American Strategic Investment - Earnings Call - Q3 2025

Executive Summary

• Q3 revenue was $12.27M, roughly flat sequentially (+0.4% QoQ) but down 20.6% YoY on prior-year asset sale; GAAP net income turned positive at $35.75M driven by a $44.27M non-cash gain tied to the consensual foreclosure of 1140 Avenue of the Americas.
• Operating metrics improved sequentially: Adjusted EBITDA rose to $1.95M (vs. $0.38M in Q2) and Cash NOI increased to $5.33M (vs. $4.20M in Q2); WALT extended to 6.2 years, though occupancy dipped to 80.9% (from 82.0%).
• Balance sheet de-risking: removal of 1140 Avenue assets/liabilities and expected elimination of a $99.0M July 2026 liability; weighted-average interest rate fell to 5.3% and total debt to $251M, from 6.4% and $350M in Q2.
• Key watch items: new loan default and acceleration notice on 400 E. 67th/200 Riverside ($50M principal, default rate +4% over 4.516%); ongoing NYSE continued listing deficiency process (market cap/equity below $50M thresholds).

What Went Well and What Went Wrong

What Went Well

• Lease execution extended WALT to 6.2 years; CEO emphasized proactive cost-rightsizing and value creation: “steps we’ve taken… position the Company to generate significant shareholder value”.
• Sequential operating improvement: Adjusted EBITDA rose to $1.95M and Cash NOI to $5.33M; interest coverage improved to 0.7x; weighted-average interest rate dropped to 5.3% post-asset removal.
• Balance sheet actions: consensual foreclosure at 1140 Avenue expected to close in Q4 2025, eliminating ~$99.0M liability; auditor change to CBIZ to reduce professional fees.

What Went Wrong

• YoY deterioration: revenue down 20.6% to $12.27M (sale of 9 Times Square), Adjusted EBITDA down to $1.95M from $4.17M, Cash NOI to $5.33M from $6.97M; occupancy fell to 80.9%.
• New credit stress: lender issued default/acceleration notice on 400 E. 67th/200 Riverside; amounts due at a default rate (max lawful or +4% over 4.516%), including $50.0M principal; outcome uncertain.
• Listing risk persists: NYSE notice of noncompliance (avg market cap ~$34.3M; equity ~$35.5M as of Q2) triggers 18-month remediation plan; potential suspension/delisting if plan rejected or milestones missed.

Transcript

Operator (participant)

Greetings and welcome to the American Strategic Investment Company's third quarter earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to Curtis Parker, Senior Vice President. Thank you, Curtis. Good to be here.

Curtis Parker (SVP)

Thank you. Hello, everyone, and thank you for joining us for our third quarter 2025 earnings call. This event is also being webcast in the investor relations section of our website. Joining me today on the call to discuss the quarter's results are Nick Schorsch, Jr., American Strategic Investment Company's Chief Executive Officer, and Michael LeSanto , the Chief Financial Officer. The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. Please review the forward-looking and cautionary statements section at the end of the third quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements.

We refer all of you to our SEC filings, including the Form 10-K filed for the year ended December 31, 2024, filed on March 19, 2025, and all subsequent SEC filings for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are only made as of the date of this call. As stated in our SEC filings, the company disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. Also, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be used in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release, which is posted on our website at www.americanstrategicinvestment.com. Please also refer to our earnings release for more detailed information about what we consider to be implied investment-grade tenants, a term we will use throughout today's call. I will now turn the call over to Nick Schorsch, Jr., Chief Executive Officer. Please go ahead, Nick.

Nick Schorsch Jr (CEO)

Thanks, Curtis. Good morning, and thank you all for joining us, and thank you for accommodating the updated timing of today's call. The additional timing ensured our newly appointed auditors, as Michael will describe in greater detail, could complete their review of our results. Our third quarter was focused on continuous proactive management of the company, with particular attention to the reduction of recurring expenses and management of our balance sheet. We remain committed to operating on unlocking value at our current assets, with a focus on tenant retention, property improvements, and cost efficiency. During the quarter, we executed a meaningful lease renewal at 196 Orchard, which extended the weighted average remaining lease term of the portfolio to 6.2 years at quarter end, up from 5.9 years at the end of the second quarter of this year.

