UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to
Commission File Number001-36416*
NEW YORK REIT LIQUIDATING LLC
(Exact Name of Registrant as Specified in its Charter)
Delaware | 83-2426528 | |
State or Other Jurisdiction of Incorporation or Organization | I.R.S. Employer Identification No. | |
2 Liberty Square, Boston, MA | 02109 | |
Address of Principal Executive Offices | Zip Code |
(617) 570-4750
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Units
(Title of class)
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 and 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 at least the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File to be submitted pursuant to Rule 405 of Regulation(232.405 (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act
As of August 1, 20222023 there were 16,791,769 Units outstanding.
Documents incorporated by reference: None
*New York REIT Liquidating LLC is the successor in interest to New York REIT, Inc. and files reports under the Commission file number for New York REIT, Inc.
NEW YORK REIT LIQUIDATING LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||||
PART I – FINANCIAL INFORMATION | ||||||
Item 1. | Financial Statements (unaudited) | |||||
1 | ||||||
2 | ||||||
3 | ||||||
Item 2. | 12 | |||||
Item 3. | 17 | |||||
Item 4. | 17 | |||||
Item 1. | 18 | |||||
Item 1A. | 18 | |||||
Item 2. | 18 | |||||
Item 3. | 18 | |||||
Item 4. | 18 | |||||
Item 5. | 18 | |||||
Item 6. | 19 | |||||
21 | ||||||
NEW YORK REIT LIQUIDATING LLC
FORM2022
CONSOLIDATED STATEMENTS OF NET ASSETS
(Liquidation Basis)
(Unaudited, in thousands)
| June 30, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Investment in unconsolidated joint venture | $ | 215,584 | $ | 226,175 | ||||
Cash and cash equivalents | 8,159 | 7,535 | ||||||
Restricted cash held in escrow | 92,141 | 92,127 | ||||||
Total Assets | 315,884 | 325,837 | ||||||
Liabilities | ||||||||
Liability for estimated costs in excess of estimated receipts during liquidation | 2,457 | 2,384 | ||||||
Accounts payable, accrued expenses and other liabilities | 410 | 342 | ||||||
Total Liabilities | 2,867 | 2,726 | ||||||
Commitments and Contingencies | 0 | |||||||
Net assets in liquidation | $ | 313,017 | $ | 323,111 | ||||
| June 30, 2023 |
|
| December 31, 2022 |
| |||
Assets |
|
|
|
|
|
| ||
Investment in unconsolidated joint venture |
| $ | 27,410 |
|
| $ | 22,692 |
|
Cash and cash equivalents |
|
| 7,599 |
|
|
| 8,192 |
|
Restricted cash |
|
| 92,120 |
|
|
| 92,538 |
|
Asset for estimated receipts in excess of estimated costs |
|
| 653 |
|
|
| — |
|
Total Assets |
|
| 127,782 |
|
|
| 123,422 |
|
Liabilities |
|
|
|
|
|
| ||
Liability for estimated costs in excess of estimated receipts during liquidation |
|
| — |
|
|
| 1,420 |
|
Accounts payable, accrued expenses and other liabilities |
|
| 732 |
|
|
| 841 |
|
Total Liabilities |
|
| 732 |
|
|
| 2,261 |
|
Commitments and Contingencies |
|
|
|
|
|
| ||
Net assets in liquidation |
| $ | 127,050 |
|
| $ | 121,161 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
NEW YORK REIT LIQUIDATING LLC
FORM2022
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Liquidation Basis)
(Unaudited, in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 202 2 | June 30, 202 1 | June 30, 202 2 | June 30, 202 1 | |||||||||||||
Net assets in liquidation, beginning of period | $ | 316,127 | $ | 325,737 | $ | 323,111 | $ | 327,390 | ||||||||
Changes in net assets in liquidation: | ||||||||||||||||
Changes in liquidation value of investment in unconsolidated joint venture | (870 | ) | 2,053 | (4,042 | ) | 4,134 | ||||||||||
Remeasurement of assets and liabilities | (561 | ) | (666 | ) | (1,182 | ) | (1,378 | ) | ||||||||
Net changes in liquidation value | (1,431 | ) | 1,387 | (5,224 | ) | 2,756 | ||||||||||
Liquidating distributions to unitholders | (1,679 | ) | (4,198 | ) | (4,870 | ) | (7,220 | ) | ||||||||
Changes in net assets in liquidation | (3,110 | ) | (2,811 | ) | (10,094 | ) | (4,464 | ) | ||||||||
Net assets in liquidation, end of period | $ | 313,017 | $ | 322,926 | $ | 313,017 | $ | 322,926 | ||||||||
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| |||||
Net assets in liquidation, beginning of period |
| $ | 123,545 |
|
| $ | 316,127 |
|
| $ | 121,161 |
|
| $ | 323,111 |
|
Changes in net assets in liquidation: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Changes in liquidation value of investment in unconsolidated joint venture |
|
| 3,541 |
|
|
| (870 | ) |
|
| 4,762 |
|
|
| (4,042 | ) |
Remeasurement of assets and liabilities |
|
| (36 | ) |
|
| (561 | ) |
|
| 1,127 |
|
|
| (1,182 | ) |
Net changes in liquidation value |
|
| 3,505 |
|
|
| (1,431 | ) |
|
| 5,889 |
|
|
| (5,224 | ) |
Liquidating distributions to unitholders |
|
| — |
|
|
| (1,679 | ) |
|
| — |
|
|
| (4,870 | ) |
Changes in net assets in liquidation |
|
| 3,505 |
|
|
| (3,110 | ) |
|
| 5,889 |
|
|
| (10,094 | ) |
Net assets in liquidation, end of period |
| $ | 127,050 |
|
| $ | 313,017 |
|
| $ | 127,050 |
|
| $ | 313,017 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(unaudited)
Note 1 — Organization
All references to the “Company” refer to New York REIT Liquidating LLC and all references to “we”,” “us”,” or “our”,” refer
to New York REIT Liquidating LLC and its consolidated subsidiaries. References to the Company’s ownership, investment in, and
rights and obligations and actions concerning WWP Holdings LLC or Worldwide Plaza refer to the interests, rights and
obligations, and actions of the Company’s subsidiary ARC NYWWPJV001, LLC, except that references relating to a $90.7 million
cash reserve established in 2017 from the proceeds of our sale of a 48.7% interest in Worldwide Plaza refer to amounts held by the
Company and not by ARC NYWWPJV001, LLC. For example, statements such as “our sole remaining property related asset is a
50.1% ownership interest in Worldwide Plaza,” “our interest in Worldwide Plaza,” “our joint venture partner in Worldwide Plaza,”
and similar statements refer to ARC NYWWPJV001, LLC’s interests, activities, rights and obligations, and partner with respect to
Worldwide Plaza.
