American Strategic Investment - Earnings Call - Q4 2024

Executive Summary

• Q4 revenue declined to $14.9M (vs $15.4M Q4’23 and $15.4M Q3’24) as the company completed the sale of 9 Times Square; net loss narrowed sharply to $(6.7)M (EPS $(2.60)) from $(73.9)M (EPS $(32.27)) YoY, reflecting the absence of large impairment charges seen in prior periods.
• Cash NOI was resilient at $6.4M (vs $6.3M in Q4’23) despite lower revenue, but Adjusted EBITDA fell sequentially to $1.3M from $3.1M in Q3 and $4.5M in Q2, driven by lower revenue post-asset sale and higher G&A ($2.69M vs $1.76M in Q3).
• Balance sheet positioned defensively: 100% fixed-rate debt, 4.4% weighted-average interest rate and 3.6-year weighted-average maturity; net debt to gross asset value 56.9% at year-end.
• Strategic catalysts: sale of 9 Times Square closed; 123 William Street and 196 Orchard re-marketed; CEO transition announced March 7 with Nick Schorsch Jr. appointed CEO—execution on dispositions and leasing pipeline are likely stock drivers near term.

What Went Well and What Went Wrong

• What Went Well
  • Disposition execution: closed sale of 9 Times Square for $63.5M, improving leverage and adding ~$13.5M of net cash proceeds; relaunching processes for 123 William and 196 Orchard to advance diversification strategy.
  • Cash NOI growth YoY: Q4 Cash NOI of $6.4M vs $6.3M in Q4’23; full-year Cash NOI also grew to $27.6M (vs $27.3M in 2023).
  • Debt profile de-risked: 100% fixed-rate debt, lower weighted-average interest rate (4.4%) and longer maturity (3.6 years) at year-end versus prior quarters.
• What Went Wrong
  • Sequential earnings pressure: Adjusted EBITDA dropped to $1.25M in Q4 from $3.10M in Q3 and $4.48M in Q2; G&A rose to $2.69M (vs $1.76M Q3), while revenue decreased post-asset sale.
  • Occupancy step down: leased/occupancy fell to 80.8% at FY-end (85.8% in Q3; 85.9% in Q2), reflecting portfolio changes and vacancies.
  • No quantitative guidance provided: investors lack explicit near-term revenue/EBITDA/occupancy targets; listing compliance and macro risks continue to be cited in filings.

Transcript

Operator (participant)

Good morning and welcome to the American Strategic Investment Co.'s fourth quarter and year-end 2024 earnings call. All lines have been placed on mute to prevent any background noise. I would now like to turn the conference over to Curtis Parker, Senior Vice President. Please go ahead.

Curtis Parker (VP of Investor Relations)

Thank you, Operator. Good morning, everyone, and thank you for joining us for ASIC's fourth quarter and year-end 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 Michael Anderson, American Strategic Investment Company's Chief Executive Officer, and Mike 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 our fourth quarter 2024 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, to be filed March 19, 2025, for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this call are only made as of the date of this call. As stated in our SEC filings, American Strategic Investment Co. disclaims any intent or obligation to update or revise these forward-looking statements except as required to do so by law. Please note that all fourth quarter 2024 financial information is unaudited. Also, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial and operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release, which is posted on our website. 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'll now turn the call over to Michael Anderson, Chief Executive Officer. Please go ahead, Michael.

Michael Anderson (SVP General Counsel and Secretary)

Thanks, Curtis. Good morning and thank you for joining us. Today we will discuss the results for the fourth quarter and full year 2024. As part of our ongoing diversification strategy, as previously communicated, we completed the disposition of Nine Times Square for $63.5 million. The sale of this property improved the leverage on our balance sheet and generated net proceeds of approximately $13.5 million, strengthening our cash position. We've also relaunched the marketing efforts to sell 123 William Street and 196 Orchard as we continue to pursue our strategy of diversifying beyond real estate in Manhattan through the strategic sale of properties and the acquisition of higher-yielding assets. Our existing portfolio consists of six real estate assets throughout New York City, primarily in Manhattan. At year-end, our $470.8 million, one million sq ft portfolio had occupancy of 80.8% and a weighted average remaining lease term of 6.3 years.

Our New York City-centric portfolio features a mix of large investment-grade tenants, of whom the top 10 tenants are 77% investment-grade or implied investment-grade based on straight-line rent, with a weighted average remaining lease term of eight years. Investment-grade tenants in our portfolio include City National Bank, CVS, and government agencies. We also continue to focus our leasing efforts on securing tenants in resilient industries such as well-capitalized financial services companies and medical institutions. Our core office properties are located in sub-markets with close proximity to major transportation hubs. Our asset management team continues to drive our leasing efforts. To that point, by leveraging relationships with existing tenants and the brokerage community, they're able to secure five new leases totaling over 37,000 sq ft and $2 million of straight-line rent during 2024.

As we look ahead, we are proactively building a pipeline of new and renewal leases to increase occupancy in our portfolio. We remain committed to strengthening our existing portfolio of real estate assets as we explore additional income-generating investments. We believe with the completion of past sales and the reinvigorated effort to sell two additional properties, we will be better positioned to take advantage of opportunities to invest in the long-term future of our portfolio. It is our intention to build a portfolio that we believe will be accretive to shareholders. With that, I'll turn it over to Mike LeSanto to go over the fourth quarter and full year 2024 results. Mike.

Michael LeSanto (CFO)

Thanks, Michael. Revenue was $61.6 million for the year ended December 31, 2024, compared to $62.7 million in 2023. Revenue for the fourth quarter 2024 was $14.9 million compared to $15.4 million in the fourth quarter of 2023. The company's full year GAAP net loss attributable to common stockholders was $140.6 million compared to a net loss of $105.9 million in 2023. Net loss for the quarter was $6.7 million compared to $73.9 million for the fourth quarter in 2023. Adjusted EBITDA for 2024 was $11.9 million and was $1.3 million for the fourth quarter. We made good progress improving cash NOI, which for the full year was $27.6 million compared to $27.3 million in 2023, and which was $6.4 million in the fourth quarter compared to $6.3 million in the fourth quarter of 2023.

As always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, supplemental, and Form 10-K. The company maintains a relatively conservative balance sheet with 100% fixed-rate debt and prudent net leverage of 56.9%. We ended the fourth quarter with net debt of $340.2 million at a weighted average effective interest rate of 4.4% and a weighted average remaining debt term of 3.6 years. Importantly, all of our debt is fixed-rate or swapped to fixed-rate after we locked in interest rates while they were broadly at historic lows. With that, I'll turn the call back to Michael for some closing remarks.

Michael Anderson (SVP General Counsel and Secretary)

Great. Thank you, Mike. One final note. On March 7, we announced that I would be resigning my position as CEO of ASIC. As such, this will be the last time I get to discuss the company's results with you. I'd like to thank you for your insight, support, and ownership of ASIC over the years, and I take great comfort leaving the company in the hands of Nick Schorsch, Jr., who was recently approved by the board to the position of CEO. Nick has been a longtime employee of our advisor, AR Global, starting in 2011, and has ably fulfilled numerous roles during his tenure here. I believe I speak for the leadership team when I say that we are excited about the opportunities ahead of us for the company to unlock future value for our shareholders. Thank you for joining us today.

Operator (participant)

That will conclude today's call. Thank you all for joining. You may now disconnect.