UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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 Number
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
Incorporation or Organization) |
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(Address of Principal Executive Offices) | (Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ◻ | Accelerated Filer ☐ | |||
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 Rule 12b-2 of the Exchange Act). Yes
No ⌧
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ⌧ No ◻
As of August 14, 2024, there were
INDEX
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| PAGE NO. |
3 | ||
3 | ||
Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 | 3 | |
4 | ||
5 | ||
7 | ||
8 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
37 | ||
37 | ||
38 | ||
38 | ||
38 | ||
39 | ||
39 | ||
39 | ||
39 | ||
40 |
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except par value and share amounts)
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
ASSETS |
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Real estate, net | $ | — | $ | | ||
Residential condominium units for sale | — |
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Cash and cash equivalents |
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Restricted cash |
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Prepaid expenses and other assets, net |
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Pension asset | |
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Investment in unconsolidated joint venture |
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Receivables |
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Deferred rents receivable | — |
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Right-of-use asset |
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Intangible assets, net |
| — |
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Total assets | $ | | $ | | ||
LIABILITIES |
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Loans payable, net | $ | — | $ | | ||
Corporate credit facility, net | — | | ||||
Secured line of credit |
| — |
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Accounts payable and accrued expenses |
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Accrued professional fees | | | ||||
Lease liability | | | ||||
Total liabilities |
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Commitments and Contingencies |
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STOCKHOLDERS’ (DEFICIT) EQUITY |
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Preferred stock, $ |
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Preferred stock, $ |
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Special stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock ( |
| ( |
| ( | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ equity (deficit) |
| |
| ( | ||
Total liabilities and stockholders’ equity (deficit) | $ | | $ | | ||
See Notes to Consolidated Financial Statements
3
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (unaudited)
(In thousands, except per share amounts)
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | June 30, | June 30, | ||||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | |||||||
Revenues |
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Rental revenues | $ | — | $ | | $ | | $ | | |||||
Other income | | | | | |||||||||
Sales of residential condominium units | — | | | | |||||||||
Total revenues |
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Operating Expenses |
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Property operating expenses |
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Real estate taxes |
| — |
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General and administrative |
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Pension related costs | | | | | |||||||||
Cost of sales - residential condominium units | — | | | | |||||||||
Transaction related costs |
| — |
| — |
| — |
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Depreciation and amortization |
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Total operating expenses |
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Operating loss | ( | ( | ( | ( | |||||||||
Gain on contribution to joint venture | — | — | | — | |||||||||
Equity in net loss from unconsolidated joint ventures |
| — |
| — |
| ( |
| ( | |||||
Equity in net gain on sale of unconsolidated joint venture property | — |
| |
| — |
| | ||||||
Unrealized (loss) gain on warrants | — | ( | — | | |||||||||
Interest expense, net |
| — |
| ( |
| ( |
| ( | |||||
Interest expense - amortization of deferred finance costs |
| — |
| ( |
| ( |
| ( | |||||
(Loss) income before taxes |
| ( |
| ( |
| |
| ( | |||||
Tax expense |
| ( |
| ( |
| ( |
| ( | |||||
Net (loss) income attributable to common stockholders | $ | ( | $ | ( | $ | | $ | ( | |||||
Other comprehensive income: |
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Unrealized gain on pension liability |
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Comprehensive (loss) income attributable to common stockholders | $ | ( | $ | ( | $ | | $ | ( | |||||
(Loss) income per share - basic and diluted | $ | ( | $ | ( | $ | | $ | ( | |||||
Weighted average number of common shares - basic and diluted |
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| |
See Notes to Consolidated Financial Statements
4
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands)
FOR THE THREE MONTHS ENDED JUNE 30, 2024 | ||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | ||||||||||||||||||
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | |||||||
Balance as of March 31, 2024 | (as revised) | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | | ||||||
Net loss attributable to common stockholders |
| — | — | — |
| — | — | ( | — |
| ( | |||||||||||
Sale of common stock |
| | | ( |
| | | | |
| ( | |||||||||||
Settlement of stock awards |
| | | — |
| — | — | — | — |
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Unrealized gain on pension liability | — | — | — |
| — | — | — | |
| | ||||||||||||
Stock-based compensation | — | — | |
| — | — | — | — |
| | ||||||||||||
Balance as of June 30, 2024 |
| | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
FOR THE SIX MONTHS ENDED JUNE 30, 2024 | ||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | ||||||||||||||||||
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | |||||||
Balance as of December 31, 2023 | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
Net income attributable to common stockholders | — | — | — |
| — | — | | — |
| | ||||||||||||
Sale of common stock |
| | | |
| — | — | — | — |
| | |||||||||||
Settlement of stock awards | | | — |
| ( | ( | — | — |
| ( | ||||||||||||
Unrealized gain on pension liability | — | — | — |
| — | — | — | |
| | ||||||||||||
Stock-based compensation | — | — | |
| — | — | — | — |
| | ||||||||||||
Balance as of June 30, 2024 | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
5
FOR THE THREE MONTHS ENDED JUNE 30, 2023 | ||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | ||||||||||||||||||
Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | ||||||||
Balance as of March 31, 2023 | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | | |||||||
Net loss attributable to common stockholders | — | — | — |
| — | — | ( | — | ( | |||||||||||||
Settlement of warrants | | | ( |
| — | — | — | — | | |||||||||||||
Settlement of stock awards | | | — |
| ( | ( | — | — | ( | |||||||||||||
Unrealized gain on pension liability | — | — | — |
| — | — | — | | | |||||||||||||
Stock-based compensation | — | — | |
| — | — | — | — | | |||||||||||||
Balance as of June 30, 2023 | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
FOR THE SIX MONTHS ENDED JUNE 30, 2023 | ||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | ||||||||||||||||||
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Deficit |
| Loss |
| Total | |||||||
Balance as of December 31, 2022 | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | | |||||||
Net loss attributable to common stockholders | — | — | — |
| — | — | ( | — | ( | |||||||||||||
Settlement of warrants | | | ( |
| — | — | — | — | | |||||||||||||
Settlement of stock awards | | | — |
| ( | ( | — | — | ( | |||||||||||||
Unrealized gain on pension liability | — | — | — |
| — | — | — | | | |||||||||||||
Stock-based compensation | — | — | |
| — | — | — | — | | |||||||||||||
Balance as of June 30, 2023 | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
See Notes to Consolidated Financial Statements
6
TRINITY PLACE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
For the | For the | |||||
Six Months Ended | Six Months Ended | |||||
June 30, | June 30, | |||||
| 2024 |
| 2023 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) attributable to common stockholders | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) attributable to common stockholders to net cash (used in) provided by operating activities: |
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Depreciation and amortization and amortization of deferred finance costs |
| | | |||
Other non-cash adjustment - paid-in-kind interest | | ( | ||||
Stock-based compensation expense |
| | | |||
Gain on sale of joint venture real estate | — | ( | ||||
Gain on contribution to joint venture | ( | — | ||||
Deferred rents receivable |
| | ( | |||
Other non-cash adjustments - pension expense |
| | | |||
Unrealized gain on warrants | — | ( | ||||
Equity in net loss from unconsolidated joint ventures |
| | | |||
Decrease (increase) in operating assets: |
| |||||
Residential condominium units for sale |
| | | |||
Receivables |
| ( | | |||
Prepaid expenses and other assets, net |
| | | |||
(Decrease) increase in operating liabilities: |
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Accounts payable and accrued expenses |
| ( | | |||
Net cash (used in) provided by operating activities |
| ( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to real estate |
| — | ( | |||
Transfer of restricted cash |
| ( | — | |||
Net proceeds from sale of unconsolidated joint venture | — | | ||||
Net cash (used in) provided by investing activities |
| ( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from loans and corporate credit facility | | | ||||
Proceeds from secured line of credit |
| — | | |||
Repayment of loans and corporate credit facility | — | ( | ||||
Repayment of note payable | — | ( | ||||
Settlement of stock awards |
| ( | ( | |||
Transfer of restricted cash |
| — | | |||
Sale of common stock, net | | — | ||||
Net cash provided by (used in) financing activities |
| |
| ( | ||
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
| ( |
| ( | ||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
| |
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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | | $ | | ||
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD | $ | | $ | | ||
RESTRICTED CASH, BEGINNING OF PERIOD |
| |
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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | $ | | $ | | ||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | | $ | | ||
RESTRICTED CASH, END OF PERIOD |
| |
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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | | $ | | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid during the period for: Interest | $ | | $ | | ||
Cash paid during the period for: Taxes | $ | | $ | | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Capitalized amortization of deferred financing costs and warrants | $ | — | $ | | ||
Capitalized stock-based compensation expense | $ | — | $ | | ||
Transfer of real estate and condominium assets | $ | | $ | — | ||
Transfer of loans, credit facility and line of credit | $ | ( | $ | — | ||
Transfer of operating assets and liabilities, net | $ | ( | $ | — |
See Notes to Consolidated Financial Statements
7
Trinity Place Holdings Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
June 30, 2024
Note 1 – Business
Overview
Trinity Place Holdings Inc., which we refer to in these financial statements as “Trinity,” “we,” “our,” or “us”, is a real estate holding, investment, development and asset management company. As part of a series of transactions described below, on February 14, 2024, TPHGreenwich Holdings LLC (“TPHGreenwich”), a previously 100% owned subsidiary of ours, became owned
We also control a variety of intellectual property assets focused on the consumer sector, a legacy of our predecessor, Syms Corp. (“Syms”), including FilenesBasement.com, our rights to the Stanley Blacker® brand, as well as the intellectual property associated with the Running of the Brides® event and An Educated Consumer is Our Best Customer® slogan. In addition, we also had approximately $
Recapitalization Transactions
On February 14, 2024, we consummated the transactions contemplated by the Stock Purchase Agreement, dated as of January 5, 2024 (as amended, the “Stock Purchase Agreement”), between the Company, TPHS Lender LLC, the lender under the Company’s Corporate Credit Facility (the “Company Investor”) and TPHS Investor LLC, an affiliate of the Company Investor (the “JV Investor”, and together with the Company Investor, the “Investor”), pursuant to which (i) the Company Investor purchased
Under the Recapitalization Transactions, the real estate assets and related liabilities as well as the Corporate Credit Facility became part of TPHGreenwich, with the Company retaining the substantial federal, state and local tax NOLs and other tax loss carry forwards, intellectual property and a
Joint Venture Agreement
At the closing of the Recapitalization Transactions, the Company and the JV Investor entered into the JV Operating Agreement, with the Company owning
8
TPHGreenwich debt financing provided by Investor or its affiliate, (x) Investor’s initial capital contribution, and (y) any additional capital contributions made by Investor), then distributed pro rata pursuant to the members’ respective percentage interests in TPHGreenwich. If TPH Manager is terminated for “Cause” under the Asset Management Agreement, as described below, at the option of Investor, the Company’s right to distributions from TPHGreenwich will be forfeited and any distribution that would otherwise have been made to the Company will instead be distributed to the JV Investor.