New York REIT Liquidating LLC (the “Company”) was formed on November 7, 2018 and is the successor entity to New York REIT, Inc., (the “Predecessor”). The Predecessor was incorporated on October 6, 2009 as a Maryland corporation that qualified as a real estate investment trust for U.S. federal income tax purposes (“REIT”) beginning with its taxable year ended December 31, 2010. On April 15, 2014, the Predecessor listed its common stock on the New York Stock Exchange (“NYSE”) under the symbol “NYRT” (the “Listing”).
The sole purpose of the Company is to wind up the Company’s affairs and the liquidation of the Company’s assets with no objective to continue or to engage in the conduct of a trade or business, except as necessary for the orderly liquidation of the Company’s assets.
On August 22, 2016, the Predecessor’s Board of Directors (the “Board”) approved a plan of liquidation to sell in an orderly manner all or substantially all of the assets of the Predecessor and its operating partnership, New York Recovery Operating Partnership, L.P., a Delaware limited partnership (the “OP”), and to liquidate and dissolve the Predecessor and the OP (the “Liquidation Plan”), subject to stockholder approval (see Note 2). The Liquidation Plan was approved at a special meeting of stockholders on January 3, 2017. All of the assets held by the OP have been sold and the OP was dissolved prior to the conversion on November 7, 2018.
As of June 30, 2022,2023, the Company’s only significant assets are a 50.1%50.1% equity interest in WWP Holdings LLC (“WWP”), which owns 1one property, known as Worldwide Plaza, aggregating 2.0 million rentable square feet with an average occupancy of 90.6%,91.5% and a $90.7 million cash, reserve to be utilized for improvements at the property owned by WWP.cash equivalents and restricted cash totaling $99.7 million. The property consisted of office space, retail space and a garage representing 88%88%, 5%5% and 7%7%, respectively, of rentable square feet as of June 30, 2022.
The Company has no employees. Since March 8, 2017, all advisory duties are administered by Winthrop REIT Advisors, LLC (the “Winthrop Advisor”).
Note 2 –— Liquidation Plan
The Liquidation Plan provides for an orderly sale of the Company’s assets, payment of the Company’s liabilities and other obligations, and the winding down of operations, and dissolution of the Company. The Predecessor was not, and the Company is not, permitted to make any new investments except to make protective acquisitions or advances with respect to its existing assets (see Note 6). The Company is permitted to satisfy any existing contractual obligations and fund required tenant improvements and capital expenditures at its real estate property owned by the joint venture in which the Company owns an interest.
The Liquidation Plan enables the Company to sell any and all of its assets without further approval of the unitholders and provides that liquidating distributions be made to the unitholders as determined by the Company’s board of managers (the “Board of Managers”). In order to comply with applicable laws, the Predecessor converted into the Company into a limited liability company. The conversion of the Predecessor to a limited liability company was approved by the stockholders on September 7, 2018 and became effective on November 7, 2018.
In October 2018, the Predecessor announced the withdrawal of its common stock from listing on the NYSE in connection with the conversion. November 2, 2018 was the last day on which shares of its common stock were traded on the NYSE and theits stock
3
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
transfer books were closed as of 4:00 p.m. (Eastern Time) on such date. At the effective time of the conversion, each outstanding share of common stock of the Predecessor was converted into one unit of common membership interest in the Company (a “Unit”), and holders of shares of the Predecessor’s common stock automatically received one Unit (which Unit was in book entry form) for each share of ourthe common stock held by such stockholder. HoldersUnlike shares of Units should note that unlike shares ofthe Predecessor’s common stock, which, in addition to being listed on the NYSE, were freely transferable, Units are not listed for trading and generally are not transferable except by will, intestate succession or operation of law. Therefore, the recipientsholders of Units willdo not have the ability to realize any value from
The Company is deemed to be the same entity as the Predecessor with the same assets and liabilities as the Predecessor on the date of conversion.Predecessor. In addition, the charter and bylaws of the Predecessor were replaced by the operating agreement of the Company. For tax purposes, the fair value of each Unit in the Company received by stockholders when the conversion became effective, which reflects the value of the remaining assets of the Company (net of liabilities), was equal to the average of the high and low trading prices for shares of the Predecessor’s common stock on the last three days on which the shares were traded on the NYSE.
The business of the Company is the same as the business of the Predecessor immediately preceding the conversion, which, consistent with the Liquidation Plan, consists of the continued ownership of the Predecessor’s interest in Worldwide Plaza, the only remaining property-related asset. Under its operating agreement, the business and affairs of the Company will be managed by or under the direction of its Board of Managers, andManagers. The sole purpose of the sole purposeCompany is winding up the affairs of the Company and the liquidation of its remaining property-related asset. On March 14, 2022, pursuant to the terms of the operating agreement of the Company, the Board of Managers extended the term of the Company such that the Company will remain in existence until the earlier of (i) the distribution of all itsCompany assets pursuant to liquidation, or (ii) December 31, 2023.
The dissolution process and the amount and timing of future distributions to unitholders involve risks and uncertainties. Accordingly, it is not possibleimpossible to predict the timing or aggregate amount which will be ultimately distributed to unitholders and nounitholders. No assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Consolidated StatementStatements of Net Assets.
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.
Liquidation Basis of Accounting
As a result of the approval of the Liquidation Plan by the stockholders, the Company adopted the liquidation basis of accounting as of January 1, 2017 and for the periods subsequent to December 31, 2016 in accordance with GAAP. Accordingly, on January 1, 2017, the carrying value of the Company’s assets were adjusted to their liquidation value, which represented the estimated amount of cash that the Company expected to collect on disposal of assets as it carried out its liquidation activities under the Liquidation Plan. All properties have been sold except for the remaining interest in Worldwide Plaza. For purposes of liquidation accounting, which requires estimating go-forward revenues and expenses including net sale proceeds, the Company’s estimate of net assets in liquidation value assumes a sale of Worldwide Plaza at June 30, 2023.2024, which is the end of our current projected liquidation period as discussed below. The actual timing of sale has not yet been determined and is subject to future events and uncertainties. These estimates are subject to change based on the actual timing of the sale of the Company’s remaining property.
Liabilities are carried at their contractual amounts due as adjusted for the timing and other assumptions related to the liquidation process.
The Company accrues costs and revenues that it expects to incur and earn as it carries out its liquidation activities through the end of the projected liquidation period which ends on June 30, 2023, to the extent it has a reasonable basis for estimation. Under the liquidation basis of accounting, it is generally accepted that the period of time to assume a reasonable basis for estimation would not exceed one year from the
4
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
reporting date. As such, our current projected liquidation period ends on June 30, 2024. Estimated costs expected to be incurred through the end of the liquidation period include corporate overhead costs associated with satisfying known and contingent liabilities and other costs associated with the winding down and dissolution of the Company. Revenues are based on current interest rate assumptions. These amounts are classified as a net asset for estimated receipts in excess of estimated costs or as net liability for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statements of Net Assets. Actual costs and revenues may differ from amounts reflected in the consolidated financial statements due to the inherent uncertainty in estimating future events. These differences may be material. See Note 4 for further discussion. Actual costs incurred but unpaid as of June 30, 20222023 and December 31, 20212022 are included in accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Net Assets.
