Fees Earned or Paid in Cash | |||
| Alan Cohen | $ | 25,000 | ||
| Alexander C. Matina | 25,000 | |||
| Joanne M. Minieri | 10,000 | |||
| Keith Pattiz | 10,000 | |||
| Marina Shevyrtalova | 25,000 | |||
| Alan B. Miller (1) | 25,000 | |||
(1) Mr. Miller resigned from the Rights Offering andBoard of Directors effective November 5, 2013.
In September 2012, the redemptionBoard adopted a policy of paying $5,000 to each Director for each Board meeting attended, up to $25,000 per each 12-month period following the effective date of the Syms shares owned by the former Majority Shareholder that occurredPlan, and reimbursing reasonable expenses incurred in connection with the Company’s emergence from bankruptcy on September 14, 2012 resulted in the Company undergoing an “ownership change,” as that term is used in Section 382attending meetings of the Internal Revenue Code of 1986, as amended (the “Code”). However, the Company has analyzed the impact of such ownership change on its ability to utilize its NOLs,Board and while the analysis is complex and subject to subjective determinations and uncertainties, the Company currently believes that it should qualify for treatment under Section 382(l)(5)committees of the Code. As a result,Board. In June 2014, the Company currently believes that its NOLs are not currently subjectBoard revised the policy to an annual limitation under Code Section 382. However, ifprovide for payment to each Director of $60,000, plus reimbursement of reasonable expenses incurred in connection with attending meetings, for each 12-month period following the Company were to undergo a subsequent ownership change ineffective date of the future, the Company’s NOLs could be subject to limitation under Code Section 382. The Company believes that its U.S. Federal NOLsPlan, effective as of the emergencesecond such period, with the aggregate of $205,000 of Board fees previously paid since the effective date were approximately $162.8 million and believes its U.S. Federal NOLs at March 1, 2014 are approximately $193.7 million. Notwithstanding the above, even if all of the Company’s regular U.S. Federal income tax liability for a given year is reducedPlan, including to zero by virtue of utilizing its NOLs,Directors no longer serving on the Company may still be subjectBoard, attributed to the U.S. Federal alternative minimum tax (which imposes12-month period ending September 14, 2013. The fees earned by Mark Ettenger for his service as a tax generally equal to the amount by which 20% of a corporation’s alternative minimum taxable income exceeds the corporation’s regular tax liability, and is calculated in a manner that may reduce the benefit of NOLs) and to state, local or other non-federal income taxes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference to the financial statements and supplemental data set forth in “Item 15 – Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures thatDirector are designed to ensure (i) that information required to be disclosed in its reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specifiedreflected in the SEC rules and forms, and (ii) that information required to be disclosed by the Company in its Exchange Act reports is accumulated and communicated to management including the Company’s Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including the Principal Executive Officer of the Company and the Principal Financial Officer of the Company, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as required by Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this report.
Based upon that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of such date.
(b) Management’s Report on Internal Control Over Financial Reporting
The Company’s management is responsibleSummary Compensation Table above for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, the Company’s management evaluated the effectiveness of the Company’s internal control over financial reporting based on the framework inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation under that framework and applicable SEC rules, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of March 1, 2014. BDO USA, LLP, the independent registered public accounting firm which audits our financial statements, is not required to audit the Company’s internal control over financial reporting as of March 1, 2014.
(c) Changes in Internal Controls Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting during the fiscal year ended March 1, 2014.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company maintains a code of ethics applicable to the Company’s Principal Executive Officer and senior financial and professional personnel (including the Company’s Principal Financial Officer, Principal Accounting Officer or controller and persons performing similar functions). The Company’s code of ethics is posted on our website at www.tphs.com under “Financials”. In the event we have any amendments to or waivers from any provision of our code of ethics applicable to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or controller, or persons performing similar functions, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting such information on our website.
The other information called for by this item is incorporated by reference to our definitive proxy statement relating to our 2014 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before June 29, 2014, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date.
Item 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated by reference to our definitive proxy statement relating to our 2014 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before June 29, 2014, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date.executives.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Ownership of Common Stock by Certain Beneficial Owners
The following table sets forth as of June 30, 2014, the names, addresses and holdings of those persons known to the Company to be beneficial owners of more than 5% of its Common Stock. To the Company’s knowledge, each person has sole investment and voting power, except where indicated otherwise. As of June 30, 2014, there were 19,999,998 shares of Common Stock outstanding.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
Marcato Capital Management, LLC One Montgomery Street, Suite 3250 San Francisco, CA 94104 | 4,723,471 (1) | 23.6% |
Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund 622 Third Avenue New York, NY 10017 | 3,369,443 (2) | 16.8% |
DS Fund I LLC 1001 Brickell Bay Dr., Suite 3102A Miami, FL 33131 | 2,308,229 (3) | 11.5% |
Franklin Resources, Inc. One Parker Plaza, Ninth Floor Fort Lee, NJ 07024 | 1,200,000 (4) | 6.0% |
Dimensional Fund Advisors LLP Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746 | 1,062,419 (5) | 5.3% |
MFP Partners, L.P. 667 Madison Avenue, 25th Floor New York, NY 10065 | 1,000,000 (6) | 5.0% |
(1) Marcato Capital Management, LLC is an investment adviser that serves as general partner of Marcato, L.P. and Marcato II, L.P., and as investment manager of Marcato International Master Fund, Ltd. Richard McGuire III is the managing member of Marcato Capital Management, LLC.
(2) The shares were acquired by Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund. Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund is an affiliate of M.J. Whitman LLC, a registered broker-dealer. Based on information calledprovided to us by Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund, it purchased the shares being offered for resale in the ordinary course of business and, at the time of purchase, it had no written or oral agreements or understandings, directly or indirectly, with any person to distribute the shares. Third Avenue Management LLC is a registered investment advisor that acts as an adviser to clients including Third Avenue Trust, on behalf of Third Avenue Real Estate Value Fund, an investment company registered under the Investment Company Act of 1940, with respect to which it acts as direct adviser. Third Avenue Management LLC has sole voting and dispositive power over all of the shares. Joanne Minieri, a Director of the Company, was appointed by this itemThird Avenue Real Estate Value Fund.