JV Investor, in its capacity as manager of TPHGreenwich, will manage, control and conduct the affairs of TPHGreenwich, subject only to certain major decisions set forth in the JV Operating Agreement. Major decisions are (1) entering into any transaction with or for the benefit of Investor or its affiliate, other than any transaction involving Investor or its affiliate providing debt and/or equity to the Company as set forth in the JV Operating Agreement or any arms-length transaction, (2) any amendment or modification of the JV Operating Agreement or any operating agreement of a subsidiary company of TPHGreenwich, or any other agreement with the Company or a subsidiary company of TPHGreenwich if such amendment would materially adversely affect the rights or obligations of the Company in a manner that is disproportionate to the JV Investor, (3) any tax or accounting matter decision relating to net operating losses that would be materially adverse to the Company but not the JV Investor, and (4) the admission of any other member to TPHGreenwich or its subsidiary except as permitted under the JV Operating Agreement.
Under the JV Operating Agreement, the Company will retain oversight of the Paramus Property and will have the sole and exclusive right to manage and make decisions regarding the Paramus Property, subject to (i) the Company Investor’s right to approve any purchase and sale agreement for the Paramus Property that may be entered into in accordance with the terms and conditions of the Stock Purchase Agreement; (ii) the JV Investor’s right to approve any material modifications of such purchase and sale agreement for the Paramus Property, and (iii) the JV Investor’s right to approve any dissolution of the owner of the Paramus Property.
The Company’s liability under any cause of action arising from or in connection with the JV Operating Agreement is limited to its interest in TPHGreenwich, other than with respect to certain Company guaranty liabilities related to (a) any loss or expense incurred by the JV Investor under any non-recourse carveout guaranty or environmental indemnity to a third-party lender, or (b) indemnification and reimbursement from the Company if the JV Investor makes a payment to a third party lender pursuant to a guaranty (other than a non-recourse carve out guaranty or environmental indemnity), in each case, to the extent such loss, expense or payment was caused solely by, or required solely as a result of, the acts or omissions of the Company or the TPH Manager without the prior written consent of the JV Investor.
Asset Management Agreement
At the closing of the Recapitalization Transactions, the TPH Manager entered into the Asset Management Agreement with TPHGreenwich. The Asset Management Agreement provides that the TPH Manager agrees to provide certain services in connection with the construction (with respect to 77 Greenwich), management, operation, supervision and maintenance of 77 Greenwich and 237 11th. To compensate TPH Manager for such services, TPHGreenwich will pay an annual management fee to TPH Manager equal to the greater of (x) $
The Asset Management Agreement will continue until the earlier to occur of (a) both consummation of a sale, transfer, conveyance or other disposition of 77 Greenwich and 237 11th and the final resolution of the 237 11th litigation, or (b) the earlier termination of the Asset Management Agreement pursuant to its terms. TPHGreenwich has the right to terminate the Asset Management Agreement at any time with or without cause, provided that if the TPH Manager is terminated without cause prior to the
As described above, if TPH Manager is terminated for “Cause” under the Asset Management Agreement, at the option of Investor, the Company’s right to distributions from TPHGreenwich will be forfeited and any distribution that would otherwise have been made to the Company will instead be distributed to the JV Investor. The term “Cause” means (a) the Company ceasing to be a member under the JV Operating Agreement, (b) TPH Manager transfers its rights or obligations under the Asset Management Agreement in violation of the terms therein, (c) TPH Manager files or consents to a petition
9
in bankruptcy, (d) TPH Manager, any Key Manager Employee (defined below) or any affiliate is convicted of fraud or is determined by a court of competent jurisdiction pursuant to a final judgment to have committed an act of fraud, (e) any misappropriation, gross negligence or willful misconduct by TPH Manager, any Key Manager Employee or any affiliate of the foregoing (which is curable one time during the term of the Asset Management Agreement if committed by a non-senior level employee), (f) any of the Company, TPH Manager or any Key Manager Employee is convicted of a felony crime or crime of moral turpitude, (g) any representation or warranty made by TPH Manager under the Asset Management Agreement is untrue in any material respect and remains uncured after notice from TPHGreenwich, (h) a material breach by TPH Manager of the terms of the Asset Management Agreement (other than as set forth above in this definition) which breach has a material adverse effect on TPHGreenwich and remains uncured after notice from TPHGreenwich, or (i) the breach or failure to comply by TPHGreenwich or any subsidiary with any loan documents (other than, in the case of loan documents in which an affiliate of JV Investor is a lender, with respect to any key person provisions relating to Mr. Messinger, our chief executive officer, or a replacement) in the event such breach or failure is caused by the actions of TPH Manager, Key Manager Employee or any affiliate and continues after the giving of any required notice and the expiration of any applicable cure period under such loan documents, and which is not the subject of a forbearance or waiver from such lender. Under the Asset Management Agreement, “Key Manager Employee” means Mr. Messinger or a replacement officer or employee of TPH Manager with reasonably equivalent skills and abilities (as determined by the JV Investor on behalf of TPHGreenwich in its reasonable discretion).
In the event Mr. Messinger fails to be involved in the day-to-day operations of the TPH Manager pursuant to the Asset Management Agreement, TPHGreenwich agrees its sole and exclusive remedy will be to terminate TPH Manager without cause on
On April 26, 2024, the Company and Mr. Messinger entered into an amendment (the “Amendment”) to Mr. Messinger’s employment agreement, dated as of October 1, 2013, as amended (the “Employment Agreement”), and TPHGreenwich and Mr. Messinger entered into a consulting agreement (the “Consulting Agreement”). Under the Amendment, the Company agreed to make the following payments to Mr. Messinger in exchange for Mr. Messinger’s agreement to continue his employment as chief executive officer of the Company until the later of July 31, 2024 or the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, unless extended by the parties (the “Termination Date”), and that he will no longer have the right to terminate the Employment Agreement with Good Reason: (i) $
Under the terms of the Amendment, for so long as Mr. Messinger is not in breach of the Amendment or the Consulting Agreement, to the extent that a seat on the Company’s board of directors is then available, until June 30, 2026, the Company Investor will exercise its vote as shareholder in favor of electing Mr. Messinger to the Company’s board of directors, in addition to its existing board appointment rights.
Upon the Termination Date, the Consulting Agreement will automatically become effective, unless the Employment Agreement is otherwise terminated in accordance with its terms. Under the Consulting Agreement, Mr. Messinger has agreed to provide certain consulting services as an independent contractor to TPHGreenwich related to the properties owned by TPHGreenwich, in exchange for certain consulting payments as follows: upon the earlier to occur of June 1, 2026 and (i) the sale of the Company’s Paramus property, $
10
Liquidity and Going Concern; Management’s Plans and Objectives
Following the Recapitalization Transactions, our primary business is owning approximately $
With the Company now unencumbered by its real estate and related liabilities, we continue to focus on exploring a range of strategic and financing alternatives to maximize stockholder value and to engage with parties that have expressed interest in the Company’s attributes and assets and may see the Company as a potential vehicle for growth, with potential opportunities to recapitalize the Company at a lower cost of capital. The Company engaged Houlihan Lokey and Ackman-Ziff to act as advisors (the “Advisors”) in connection with our strategic review process and to assist us in identifying and evaluating potential alternatives, including among others securing an equity and/or debt financing of the Company, refinancing of existing debt, and/or a sale or merger or reverse merger of the Company. There is no assurance that we will be successful in consummating any such strategic transaction on terms or a timeframe acceptable to us or at all.
The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to our ability to continue as a going concern.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our financial statements and the financial statements of our wholly-owned subsidiaries.
The accompanying unaudited consolidated interim financial information also conform to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Management believes that the disclosures presented in these unaudited consolidated financial statements are adequate to make the information presented not misleading. In management’s opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited consolidated interim financial information should be read in conjunction with our December 31, 2023 audited consolidated financial statements filed on Form 10-K (as amended, the “2023 Annual Report”).
a. Principles of Consolidation - The consolidated financial statements include our accounts and those of our subsidiaries which are or were wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. Accordingly, our share of the earnings or losses of our unconsolidated joint ventures, namely TPHGreenwich, which began on February 14, 2024, and 250 North 10th, which was sold in February 2023, are included in our consolidated statements of operations and comprehensive (loss) income (see Note 3 – Investments in Unconsolidated Joint Ventures for further information). All significant intercompany balances and transactions have been eliminated.
We are required to consolidate a variable interest entity (the “VIE”) in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
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b. | Investments in Unconsolidated Joint Ventures - We accounted for our investments in unconsolidated joint ventures, namely, 250 North 10th, which was sold in February 2023, and TPHGreenwich under the equity method of accounting (see Note 3 - Investments in Unconsolidated Joint Ventures for further information). |
Under the equity method, investments in real estate ventures are recorded initially at the fair value of the assets contributed and subsequently adjusted for equity in earnings, contributions, distributions, and impairments. The Company generally allocates income and losses from the unconsolidated real estate ventures based on the venture's distribution priorities, which may be different from its stated ownership percentage.
We are applying the hypothetical-liquidation-at-book-value (“HLBV”) method to account for our investment in the TPHGreenwich given the non-pro rata distribution provision in the JV Operating Agreement in favor of Investor. As such, we will not recognize losses from the joint venture in excess of our investment basis. Our investment in this joint venture is
At least quarterly, management assesses whether there are any other than temporary impairment indicators of the Company’s investments in real estate ventures. If any indicators of impairment are present, we calculate the fair value of the investment in the unconsolidated real estate venture. An investment is other than temporarily impaired only if the fair value of the investment in a real estate venture, as estimated by management, is less than the carrying value and the decline is other than temporary. To the extent that an other than temporary impairment has occurred, an impairment charge is recorded in the amount of the excess of the carrying amount of the investment over the estimated fair value. Management is required to make significant judgments about the estimated fair value of its investments to determine if an impairment exists. Fair value is generally determined through income valuation approaches, including discounted cash flows and direct capitalization models or a sales comparison approach.
When the Company acquires an interest in or contributes assets to a real estate venture project, the difference between the Company’s cost basis in the investment and the value of the real estate venture or asset contributed is amortized over the life of the related assets, intangibles, and liabilities and such adjustment is included in the Company’s share of equity in income of unconsolidated real estate ventures.
In connection with the Recapitalization Transaction, all assets and liabilities contributed to TPHGreenwich were transferred at fair value. This resulted in a gain on contribution to joint venture of approximately $
c. Use of Estimates - The preparation of financial statements in conformity with GAAP 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 reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
d. Reportable Segments - We operate in
e. Concentrations of Credit Risk - Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. We hold substantially all of our cash and cash equivalents in banks. Such cash balances at times exceed federally insured limits.
f. | Fair Value Measurements - We determine fair value in accordance with Accounting Standards Codification (“ASC”)-820, “Fair Value Measurement,” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. |
Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.