Use of Estimates
Certain of the Company’s accounting estimates are particularly important for an understanding of the Company’s financial position and results of operations and require the application of significant judgment by management. As a result, these estimates are subject to a degree of uncertainty. Under liquidation accounting, the Company is required to estimate all costs and revenue it expects to incur and earn through the end of liquidation including the estimated amount of cash it expects to collect on the disposal of its assets and the estimated costs to dispose of its assets. All of the estimates and evaluations are susceptible to change and actual results could differ materially from the estimates and evaluations.
Revenue Recognition
The Company has no revenuesrevenue sources other than interest income. These amounts areincome, which is classified withinin assets for estimated receipts in excess of estimated costs or in liability for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statements of Net Assets.
Investment in Unconsolidated Joint Venture
The Company accounts for its investment in unconsolidated joint venture under the equity method of accounting because the Company exercises significant influence over but does not control the entity and is not considered to be the primary beneficiary.
The investment in the unconsolidated joint venture is recorded at its liquidation value, or net realizable value, which is comprised of an estimate of the expected sale proceeds upon disposition plus the estimated net cash flow from the venture during the liquidation period. The Company evaluates the net realizable value of its unconsolidated joint
Restricted Cash
At June 30, 20222023 and December 31, 2021,2022, management has included in restricted cash primarily consists of the $90.7$92.1 million. Of this sum, $90.7 million has been reserved either for potential capital improvement reserve forwork at Worldwide Plaza, and $1.4should the Company elect to contribute, or to be paid as a liquidating distribution to unitholders. The remaining $1.4 million is being held in escrow in connection with the sale of the Viceroy Hotel (the “Viceroy Escrow”). The Viceroy Escrow was established from proceeds of the sale of the Viceroy Hotel and was required to cover a potential seller’s obligation to fund any shortfalls to the New York Hotel Pension Fund should the purchaser of the property withdraw from the Pension Fund without fully funding the then outstanding shortfall due to the Pension Fund. The Viceroy Escrow is set to expire in October 2023, and the funds will be used to satisfy the liabilities under the agreement or will be distributed to unitholders.
5
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
Recent Accounting Pronouncements
There are no new accounting pronouncements that are applicable or relevant to the Company under the liquidation basis of accounting.
Note 4—4 — Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation
The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation. The Company currently estimates that it will have costsreceipts in excess of estimated receiptscosts during the liquidation. These amounts can vary significantly due to, among other things, the timing and estimates for operating expenses, interest earned on reserves and the costs associated with the winding down of operations. These costs are estimated and are anticipated to be paid out over the liquidation period.
At June 30, 20222023 and December 31, 2021,2022, the Company had accrued the following net expenses expected to be incurred during liquidation (in thousands):
| June 30, |
|
| December 31, 2022 |
| |||
Interest Income |
| $ | 4,000 |
|
| $ | 2,040 |
|
General and administrative expenses |
|
| (3,347 | ) |
|
| (3,460 | ) |
Assets for estimated receipts in excess of estimated costs (liability |
| $ | 653 |
|
| $ | (1,420 | ) |
| June 30, 2022 | December 31, 2021 | |||||||
General and administrative expenses | $ | (2,457 | ) | $ | (2,384 | ) | ||
Liability for estimated costs in excess of estimated receipts during liquidation | $ | (2,457 | ) | $ | (2,384 | ) | ||
The change in the liability for estimated costs in excess of estimated receipts during liquidation for the six months ended June 30, 20222023 and 20212022 are as follows (in thousands):
| January 1, |
|
| Net Change |
|
| Remeasurement |
|
| June 30, |
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Estimated inflows of interest income |
| $ | 2,040 |
|
| $ | (1,546 | ) |
| $ | 3,506 |
|
| $ | 4,000 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative expenses |
|
| (3,460 | ) |
|
| 2,492 |
|
|
| (2,379 | ) |
|
| (3,347 | ) |
Total assets for estimated receipts in excess of estimated costs |
| $ | (1,420 | ) |
| $ | 946 |
|
| $ | 1,127 |
|
| $ | 653 |
|
| January 1, |
|
| Net Change |
|
| Remeasurement |
|
| June 30, |
| |||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Estimated inflows of interest income |
| $ | 27 |
|
| $ | (23 | ) |
| $ | 176 |
|
| $ | 180 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative expenses |
|
| (2,411 | ) |
|
| 1,132 |
|
|
| (1,358 | ) |
|
| (2,637 | ) |
Total assets for estimated receipts in excess of estimated costs |
| $ | (2,384 | ) |
| $ | 1,109 |
|
| $ | (1,182 | ) |
| $ | (2,457 | ) |
| January 1, 2022 | Net Change in Working Capital (1) | Remeasurement of Assets and Liabilities | June 30, 2022 | |||||||||||||
Liabilities: | ||||||||||||||||
General and administrative expenses | $ | (2,384 | ) | $ | 1,109 | $ | (1,182 | ) | $ | (2,457 | ) | |||||
| �� | ||||||||||||||||
Total liability for estimated costs in excess of estimated receipts during liquidation | $ | (2,384 | ) | $ | 1,109 | $ | (1,182 | ) | $ | (2,457 | ) | |||||
| January 1, 2021 | Net Change in Working Capital (1) | Remeasurement of Assets and Liabilities | June 30, 2021 | |||||||||||||
Liabilities: | ||||||||||||||||
General and administrative expenses | $ | (2,342 | ) | $ | 1,357 | $ | (1,378 | ) | $ | (2,363 | ) | |||||
Total liability for estimated costs in excess of estimated receipts during liquidation | $ | (2,342 | ) | $ | 1,357 | $ | (1,378 | ) | $ | (2,363 | ) | |||||
6
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
Note 5 –— Net Assets in Liquidation
Net assets in liquidation decreasedincreased by $3.1$3.5 million during the three months ended June 30, 2022,2023. The increase was primarily due to a $1.7 million liquidating distribution to unitholders, a net decreaseincrease of $0.9$3.5 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza relatedprimarily resulting from an increase in estimated distributions from working capital and property operations.
Net assets in liquidation increased by $5.9 million during the six months ended June 30, 2023. The increase was primarily due to an increase of $4.8 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza resulting from the estimated distributions to be received from working capital at the property and property operations and a $0.5$1.1 million net increase due to a remeasurement of estimated costs primarily related to an increase of estimated interest income.
Net assets in liquidation decreased by $3.1 million during the three months ended June 30, 2022, primarily due to a $1.7 million liquidating distribution to unitholders, a net decrease of $0.9 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza primarily resulting from the estimated distributions to be received from working capital at the property and property operations; and a $0.5 million net decrease due to a remeasurement of estimated costs.
Net assets in liquidation decreased by $10.1$10.1 million during the six months ended June 30, 2022,$4.9$4.9 million,,$4.0 related toprimarily resulting from the estimated distributions to be received from working capital and property operationsoperations; and a $1.2$1.2 million net decrease due to a remeasurement of estimated costs.