(3) DS Fund I LLC is incorporatedan investment entity. DS Fund I LLC is ultimately owned by reference to our definitive proxy statement relating to our 2014 Annual MeetingBharat Desai and Neerja Sethi through an intervening limited liability company, DS Investco LLC. Marina Shevyrtalova, a Director of Stockholders, which will bethe Company, is the Portfolio Manager and a member of the Investment Committee at DS Advisors, LLC, a related entity.
(4) All information regarding Franklin Resources, Inc. (“Franklin”) is based on information disclosed in a Statement on Schedule 13G filed with the SEC. IfSecurities and Exchange Commission on February 11, 2014. These securities are beneficially owned by one or more open- or closed-end investment companies or other managed accounts that are investment management clients of Franklin. Charles Johnson and Rupert Johnson are the principal shareholders of Franklin but each disclaims beneficial ownership of the securities listed above.
(5) All information regarding Dimensional Fund Advisors LP is based on information disclosed in a Statement on Schedule 13G filed with the Securities and Exchange Commission on February 10, 2014. Dimensional Fund Advisors LP (“Dimensional”) is an investment adviser that furnishes investment advice to four investment companies and serves as investment manager to certain other commingled group trusts and separate accounts (such investment companies, trusts and accounts are collectively referred to as the “Dimensional Funds”). All securities reported are owned by the Dimensional Funds. Dimensional and its subsidiaries disclaim beneficial ownership of such proxy statementsecurities.
(6) All information regarding MFP Investors, L.P. is notbased on information disclosed in a Statement on Schedule 13D/A filed with the Securities and Exchange Commission on or beforeApril 19, 2013. MFP Investors LLC is an investment adviser and serves as the general partner of MFP Partners, L.P. Michael F. Price is the managing partner of MFP Partners, L.P. and the managing member and controlling person of MFP Investors LLC. Alexander C. Matina, a Director of the Company, is Vice President of Investments of MFP Investors LLC.
Ownership of Series A Preferred Stock
The following table sets forth as of June 29,30, 2014, the name and address of the holder of the one share of the Company’s Series A Preferred Stock. To the Company’s knowledge, the holder listed below has sole investment and voting power with respect to such share.
| Title of Class | Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
| Series A Preferred Stock | Alan Cohen, Trustee of the Series A Trust 2012
c/o Trinity Place Holdings Inc. 717 Fifth Avenue New York, NY 10022 | 1 | 100% |
Ownership of Management
The following table sets forth certain information called forregarding the beneficial ownership of the shares of the Company’s Common Stock as of June 30, 2014 by our named executive officers and certain directors. Except as set forth in the below table or above with respect to Mr. Cohen’s beneficial ownership of the one share of the Company’s Series A Preferred Stock, no Director or executive officer of the Company personally owns any shares of the Company’s voting securities. However, Mr. Matina and Ms. Shevyrtalova are affiliated with entities that own a significant percentage of the Company’s Common Stock, and Ms. Minieri was appointed by Third Avenue Real Estate Value Fund, a major investor in the Company.
| Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership | Percent of Class |
Matthew Messinger
| 243,918 | 1.2% |
| Richard Pyontek | 0 | *% |
Mark Ettenger |
0(2) |
*% |
Joanne Minieri |
10,000 |
*% |
All Executive Officers and Directors as a Group (7 Persons) |
253,918 |
1.3% |
*Represents less than 1% of the shares outstanding.
(1) The business address of the individuals named in this item will be filedtable is c/o Trinity Place Holdings Inc., 717 Fifth Avenue, New York, New York 10022.
(2) On August 30, 2013, the Company and Mark Ettenger mutually agreed to end his service as partChairman of an amendment to this Annual Report on Form 10-K on or beforethe Board and principal executive officer, effective as of such date. Mr. Ettenger remained a director of the Company until September 25, 2013.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Director Independence Generally
The information calledBoard of Directors has determined that each of the current Directors is “independent” in accordance with Section 803A of the NYSE MKT Company Guide.
Audit Committee Independence
As mentioned in Item 10, the entire Board of Directors acts as the audit committee for by this itemthe Company. The Board of Directors believes that each of the current Directors is incorporated by reference to our definitive proxy statement relating to our 2014 Annual Meetingindependent under Section 803A of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before June 29, 2014,NYSE MKT Company Guide, meets the information calledcriteria for by this item will be filed as partindependence set forth in Rule 10A-3 under the Exchange Act and satisfies the other audit committee membership requirements specified in Section 803B of an amendment to this Annual Report on Form 10-K on or before such date.the NYSE MKT Company Guide.
Item 14. PRINCIPAL ACCOUNTANTACCOUNTING FEES AND SERVICES
The information called for by this item is incorporated by reference to our definitive proxy statement relating to our 2014 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before June 29, 2014, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date.Audit Fees
BDO USA, LLP billed aggregate fees of approximately $185,000 for professional services rendered for the audit of the Company’s fiscal 2013 financial statements and the reviews of the financial statements included in the Company’s Forms 10-Q for fiscal 2013. BDO USA, LLP billed aggregate fees of approximately $255,000 for the same services in fiscal 2012 in addition to the audit of internal controls.
Audit-Related Fees
“Audit-related fees” include fees billed for assurance and related services that are reasonably related to the performance of the audit and not included in the “audit fees” mentioned above. BDO USA, LLP billed approximately $35,000 for audit-related fees for fiscal 2013 and $25,000 for fiscal 2012. The fees for fiscal 2013 relate to the Company’s S-1 filing related to the Third Avenue Real Estate Value Fund purchase of the Company’s common stock as well as to employee benefit related services. The fees for fiscal 2012 relate to employee benefit related services.
Tax Fees
There were approximately $35,000 in fees billed by BDO USA, LLP in fiscal 2013 and $6,300 billed in fiscal 2012 for tax compliance, tax advice and tax planning. These fees were for professional services rendered in assisting with responses to notices received from various taxing authorities.