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Hierarchical levels, which are defined by ASC-820-10-35, are directly related to the amount of subjectivity associated with the inputs to the fair valuation of these assets and liabilities. Determining which category an asset or liability falls within the hierarchy requires significant judgment and we evaluate our hierarchy disclosures each quarter.
Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Valuations based on unobservable inputs reflecting management’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
g. Cash and Cash Equivalents - Cash and cash equivalents include securities with original maturities of three months or less when purchased.
h. Restricted Cash - Restricted cash represents amounts required to be restricted under our stock purchase agreement.
i. | Revenue Recognition – We earn a management fee in accordance with the asset Management Agreement. These fees are recognized in earnings over time in accordance with ASC-606. |
j. | Stock-Based Compensation – We have granted stock-based compensation, which is described below in Note 14 – Stock-Based Compensation. Stock-based compensation cost is measured at the grant date, based on the fair value of the award on that date, and is expensed at the grant date (for the portion that vests immediately) or ratably over the related vesting periods. Shares that are forfeited are added back into the pool of shares available under the Stock Incentive Plan, and any recorded expense related to forfeited shares are reversed in the year of forfeiture. |
k. | Income Taxes - We account for income taxes under the asset and liability method as required by the provisions of ASC-740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not. |
ASC-740-10-65 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC-740-10-65, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC-740-10-65 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and increased other disclosures. As of both June 30, 2024 and December 31, 2023, we had determined that
We are subject to certain federal, state and local income and franchise taxes.
l. Earnings (loss) Per Share - We present both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower per share amount. There were no shares issuable at June 30, 2024 that had vested but not yet settled that were excluded from the
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computation of diluted loss per share because the awards would have been antidilutive for the three and six months ended June 30, 2024. Shares issuable at June 30, 2023 comprising
Any references to square footage, property count or occupancy percentages, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review.
Note 3 – Investments in Unconsolidated Joint Ventures
Prior to February 2023, we owned a
Under the Recapitalization Transactions which closed on February 14, 2024, the real estate assets, encompassing 77 Greenwich, 237 11th and Paramus, and related liabilities as well as the Corporate Credit Facility became part of TPHGreenwich. In addition, the maturity date of each of the 77G Mortgage Loan and the 77G Mezzanine Loan for 77 Greenwich was extended to October 23, 2025 with an option to extend for an additional year, and the maturity date of the Corporate Credit Facility was extended to June 30, 2026.
The following table provides a summary of the loans held by TPHGreenwich as of June 30, 2024 (in thousands):
Loan Name | Encumbered Asset | Initial | Effective Rate at June 30, 2024 | Balance at | |||||
Corporate Credit Facility | N/A | July 2026 | | % | $ | | |||
77G Mortgage Loan | 77 Greenwich | October 2025 | | % | $ | | |||
77G Mezzanine Loan | 77 Greenwich | October 2025 | | % | $ | | |||
237 11th | 237 11th | January 2025 | | % | $ | | |||
Secured Line of Credit | Paramus, NJ | October 2024 | | % | $ | |
The following table summarizes TPHGreenwich’s hedging instruments, all of which hedge variable rate debt, as of June 30, 2024 (in thousands):
Fair Value Asset as of June 30, | Notional | All-In | Interest Rate | |||||||
| 2024 |
| Amount |
| Rate |
| Date | |||
Interest Rate Caps: | ||||||||||
77G Mortgage Loan | $ | | $ | | | % | 2/15/2025 | |||
237 11th Loans | | $ | | | % | 7/9/2024 | ||||
237 11th Loans | — | $ | | | % | 1/9/2025 | ||||
$ | |
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As we did not control the 250 North 10th JV, and do not control TPHGreenwich, we accounted for the joint venture under the equity method of accounting.
June 30, | |||
2024 | |||
ASSETS |
| ||
Real estate, net | $ | | |
Residential condominium units for sale | | ||
Cash and cash equivalents |
| | |
Restricted cash |
| | |
Tenant and other receivables, net |
| | |
Prepaid expenses and other assets, net |
| | |
Intangible assets, net |
| | |
Total assets | $ | | |
LIABILITIES |
|
| |
Loans Payable, net | $ | | |
Corporate credit facility, net | | ||
Secured line of credit | | ||
Accounts payable and accrued expenses |
| | |
Total liabilities |
| | |
MEMBERS’ EQUITY |
|
| |
Members’ equity |
| | |
Accumulated deficit |
| ( | |
Total members’ deficit |
| ( | |
Total liabilities and members’ deficit | $ | |
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The statements of operations for the unconsolidated joint ventures reflect the operations of 250 N 10th from January 1, 2023 through the date of sale in February 2023 and TPHGreenwich from February 14, 2024 through June 30, 2024, are as follows (in thousands):
For the Three Months Ended | For the Three Months Ended | For the Six Months Ended | For the Six Months Ended | |||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Revenues |
|
|
|
|
|
|
|
| ||||
Rental revenues | $ | | $ | — | $ | | $ | | ||||
Other income | | — | | — | ||||||||
Sales of residential condominium units | | — | | — | ||||||||
Total revenues |
| |
| — |
| |
| | ||||
Operating Expenses |
|
|
|
|
|
|
|
| ||||
Property operating expenses |
| |
| — |
| |
| | ||||
Real estate taxes |
| |
| — |
| |
| | ||||
General and administrative |
| |
| — |
| |
| — | ||||
Cost of sales - residential condominium units | |
| — |
| |
| — | |||||
Transaction related costs | |
| — |
| |
| — | |||||
Amortization |
| |
| — |
| |
| | ||||
Depreciation |
| |
| — |
| |
| | ||||
Total operating expenses |
| |
| — |
| |
| | ||||
Operating (loss) income |
| ( |
| — |
| ( |
| | ||||
Interest expense |
| ( |
| — |
| ( |
| ( | ||||
Interest expense - amortization of deferred finance costs |
| — |
| — |
| ( |
| ( | ||||
Interest income - change in fair market value of interest rate swap |
| |
| — |
| |
| — | ||||
Net loss | $ | ( | $ | — | $ | ( | $ | ( | ||||
Our equity in net loss from unconsolidated joint ventures | $ | — | $ | — | $ | ( | $ | — |
Note 4 – Revision of Previously Issued Consolidated Financial Statements
The Company identified an error in its previously issued interim financial statements as of and for the three months ended March 31, 2024 that was determined individually, and in the aggregate, quantitatively and qualitatively immaterial. As such, the Company has revised its interim financial statements for the three months ended March 31, 2024, as illustrated in this Note 4, referred to as the "Revision”. No other periods were impacted by this immaterial error.
In conjunction with the Recapitalization Transactions during February 2024, as discussed above, the Company recorded an equity method investment in TPHGreenwich. During the three months ended March 31, 2024, the Company previously recorded losses from TPHGreenwich in excess of our investment in the joint venture totaling $
Given the non-pro rata distribution provision in the JV Operating Agreement in favor of the Investor, the HLBV method should have been applied to our investment in TPHGreenwich. As a result, losses from the joint venture in excess of our investment basis should not have been recognized. The previously recorded losses in excess of our basis in TPHGreenwhich have been revised, resulting in an investment in the joint venture of
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The impact of the Revision on the Company’s consolidated financial statements as of and for the three months ended March 31, 2024 are reflected below (dollars in thousands):
As Previously | Revision | ||||||||
| Reported |
| Impact |
| As Revised | ||||
Consolidated Balance Sheet | |||||||||
Losses in excess of investment in unconsolidated joint venture | $ | | $ | ( | $ | — | |||
Total liabilities | $ | | $ | ( | $ | | |||
Accumulated deficit | $ | ( | $ | | $ | ( | |||
Total stockholders' equity | $ | | $ | | $ | | |||
Total liabilities and stockholders' equity | $ | | $ | — | $ | | |||
Consolidated Statement of Operations and Comprehensive Income | |||||||||
Equity in net loss from unconsolidated joint venture | $ | ( | $ | | $ | ( | |||
Income before taxes | $ | | $ | | $ | | |||
Net income attributable to common stockholders | $ | | $ | | $ | | |||
Comprehensive income attributable to common stockholders | $ | | $ | | $ | | |||
Income per share - basic and diluted | $ | | $ | | $ | | |||
Consolidated Statement of Cash Flows | |||||||||
Net Income attributable to common stockholders | $ | | $ | | $ | | |||
Equity in net loss from unconsolidated joint ventures | $ | | $ | ( | $ | | |||
Net cash used in operating activities | $ | ( | $ | — | $ | ( |
Note 5 – Residential Condominium Units for Sale
Residential condominium units for sale as of December 31, 2023 included 77 Greenwich, and in all cases, excluded costs of development for the residential condominium units at 77 Greenwich that were sold. Closings on residential condominium units started in September 2021 with
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Note 6 – Real Estate, Net
As of December 31, 2023, real estate, net, includes the following (dollars in thousands):
December 31, | |||
| 2023 | ||
Building and building improvements | $ | | |
Tenant improvements |
| | |
Furniture and fixtures |
| | |
Land and land improvements |
| | |
| | ||
Less: accumulated depreciation |
| | |
$ | |
Building and building improvements, tenant improvements, furniture and fixtures, and land and land improvements included the 237 11th property and the Paramus, New Jersey property as of December 31, 2023. Depreciation expense amounted to approximately $
In May 2018, we closed on the acquisition of 237 11th, a 105-unit, 12-story multi-family apartment building located at 237 11th Street, Brooklyn, New York for a purchase price of $
As of December 31, 2023, intangible assets, net, consisted of the real estate tax abatement at its original valuation of $
77 Greenwich and the New York City School Construction Authority
We entered into an agreement with the New York City School Construction Authority (the “SCA”), whereby we constructed a school sold to the SCA as part of our condominium development at 77 Greenwich. Pursuant to the agreement, the SCA agreed to pay us $
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the school condominium unit from us, at which point title transferred to the SCA, and the SCA has completed the buildout of the interior space, which is a public elementary school with approximately 476 seats. The school received its final temporary certificate of occupancy (“TCO”) and opened to students in September 2022. Trinity retained a guarantee of certain obligations with respect to the construction of the school. As a result of the Recapitalization Transactions, this asset is now held by TPHGreenwich.