The net assets in liquidation at June 30, 2022,2023, presented on an undiscounted basis, include the Company’s proportionate share in Worldwide Plaza’s net assets which include a property value of $1.65 billion based on estimated cash flow projections utilizing appropriate discount and capitalization rates as well as available market informationinformation. The estimated cash flow projections, which include minimal future capital investment, were negatively impacted by increased interest rates, inflation, uncertainty of the timing of market recovery and assumptions regarding capital expenditures.
There were 16,791,769 Units outstanding at June 30, 2022.2023. The net assets in liquidation as of June 30, 2022,2023, if sold at their net asset value, would result in liquidating distributions of approximately $18.64
Note 6 — Investment in Unconsolidated Joint Venture
On October 30, 2013, the Predecessor purchased a 48.9%48.9% equity interest in Worldwide Plaza for a contract purchase price of $220.1$220.1 million, based on the property value at that time for Worldwide Plaza of $1.3$1.3 billion less $875.0$875.0 million of debt on the property.
On June 1, 2017, the Predecessor acquired an additional 49.9%49.9% equity interest on exercise of the Predecessor’s option to purchase pursuant to the Company’s rights under the joint venture agreement of Worldwide Plaza for a contract purchase price of $276.7$276.7 million, based on the option price of approximately $1.4$1.4 billion less $875.0$875.0 million of debt on the property. The Predecessor’s joint venture partner exercised its right to retain 1.2%1.2% of the aggregate membership interests in Worldwide Plaza. Following the exercise of the option, the Predecessor owned a total equity interest of 98.8%98.8% in Worldwide Plaza.
On October 18, 2017, the Predecessor sold a 48.7%48.7% interest in Worldwide Plaza to a joint venture managed by SL Green Realty Corp. and RXR Realty LLC based on an estimated underlying property value of $1.725$1.725 billion. In conjunction with the equity sale, there was a concurrent $1.2$1.2 billion refinancing of the existing Worldwide Plaza debt. The Predecessor received cash at closing of approximately $446.5$446.5 million from the sale and excess proceeds from the financing, net of closing costs which included $108.3$108.3 million of defeasance and prepayment costs. The new debt on Worldwide Plaza bears interest at a blended rate of approximately 3.98%3.98% per annum, requires monthly payments of interest only and matures in November 2027.
7
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
currently leased by Cravath, Swaine & Moore, LLP has not been sufficiently re-leased on terms that would generate sufficient cash flow to satisfy debt service requirements, the joint venture that owns Worldwide Plaza would be restricted from making distributions under the terms of its indebtedness.
The Company hasinitially set aside $90.7approximately $90.7 million from the 2017 refinancing proceeds to cover our share of potential future leasing and capital costs at the proceedsproperty; as discussed in “Note 8 – Commitments and Contingencies”. The Company believes that there is no obligation to reserve this amount, and even if such an obligation existed, it has lapsed. We filed an action in the Delaware Court of Chancery seeking a separate accountdeclaratory judgment that we are permitted to fund future capital improvements to Worldwide Plaza.distribute the reserved funds; that action has been stayed pending resolution of an action brought by ARCNYWWPJV001, LLC in New York Supreme Court. Following the sale of its interest discussed above, the Company now holds a 50.1%50.1% interest in Worldwide Plaza. The Company has determined that this investment is an investment in a variable interest entity (“VIE”).VIE. The Company has determined that it is not the primary beneficiary of this VIE since the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance. The Company accounts for this investment using the equity method of accounting.
The lease with one of the tenants at the Worldwide Plaza property contains a right of first offer in the event thatif Worldwide Plaza sells 100%100% of the property. The right requires Worldwide Plaza to offer the tenant the option to purchase 100%100% of the Worldwide Plaza property, at thea price, and on other material terms, proposed by Worldwide Plaza to third parties. If, after a45-dayperiod,45 days, that tenant does not accept the offer, Worldwide Plaza may then sell the property to a third party, provided that Worldwide Plaza will be required to92.5%92.5% of the initial purchase price contained in the offer to that tenant.
Any transferee of our interest would acquire an interest subject to the same limitations on participation in the management of Worldwide Plaza that apply to us. There can be no assurance these limitations will not affect our ability to sell our interest in Worldwide Plaza or the amount we would receive on a sale. In addition, we may determine that a sale of the property rather than a sale of our interest in Worldwide Plaza is the best way to maximize the value of our interest in Worldwide Plaza. A sale of the property could substantially delay the timing of our complete liquidation. Additionally, the existence of the right of first offers may delay our ability to sell the Worldwide Plaza property or our interest in Worldwide Plaza on terms and in the timeframe of our choosing and may diminish the price we receive on a sale.
The following table lists the tenants whose annualized cash rent represented greater than 10% of total annualized cash rent for the six months ended June 30, 20222023 and 2021,2022, including annualized cash rent related to the Company’s unconsolidated joint venture:
|
|
| June 30, |
| ||||||
Property Portfolio |
| Tenant |
| 2023 |
|
| 2022 |
| ||
Worldwide Plaza |
| Cravath, Swaine & Moore, LLP |
|
| 51.5 | % |
|
| 50.4 | % |
Worldwide Plaza |
| Nomura Holdings America, Inc. |
|
| 29.2 | % |
|
| 28.8 | % |
| June 30, | ||||||||||
Property Portfolio | Tenant | 2022 | 2021 | |||||||
Worldwide Plaza | Cravath, Swaine & Moore, LLP | 50.4 | % | 47.4 | % | |||||
Worldwide Plaza | Nomura Holdings America, Inc. | 28.8 | % | 30.0 | % | |||||
The termination, delinquency ormaywill have a material adverse effect on the Company’s operations. The lease with Cravath, Swaine & Moore, LLP expires in August 2024 and the tenant has informed Worldwide Plaza that they doit does not intend to enter into a new lease upon expiration of the existing lease.
See "Note 8 - Commitments and Contingencies" for a discussion of legal proceedings.
The amounts reflected in the following tables are based on the going concern basis financial information of Worldwide Plaza. Under liquidation accounting, equity investments are carried at net realizable value.