All Other Fees
The “audit fees,” “audit-related fees,” and “tax fees” mentioned above are the only fees billed by BDO USA, LLP in fiscal years 2013 and 2012.
Pre-Approval Policy
Pursuant to the rules and regulations of the Securities and Exchange Commission, before the Company’s independent registered public accounting firm is engaged to render audit or non-audit services, the engagement must be approved by the Company’s audit committee or entered into pursuant to a pre-approval policy. The Company does not have a formal pre-approval policy, but all audit and non-audit services performed by BDO USA, LLP were pre-approved by the Company’s audit committee during fiscal 2013.
Item 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES
Number | ||
| Description | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities | |
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities | |
| 32.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities | |
| 32.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities | |
*Management contract, compensatory plan or arrangement.
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.
Trinity Place Holdings Inc.
| By: | /s/ Matthew Messinger | |
| Matthew Messinger | ||
| President and Chief Executive Officer |
Date: MayJune 30, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Matthew Messinger | President and Chief Executive Officer | |||
| Matthew Messinger | (Principal Executive Officer) | |||
| /s/ Richard G. Pyontek | Chief Financial Officer, Treasurer and Secretary | |||
| Richard G. Pyontek | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Marina Shevyrtalova | Director | June 30, 2014 | ||
| Marina Shevyrtalova | ||||
| /s/ Alan Cohen | Director | |||
| Alan Cohen | ||||
| /s/ | Director | |||
| Joanne Minieri | ||||
/s/ | Director | |||
| Alexander C. Matina | ||||
| /s/ Keith Pattiz | Director | |||
| Keith Pattiz | ||||
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Trinity Place Holdings Inc.
Secaucus, New Jersey
We have audited the accompanying consolidated statements of net assets of Trinity Place Holdings Inc., as of March 1, 2014 and March 2, 2013, and the related consolidated statements of changes in net assets for the period February 25, 2012 to March 1, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, the shareholders of the Company approved a plan of liquidation on November 1, 2011. As a result the Company changed its basis of accounting from the going concern basis to the liquidation basis of accounting effective October 30, 2011.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated net assets of Trinity Place Holdings Inc. as of March 1, 2014 and March 2, 2013, and the consolidated statements of changes in net assets for the period February 25, 2012 to March 1, 2014, in conformity with accounting principles generally accepted in the United States of America.
/s/ BDO USA, LLP
BDO USA, LLP
New York, New York
May 30, 2014
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS FOR THE
PERIOD FEBRUARY 25, 2012 TO MARCH 1, 2014 (LIQUIDATION BASIS)
(in thousands)
| Net Assets (liquidation basis) as of February 25, 2012 available to common shareholders | $ | 21,183 | ||
| Adjustment to fair value of assets and liabilities | 12,353 | |||
| Adjustment to accrued costs of liquidation | (33,739 | ) | ||
| Sale of common stock pursuant to rights offering | 25,002 | |||
| Subtotal | 3,616 | |||
| Net Assets (liquidation basis) as of March 2, 2013 available to common shareholders | 24,799 | |||
| Adjustment to fair value of assets and liabilities | 59,511 | |||
| Adjustment to accrued costs of liquidation | (8,872 | ) | ||
| Sale of common stock, net | 13,044 | |||
| Subtotal | 63,683 | |||
| Net Assets (liquidation basis) as of March 1, 2014 available to common shareholders | $ | 88,482 |
See Notes to Consolidated Financial Statements
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF NET ASSETS
AS OF MARCH 1, 2014 AND MARCH 2, 2013 (LIQUIDATION BASIS)
(in thousands)
| March 1, | March 2, | |||||||
| 2014 | 2013 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 9,663 | $ | 8,404 | ||||
| Restricted cash | 5,600 | 5,050 | ||||||
| Receivables | 209 | 342 | ||||||
| Prepaid expenses and other assets | 2,246 | 2,708 | ||||||
| Real estate, including air rights | 157,660 | 142,600 | ||||||
| TOTAL ASSETS | $ | 175,378 | $ | 159,104 | ||||
| LIABILITIES | ||||||||
| Accounts payable | $ | 6,578 | $ | 21,814 | ||||
| Accrued expenses | 18,018 | 25,611 | ||||||
| Accrued liquidation costs | 17,912 | 24,487 | ||||||
| Other liabilities, primarily lease settlement costs | 37,322 | 44,595 | ||||||
| Obligation to former majority shareholder | 7,066 | 17,792 | ||||||
| Obligations to customers | - | 6 | ||||||
| TOTAL LIABILITIES | $ | 86,896 | $ | 134,305 | ||||
| Net assets (liquidation basis) available to common shareholders | $ | 88,482 | $ | 24,799 | ||||
See Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
NOTE 1 – BASIS OF PRESENTATION
General Business Plan
As of March 1, 2014, the Company owns seven commercial real estate properties and a variety of intellectual property assets focused on the consumer sector. The Company’s business plan includes the monetization of its remaining commercial real estate properties and the sale or development of the Trinity Place Property.
Description of Former Business Operations; Disposition of the Company’s and Filene’s Businesses
Prior to November 2, 2011, all of the Company’s and Filene’s business operations consisted primarily of running retail operations. The Company’s 46 stores offered a broad range of “off-price” first quality, in-season merchandise. As the economy worsened, sales continued to erode and, as a result, cash flow suffered and significant operational losses continued to threaten the on-going businesses. Trade vendors tightened and/or ceased credit terms. As a result, the Company and Filene’s projected that, absent additional financing or measures to monetize certain assets, liquidity would cease to exist.
At a meeting held on November 1, 2011, the Company’s Board of Directors determined that it was in the best interests of the Company and its shareholders for it and its subsidiaries to file voluntary petitions for reorganization under Chapter 11 and liquidate the retail operations. On November 2, 2011, the Company and Filene’s filed voluntary petitions for reorganization under Chapter 11 in the Court. On August 30, 2012, the Court entered an order confirming the Plan by which the Company and its subsidiaries would be reorganized, and the Plan became effective on September 14, 2012.