Note 7 – Prepaid Expenses and Other Assets, Net
As of June 30, 2024 and December 31, 2023, prepaid expenses and other assets, net, include the following (dollars in thousands):
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Prepaid expenses | $ | | $ | | ||
Deferred finance costs warrants |
| — |
| | ||
Other |
| |
| | ||
| |
| | |||
Less: accumulated amortization |
| |
| | ||
$ | | $ | |
Note 8 – Loans Payable and Secured Line of Credit
Corporate Credit Facility
In December 2019, we entered into our Corporate Credit Facility, or CCF, a multiple draw credit agreement aggregating $
In connection with the Recapitalization Transactions, the Company entered into a Borrower Assignment and Assumption Agreement (the “Borrower Assignment and Assumption Agreement”), pursuant to which the Company assigned all of its rights, interests, duties, obligations and liabilities in, to and under the CCF, and each other document and instrument related to the CCF, to TPHGreenwich. As of February 14, 2024, the CCF had an outstanding balance of $
In addition, in connection with the Recapitalization Transactions, TPHGreenwich entered into an amended and restated credit agreement, among TPHGreenwich, as borrower, certain subsidiaries of TPHGreenwich party thereto, as guarantors, the Company Investor, as lender and Mount Street US (Georgia) LLP (“Mount Street”), as administrative agent (the “Amended CCF”), pursuant to which the CCF was amended and restated in its entirety in order to, among other things, (i) release certain subsidiaries of the Company that were guarantors under the CCF from their guarantee obligations thereunder, (ii) extend the maturity date to June 30, 2026, and (iii) cause TPHGreenwich to incur an advance of $
Loans Payable
77G Mortgage Loan
In October 2021, TPHGreenwich Owner LLC, the subsidiary that owns 77 Greenwich (the “77G Mortgage Borrower”) entered into a loan agreement with Macquarie PF Inc., a part of Macquarie Capital, the advisory, capital markets and principal investment arm of Macquarie Group, as lender and administrative agent (the “77G Mortgage Lender”), pursuant to which 77G Mortgage Lender agreed to extend credit to Mortgage Borrower in the amount of up to $
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In connection with the Recapitalization Transactions, the 77G Mortgage Borrower entered into a third amendment to the 77G Mortgage Loan Agreement with MPF Greenwich Lender LLC (as successor-in-interest to Macquarie PF Inc.), as lender, and certain entities affiliated with the Investor, as supplemental guarantors (the “77G MLA Amendment”), which, among other things, provides that (i) the original building loan will be reduced to $
As of February 14, 2024, the 77G Mortgage Loan had a balance of $
77G Mezzanine Loan
In December 2020, TPHGreenwich Subordinate Mezz LLC, a subsidiary of the Company (the “77G Mezz Borrower”) entered into a mezzanine loan agreement with an affiliate of the CCF Lender (the “77G Mezzanine Loan Agreement”).
In connection with the Recapitalization Transactions, the 77G Mezz Borrower entered into a second amendment to the 77G Mezzanine Loan Agreement, which provides for, among other things, the (i) termination of the pledge by TPHGreenwich Mezz LLC of
237 11th Loans
In June 2021, 470 4th Avenue Fee Owner, LLC, a subsidiary of the Company (the “237 11th Senior Loan Borrower”), entered into a $
In connection with the Recapitalization Transactions, (i) the 237 11th Senior Loan Borrower entered into a fourth amendment to the 237 11th Senior Loan with certain affiliates of the Investor as supplemental guarantors and Natixis, New York Branch, as lender and agent and (ii) the 237 11th Mezz Borrower entered into a fourth amendment to the 237 11th Mezz Loan with certain affiliates of the Investor as supplemental guarantors and Lexington 11th Street, LLC, as lender, which each provide, among other things, that the respective Completion Guaranty by the Company as original guarantor under each 237 11th Loan is terminated, and that the respective Recourse Guaranty by the Company as original guarantor under each 237 11th Loan is only in full force and effect with respect to matters arising prior to the date of the fourth amendment or matters authorized by the Company.
As of February 14, 2024, there was an outstanding balance of $
20
Secured Line of Credit
The subsidiary that owns the Paramus Property (the “Paramus Borrower”) has an $
In connection with the transfer of the loans to TPHGreenwich, the associated unamortized loan costs were fully amortized in Trinity’s consolidated statement of operations.
Interest
Consolidated interest expense, net includes the following (in thousands):
| Three Months Ended |
| Three Months Ended |
| Six Months Ended |
| Six Months Ended | |||||
June 30, | June 30, | June 30, | June 30, | |||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
Interest expense | $ | — | $ | | $ | | $ | | ||||
Interest capitalized |
| — |
| — |
| — |
| ( | ||||
Interest expense, net | $ | — | $ | | $ | | $ | |
Note 9 – Fair Value Measurements
The fair value of our financial instruments are determined based upon applicable accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).
The fair values of cash and cash equivalents, receivables, accounts payable and accrued expenses, and other liabilities approximated their carrying value because of their short-term nature.
Pension Plan
On an annual recurring basis, we are required to use fair value measures when measuring plan assets of our pension plans. As we elected to adopt the measurement date provisions of ASC-715, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” as of March 4, 2007, we are required to determine the fair value of our pension plan assets as of December 31, 2023. The fair value of pension plan assets was $
Note 10 – Pension Plan
Syms sponsored a defined benefit pension plan for certain eligible employees not covered under a collective bargaining agreement. The pension plan was frozen effective December 31, 2006. At June 30, 2024 and December 31, 2023, we had recorded an overfunded pension balance of $
We plan to continue to maintain the Syms pension plan and make all contributions required, if any, under applicable minimum funding rules through the plan termination date. In accordance with minimum funding requirements and court ordered allowed claims distributions, we paid approximately $
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2012 through June 30, 2024. Historically, we have funded this plan in the third quarter of the calendar year. We funded $
Note 11 – Commitments
a. | Leases – The lease for our corporate office located at 340 Madison Avenue, New York, New York expires on March 31, 2025. Rent expense paid for this operating lease was approximately $ |
Future | |||
Minimum | |||
Year Ended |
| Rentals | |
2024 | $ | | |
2025 |
| | |
Total undiscounted lease payments | $ | ||
Discount | ( | ||
Lease Liability | $ |
b. | Legal Proceedings – In the normal course of business, we are party to routine legal proceedings. Based on advice of counsel and available information, including current status or stage of proceeding, and taking into account accruals where they have been established, management currently believes that any liabilities ultimately resulting from litigation we are currently involved in will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity. |
Note 12 – Income Taxes
As of June 30, 2024, we had federal NOLs and other tax loss carryforwards of approximately $
Based on management’s assessment, we believe it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategy. In recognition of this risk, we have provided a valuation allowance of $
Note 13 – Stockholders’ Equity
Capital Stock
Our authorized capital stock consists of
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Warrants
In December 2019, we entered into a Warrant Agreement (the “Warrant Agreement”) with the CCF Lender (the “Warrant Holder”) pursuant to which we issued
The Warrant Agreement was terminated as part of the Recapitalization Transactions that closed on February 14, 2024.
Preferred Stock
We are authorized to issue
Note 14 – Stock-Based Compensation
Stock Incentive Plan
We adopted the Trinity Place Holdings Inc. 2015 Stock Incentive Plan (the “SIP”), effective September 9, 2015. Prior to the adoption of the SIP, we granted restricted stock units (“RSUs”) to our executive officers and employees pursuant to individual agreements. The SIP, which has a
Six Months Ended | Year Ended | |||||||||
June 30, 2024 | December 31, 2023 | |||||||||
Weighted | Weighted | |||||||||
Average Fair | Average Fair | |||||||||
Number of | Value at | Number of | Value at | |||||||
| Shares |
| Grant Date |
| Shares |
| Grant Date | |||
Balance available, beginning of period | | - | | - | ||||||
Additional shares approved by stockholders | | - | | - | ||||||
Granted to employees |
| ( | $ | |
| ( | $ | | ||
Granted to non-employee directors |
| ( | $ | |
| ( | $ | | ||
Deferred under non-employee director's deferral program |
| ( | $ | |
| ( | $ | | ||
Balance available, end of period |
| |
| - |
| |
| - |
Restricted Stock Units
We grant RSUs to certain executive officers and employees as part of compensation. These grants generally have vesting dates ranging from immediate vest at grant date to
During the six months ended June 30, 2024, we granted
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six months ended June 30, 2024 approximately $
Total stock-based compensation expense for the three months ended June 30, 2024 and 2023 totaled $
Our RSU activity was as follows:
Six Months Ended | Year Ended | |||||||||
June 30, 2024 | December 31, 2023 | |||||||||
Weighted | Weighted | |||||||||
Average Fair | Average Fair | |||||||||
Number of | Value at Grant | Number of | Value at Grant | |||||||
| Shares |
| Date |
| Shares |
| Date | |||
Non-vested at beginning of period |
| | $ | |
| | $ | | ||
Granted RSUs |
| | $ | |
| | $ | | ||
Vested |
| ( | $ | |
| ( | $ | | ||
Non-vested at end of period |
| | $ | |
| | $ | |
As of June 30, 2024, there was approximately $
During the six months ended June 30, 2024, we issued
During the six months ended June 30, 2024, we issued
Director Deferral Program
Our Non-Employee Director’s Deferral Program (the “Deferral Program”), as amended in December 2018, allows our non-employee directors to elect to receive the cash portion of their annual compensation in shares of the Company’s common stock, as well as to defer receipt of the portion of their annual board compensation that is paid in equity. Any deferred amounts are paid under the SIP (as is non-employee directors’ annual equity compensation that is not deferred). Compensation deferred under the Deferral Program is reflected by the grant of stock units equal to the number of shares that would have been received absent a deferral election. The stock units, which are fully vested at grant, generally will be settled under the SIP for an equal number of shares of common stock within 10 days after the participant ceases to be a director. In the event that we distribute dividends, each participant shall receive a number of additional stock units (including fractional stock units) equal to the quotient of (i) the aggregate amount of the dividend that the participant would have received had all outstanding stock units been shares of common stock divided by (ii) the closing price of a share of common stock on the date the dividend was issued.
As of June 30, 2024, a total of
Note 15 – Subsequent Events
On July 30, 2024, the Company received notice from the NYSE Regulation that it had suspended trading of the Company’s common stock and determined to commence proceedings to delist the Company’s common stock from the NYSE American as a result of its determination that the Company is no longer suitable for listing pursuant to Section 1003(f)(v) of the NYSE American Company Guide. On August 9, 2024, the NYSE applied to the SEC to delist the Company’s common stock effective August 20, 2024. The Company’s common stock began trading under its current trading symbol “TPHS” on the OTC Pink Market operated on the OTC Markets system effective with the open of the markets on July 31, 2024. The Company may apply to have its common stock quoted on the OTCQB Venture Market on the OTC Markets; however, there can be no assurances that its common stock will be approved, or will continue, to be traded on such market.