8
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
The condensed balance sheets as of June 30, 20222023 and December 31, 20212022 for Worldwide Plaza are as follows:
(In thousands) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Real estate assets, at cost |
| $ | 847,955 |
|
| $ | 846,124 |
|
Less accumulated depreciation and amortization |
|
| (308,000 | ) |
|
| (298,953 | ) |
Total real estate assets, net |
|
| 539,955 |
|
|
| 547,171 |
|
Cash and cash equivalents |
|
| 55,387 |
|
|
| 47,613 |
|
Other assets |
|
| 125,559 |
|
|
| 126,811 |
|
Total assets |
| $ | 720,901 |
|
| $ | 721,595 |
|
Debt |
| $ | 1,300,672 |
|
| $ | 1,241,903 |
|
Other liabilities |
|
| 195,149 |
|
|
| 240,428 |
|
Total liabilities |
|
| 1,495,821 |
|
|
| 1,482,331 |
|
Deficit |
|
| (774,920 | ) |
|
| (760,736 | ) |
Total liabilities and deficit |
| $ | 720,901 |
|
| $ | 721,595 |
|
(In thousands) | June 30 , 2022 | December 31, 2021 | ||||||
Real estate assets, at cost | $ | 842,126 | $ | 840,798 | ||||
Less accumulated depreciation and amortization | (289,948 | ) | (281,011 | ) | ||||
Total real estate assets, net | 552,178 | 559,787 | ||||||
Cash and cash equivalents | 39,792 | 53,351 | ||||||
Other assets | 131,202 | 122,921 | ||||||
Total assets | $ | 723,172 | $ | 736,059 | ||||
Debt | $ | 1,280,621 | $ | 1,271,177 | ||||
Other liabilities | 185,068 | 181,005 | ||||||
Total liabilities | 1,465,689 | 1,452,182 | ||||||
Deficit | (742,517 | ) | (716,123 | ) | ||||
Total liabilities and deficit | $ | 723,172 | $ | 736,059 | ||||
The condensed statements of operations for the three and six months ended June 30, 2022 and 20212023 for Worldwide Plaza are as follows:
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||
| June 30, |
|
| June 30, |
| |||||||||||
(In thousands) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Rental income |
| $ | 35,319 |
|
| $ | 34,711 |
|
| $ | 70,345 |
|
| $ | 70,058 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses |
|
| 16,079 |
|
|
| 16,440 |
|
|
| 32,572 |
|
|
| 32,665 |
|
Depreciation and amortization |
|
| 5,250 |
|
|
| 5,194 |
|
|
| 10,524 |
|
|
| 10,383 |
|
Total operating expenses |
|
| 21,329 |
|
|
| 21,634 |
|
|
| 43,096 |
|
|
| 43,048 |
|
Operating income |
|
| 13,990 |
|
|
| 13,077 |
|
|
| 27,249 |
|
|
| 27,010 |
|
Interest expense |
|
| (20,666 | ) |
|
| (20,152 | ) |
|
| (41,111 | ) |
|
| (40,088 | ) |
Net loss |
| $ | (6,676 | ) |
| $ | (7,075 | ) |
| $ | (13,862 | ) |
| $ | (13,078 | ) |
| Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands) | June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||
Rental income | $ | 34,551 | $ | 36,923 | $ | 70,058 | $ | 72,270 | ||||||||
Operating expenses: | ||||||||||||||||
Operating expenses | 16,440 | 16,161 | 32,665 | 32,653 | ||||||||||||
Depreciation and amortization | 5,194 | 6,358 | 10,383 | 16,617 | ||||||||||||
Total operating expenses | 21,634 | 22,519 | 43,048 | 49,270 | ||||||||||||
Operating income | 12,917 | 14,404 | 27,010 | 23,000 | ||||||||||||
Interest expense | (20,152 | ) | (19,670 | ) | (40,088 | ) | (39,130 | ) | ||||||||
Net loss | $ | (7,235 | ) | $ | (5,266 | ) | $ | (13,078 | ) | $ | (16,130 | ) | ||||
Note 7 — Common Equity
As of June 30, 20222023 and December 31, 2021.2022, the Company had 16,791,769 Units outstanding. The Company expects to make periodic liquidating distributions out of cash flow distributions received from our investment in Worldwide Plaza and proceeds from the ultimate sale of the Company’sCompany's interest in Worldwide Plaza, subject to satisfying its liabilities and obligations, in lieu of regular monthly dividends. Through June 30, 2022,2023, the Company paid aggregate distributions equal to $61.55$61.58 per share/Unit.
Note 8 — Commitments and Contingencies
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. ThereOther than the matters described below (about which the Company offers no prediction), there are no legal or regulatory proceedings pending or known to be contemplated against the Company from which the Company expects to incur a material loss.
On December 28, 2022, the Company filed suit against WWP JV LLC captioned New York REIT Liquidating LLC v. WWP JV LLC (Del. Ch.). The Company is seeking declaratory relief that it may release to its unitholders a reserve of more than $90 million (the “Reserve”) that was established in 2017 in connection with a transaction between the Company’s subsidiary, ARC NYWWPJV 001, LLC, and WWP JV LLC relating to a proposed investment in Worldwide Plaza, an office and retail mixed-use project located in midtown Manhattan. On May 11, 2023, the Delaware Court of Chancery issued a stay of the case, pending resolution of the New York litigation filed by the Company's subsidiary, ARCNYWWPJV001, LLC, as described below.
9
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
The Company’s subsidiary, ARC NYWWPJV001, LLC filed suit against WWP JV LLC on December 22, 2022. The suit is captioned ARC NYWWPJV001, LLC v. WWP JV LLC, (Sup. Ct. N.Y. County), and, on February 10, 2023, the Company was named as Counterclaim Defendant and Third-Party Defendant in such action. ARC NYWWPJV001, LLC has sought declaratory relief that it need not fund certain disputed capital contributions exceeding $82 million under the Third Amended and Restated Limited Liability Company Agreement of WWP Holdings, LLC (“LLC Agreement”) related to proposed capital improvements at Worldwide Plaza, because it is ARC NYWWPJV001's position that the Initial Budget expired at year end 2018 and the subject capital improvements would require a new Annual Budget that has received Board Approval, which has not occurred. WWP JV LLC’s counterclaim against the Company seeks declaratory relief that the Company must continue to maintain the Reserve until such time as a member of WWP Holdings, LLC issues a call notice for the Reserve under the LLC Agreement (the “Counterclaim”). WWP JV LLC’s third party claims against the Company assert claims under various theories of tort and unjust enrichment and seek damages in excess of $90 million (the “Third Party Claims”). It is the Company’s and ARC NYWWPJV001’s position that the Counterclaim and Third Party Claims are without merit and fail to state any causes of action upon which relief may be granted as a matter of law and/or pursuant to the express terms of the LLC Agreement. Moreover, NYRT is not a party to the LLC Agreement.
If the Company is unsuccessful in receiving favorable declaratory judgments in the above referenced actions or is unsuccessful in defending the claims against it therein, the Company may be required to contribute additional capital to the joint venture. The Company cannot predict and expresses no prediction as to the outcome of these matters. Therefore, the Company cannot estimate the range of any reasonably possible loss.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company, throughThrough its joint venture, the Company maintains environmental insurance for its property that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. The Company has not been notified by any governmental authority of any
Note 9 — Related Party Transactions and Arrangements
Winthrop Advisor and its Affiliates
The activities of the Company are administered by the Winthrop Advisor pursuant to the terms of an advisory agreement, as amended, (the “Advisory Agreement”) between the Company and the Winthrop Advisor.
The Advisory Agreement is subject to automatic
From the Liquidation Date through July 31, 2020, the Company paid to the Winthrop Advisor a monthly fee of $100,000$100,000 and a supplemental fee of $50,000$50,000 per quarter (prorated for any partial quarter) for any period that the principal executive and financial officers of the Company are required to certify the financial and other information contained in the Company’s quarterly and annual reports pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended. On October 30, 2020, the Advisory Agreement was amended to reduce the monthly fee payable to Winthrop Advisor to $83,000$83,000 effective August 1, 2020. All other terms of the Advisory Agreement remained unchanged.