If the Company and Filene’s are able to generate value in excess of what is needed to satisfy all of their obligations under the Plan, any excess cash proceeds will be used by the Company in the manner determined by the Board of Directors.
Liquidation Basis of Accounting
In response to the Chapter 11 filing the Company adopted the liquidation basis of accounting effective on October 30, 2011, which was the beginning of the fiscal month closest to the petition date.
Under the liquidation basis of accounting, assets are stated at their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation are accrued to the extent reasonably determinable.
The Company does not believe it would qualify for fresh start accounting if it were to emerge from liquidation. Under fresh-start accounting, assets and liabilities are adjusted to fair value. Since fresh-start accounting would likely not apply if the company were to emerge from liquidation, the Company’s accounting basis could revert back to the going concern basis of accounting, resulting in all remaining assets and liabilities at that date being adjusted to their net book value less an adjustment for depreciation and / or amortization calculated from the date the Company entered liquidation through the date it emerged from liquidation. Accordingly, if a change in accounting basis were to occur, it would likely result in a decrease in the reporting basis of the respective assets and liabilities. The Company can provide no guarantee that it will emerge from liquidation as a going concern entity, nor can it guarantee the method of accounting that would be adopted upon emergence from liquidation.
The preparation of the accompanying consolidated financial statements in conformity with the liquidation basis of accounting requires management to make significant estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities. These estimates include, among others, realizable value of real estate and other assets, accrued liquidation costs, lease settlement costs, and deferred tax assets. Actual results could differ from those estimates.
Reclassifications
Certain amounts reported for prior years in the Consolidated Financial Statements and Notes to Consolidated Financial Statements have been reclassified to conform to the current year’s presentation.
Estimated Costs of Liquidation
Significant estimates and judgment are required to determine the accrued costs of liquidation, which reflects all other remaining operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, professional fees and other outside services to be incurred during the liquidation period. The company’s accrued costs expected to be incurred in liquidation and recorded payments made related to the accrued liquidation costs are as follows (in thousands):
| Balance | Balance | Balance | ||||||||||||||||||||||||||
| March 1, | Adjustments | March 2, | Adjustments | February 25, | ||||||||||||||||||||||||
| Estimated Costs of Liquidation | 2014 | to Reserves | Payments | 2013 | to Reserves | Payments | 2012 | |||||||||||||||||||||
| Real estate related carrying costs | $ | 10,961 | $ | 4,404 | $ | (9,096 | ) | $ | 15,653 | $ | 13,763 | $ | (5,760 | ) | $ | 7,650 | ||||||||||||
| Professional fees | 3,666 | 2,564 | (3,944 | ) | 5,046 | 13,879 | (31,753 | ) | 22,920 | |||||||||||||||||||
| Payroll related costs | 2,717 | 1,445 | (2,156 | ) | 3,428 | 4,938 | (3,087 | ) | 1,577 | |||||||||||||||||||
| Other | 568 | 459 | (251 | ) | 360 | 1,159 | (968 | ) | 169 | |||||||||||||||||||
| $ | 17,912 | $ | 8,872 | $ | (15,447 | ) | $ | 24,487 | $ | 33,739 | $ | (41,568 | ) | $ | 32,316 | |||||||||||||
The assumptions underlying the estimated accrued costs of liquidation of $17.9 million as of March 1, 2014 contemplated all changes in estimates resulting from the Plan.
The Company reviewed all of its operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, property carrying costs and professional fees to determine the estimated costs to be incurred during the liquidation period. The liquidation period, which was initially anticipated to conclude in August 2012, was amended in Fiscal 2012 to conclude in July 2015 based on expectations that substantially all of its real estate properties are likely to be monetized prior to the end of 2014, with a short period thereafter to conclude the liquidation.
The following discussion explains the adjustments to the costs of liquidation reserves as recorded during the fiscal year ended March 1, 2014:
Adjustments to increase the reserve for real estate carrying costs of approximately $4.4 million were mainly the result of increasing the estimated expenses due to the higher estimated values of the properties as well as estimated timing of property sales. The estimates assume that two of the Company’s properties will be sold or monetized by May 2014 and the remaining five of its properties, including the Trinity Place Property, will be sold or monetized by the end of December 2014.
Adjustments to increase the reserve for professional fees of approximately $2.6 million reflects increased costs resulting from the complexities of litigating the estate.
Adjustments to increase the reserve for payroll and related liquidation expenses of approximately $1.5 million were primarily the result of settlement charges relating to the separation agreement with the former principle executive officer during the second quarter ended August 31, 2013.
The following discussion explains the adjustments to the costs of liquidation reserves as recorded during the fiscal year ended March 2, 2013:
Adjustments to increase the reserve for real estate carrying costs of approximately $13.8 million were mainly the result of increasing the estimated expenses to reflect a liquidation period concluding in July 2015. The estimates assumed that eight of the Company’s properties would be sold or monetized by October 2013, another four of its properties would be sold or monetized by October 2014, and the Trinity Place Property would be sold by the end of 2014.
Adjustments to increase the reserve for professional fees of approximately $13.9 million reflects the costs of professionals as a result of extending the expected liquidation period to conclude in July 2015. This also reflects increased costs due to the complexities of litigating the estate as well as the unplanned hiring of a fee examiner during the pre-emergence time period.
Adjustments to increase the reserve for payroll and related liquidation expenses of approximately $4.9 million were primarily the result of extending the expected liquidation period to conclude in July 2015.