Other than as disclosed above and elsewhere in these consolidated financial statements, there were no subsequent events requiring adjustment to, or disclosure in, the consolidated financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Trinity Place Holdings Inc., which we refer to in this Quarterly Report on Form 10-Q as “Trinity,” “we,” “our,” or “us”, is a real estate holding, investment, development and asset management company. As part of a series of transactions described below, on February 14, 2024, TPHGreenwich Holdings LLC (“TPHGreenwich”), a previously 100% owned subsidiary of ours, became owned 95% by us, with an affiliate of the lender under our corporate credit facility (the “Corporate Credit Facility” or “CCF”) owning a 5% interest in, and acting as manager of, such entity. The entity holds our real estate assets and related liabilities, including (i) the property located at 77 Greenwich Street in Lower Manhattan (“77 Greenwich”), which is substantially complete as a mixed-use project consisting of a 90-unit residential condominium tower, retail space and a New York City elementary school, (ii) a 105-unit, 12-story multi-family property located at 237 11th Street in Brooklyn, New York (“237 11th”), and (iii) a property occupied by retail tenants in Paramus, New Jersey (the “Paramus Property”). See Item 2. Properties below for a more detailed description of these properties.
We also control a variety of intellectual property assets focused on the consumer sector, a legacy of our predecessor, Syms Corp. (“Syms”), including FilenesBasement.com, our rights to the Stanley Blacker® brand, as well as the intellectual property associated with the Running of the Brides® event and An Educated Consumer is Our Best Customer® slogan. In addition, we also had approximately $340.1 million of federal net operating loss carryforwards (“NOLs”) and other tax loss carryforwards at June 30, 2024, as well as approximately $362.1 million of various state and local NOLs and other tax loss carryforwards, which can be used to reduce our future taxable income and capital gains.
Recapitalization Transactions
On February 14, 2024, we consummated the transactions contemplated by the Stock Purchase Agreement, dated as of January 5, 2024 (as amended, the “Stock Purchase Agreement”), between the Company, TPHS Lender LLC, the lender under the Company’s Corporate Credit Facility (the “Company Investor”) and TPHS Investor LLC, an affiliate of the Company Investor (the “JV Investor”, and together with the Company Investor, the “Investor”), pursuant to which (i) the Company Investor purchased 25,112,245 shares of common stock, par value $0.01 per share of the Company (the “Investor Shares”) for a purchase price of $0.30 per share, (ii) the Company and the JV Investor entered into an amended and restated limited liability company operating agreement of TPHGreenwich (the “JV Operating Agreement”), pursuant to which the JV Investor was appointed the initial manager of, and acquired a five percent (5%) interest in, TPHGreenwich, as described in more detail below, and TPHGreenwich continues to own, indirectly, all of the real property assets and liabilities of the Company, and (iii) TPHGreenwich entered into an asset management agreement (the “Asset Management Agreement”) with a newly formed subsidiary of the Company (the “TPH Manager”), pursuant to which TPHGreenwich hired the TPH Manager to act as initial asset manager for TPHGreenwich for an annual management fee, as described in more detail below (collectively, the “Recapitalization Transactions”).
Under the Recapitalization Transactions, the real estate assets and related liabilities as well as the Corporate Credit Facility became part of TPHGreenwich, with the Company retaining the substantial federal, state and local tax NOLs and other tax loss carryforwards, intellectual property and a 95% equity interest in TPHGreenwich. In addition, the maturity date of each of the mortgage loan agreement (the “77G Mortgage Loan”) and mezzanine loan agreement (the “77G Mezzanine Loan”) for 77 Greenwich, both of which were assumed by TPHGreenwich, was extended to October 23, 2025 with an option to extend for an additional year, and the maturity date of the Corporate Credit Facility was extended to June 30, 2026.
We believe that the Recapitalization Transactions allow for an improved structure for a new investor to invest in the Company, which is less complex as a result of the real estate assets and substantially all liabilities being off-balance sheet. In addition, the parties agreed to certain provisions in the Stock Purchase Agreement to accommodate a new strategic partner that may invest in the Company.
Joint Venture Agreement
At the closing of the Recapitalization Transactions, the Company and the JV Investor entered into the JV Operating Agreement, with the Company owning 95% of the ownership interests in TPHGreenwich and the JV Investor owning 5% of the ownership interests in TPHGreenwich. Distributions under the JV Operating Agreement first go to the Investor until the JV Investor has received its initial distribution amount in full (which initial distribution amount is the sum of (v) all
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amounts due under the CCF and 77G Mezzanine Loan, (w) all amounts due in connection with any additional TPHGreenwich debt financing provided by Investor or its affiliate, (x) Investor’s initial capital contribution, and (y) any additional capital contributions made by Investor), then distributed pro rata pursuant to the members’ respective percentage interests in TPHGreenwich. If TPH Manager is terminated for “Cause” under the Asset Management Agreement, as described below, at the option of Investor, the Company’s right to distributions from TPHGreenwich will be forfeited and any distribution that would otherwise have been made to the Company will instead be distributed to the JV Investor.
JV Investor, in its capacity as manager of TPHGreenwich, will manage, control and conduct the affairs of TPHGreenwich, subject only to certain major decisions set forth in the JV Operating Agreement. Major decisions are (1) entering into any transaction with or for the benefit of Investor or its affiliate, other than any transaction involving Investor or its affiliate providing debt and/or equity to the Company as set forth in the JV Operating Agreement or any arms-length transaction, (2) any amendment or modification of the JV Operating Agreement or any operating agreement of a subsidiary company of TPHGreenwich, or any other agreement with the Company or a subsidiary company of TPHGreenwich if such amendment would materially adversely affect the rights or obligations of the Company in a manner that is disproportionate to the JV Investor, (3) any tax or accounting matter decision relating to net operating losses that would be materially adverse to the Company but not the JV Investor, and (4) the admission of any other member to TPHGreenwich or its subsidiary except as permitted under the JV Operating Agreement.
Under the JV Operating Agreement, the Company will retain oversight of the Paramus Property and will have the sole and exclusive right to manage and make decisions regarding the Paramus Property, subject to (i) the Company Investor’s right to approve any purchase and sale agreement for the Paramus Property that may be entered into in accordance with the terms and conditions of the Stock Purchase Agreement; (ii) the JV Investor’s right to approve any material modifications of such purchase and sale agreement for the Paramus Property, and (iii) the JV Investor’s right to approve any dissolution of the owner of the Paramus Property.
The Company’s liability under any cause of action arising from or in connection with the JV Operating Agreement is limited to its interest in TPHGreenwich, other than with respect to certain Company guaranty liabilities related to (a) any loss or expense incurred by the JV Investor under any non-recourse carveout guaranty or environmental indemnity to a third-party lender, or (b) indemnification and reimbursement from the Company if the JV Investor makes a payment to a third party lender pursuant to a guaranty (other than a non-recourse carve out guaranty or environmental indemnity), in each case, to the extent such loss, expense or payment was caused solely by, or required solely as a result of, the acts or omissions of the Company or the TPH Manager without the prior written consent of the JV Investor.
Asset Management Agreement
At the closing of the Recapitalization Transactions, the TPH Manager entered into the Asset Management Agreement with TPHGreenwich. The Asset Management Agreement provides that the TPH Manager agrees to provide certain services in connection with the construction (with respect to 77 Greenwich), management, operation, supervision and maintenance of 77 Greenwich and 237 11th. To compensate TPH Manager for such services, TPHGreenwich will pay an annual management fee to TPH Manager equal to the greater of (x) $400,000 or (y) 1.25% of (i) the outstanding principal balance of the CCF plus (ii) the outstanding principal balance of the 77G Mezzanine Loan, plus (iii) the principal balance of any future fundings of any type under the CCF and/or 77G Mezzanine Loan.
The Asset Management Agreement will continue until the earlier to occur of (a) both consummation of a sale, transfer, conveyance or other disposition of 77 Greenwich and 237 11th and the final resolution of the 237 11th litigation, or (b) the earlier termination of the Asset Management Agreement pursuant to its terms. TPHGreenwich has the right to terminate the Asset Management Agreement at any time with or without cause, provided that if the TPH Manager is terminated without cause prior to the 18-month anniversary of the Asset Management Agreement, the TPH Manager will be entitled to a termination payment equal to 75 days’ payment of the management fee, based on the average fee paid to the TPH Manager during the immediately prior 12 months. After the 18-month anniversary of the Asset Management Agreement, the TPH Manager will also have the right to terminate the Asset Management Agreement in its sole and absolute discretion, upon not less than 75 days’ prior written notice to TPHGreenwich.
As described above, if TPH Manager is terminated for “Cause” under the Asset Management Agreement, at the option of Investor, the Company’s right to distributions from TPHGreenwich will be forfeited and any distribution that would otherwise have been made to the Company will instead be distributed to the JV Investor. The term “Cause” means (a) the Company ceasing to be a member under the JV Operating Agreement, (b) TPH Manager transfers its rights or obligations
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under the Asset Management Agreement in violation of the terms therein, (c) TPH Manager files or consents to a petition in bankruptcy, (d) TPH Manager, any Key Manager Employee (defined below) or any affiliate is convicted of fraud or is determined by a court of competent jurisdiction pursuant to a final judgment to have committed an act of fraud, (e) any misappropriation, gross negligence or willful misconduct by TPH Manager, any Key Manager Employee or any affiliate of the foregoing (which is curable one time during the term of the Asset Management Agreement if committed by a non-senior level employee), (f) any of the Company, TPH Manager or any Key Manager Employee is convicted of a felony crime or crime of moral turpitude, (f) any representation or warranty made by TPH Manager under the Asset Management Agreement is untrue in any material respect and remains uncured after notice from TPHGreenwich, (h) a material breach by TPH Manager of the terms of the Asset Management Agreement (other than as set forth above in this definition) which breach has a material adverse effect on TPHGreenwich and remains uncured after notice from TPHGreenwich, or (i) the breach or failure to comply by TPHGreenwich or any subsidiary with any loan documents (other than, in the case of loan documents in which an affiliate of JV Investor is a lender, with respect to any key person provisions relating to Mr. Messinger, our chief executive officer, or a replacement) in the event such breach or failure is caused by the actions of TPH Manager, Key Manager Employee or any affiliate and continues after the giving of any required notice and the expiration of any applicable cure period under such loan documents, and which is not the subject of a forbearance or waiver from such lender. Under the Asset Management Agreement, “Key Manager Employee” means Mr. Messinger or a replacement officer or employee of TPH Manager with reasonably equivalent skills and abilities (as determined by the JV Investor on behalf of TPHGreenwich in its reasonable discretion).
In the event Mr. Messinger fails to be involved in the day-to-day operations of the TPH Manager pursuant to the Asset Management Agreement, TPHGreenwich agrees its sole and exclusive remedy will be to terminate TPH Manager without cause on 30 days’ notice. As noted below and previously disclosed, Mr. Messinger will be transitioning from CEO of the Company (i.e., TPH Manager) to consultant to TPHGreenwich. While TPHGreenwich has not indicated an intention to terminate the Asset Management Agreement, however there is no assurance of how long the Asset Management Agreement will remain in effect.