In connection with the adoption of liquidation accounting, the Company accrues costs it expects to incur through the end of liquidation. As of June 30, 20222023 and December 31, 2021,2022 the Company has accrued asset management fees and compensation reimbursements totaling $1.2$1.2 million payable to the Winthrop Advisor representing management’s estimate of future asset management
10
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(unaudited)
fees to final liquidation, provided there is no assurance that the contract will continue to be extended at the same terms, if at all. This amount is included in estimated costs in excess of estimated receipts during liquidation.
In connection with the payment of (i) any distributions of money or other property by the Company to its stockholders or unitholders during the term of the Advisory Agreement and (ii) any other amounts paid to the Company’s stockholders or unitholders on account of their shares of common stock or membership interests in the Company in connection with a merger or other change in control transaction pursuant to an agreement with the Company entered into after March 8, 2017 (such distributions and payments, the “Hurdle Payments”), in excess of $110.00$110.00 per share (the(adjusted for the Reverse Split, the “Hurdle Amount”), when taken together with all other Hurdle Payments, the Company will pay an incentive fee to Winthrop Advisor in an amount equal to 10.0%10.0% of such excess (the “Incentive Fee”). The Hurdle Amount will be increased on an annualized basis by an amount equal to the product of (a) the Treasury Rate plus 200 basis points and (b) the Hurdle Amount minus all previous Hurdle Payments. Based on the current estimated undiscounted net assets in liquidation, the Winthrop Advisor would not be entitled to receive any such incentive fee.
The Company paid the Winthrop Advisor $300,000 for the three months and $600,000$600,000 for the six months ended June 30, 20222023 and 2021, respectively.2022.
Note 10 — Economic Dependency
Under various agreements, the Company has engaged Winthrop Advisor, its affiliates and entities under common control with Winthrop Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of propertiesthe property owned by the Company, asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services, transaction management and investor relations.
As a result of these relationships, the Company is dependent upon Winthrop Advisor.Advisor and its affiliates. In the event that Winthrop Advisor isthese companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 11 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Formtoor disclosures in the consolidated financial statements.
11
NEW YORK REIT LIQUIDATING LLC
June 30, 2022
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of New York REIT Liquidating LLC and the notes thereto. As used herein, the term "Liquidating LLC" refers to New York REIT Liquidating LLC, a Delaware limited liability company, and the terms “Company,” “we,” “our” and “us” refer to New York REIT Liquidating LLC, a Delaware limited liability company,and its consolidated subsidiaries and, as required by context to New York REIT, Inc., a Maryland corporation (the “Predecessor”), to New York Recovery Operating Partnership LP, a Delaware Limited Partnership (the “OP”), and to their subsidiaries. References to the Company’s ownership, investment in, and rights and obligations and actions with respect to WWP Holdings LLC or Worldwide Plaza refer to the interests, rights and obligations, and actions of the Company’s subsidiary ARC NYWWPJV001, LLC, except that references relating to the $90.7 million cash reserve established in 2017 from the proceeds of our sale of a 48.7% interest in Worldwide Plaza refer to amounts held by the Company and not by ARC NYWWPJV001, LLC. For example, statements such as “our sole remaining property related asset is a 50.1% ownership interest in Worldwide Plaza”, “our interest in Worldwide Plaza”, “our joint venture partner in Worldwide Plaza”, and similar statements refer to ARC NYWWPJV001, LLC’s interests, activities, rights and obligations, and joint venture partner with respect to Worldwide Plaza.
We are externally managed by Winthrop REIT Advisors, LLC (the “Winthrop Advisor”). Capitalized terms used herein but not otherwise defined have the meaning ascribed to those terms in “Part I—Financial Information” included in the notes to consolidated financial statements and contained herein.
Forward-Looking Statements
Certain statements conta20212022 under “Forward Looking Statements” and “Item 1A. Risk Factors,” as well as our other filings with the Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based on information, judgments and estimates at the time they are made, to anticipate future results or trends.
Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our unaudited consolidated interim financial statements and notes thereto. These unaudited interim financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.
Overview
On August 22, 2016, the Predecessor’s Board of Directors (the “Board”) approved a plan of liquidation to sell in an orderly manner all or substantially all of our assets and the assets of the OP (the “Liquidation Plan”), subject to stockholder approval. The Liquidation Plan was approved at a special meeting of stockholders on January 3, 2017.
The Liquidation Plan provides for an orderly sale of our assets, payment of our liabilities and other obligations, and the winding down of operations and the dissolution of the Company. We are no longer permitted to make any new investments except to make protective acquisitions or advances with respect to our existing assets. We are permitted to satisfy any existing contractual obligations and pay for required tenant improvements and capital expenditures at our real estate property owned by the joint venture in which we own an interest.
12
NEW YORK REIT LIQUIDATING LLC
June 30, 2023
In order to comply with applicable tax laws, the Predecessor converted into a limited liability company known as New York REIT Liquidating LLC. The conversion to the Company was approved by the stockholders on September 7, 2018 and became effective on November 7, 2018. The Liquidation Plan enables us to sell our assets without further approval of the stockholders or unitholders and provides that liquidating distributions be made to the stockholders as determined by the Board, and following the conversion, to our unitholders as determined by the Board of Managers.
In October 2018, the Predecessor announced the withdrawal of its common stock from listing on the NYSE in connection with the conversion. November 2, 2018 was the last day on which shares of its common stock were traded on the NYSE and our stock transfer books were closed as of 4:00 p.m. (Eastern Time) on such date. At the effective time of the conversion, each outstanding share of common stock of the Predecessor was converted into one unit of common membership interest in the Company (a “Unit”), and holders of shares of our common stock automatically received one Unit (which Unit was in book entry form) for each share of the Predecessor’s common stock held by such stockholder. Unlike shares of the Predecessor’s common stock, which, in addition to being listed on the NYSE, were freely transferable, Units are not listed for trading and generally are not transferable except by will, intestate succession or operation of law. Therefore, the holders of Units do not have the ability to realize any value from these interests except from distributions made by the Company, the timing of which will be solely in the discretion of the Board of Managers. The Board of Managers is currently comprised of three members: Randolph C. Read, Craig T. Bouchard and Howard Goldberg. John Lee and Joseph Moinian, representing two of the Company’s largest unitholders, serve as observers to the Board of Managers in unpaid positions with no voting rights in connection with Board matters.
The Company is deemed to be the same entity as the Predecessor with the same assets and liabilities as the Predecessor on the date of conversion. In addition, the charter and bylaws of the Predecessor were replaced by the operating agreement of the Company. For tax purposes, the fair value of each Unit in the Company received by stockholders when the conversion became effective, which reflectedreflects the value of the remaining assets of the Company (net of liabilities), was $14.00 per Unit and was equal to the average of the high and low trading prices for shares of the Predecessor’s common stock on the last three days on which the shares were traded on the NYSE.