Adjustments to the Fair Value of Assets and Liabilities
The following table summarizes adjustments to the fair value of assets and liabilities under the liquidation basis of accounting during the fiscal years ended March 1, 2014 and March 2, 2013 (in thousands):
| Adjustments of Assets and Liabilities to Net Realizable Value | March 3, 2013 through March 1, 2014 | February 26, 2012 through March 2, 2013 | ||||||
| Adjust real estate to estimated net realizable value | $ | 53,685 | $ | 16,688 | ||||
| Adjust other assets to estimated net realizable value | - | (2,891 | ) | |||||
| Adjust estimated lease settlement costs to net realizable value | 4,574 | 11,922 | ||||||
| Adjust liability to restore properties | - | 311 | ||||||
| Adjust obligation to former majority shareholder | - | (19,566 | ) | |||||
| Adjust obligation to customers | - | 4,601 | ||||||
| Adjust pension liability | 1,024 | 1,860 | ||||||
| Adjust other claims to net realizable value | 228 | (572 | ) | |||||
| $ | 59,511 | $ | 12,353 | |||||
The following discussion explains the adjustments to the fair value of assets and liabilities under the liquidation basis of accounting as recorded during the fiscal year ended March 1, 2014:
Real Estate - The net realizable value of real estate assets was adjusted upward in the aggregate by approximately $53.7 million primarily from an increase in value of the Trinity Place Property, the Secaucus Lease and the property located in West Palm Beach, Florida. The revised estimates were supported by valuations from third party real estate experts. Based on management’s assessment, an estimated net realizable value of real estate of $157.7 million has been recorded at March 1, 2014. See Note 3 - Real Estate for a discussion on valuation methodology.
Lease Settlement Costs – Lease settlement costs have decreased by $4.6 million due to adjustments from 18 locations and cash settlements with three others. These reductions were mainly the result of the Company’s continued efforts to reconcile and settle its remaining lease claims.
Pension Liability – This amount mainly represents a decrease in the unfunded pension liability of the Syms sponsored defined benefit plan primarily as a result of improved performance of the plan’s assets.
Other Claims – This amount mainly represents a decrease in various claims pursuant to the final Plan document and further review by the Company of the validity of the claims made against the Company.
The following discussion explains the adjustments to the fair value of assets and liabilities under the liquidation basis of accounting as recorded during the fiscal year ended March 2, 2013:
Real Estate - The net realizable value of real estate assets was adjusted upward in the aggregate by approximately $16.7 million to reflect $15.1 million of revised estimates of management utilizing information obtained from third party real estate experts as of March 2, 2013 as well as $1.6 million in the net incremental sales price of three properties that were sold during fiscal 2012. Based on management’s assessment of available information, an estimated net realizable value of $142.6 million was recorded as of March 2, 2013. See Note 3 - Real Estate for a discussion on valuation methodology.
Other Assets – Other assets have decreased by approximately $2.9 million due mainly to the netting out of assets with corresponding claim liabilities.
Lease Settlement Costs – Lease settlement costs have decreased by $11.9 million due to adjustments from 22 locations. These reductions were mainly the result of the Plan which stipulated that the long-term Filene’s, LLC general unsecured creditors with allowed claims are entitled to a recovery of only 75% on their allowed claims.
Liability to Restore Properties – The Houston, Texas property was sold in November 2012 and the previously recorded liability to repair the roof was assumed by the acquirer of the property, thus the Company reversed the liability upon the consummation of the sale.
Obligation to Former Majority Shareholder – This represents the recognition of amounts due to the former Majority Shareholder during fiscal 2012 in accordance with the terms of the Plan. On September 14, 2012, immediately following the effectiveness of the Plan, the former Majority Shareholder sold all of its 7,857,794 shares of common stock to Syms at $2.49 per share. Payment for the shares will be made to the former Majority Shareholder in accordance with the Plan as Trinity’s real estate assets are monetized. As further discussed in Note 9, $1.8 million due from the Majority Shareholder was reclassified from other assets resulting in a net obligation to the former Majority Shareholder of approximately $17.8 million as of March 2, 2013.
Obligation to Customers – Obligations to customers represented credits issued for returned merchandise as well as gift certificates. The Company has determined that it no longer has a legal liability to the customers and accordingly the amount of $4.6 million has been derecognized.
Pension Liability – This amount mainly represents a decrease in the unfunded pension liability of the Syms sponsored defined benefit plan primarily as a result of improved performance of the plan’s assets.
Other Claims – This amount mainly represents a decrease in various claims pursuant to the final Plan document and further review by the Company of the validity of the claims made against the Company.
Financial Position
As of March 1, 2014 and March 2, 2013, the Company had cash and cash equivalents of $9.7 million and $8.4 million, respectively. At March 1, 2014 and March 2, 2013, the Company’s restricted cash of $5.6 million and $5.1 million, respectively. Prior to September 14, 2012, the Company used its cash and cash equivalents primarily for the payment of professional fees related to the Chapter 11 cases, as well as its daily operations. After September 14, 2012, the Company has used its cash and equivalents primarily for the payment of professional fees and claims related to the Chapter 11 cases, as well as its daily operations and to fund reserves under the Plan.
The Company has estimated claims liabilities recorded in its consolidated financial statements of approximately $62.1 million and $102 million at March 1, 2014 and March 2, 2013, respectively. The claims liability includes the Majority Shareholder liability of approximately $7.1 million and $17.8 million at March 1, 2014 and March 2, 2013, respectively. During the fiscal year ended March 1, 2014, the Company made cash payments to holders of Allowed Claims, together with other payments required under the Plan, including to the Majority Shareholder, in an aggregate amount of approximately $33.7 million. These payments constituted the full distributions payable to the Allowed Syms and Filene’s Class 3 (Convenience Claims) and the Allowed Syms Unsecured Creditors in Syms Class 4 General Unsecured Claims, and the Syms Class 5 Union Pension Plan, all as defined in the Plan. Because holders of Allowed Filene’s, LLC Class 5(b)(General Unsecured (Long-Term) Claims) (as defined in the Plan) are entitled to a 75% recovery, the Company has recorded the estimated net settlement amount of such claims.
The process of reconciling claims is different from the process of actually resolving claims. Accordingly, the above estimates are based primarily on the Company’s identification and reconciliation of the amounts of asserted claims to the Company’s books and records, and not on the negotiation or settlement of specific claims. Because of the large number of claims filed and the ongoing reconciliation and settlement processes, the ultimate amount of allowed claims and the ultimate amount of distributions under the Plan could be materially different from the Company’s current estimates.