On April 26, 2024, the Company and Mr. Messinger entered into an amendment (the “Amendment”) to Mr. Messinger’s employment agreement, dated as of October 1, 2013, as amended (the “Employment Agreement”), and TPHGreenwich and Mr. Messinger entered into a consulting agreement (the “Consulting Agreement”). Under the Amendment, the Company agreed to make certain payments to Mr. Messinger in exchange for Mr. Messinger’s agreement to continue his employment as chief executive officer of the Company until the later of July 31, 2024 or the filing of this Quarterly Report on Form 10-Q, unless extended by the parties (the “Termination Date”). Upon the Termination Date, the Consulting Agreement will automatically become effective, unless the Employment Agreement is otherwise terminated in accordance with its terms. Under the Consulting Agreement, Mr. Messinger has agreed to provide certain consulting services as an independent contractor to TPHGreenwich related to the properties owned by TPHGreenwich, in exchange for certain consulting payments. The Consulting Agreement will remain in effect until June 1, 2026, unless sooner terminated in accordance with its terms.
Liquidity and Going Concern; Management’s Plans and Objectives
Following the Recapitalization Transactions, our primary business is owning approximately $700 million of federal, and various state and local NOLs and other tax loss carryforwards and a variety of intellectual property assets focused on the consumer sector, as well as a 95% interest in TPHGreenwich and acting as asset manager for the properties owned by TPHGreenwich. We have a limited amount of unrestricted cash and liquidity available for working capital and our cash needs are variable under different circumstances. If the Asset Management Agreement does not remain in place and the related fees are not increased significantly, the Company’s cash and cash equivalents will not be sufficient to fund the Company’s operations and corporate expenses beyond the next few months, unless we are able to raise additional capital or enter into a strategic transaction, creating substantial doubt about our ability to continue as a going concern.
With the Company now unencumbered by its real estate and related liabilities, we continue to focus on exploring a range of strategic and financing alternatives to maximize stockholder value and to engage with parties that have expressed interest in the Company’s attributes and assets and may see the Company as a potential vehicle for growth, with potential opportunities to recapitalize the Company at a lower cost of capital. The Company engaged Houlihan Lokey and Ackman-Ziff to act as advisors (the “Advisors”) in connection with our strategic review process and to assist us in identifying and evaluating potential alternatives, including among others securing an equity and/or debt financing of the Company,
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refinancing of existing debt, and/or a sale or merger or reverse merger of the Company. There is no assurance that we will be successful in consummating any such strategic transaction on terms or a timeframe acceptable to us or at all.
Properties
Below is certain information regarding the real estate properties held by TPHGreenwich as of June 30, 2024:
|
| Building Size |
|
|
| ||||
(estimated | Leased at |
| |||||||
rentable | Number of | June 30, |
| ||||||
Property Location | Type of Property | square feet) | Units | 2024 |
| ||||
Owned Locations | |||||||||
77 Greenwich, New York, New York (1) |
| Residential condominium units for sale |
| — |
| — |
| N/A | |
Paramus, New Jersey (2) |
| Retail |
| 77,000 |
| — |
| 100 | % |
237 11th Street, Brooklyn, New York (3) |
| Multi-family |
| 80,000 |
| 105 |
| 93 | % |
Total |
|
|
| 157,000 |
| 105 |
|
| |
(1) | 77 Greenwich. TPHGreenwich has substantially completed the construction of an over 300,000 gross square foot mixed-use building that corresponds to the approximate total of 233,000 zoning square feet. The property consists of 90 luxury residential condominium apartments, 7,500 square feet of retail space, almost all of which is street level, a 476-seat elementary school serving New York City District 2, including the adaptive reuse of the landmarked Robert and Anne Dickey House. As of March 3, 2023, this property had received its temporary certificates of occupancy (“TCOs”) for 100% of the residential condominium units, lobby, Cloud Club (lounge, terrace, game room, dining room, kitchen and kids play room), mechanical rooms, and portions of the cellar (including the bike and storage rooms.) We have closed on the sale of 40 residential condominium units through June 30, 2024, and we have closed on one more residential condominium units since June 30, 2024 with 49 remaining units to sell as of August 14, 2024. |
We entered into an agreement with the New York City School Construction Authority (the “SCA”), whereby we constructed a school sold to the SCA as part of our condominium development at 77 Greenwich. Pursuant to the agreement, the SCA agreed to pay us $41.5 million for the purchase of their condominium unit and reimburse us for the costs associated with constructing the school, including a construction supervision fee of approximately $5.0 million. Payments for construction are being made by the SCA to the general contractor in installments as construction on their condominium unit progresses. Payments to us for the land and construction supervision fee commenced in January 2018 and continued through October 2019 for the land and will continue through completion of the SCA buildout for the construction supervision fee. An aggregate of $46.4 million had been paid to us by the SCA as of June 30, 2024 with approximately $176,000 remaining to be paid to TPHGreenwich. We have also received an aggregate of $56.1 million in reimbursable construction costs from the SCA through June 30, 2024. In April 2020, the SCA closed on the purchase of the school condominium unit from us, at which point title transferred to the SCA. The SCA has completed the buildout of the interior space, which is a public elementary school with approximately 476 seats. The school received its final TCO and opened to students in September 2022.
There is an inherent risk that the development and sales of residential condominiums may be subject to unknown potential changes in internal and external financial and economic conditions, such as inflation and rising interest rates, and general market conditions, which could impact the business and potential buyers of the residential condominiums for sale. In addition, construction work is ongoing and there continue to be delays and issues the impact of which is not yet known. We believe it is possible under generally accepted accounting practices to incur real estate impairment charges in the future in the event these conditions deteriorate.
(2) Paramus Property. The Paramus property consists of a one-story and partial two-story, 73,000 square foot freestanding building and an outparcel building of approximately 4,000 square feet, for approximately 77,000 total square feet of rentable space. The primary building is comprised of approximately 47,000 square feet of ground floor
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space, and two separate mezzanine levels of approximately 21,000 and 5,000 square feet. The 73,000 square foot building is leased to Restoration Hardware Holdings, Inc. (NYSE: RH) pursuant to a license agreement that began on June 1, 2016, is terminable upon three months’ notice, and currently is scheduled to end on March 31, 2025. The outparcel building was leased under a short-term license agreement with a tenant whose lease began on October 1, 2023 and ends December 31, 2024. The land area of the Paramus property consists of approximately 292,000 square feet, or approximately 6.7 acres. TPHGreenwich is currently exploring options with respect to a potential sale of the Paramus property.
(3) 237 11th Street. In 2018, we acquired a 105-unit, 12-story multi-family apartment building encompassing approximately 93,000 gross square feet (approximately 80,000 rentable square feet) located at 237 11th Street, Park Slope, Brooklyn, New York for a purchase price of $81.2 million, excluding transaction costs of approximately $0.7 million. The property also includes 6,264 square feet of retail space, all of which is leased to Starbucks Inc. (NQGS:SBUX), an oral surgeon and a health and wellness tenant. Located on the border of the Park Slope and Gowanus neighborhoods of Brooklyn, the property is located one block from the 4th Avenue/9th Street subway station. The 237 11th property offers an array of modern amenities that surpass what is available in the neighborhood’s “brownstone” housing stock. The property also benefits from a 15-year Section 421-a real estate tax exemption. Although all apartments are market rate units, they are subject to New York City’s rent stabilization law during the remaining term of the Section 421-a real estate tax exemption. Due to the approval of the Gowanus up-zoning, this property benefitted to the extent of approximately 30,000 square feet of air rights.
Due to water damage in apartment units and other property at 237 11th resulting from construction defects which we believe were concealed by the prior ownership team and its contractor, we submitted a notice of claim to our insurance carrier for property damage and business interruption (lost revenue) in September 2018. The insurance carrier subsequently disclaimed coverage for the losses and we filed a complaint against the carrier alleging that it breached the insurance policy by denying coverage. We also filed legal claims against the seller, its parent company, and the general contractor to recover damages arising from defective construction of the building, including defects that resulted in water damage as well as other defects. In addition, the general contractor impleaded into that litigation several subcontractors who performed work on the property. Management expects that TPHGreenwich will recover some portion of the cost incurred to repair the property through the litigations and/or settlement negotiations with the seller, its parent company, the general contractor, the subcontractors, and the insurance carrier, although the amount of damages that may be recoverable in litigation and/or potential settlement negotiations are uncertain at this time, as is the timing of receipt of any such payments. TPHGreenwich will continue to pursue all legal remedies. We incurred significant cash outflows for costs associated with these repairs and remediation, which commenced in September 2019 and were completed as of December 31, 2021.
TPH Greenwich has entered into a non-binding letter of intent for the sale of the property at 237 11th. There is no assurance that the sale will occur, or if it does, what the terms will be for such sale.
Lease Expirations
As of June 30, 2024, TPHGreenwich had one retail license at its Paramus property encompassing 73,000 square feet of leased space with annualized rent of $540,000 per year and expiring in March 2025 and a short-term license for the outparcel building began October 1, 2023 and expiring on December 31, 2024. As of June 30, 2024, TPHGreenwich also had a retail lease at the 237 11th property encompassing 2,006 square feet of leased space with annualized rent of $130,000 per year that expires in 2027, a second retail lease at the 237 11th property encompassing 1,074 square feet of leased space with average annualized rent of $94,506 per year that expires in 2036 and a third retail lease at the 237 11th property encompassing 2,208 square feet of leased space with average annualized rent of $153,366 per year that expires in 2032. As of June 30, 2024, TPHGreenwich also had a retail lease at 77 Greenwich encompassing 1,061 square feet of leased space with an average annualized rent of $88,085 per year that expires in 2034. All TPHGreenwich’s other leases are residential leases most of which expire within twelve or twenty-four months of the commencement date.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts in our consolidated financial statements. Actual results could differ from these estimates. A summary of our significant accounting policies that management believes are critical
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to the preparation of the consolidated financial statements are included in this report (see Note 2 - Summary of Significant Accounting Policies - Basis of Presentation to our consolidated financial statements for further information). Certain of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in the historical consolidated financial statements included in this report and require the application of significant judgment by management and, as a result, are subject to a degree of uncertainty. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2023 Annual Report on Form 10-K (as amended, the “2023 Annual Report”) for the year ended December 31, 2023.
The following discussion and analysis is intended to assist readers in understanding our financial condition and results of operations during the three and six months ended June 30, 2024 and 2023 and should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and our 2023 Annual Report. As a result of the closing of the Recapitalization Transactions on February 14, 2024, the results of operations and the cash flows for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 may not be comparable.
Results of Operations for the Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
There was no rental revenues for the three months ended June 30, 2024 as compared to total rental revenues of $1.4 million for the three months ended June 30, 2023. This is due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording all of the rental revenue. For the three months ended June 30, 2023, rental revenues were approximately $1.4 million and tenant reimbursements were approximately $78,000.
Other income increased by approximately $349,000 to $373,000 for the three months ended June 30, 2024 from $24,000 for the three months ended June 30, 2023. For the three months ended June 30, 2024, this income represents the management fee earned from TPHGreenwich. For the three months ended June 30, 2023, the income was from the SCA’s construction supervision fee.