The business of the Company is the same as the business of the Predecessor immediately preceding the conversion, which, consistent with the Liquidation Plan, consists of the continued ownership of the Predecessor’s interest in Worldwide Plaza, the only remaining property-related asset. Under its operating agreement, the business and affairs of the Company will be managed by or under the direction of its Board of Managers, and the sole purpose is winding up the affairs of the Company and the liquidation of its remaining property-related asset. On March 14, 2022, pursuant to the terms of the operating agreement of the Company, the Board of Managers extended the term of the Company such that the Company will remain in existence until the earlier of (i) the distribution of all company assets pursuant to liquidation or (ii) December 31, 2023.
The dissolution process and the amount and timing of distributions to unitholders involveinvolves risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will be ultimately distributed to unitholders, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Consolidated StatementStatements of Net Assets. To date, liquidating distributions totaling $61.55$61.58 per common share/Unit have been paid.
Liquidation Plan
As of the date of this Quarterly Report on Form20232024, which is based on a value of $1.65 billion.estimated cash flow projections utilizing appropriate discount and capitalization rates as well as available market information and assumptions regarding capital expenditures. The actual timing of sale has not yet been determined and is subject to future events and uncertainties. These estimates are subject to change based on the actual timing of the sale of our remaining interest in Worldwide Plaza and the actual cash distributions received from the property during our holding period.
Net operating income at Worldwide Plaza has remained relatively steady throughout theThe capital plan includes targeted capital improvements aimed at maintaining the institutional quality of the building and an appropriate allocation to allow for critical tenant lease renewals and rolls. In addition, capital will be available for management
13
NEW YORK REIT LIQUIDATING LLC
June 30, 2023
Current Activity
There were no property sales for the fiscal quarter ended June 30, 2022, there were no property sales.
Liquidity and Capital Resources
As of June 30, 2022,2023, we had cash, and cash equivalents of $8.2and restricted cash aggregating $99.7 million. Our total assets and undiscounted net assets in liquidation were $315.9$127.8 million and $313.0$127.1 million, respectively, at June 30, 2022.
Our principal demands for funds are to pay or fund operating expenses, capital expenditures and liquidating distributions to our unitholders. We believe that our current cash balance plus flow distributions we expect to receive frominterest earned on our investment in Worldwide Plazacash balances will continue to provide adequate capital to fund our operating, administrative and other expenses incurred during liquidation. We currently estimate that our current cash balance is sufficient to cover approximately three years of net operating expenses at the Company. If by August 31, 2023, all or substantially all the space currently leased by Cravath, Swaine & Moore, LLP has not beenspecified terms that would generate sufficient cash flow to satisfy debt service requirements, the lender has the right to initiate a cash sweep and the joint venture that owns Worldwide Plaza would be restricted from making distributions under the terms of its indebtedness. If the lender initiates a cash flow distributions fromsweep, all rent payments would be directed to the sweep account and the lender would control disbursements to cover operating expenditures and capital improvements at Worldwide Plaza. Any excess funds would be retained in a lender-controlled account to be utilized to cover future operating cash shortfall at the property. Even though our joint venture partner in Worldwide Plaza are suspended or lower than currently estimated as a result ofhas informed us that it does not intend to make any further distributions to the economic conditions caused by theCOVID-19pandemic and government protective measures,joint venture partners, we will still be able to satisfy our current operating, administrative and other expenses; however, it is likely that liquidating distributions to our unitholders would likely be suspended or reduced accordingly.
Our principal sources and uses of funds are further described below.
Principal Sources of Funds
Cash Flows from Operating Activities
Our cash flows from operating activities are primarily dependent upon the occupancy level at Worldwide Plaza, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants at Worldwide Plaza and the level of operating and other costs, including general and administrative expenses and other expenses associated with carrying out our Liquidation Plan.
Sales Proceeds
In connection with the Liquidation Plan, we plan to sell our remaining 50.1% interest in Worldwide Plaza.
Principal Use of Funds
Capital Expenditures
As of June 30, 2022,2023, we owned a 50.1% interest in the joint venture that owns Worldwide Plaza. In connection with the leasing of the property, the joint venture entered into agreements with its tenants to provide allowances for tenant improvements. These allowances require the joint venture to fund capital expenditures up to amounts specified in the lease agreements. Our share of capital expenditures for the six months ended June 30, 20222023 was funded from property cash flow.
We initially set aside approximately $90.7 million from the 2017 refinancing proceeds of our sale of a 48.7% interest in Worldwide Plaza to cover estimatedour share of potential future leasing and capital improvement costs at the property. Our joint venture partnersproperty; as discussed in “Note 8 –Commitments and Contingencies” we believe that any obligation to reserve this amount has lapsed, and we are seeking a declaratory judgment in the Delaware Court of Chancery that we are permitted to distribute the reserved funds; those Delaware proceedings have committed to contribute theirpro-ratasharebeen stayed pending resolution of proceedings in New York initiated by the budgeted capital investment. To date, none of the $90.7 million has been utilized.
Liquidating Distributions
Until such time as we are able to dispose of our remaining asset, the actual amount and timing of, and record dates for, future liquidating distributions will be determined by our Board of Managers and will depend upon the timing and amount of cash flow
14
NEW YORK REIT LIQUIDATING LLC
June 30, 2023
distributions we receive from our Worldwide Plaza joint venture and the amounts deemed necessary by our Board of Managers to pay or provide for our liabilities and obligations. The timing and amount of our final liquidating distribution will be dependent on the timing and proceeds of the sale of our remaining interest in Worldwide Plaza.Plaza and the timing of the resolution of the litigations, discussed in “Note 8 Commitments and Contingencies.” As the Company is treated as a partnership for federal and state income tax purposes, any such liquidating distributions on the Units will be deemed a return of capital.
Cash Flows
Our level of liquidity based upon cash, and cash equivalents increasedand restricted cash decreased by approximately $0.7$0.5 million from $7.5$99.7 million at December 31, 20212022 to $8.2$92.1 million at June 30, 2022.
The holders of shares of common stock of the Predecessor approved the Liquidation Plan on January 3, 2017, and we adopted the liquidation basis of accounting effective January 1, 2017. We did not make any acquisitions in new investments during 20212022 or the first six months of 2022,ended June 30, 2023, and, in accordance with the Liquidation Plan, no further acquisitions are expected.
Our primary sources of
Our primary uses of
Contractual Obligations
We did not have any contractual debt or lease obligations as of June 30, 2022.
Comparability of Financial Data Fromfrom Period to Period
Results of Operations
Our remaining asset continues to perform in a manner that is relatively consistent with prior reporting periods. We have experienced no significant changes in occupancy or rental rates at Worldwide Plaza.
Occupancy and Leasing
As of June 30, 2022,2023, Worldwide Plaza was 90.6%91.5% leased, compared to 97.3%90.6% as of June 30, 2021.2022. The decrease was due to Nomura Holdings America, Inc. exercising their termination rights effective December 31, 2021 for two floors. Additionally, a lease with anotherCravath, Swaine & Moore, LLP expires in August 2024 and the tenant expired in accordance with its terms. These spaces are actively being marketed forhas informed Worldwide Plaza that it does not intend to enter into a new lease upon expiration of the existing lease.