The Company believes that it would be able to fund its operations through net cash proceeds from property sales; however, the Plan imposes restrictions on the amount of operating expenses that the Company is allowed to incur and pay from such net cash proceeds. As previously discussed, the Company’s $5 million corporate overhead reserve initially contemplated by the Plan has been depleted, primarily due to greater than expected professional fees, and the Company has obtained the consent of the holder of the Company’s Series A Preferred Stock, who has the sole authority to approve an increase in the operating reserves, to increase the corporate overhead reserve to $11 million, subject to certain limitations and a reduction of up to approximately $0.8 million if certain anticipated expenses are not incurred. Up to $2.5 million of corporate overhead expenses previously paid by the Company from generally available cash will count toward and be reimbursed from the increased corporate overhead reserve following receipt of net cash proceeds from future property sales. In addition, during fiscal 2013, the Company raised $13.0 million, net of $0.5 million in offering costs, from the issuance of stock, which can be used to fund overhead and other expenses. The Company believes through the sale of its assets and cash on hand, along with the possibility of additional equity and/or debt financing, it has the cash necessary to satisfy its required claims distributions and operating activities.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liquidation Basis of Accounting
The liquidation basis of accounting is appropriate when the liquidation of a company appears imminent and the net realizable value of its assets is reasonably determinable. Accordingly, the Company implemented the liquidation basis of accounting effective on October 30, 2011. Under this basis of accounting, assets are stated at their net realizable value and liabilities are stated at their net settlement amount and estimated costs over the period of liquidation are accrued to the extent reasonably determinable.
Since under liquidation basis accounting all future estimated taxes are accrued as of the reporting date net of the benefit expected to be derived from available NOLs, it is not appropriate to record a separate deferred tax asset on the same NOLs. Accordingly, a valuation allowance of approximately $59.9 million was recorded through March 1, 2014.
NOTE 3 – REAL ESTATE
The estimated net realizable value of owned real estate, including land, building, building improvements and air rights, amounted to $157.7 million and $142.6 million as of March 1, 2014 and March 2, 2013, respectively. While $157.7 million represents management’s best estimate of the net realizable value of the Company’s real estate properties at the time of finalizing the accompanying consolidated statement of net assets, the amount ultimately realized in the monetization of the real estate could materially differ from this estimate.
The Company adjusted the carrying value of the real estate assets to reflect the estimated net realizable value of owned property. This value was estimated by considering a number of factors, including but not limited to, input from a third party valuation expert, sales agreements, letters of intent and broker opinions.
The net realizable value of real estate assets was estimated after developing a likely range of values for each of the properties, then selecting a value within each properties range (not necessarily the mid-point) and aggregating those selected values. The ultimate sales price obtained by the Company with respect to any one or all of the properties may vary materially from these estimates based upon numerous factors, including but not limited to macro and local market conditions, the potential for the Company or a prospective buyer to lease the property or to redevelop it, physical and legal (e.g., title) conditions affecting the property, the Company’s ability to deploy capital for leasing activity or to repair or cure issues with respect to the properties, and the ability to carry the properties through a customary or prolonged marketing process.
The estimate of value of the Trinity Place Property is subject to a number of complex factors which could materially affect the value of the property. The estimate of value for this property is subject to additional uncertainty due to the inherent complexities and uncertainties of monetizing the site as a Lower Manhattan mixed use development project, whether developed by the Company or a third party, including zoning and planning issues, hard and soft costs of construction, potential rents or prices of commercial and/or residential space and the mix thereof, the availability of capital to support development, the availability of tax incentives, and competitive projects and forces in the market that are unique to Lower Manhattan. The Company is in the process of analyzing these and other factors, and its estimate of value may change materially as its analysis proceeds. The Company has retained advisors, including architects, construction experts and attorneys to assist it in its evaluation and review of cost estimates and monetization strategies. To date no specific course of action has been determined. As a result, there remains a range of estimated values that may be realized for the Trinity Place Property under the various sale or development alternatives.
The Company expects to continue evaluating the best ways in which to monetize its remaining assets for the benefit of stockholders and creditors.
NOTE 4 - INCOME TAXES
The composition of the Company’s deferred tax assets and liabilities is as follows:
| Fiscal Year Ended | ||||||||
| March 1, 2014 | March 2, 2013 | |||||||
| (in thousands) | ||||||||
| Deferred tax assets: | ||||||||
| Pension costs | $ | 2,759 | $ | 4,004 | ||||
| Reserves not currently deductible for tax purposes | 66 | 69 | ||||||
| Net operating loss carry forwards | 79,145 | 70,746 | ||||||
| Depreciation | 3,490 | 13,124 | ||||||
| AMT credit | 3,182 | 3,182 | ||||||
| Accrued expenses | 110 | 4,086 | ||||||
| Other | 82 | 81 | ||||||
| Wind-down expenses | 3,954 | 8,752 | ||||||
| Air right | 3,703 | 3,641 | ||||||
| Lease claim | 13,934 | 14,439 | ||||||
| Store closing cost | - | 2,650 | ||||||
| Total deferred tax assets | $ | 110,425 | $ | 124,774 | ||||
| Valuation Allowance | (59,868 | ) | (83,676 | ) | ||||
| Deferred tax asset after valuation allowance | $ | 50,557 | $ | 41,098 | ||||
| Deferred tax liabilities: | ||||||||
| Intangibles | $ | (156 | ) | $ | (356 | ) | ||
| Write up of owned real estate | (50,401 | ) | (40,742 | ) | ||||
| Total deferred tax liabilities | $ | (50,557 | ) | $ | (41,098 | ) | ||
| Net deferred tax assets | $ | - | $ | - | ||||
At March 1, 2014, the Company had state net operating loss carry forwards of approximately $216.2 million. These net operating losses expire in years through fiscal 2033. The Company also had Federal net operating loss carry forwards of approximately $193.7 million. These net operating losses will expire in years through fiscal 2033.