Near-term lease expirations are 8% of annualized straight-line rent, and 56% of our leases now extend beyond 2030, up from 54% last quarter. We believe that this term, coupled with a high-quality tenant base featuring top 10 tenants who are 69% investment-grade or implied investment-grade, provides significant portfolio stability. We own six properties, with one property, 1140 Avenue Americas, expected to be disposed of during the current quarter. Excluding this property, our $390 million, approximately 743,000 sq ft New York City real estate portfolio is located primarily in Manhattan. Our office and retail properties benefit from a strong tenant base that includes large investment-grade firms. By focusing on resilient industries near transit-oriented locations, we believe the portfolio is well-positioned for occupancy growth and tenant retention.

As a key part of our strategy to unlock value, diversify our holdings, and strengthen our balance sheet, we are also continuing to market 123 Williams Street and 196 Orchard for sale. Assuming we can sell these properties on favorable terms, upon closing, we expect to use the net proceeds to retire debt and reinvest in higher-yielding assets to enhance our long-term portfolio value. In September, we entered into an agreement for the strategic disposition of 1140 Avenue Americas via a cooperative consensual foreclosure with the lender, which is anticipated to close in the fourth quarter of 2025. Upon completion, this transaction is expected to eliminate a $99 million liability that matures in July 2026. This transaction is consistent with our strategy to proactively manage our balance sheet and allocate capital toward what we believe are the highest returns.

In making this decision, we consider the significant ongoing and upfront expenses needed to operate the property and to retain and attract new tenants, compared to the capital being invested toward other assets in the portfolio. With that, I'll turn it over to Michael LeSanto to go over the third quarter results. Michael.

Michael LeSanto (CFO)

Thank you, Nick. Third quarter 2025 revenue was $12.3 million compared to $15.4 million in the third quarter of 2024, principally due to the sale of 9 Times Square in the fourth quarter of 2024. The company's GAAP net gain attributable to common stockholders was $35.8 million in the third quarter of 2025, impacted by a $44.3 million non-cash gain related to the foreclosure at 1140 Avenue of the Americas. This is compared to a net loss of $34.5 million in the third quarter of 2024, which was impacted by an impairment recorded in the quarter related to the sale of 9 Times Square. For the third quarter of 2025, adjusted EBITDA was $1.9 million, compared to $4.1 million in the third quarter of 2024. Cash net operating income was $5.3 million, compared to $7 million in the third quarter of 2024.

As always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release and quarterly supplemental on our website. We also proactively and significantly reduced our professional fees by electing to change our audit partners via the engagement of CBIZ CPAs as our new independent registered public accounting firm for the fiscal year ending December 31st, 2025, beginning with the review of our unaudited results for the third quarter of 2025. The decision to change the company's independent registered accountants was the result of a competitive bid process, as well as the company's focus on streamlining its cost structure and reducing its general and administrative expenses. There was no dispute or conflict with the prior firm. We look forward to a long and productive relationship with CBIZ CPAs in the future. I'll now turn the call back to Nick for some closing remarks.

Nick Schorsch Jr (CEO)

Thank you, Michael. As we prepare to close out this year, we continue to focus on enhancing operational flexibility through the consensual foreclosure of 1140 Avenue Americas and our ongoing efforts to sell 123 Williams Street and 196 Orchard. We believe these sales will generate cash on the balance sheet that can be deployed into higher-yielding assets, creating future value for the portfolio. Simultaneously, our team is focused on leasing up available space, renewing leases with existing tenants, and maintaining tight controls on expenses across the board. Thank you for joining us today, and we look forward to presenting our full year 2025 results for you in a few months.

Operator (participant)

Thank you. With that, ladies and gentlemen, we thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful evening.