There were no sales of residential condominium units at 77 Greenwich for the three months ended June 30, 2024 as compared to $5.2 million for the three months ended June 30, 2023. This is due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the sales of residential condominium units. We closed on two residential condominium units during the three months ended June 30, 2023. Units that we closed during 2023 were generally lower priced, smaller units on the building’s lower floors, many of which entered into contract during the height of the pandemic.
Property operating expenses decreased by approximately $791,000 to $20,000 for the three months ended June 30, 2024 from $811,000 for the three months ended June 30, 2023. The decrease in property operating expenses was mainly due to the Recapitalization Transactions mentioned above as most of the operating expenses are recorded at TPHGreenwich. Property operating expenses consisted primarily of expenses incurred for utilities, payroll, and general operating expenses as well as repairs and maintenance and leasing commission at 237 11th, general operating expenses at 77 Greenwich, including marketing costs, and to a lesser extent expenses related to the Paramus, New Jersey property.
There was no real estate tax expense for the three months ended June 30, 2024 as compared to $451,000 for the three months ended June 30, 2023. The decrease in real estate tax expense was mainly due to the Recapitalization Transactions mentioned above as real estate tax expenses are recorded at TPHGreenwich. Real estate tax expense is predominately for 77 Greenwich and to a lesser extent for 237 11th and the Paramus, New Jersey property.
General and administrative expenses increased by approximately $51,000 to $1.9 million for the three months ended June 30, 2024 from $1.8 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, approximately $32,000 related to stock-based compensation, $912,000 related to payroll and payroll related expenses, $452,000 related to other corporate expenses, including board fees, corporate office rent and insurance and $490,000 related to legal, accounting and other professional fees. For the three months ended June 30, 2023, approximately $114,000 related to stock-based compensation, $651,000 related to payroll and payroll related expenses, $456,000 related to other corporate expenses, including board fees, corporate office rent and insurance and $614,000 related to legal, accounting and other professional fees.
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Pension related costs remained relatively flat at $135,000 for the three months ended June 30, 2024 compared to $143,000 for the three months ended June 30, 2023. These costs represent professional fees and other periodic pension costs incurred in connection with the legacy Syms Pension Plan (see Note 10 – Pension Plan to our consolidated financial statements for further information).
There was no cost of sales – residential condominium units at 77 Greenwich for the three months ended June 30, 2024 as compared to $5.2 million for the three months ended June 30, 2023. This is due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the cost of sales of residential condominium units. We closed on two residential condominium units during the three months ended June 30, 2023. Cost of sales consists of construction and capitalized operating costs that are allocated to the respective condominium units being sold, as well as closing costs of the residential condominium units. Units that we closed during 2023 were generally lower priced, smaller units on the building’s lower floors, many of which entered into contract during the height of the pandemic.
Depreciation and amortization decreased by approximately $1.0 million to $4,000 for the three months ended June 30, 2024 from $1.0 million for the three months ended June 30, 2023. The decrease in depreciation and amortization expense was mainly due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the depreciation and amortization expense. For the three months ended June 30, 2024, depreciation and amortization expense consisted of depreciation for the corporate office furniture, fixtures and computer equipment. For the three months ended June 30, 2023, depreciation and amortization expense consisted of depreciation for the Paramus, New Jersey property of approximately $283,000, depreciation for 237 11th of approximately $414,000, the amortization of lease commissions and acquired in-place leases of approximately $192,000 for 237 11th, and amortization of warrants of approximately $114,000.
Equity in net gain on sale of unconsolidated joint venture property was $7,000 for the three months ended June 30, 2023 which represents the February 2023 sale of our interest in the joint venture that owned 250 North 10th to our joint venture partner resulting in net proceeds of approximately $1.2 million after repayment of our Partner Loan, where we recognized an approximate $3.1 million gain.
Unrealized loss on warrants was $10,000 for the three months ended June 30, 2023. This represents the change in the fair market valuation of the warrants due mainly to the change in our stock price on the measurement date.
There was no interest expense for the three months ended June 30, 2024 as compared to $7.2 million for the three months ended June 30, 2023. This is due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the interest expense. For the three months ended June 30, 2023, there was approximately $7.2 million of gross interest expense incurred and no amounts were capitalized into residential condominium units for sale.
There was no interest expense - amortization of deferred finance costs for the three months ended June 30, 2024 as compared to $933,000 for the three months ended June 30, 2023. This is due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the amortization of deferred finance costs.
We recorded $54,000 in tax expense for the three months ended June 30, 2024 compared to $51,000 for the three months ended June 30, 2023.
Net loss attributable to common stockholders decreased approximately $9.2 million to $1.7 million for the three months ended June 30, 2024 as compared to $10.9 million for the three months ended June 30, 2023. This is a result of the changes discussed above.
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Results of Operations for the Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Rental revenues in total decreased by approximately $2.1 million to $798,000 for the six months ended June 30, 2024 from $2.9 million for the six months ended June 30, 2023. This consisted of a decrease in rent revenues of approximately $2.1 million to $741,000 for the six months ended June 30, 2024 from $2.8 million for the six months ended June 30, 2023, as well as a decrease in tenant reimbursements of approximately $57,000 to $55,000 for the six months ended June 30, 2024 from $112,000 for the six months ended June 30, 2023. The decrease in total rental revenues and its related components was mainly due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the rental revenues.
Other income increased by approximately $349,000 to $493,000 for the six months ended June 30, 2024 from $144,000 for the six months ended June 30, 2023. For the six months ended June 30, 2024, this income represents the management fee earned from TPHGreenwich. For the six months ended June 30, 2023, this income was made up of a contractual payment received as a result of the cancelation of the purchase and sale agreement for the Paramus, New Jersey property in January 2023, as well as the SCA’s construction supervision fee.
Sales of residential condominium units at 77 Greenwich decreased by approximately $16.9 million to $1.4 million for the six months ended June 30, 2024 from $18.3 million for the six months ended June 30, 2023. We closed on one and seven residential condominium units during the six months ended June 30, 2024 and 2023, respectively. The decrease in total sales of residential condominium units at 77 Greenwich was due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the sales of residential condominium units. Units that we closed during 2023 were generally lower priced, smaller units on the building’s lower floors, many of which entered into contract during the height of the pandemic.
Property operating expenses decreased by approximately $1.6 million to $437,000 for the six months ended June 30, 2024 from $2.1 million for the six months ended June 30, 2023. The decrease in property operating expenses was mainly due to the Recapitalization Transactions mentioned above, and to a lesser extent lower marketing and operating costs at 77 Greenwich due to six fewer residential condominium units having closed. This was partially offset by no capitalized operating costs associated with 77 Greenwich during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Property operating expenses consisted primarily of expenses incurred for utilities, payroll, and general operating expenses as well as repairs and maintenance and leasing commission at 237 11th, general operating expenses at 77 Greenwich, including marketing costs, and to a lesser extent expenses related to the Paramus, New Jersey property.
Real estate tax expense decreased by approximately $551,000 to $363,000 for the six months ended June 30, 2024 from $914,000 for the six months ended June 30, 2023. The decrease in real estate tax expense was mainly due to the Recapitalization Transactions mentioned above as real estate tax expenses are recorded at TPHGreenwich. There were also less unsold residential condominium units paying real estate taxes which was partially offset by higher assessed values for the unsold residential condominium units and there was less capitalized real estate tax expenses for those units at 77 Greenwich for the six months ended June 30, 2024 as compare to the six months ended June 30, 2023.
General and administrative expenses decreased by approximately $287,000 to $3.0 million for the six months ended June 30, 2024 from $3.3 million for the six months ended June 30, 2023. For the six months ended June 30, 2024, approximately $64,000 related to stock-based compensation, $1.5 million related to payroll and payroll related expenses, $864,000 related to other corporate expenses, including board fees, corporate office rent and insurance and $519,000 related to legal, accounting and other professional fees. For the six months ended June 30, 2023, approximately $208,000 related to stock-based compensation, $1.3 million related to payroll and payroll related expenses, $869,000 related to other corporate expenses, including board fees, corporate office rent and insurance and $903,000 related to legal, accounting and other professional fees.
Pension related costs decreased by approximately $22,000 to $265,000 for the six months ended June 30, 2024 compared to $287,000 for the six months ended June 30, 2023. These costs represent professional fees and other periodic pension costs incurred in connection with the legacy Syms Pension Plan (see Note 10 – Pension Plan to our consolidated financial statements for further information).
Cost of sales – residential condominium units decreased by approximately $16.1 million to $1.4 million for the six months ended June 30, 2024 from $17.5 million for the six months ended June 30, 2023. We closed on one and seven residential
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condominium units during the six months ended June 30, 2024 and 2023, respectively. This decrease in costs of sales is due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the cost of sales of residential condominium units. Cost of sales consists of construction and capitalized operating costs that are allocated to the respective condominium units being sold, as well as closing costs of the residential condominium units. Units that we closed during 2023 were generally lower priced, smaller units on the building’s lower floors, many of which entered into contract during the height of the pandemic.
Depreciation and amortization decreased by approximately $1.2 million to $766,000 for the six months ended June 30, 2024 from $2.0 million for the six months ended June 30, 2024. The decrease in depreciation and amortization expense was mainly due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the depreciation and amortization expense. For the six months ended June 30, 2024, depreciation and amortization expense consisted of depreciation for 237 11th of approximately $208,000, the amortization of lease commissions and acquired in-place leases of approximately $96,000 for 237 11th and the amortization of warrants of approximately $452,000. For the six months ended June 30, 2023, depreciation and amortization expense consisted of depreciation for the Paramus, New Jersey property of approximately $564,000, depreciation for 237 11th of approximately $826,000, the amortization of lease commissions and acquired in-place leases of approximately $385,000 for 237 11th, and amortization of warrants of approximately $228,000.
Gain on contribution to joint venture was approximately $21.0 million for the six months ended June 30, 2024 and represents the gain in the value of the Company relating to the Recapitalization Transactions that closed on February 14, 2024.
Equity in net loss from unconsolidated joint ventures was approximately $6.0 million for the six months ended June 30, 2024. For the six months ended June 30, 2024, equity in net loss from unconsolidated joint venture represented the impact of our contribution to the joint venture on February 14, 2024. For the six months ended June 30, 2023, equity in net loss from unconsolidated joint ventures represented our 10% share in 250 North 10th, which was sold in February 2023. For the six months ended June 30, 2023, our share of the net loss is primarily comprised of operating income before depreciation of $121,000 offset by depreciation and amortization of $77,000 and interest expense of $48,000 for 250 North 10th.
Equity in net gain on sale of unconsolidated joint venture property of $3.1 million for the six months ended June 30, 2023 represents the February 2023 sale of our interest in the joint venture that owned 250 North 10th to our joint venture partner resulting in net proceeds of approximately $1.2 million after repayment of our Partner Loan, where we recognized an approximate $3.1 million gain.