Changes in Net Assets in Liquidation
Net assets in liquidation increased by $3.5 million during the three months ended June 30, 2023. The increase was primarily due to a net increase of $3.5 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza primarily resulting from an increase in estimated distributions from working capital and property operations.
Net assets in liquidation increased by $5.9 million during the six months ended June 30, 2023. The increase was primarily due to an increase of $4.8 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza resulting from the estimated distributions to be received from working capital at the property and property operations and a $1.1 million net increase due to a remeasurement of estimated costs primarily related to an increase of estimated interest income.
Net assets in liquidation decreased by $3.1 million during the three months ended June 30, 2022, primarily due to a $1.7 million liquidating distribution to unitholders, a net decrease of $0.9 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related toprimarily resulting from the estimated distributions to be received from working capital at the property and property operationsoperations; and a $0.5 million net decrease due to a remeasurement of estimated costs.
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NEW YORK REIT LIQUIDATING LLC
June 30, 2023
Net assets in liquidation decreased by $10.1 million during the six months ended June 30, 2022, primarily due to liquidating distributions to unitholders of $4.9 million, a $4.0 million net decrease in the estimated liquidation value of the Company’s investment in Worldwide Plaza related toprimarily resulting from the estimated distributions to be received from working capital and property operationsoperations; and a $1.2 million net decrease due to a remeasurement of estimated costs.
Net assets in liquidation decreased by $2.8 million during the three months ended June 30, 2021, primarily due to a liquidating distribution to unitholders of $4.2 million and a $0.7 million net decrease due to a remeasurement of estimated costs. The decrease was offset in part by an net increase of $2.1 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
Our unaudited financial statements included in this Quarterly Report on Formactual amount or timing of liquidating distributions you will receive pursuant to the Liquidation Plan.
Tax Status
We are taxed as a partnership for federal and state income tax purposes. Accordingly, no provision or benefit for income taxes is made in the consolidated financial statements. All distributions from the Company will be considered a return of capital for tax purposes. Unitholders will receive a Schedule
Inflation
Many of Worldwide Plaza’s leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions.
Off-Balance
We have no
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. Subsequent to the adoption of the Liquidation Plan, we are required to estimate all costs and income we expect to incur and earn through the end of liquidation including the estimated amount of cash we expect to collect on the disposal of our assets and the estimated costs to dispose of our assets.
Investment in Unconsolidated Joint Venture
We account for our investment in unconsolidated joint venture under the equity method of accounting because we exercise significant influence over, but do not control the entity and are not considered to be the primary beneficiary.
Under liquidation accounting, the investment in the unconsolidated joint venture is recorded at its liquidation value, or net realizable value.value, comprised of an estimate of the expected sale proceeds upon disposition plus the estimated net cash flow to be
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NEW YORK REIT LIQUIDATING LLC
June 30, 2023
received from the venture during the liquidation period. We evaluate the net realizable value of our unconsolidated joint venture at each reporting period.
Recent Accounting Pronouncement
There are no new accounting pronouncements that are applicable or relevant to the Company under the liquidation basis of accounting.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2022,2023, we had $601.2 million of unconsolidated mortgage debt reflecting our pro rata share of Worldwide Plaza’s total mortgage debt of $1.2 billion. This debt consisted of fixed-rate secured mortgage notes payable. Changes in market interest rates have no impact on interest due on the notes.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
As of June 30, 20222023, an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in2022.
Other Matters
There have been no changes in our internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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NEW YORK REIT LIQUIDATING LLC
June 30, 2022
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Except as set forth below and regulatory matters containeddescribed in Note"Note 8—Commitments and ContingenciesContingencies" of our notes to the consolidated financial statements included in this Quarterly Report on Form
On December 28, 2022, the Company filed suit against WWP JV LLC captioned New York REIT Liquidating LLC v. WWP
JV LLC, (Del. Ch.). The Company is seeking declaratory relief that it may release to its unitholders a reserve of more than $90 million
(the “Reserve”) which was established in 2017 in connection with a transaction between the Company’s subsidiary, ARC NYWWPJV
001, LLC, and WWP JV LLC relating to WWP JV LLC's proposed investment in Worldwide Plaza, an office and retail mixed-use
project located in midtown Manhattan. On May 11, 2023, the Delaware Court of Chancery stayed the case pending resolution of the New York litigation initiated by the Company's subsidiary, ARCNYWWPJV001, LLC, as described below.
The Company’s subsidiary, ARC NYWWPJV001, LLC filed suit against WWP JV LLC on December 22, 2022. The suit is
captioned ARC NYWWPJV001, LLC v. WWP JV LLC, (Sup. Ct. N.Y. County), and, on February 10, 2023, the Company was
named as Counterclaim Defendant and Third-Party Defendant in such action. ARC NYWWPJV001, LLC has sought declaratory relief
that it need not fund certain disputed capital contributions exceeding $82 million under the Third Amended and Restated Limited
Liability Company Agreement of WWP Holdings, LLC (“LLC Agreement”) related to proposed capital improvements at Worldwide
Plaza, because it is ARC NYWWPJV001's position that the Initial Budget expired at year end 2018 and the subject capital improvements would require a new Annual Budget that has received Board Approval, which has not occurred. WWP JV LLC’s counterclaim against the Company seeks declaratory relief that the Company must continue to maintain the Reserve until such time as a member of WWP Holdings, LLC issues a call notice for the Reserve under the LLC Agreement (the “Counterclaim”). WWP JV LLC’s third party claims against the Company assert claims under various theories of tort and unjust enrichment and seek damages in excess of $90 million (the “Third Party Claims”). It is the Company’s and ARC NYWWPJV001’s position that the Counterclaim and Third Party Claims are without merit and fail to state any causes of action upon which relief may be granted as a matter of law and/or pursuant to the express terms of the LLC Agreement. Moreover, NYRT is not a party to the LLC Agreement.
If the Company is unsuccessful in receiving favorable declaratory judgments in the above-referenced actions or is unsuccessful
in defending the claims against it therein, the Company may be required to contribute additional capital to the joint venture. The
Company cannot predict and expresses no prediction as to the outcome of these matters. Therefore, the Company cannot estimate the
range of any reasonably possible loss.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in Part 1, Item 1A of our Annual Report on Form2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The exhibits listed on the Exhibit Index are included, or incorporated by reference, in this Quarterly Report on Form
EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form20222023 (and are numbered in accordance with Item 601 of Regulation
Exhibit No. | Description | |
31.1* | ||
32.1* | ||
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within Inline XBRL document) |
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEW YORK REIT LIQUIDATING LLC | ||
By: | /s/ John Garilli | |
John Garilli | ||
Chief Executive Officer, President, Chief Financial Officer, | ||
Treasurer and Secretary (Principal Executive Officer, | ||
Principal Financial Officer and Principal Accounting Officer) | ||
Date: August 5, 20227, 2023