Since under liquidation basis accounting all future estimated taxes are accrued as of the reporting date net of the benefit expected to be derived from available NOLs, it is not appropriate to record a separate deferred tax asset on the same NOLs. Accordingly, a valuation allowance of approximately $83.7 million was recorded through March 2, 2013. The valuation allowance was reduced by approximately $23.8 million during the fiscal year ended March 1, 2014 to $59.9 million primarily due to the increase in the estimated net realizable values of various Company properties during the fiscal year ended March 1, 2014.
NOTE 5 – PENSION AND PROFIT SHARING PLANS
Presented below is financial information relating to this plan for the fiscal years indicated:
| March 1, 2014 | March 2, 2013 | |||||||
| (in thousands) | ||||||||
| CHANGE IN BENEFIT OBLIGATION: | ||||||||
| Net benefit obligation - beginning of period | $ | 11,514 | $ | 11,217 | ||||
| Interest cost | 611 | 556 | ||||||
| Actuarial return (loss) | 456 | (821 | ) | |||||
| Gross benefits received | 615 | 562 | ||||||
| Net benefit obligation - end of period | $ | 13,196 | $ | 11,514 | ||||
| CHANGE IN PLAN ASSETS: | ||||||||
| Fair value of plan assets - beginning of period | $ | 8,737 | $ | 8,094 | ||||
| Employer contributions | 868 | 685 | ||||||
| Gross benefits paid | (615 | ) | (562 | ) | ||||
| Actual return on plan assets | 858 | 520 | ||||||
| Fair value of plan assets - end of period | $ | 9,848 | $ | 8,737 | ||||
| Funded Status at end of year | $ | (3,348 | ) | $ | (2,777 | ) | ||
| March 1, 2014 | March 2, 2013 | |||||||
| (in thousands) | ||||||||
| COMPONENTS OF NET PERIODIC COST: | ||||||||
| Interest cost | $ | 611 | $ | 556 | ||||
| Loss of assets | (858 | ) | (520 | ) | ||||
| Amortization of loss | 597 | 204 | ||||||
| Net periodic cost | $ | 350 | $ | 240 | ||||
| WEIGHTED-AVERAGE ASSUMPTION USED: | ||||||||
| Discount rate | 5.0 | % | 5.0 | % | ||||
| Rate of compensation increase | 0.0 | % | 0.0 | % | ||||
As of March 1, 2014 the benefits expected to be paid in the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows (in thousands):
| Year | Amount | |||
| 2014 | $ | 630 | ||
| 2015 | 364 | |||
| 2016 | 498 | |||
| 2017 | 327 | |||
| 2018 | 828 | |||
| 2019-2023 | 3,282 | |||
The fair values and asset allocation of the Company’s plan assets as of March 1, 2014 and the target allocation for fiscal 2014, by asset category, are presented in the following table (in thousands). All fair values are based on quoted prices in active markets for identical assets (Level 1 in the fair value hierarchy).
| % of Plan | ||||||||||
| Asset Category | Asset Allocation | Fair Value | Assets | |||||||
| (in thousands) | ||||||||||
| Cash and equivalents | 0% to 10% | $ | 295 | 3 | % | |||||
| Equity Securities | 30% to 50% | 4,333 | 44 | % | ||||||
| Fixed Income Securities | 35% to 55% | 4,333 | 44 | % | ||||||
| Alternative Investments | 5% to 25% | 887 | 9 | % | ||||||
| Total | $ | 9,848 | 100 | % | ||||||
Under the provisions of ASC 715, the Company is required to recognize in its consolidated balance sheet the unfunded status of a benefit plan. This is measured as the difference between plan assets at fair value and the projected benefit obligation. For the pension plan, this is equal to the accumulated benefit obligation.
Certain employees covered by collective bargaining agreements participate in multiemployer pension plans. Syms ceased to have an obligation to contribute to these plans in 2012, thereby triggering a complete withdrawal from the plans within the meaning of section 4203 of ERISA. Consequently, the Company is subject to the payment of a withdrawal liability to these pension funds. The additional costs have been estimated at approximately $6.9 million for the multiemployer pension plans. The Company has a recorded liability of $5.3 million and $6.9 million which is reflected in accrued expenses as of March 1, 2014 and March 2, 2013, respectively. In accordance with minimum funding requirements, the Company paid approximately $1.7 million to the Syms sponsored plan and approximately $1.6 million to the multiemployer plans from September 17, 2012 through March 1, 2014.
NOTE 6 – COMMITMENTS
As discussed in Note 1, Syms and its subsidiaries filed voluntary petitions for relief under Chapter 11 on November 2, 2011. On September 14, 2012, a plan of reorganization became effective and Syms and its subsidiaries emerged from bankruptcy, with reorganized Syms merging with and into Trinity.
NOTE 7 – PREFERRED STOCK
The Company is authorized to issue two shares of preferred stock and one share of Special Stock. The Series A Preferred Share, is held by a trustee acting for the benefit of the Company’s creditors. The Series B Preferred Share, is held by the former Majority Shareholder. The Special Stock was issued and sold to Third Avenue and enables Third Avenue or its affiliated designee to elect one member of the Board of Directors.
NOTE 8 – STOCK BASED COMPENSATION
Stock Option Plan
The Company formerly had an Incentive Stock Option and Appreciation Plan that allowed for the granting of incentive stock options, as defined in Section 422A of the Internal Revenue Code of 1986 (as amended), non-qualified stock options and stock appreciation rights. All outstanding options were cancelled when the Company emerged from bankruptcy on September 14, 2012. Neither the Amended and Restated Incentive Stock Option Plan nor the 2005 Plan is available for additional grants.
The following table summarizes stock option activity during fiscal 2012 as there was no stock option activity during fiscal 2013:
| Year Ended | ||||||||
| March 2, 2013 | ||||||||
| Options | Weighted Average Exercise Price per Share | |||||||
| (in thousands, except pre share amounts) | ||||||||
| Outstanding - beginning of year | 98 | $ | 15.01 | |||||
| Exercised | - | - | ||||||
| Cancelled | (98 | ) | (15.01 | ) | ||||
| Outstanding - end of year | - | $ | - | |||||
| Options exercisable at year end | - | $ | - | |||||
Restricted Stock Units
During fiscal 2013, the Company granted an aggregate of 326,000 RSUs (“Restricted Stock Units”) to certain employees and executives. The Company grants RSUs that are subject to continued employment and service based vesting conditions, but do not have dividend or voting rights. The RSUs vest in various increments typically on the anniversaries of the individual grant dates, through August 2016, subject to the recipient’s continued employment or service through each applicable vesting date.
The Company’s restricted stock activity is as follows:
| Year Ended March 1, 2014 | ||||||||
| Number of Shares | Weighted Average Fair Value at Grant Date | |||||||
| Non-vested at beginning of period | - | - | ||||||
| Granted RSUs | 326,000 | $ | 5.35 | |||||
| Vested | (250,000 | ) | $ | 5.00 | ||||
| Non-vested at end of period | 76,000 | $ | 6.49 | |||||
NOTE 9 – RELATED PARTY TRANSACTIONS
Under the terms of the Plan, the Company is restricted from making any distributions, dividends or redemptions until after the former Majority Shareholder payments are made in full. The Certificate of Incorporation provides for a preferred series share, held by the former Majority Shareholder and which is pledged as security and held in escrow, entitling the Majority Shareholder to control a majority of the Board of Directors if the former Majority Shareholder payments are not made by October 16, 2016, provided and conditioned upon the general unsecured claim satisfaction having occurred.
In addition, as part of the Plan, the former Majority Shareholder agreed to repay the Company $1.6 million for all premiums paid by the Company on her behalf after the adoption of the Sarbanes-Oxley Act of 2002, as well as $0.2 million for the net present value of pre-Sarbanes-Oxley premiums, for a total of $1.8 million. At March 1, 2014 and March 2, 2013, the value of these premiums was recorded as an offset against the payment due under the Plan to the former Majority Shareholder (i.e., Ms. Syms and her related trusts) on account of the redemption of the former Majority Shareholder’s shares of Syms common stock. As of March 2, 2013, the Company had recorded a net liability of $17.8 million due to the former Majority Shareholder. On October 1, 2013 the Company met its Plan obligation to pay the former Majority Shareholder $10.7 million and has a remaining liability of $7.1 million due to the Majority Shareholder recorded on its Consolidated Statement of Net Assets as of March 1, 2014.
Ms. Syms, the Company and Filene’s, LLC also entered into an agreement in connection with the Plan whereby the rights to the “Syms” name and to any images of Ms. Syms and her family members were assigned to Ms. Syms. The impact of this provision of the Plan has been reflected in the estimated net realizable value of the trademarks within other assets as of March 1, 2014 and March 2, 2013.
NOTE 10 – DISPOSITIONS OF ASSETS
Fiscal 2013
Certain information about the properties of the Company that have been sold during fiscal 2013, including the net proceeds generated by the sold properties, net of brokerage commissions and sale costs, are set forth below:
| Property Location | Type of Property | Building Size (square feet) | Net Proceeds ($ in millions) | Date of Sale | ||||||||
| Southfield, MI | Short term property | 60,000 | $ | 2.5 | April, 2013 | |||||||
| Marietta, GA | Short term property | 77,000 | $ | 2.9 | July, 2013 | |||||||
| Ft. Lauderdale, FL | Short term property | 55,000 | $ | 1.9 | August, 2013 | |||||||
| Elmsford, NY | Medium term property | 59,000 | $ | 22.0 | August, 2013 | |||||||
| Cherry Hill, NJ | Short term property | 150,000 | $ | 4.5 | September, 2013 | |||||||
| Addison, IL | Short term property | 68,000 | $ | 1.9 | December, 2013 | |||||||
| Norcross, GA | Short term property | 69,000 | $ | 1.1 | February, 2014 | |||||||
| Total | 538,000 | $ | 36.8 | |||||||||
Fiscal 2012
Certain information about the properties of the Company that have been sold during fiscal 2012, including the net proceeds generated by the sold properties, net of brokerage commissions and sale costs, are set forth below:
| Property Location | Type of Property | Building Size (square feet) | Net Proceeds ($ in millions) | Date of Sale | ||||||||
| Miami, FL | Short term property | 53,000 | $ | 4.1 | September, 2012 | |||||||
| Houston, TX | Short term property | 42,000 | $ | 3.6 | November, 2012 | |||||||
| Fairfield, CT | Short term property | 43,000 | $ | 5.5 | December, 2012 | |||||||
| Secaucus, NJ (Condo) | Short term property | 2,000 | $ | 0.3 | January, 2013 | |||||||
| Total | 140,000 | $ | 13.5 | |||||||||
During December 2012, the Company received a $0.9 million settlement on its Marietta, GA location. This was the result of the second and final payment regarding the 2011 partial condemnation.
NOTE 11 – SUBSEQUENT EVENT
Certain information about the properties of the Company that have been sold subsequent to March 1, 2014, including the net proceeds generated by the sold properties, net of brokerage commissions and sale costs, and are set forth below and the value recorded in the financial statements as of March 1, 2014 is consistent with the amount realized from these subsequent transactions:
| Property Location | Type of Property | Building Size (square feet) | Net Proceeds ($ in millions) | Date of Sale | ||||||||
| Berwyn, PA | Short term property | 69,000 | $ | 3.0 | April, 2014 | |||||||
| Secaucus, NJ (1) | Short term property | 340,000 | $ | 28.0 | May, 2014 | |||||||
| Total | 409,000 | $ | 31.0 | |||||||||
(1) On May 20, 2014, the Company closed on the sale of the Secaucus Lease to ASG. See Item 3, Legal Proceedings, for additional information.
Exhibits Index
*Management contract, compensatory plan or arrangement.
| 13 |