Unrealized gain on warrants was $56,000 for the six months ended June 30, 2023. This represents the change in the fair market valuation of the warrants due mainly to the change in our stock price on the measurement date.
Interest expense, net decreased by approximately $9.6 million to $3.9 million for the six months ended June 30, 2024 from $13.5 million for the six months ended June 30, 2023. The decrease in interest expense was mainly due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the interest expense. For the six months ended June 30, 2024, there was approximately $3.9 million of gross interest expense incurred and no amounts were capitalized into residential condominium units for sale. For the six months ended June 30, 2023, there was approximately $14.2 million of gross interest expense incurred, $689,000 of which was capitalized into residential condominium units for sale.
Interest expense - amortization of deferred finance costs decreased approximately $1.5 million to $334,000 for the six months ended June 30, 2024 from $1.8 million for the six months ended June 30, 2023 which was principally due to the Recapitalization Transactions mentioned above whereby TPHGreenwich is recording the amortization of deferred finance costs.
We recorded $140,000 in tax expense for the six months ended June 30, 2024 compared to $175,000 for the six months ended June 30, 2023.
Net income attributable to common stockholders increased by approximately $24.3 million to $7.1 million for the six months ended June 30, 2024 from a loss of $17.2 million for the six months ended June 30, 2023. This is a result of the changes discussed above, principally due to the gain on disposition recognized from the Recapitalization Transactions mentioned above, partially offset by equity in net loss from unconsolidated joint ventures and interest expense.
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Liquidity and Capital Resources
As of June 30, 2024, we had total cash and restricted cash of $2.5 million, of which approximately $854,000 was cash and cash equivalents and approximately $1.6 million was restricted cash.
Under the Recapitalization Transactions, the real estate assets and related liabilities as well as the Corporate Credit Facility became part of TPHGreenwich, with the Company retaining the substantial federal, state and local tax NOLs and other tax loss carryforwards, intellectual property and a 95% equity interest in TPHGreenwich. In addition, the maturity date of each of the 77G Mortgage Loan and the 77G Mezzanine Loan was extended to October 23, 2025 with an option to extend for an additional year, and the maturity date of the Corporate Credit Facility was extended to June 30, 2026. In addition, we were released from all guarantees arising under these loan agreements subsequent to the closing of the Recapitalization Transactions. As part of the amendment, we re-affirmed our guaranty under the Secured Line of Credit. For a discussion regarding these loan agreements, see Note 8 – Loans Payable and Secured Line of Credit to our consolidated financial statements.
Cash Position
As part of the Recapitalization Transactions, the CCF, 77G Mortgage Loan and 77G Mezzanine Loan were amended and extended, and were transferred to TPHGreenwich. As of August 13, 2024, our cash and cash equivalents totaled approximately $1.7 million. We have a limited amount of unrestricted cash and liquidity available for working capital and our cash needs are variable under different circumstances. If the Asset Management Agreement does not remain in place and the related fees are not increased significantly, the Company’s cash and cash equivalents will not be sufficient to fund the Company’s operations and corporate expenses beyond the next few months, unless we are able to raise additional capital or enter into a strategic transaction, creating substantial doubt about our ability to continue as a going concern.
Cash Flows
Cash Flows for the Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Net cash used in operating activities increased by approximately $7.6 million to $5.8 million for the six months ended June 30, 2024 compared to net cash provided by operating activities of $1.8 million for the six months ended June 30, 2023. This increase was mainly due to the Recapitalization Transactions that occurred on February 14, 2024 whereby Trinity transferred assets and liabilities, including restricted cash, to the TPHGreenwich.
Net cash used in investing activities increased by approximately $14.1 million to $6.9 million for the six months ended June 30, 2024 compared to net cash provided by investing activities of $7.2 million for the six months ended June 30, 2023. The cash used in investing activities was due to the Recapitalization Transactions that occurred on February 14, 2024 whereby Trinity transferred cash to TPHGreenwich. The cash provided by investing activities for the six months ended June 30, 2023 was due to $7.2 million in sale proceeds from the sale of our 10% interest in the 250 North 10th joint venture property in February 2023.
Net cash provided by financing activities increased by approximately $22.6 million to $6.9 million for the six months ended June 30, 2024 compared to net cash used in financing activities of $15.7 million for the six months ended June 30, 2023. The increase in net cash provided by financing activities primarily relates to the proceeds from loans and corporate credit facility of approximately $2.5 million as well as the approximate $4.4 million, net of expenses, from the sale of common stock related to the Recapitalization Transactions during the six months ended June 30, 2024, as compared to the approximate $20.5 million in repayments of loans, corporate credit facility and notes payable for the six months ending June 30, 2023 partially offset by $5.0 million in borrowings from the loans, corporate credit facility and secured line of credit for the six months ending June 30, 2023.
Net Operating Losses
Our U.S. federal NOLs as of the emergence date of the Syms bankruptcy were approximately $162.8 million. As of June 30, 2024, our U.S. federal NOLs and other tax loss carryforwards, and state NOLs and other tax loss carryforwards were approximately $340.1 million and $311.3 million, respectively, and our New York State and New York City prior NOL conversion subtraction pools were approximately $27.9 million and $22.9 million, respectively. In connection with the conveyance of the school condominium to the SCA, we applied approximately $11.6 million of federal NOLs against
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taxable capital gains of approximately $18.5 million. Since 2009 through June 30, 2024, we have utilized approximately $20.1 million of the federal NOLs.
Based on management’s assessment, it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategies. Accordingly, a valuation allowance of $87.9 million was recorded as of June 30, 2024.
We believe that certain of the transactions that occurred in connection with our emergence from bankruptcy in September 2012, including the rights offering and the redemption of the Syms shares owned by the former majority shareholder of Syms in accordance with the Plan, resulted in us undergoing an “ownership change,” as that term is used in Section 382 of the Code. However, while the analysis is complex and subject to subjective determinations and uncertainties, we believe that we should qualify for treatment under Section 382(l)(5) of the Code. As a result, we believe that our NOLs are not subject to an annual limitation under Section 382. However, if we were to undergo a subsequent ownership change in the future, our ability to utilize our NOLs could be subject to limitation under Section 382. In addition, the TCJA limited the deductibility of NOLs arising in tax years beginning after December 31, 2017 to 80 percent of taxable income (computed without regard to the net operating loss deduction) for the taxable year. However, the CARES Act suspended the 80% limitation on the use of NOLs for tax years beginning before January 1, 2021, and allowed losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back up to five years.
Even if all of our regular U.S. federal income tax liability for a given year is reduced to zero by virtue of utilizing our NOLs, we may still be subject to state, local or other non-federal income taxes.
Our certificate of incorporation includes a provision intended to help preserve certain tax benefits primarily associated with our NOLs. This provision generally prohibits transfers of stock that would result in a person or group of persons becoming a 4.75% stockholder, or that would result in an increase or decrease in stock ownership by a person or group of persons that is an existing 4.75% stockholder. This provision expires by its terms on February 12, 2025, ten years after its adoption. The Company intends to extend this provision prior to its expiration or implement a similar mechanism to preserve such benefits.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including information included or incorporated by reference in this Quarterly Report on or any supplement to this Quarterly Report, may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information relating to us that are based on the beliefs of management as well as assumptions made by and information currently available to management. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions that are not historical facts, and other statements identified by words such as “may,” “will,” “expects,” “believes,” “plans,” “estimates,” “potential,” or “continues,” or the negative thereof or other and similar expressions. In addition, in some cases, you can identify forward-looking statements by words or phrases such as “trend,” “potential,” “opportunity,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions. Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including among others:
● | the Company’s limited cash resources, our only source of revenue is an asset management fee, and our reliance on external sources of capital to fund operations in the future, and existing cash and cash equivalents will not be sufficient to fund the Company’s operations and corporate expenses beyond the next few months, unless we are able to raise additional capital or enter into a strategic transaction, creating substantial doubt about our ability to continue as a going concern; |
● | one of our primary business purposes following the Recapitalization Transactions is to act as asset manager for the properties owned by TPHGreenwich in accordance with the terms and conditions of the Asset Management Agreement which can be terminated by TPHGreenwich at any time with or without cause; |
● | risks associated with the Company evaluating and potentially consummating a strategic transaction, including the risk that the Company may fail to realize the anticipated benefits of any such transaction; |
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● | the loss of key personnel upon whom we depend to operate our business, including the departure of Matthew Messinger as president and chief executive officer, would adversely affect our business; |
● | our common stock may be delisted; |
● | we are eligible to terminate the registration of our common stock under the Exchange Act and cease being a U.S. public company with reporting obligations and we may do so in the near future; |
● | we have not generated an operating profit and consequently our business plan is difficult to evaluate and our long-term viability cannot be assured; |
● | we are subject to risks associated with TPHGreenwich, including that we may not receive any distributions from TPHGreenwich; |
● | we are subject to extensive covenants, and the Investor has many consent and approval rights, under the Stock Purchase Agreement, many of which survive indefinitely following the closing of the Recapitalization Transactions; |
● | our revenues and the value of our portfolio are affected by a number of factors that affect investments in leased commercial and residential real estate generally; |
● | our ability to utilize our NOLs to offset future taxable income and capital gains for U.S. Federal, state and local income tax purposes; |
● | TPHGreenwich and its subsidiaries are subject to leverage and face risks generally associated with such debt, including an increased risk of default on the such entity’s obligations and an increase in debt service requirements that could adversely affect our financial condition and results of operations; |
● | covenants in the loan agreements could limit TPHGreenwich’s flexibility and adversely affect our financial condition; |
● | the Company Investor is the lender under the CCF, and an affiliate of the Company Investor and JV Investor is the lender under the 77G Mezzanine Loan, which could create a conflict of interest; |
● | adverse trends in the New York City residential condominium market; |
● | general economic and business conditions, including with respect to real estate, and their effect on the New York City residential real estate market in particular; |
● | TPHGreenwich’s ability to enter into new leases and renew existing leases with tenants at the commercial and residential properties; |
● | risks associated with the effect that rent stabilization regulations may have on TPHGreenwich’s ability to raise and collect rents; |
● | TPHGreenwich’s ability to maintain certain state tax benefits with respect to certain of the properties; |
● | TPHGreenwich’s ability to obtain required permits, site plan approvals and/or other governmental approvals in connection with the development or redevelopment of the properties; |
● | costs associated with complying with environmental laws and environmental contamination, as well as the Americans with Disabilities Act or other safety regulations and requirements; |
● | the effects of new tax laws; |
● | risks associated with current political and economic uncertainty, and developments related to the outbreak of contagious diseases; |
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● | risks associated with breaches of information technology systems; |
● | stock price volatility and other risks associated with a lightly traded stock; |
● | stockholders may be diluted by the issuance of additional shares of common stock or securities convertible into common stock in the future; |
● | a declining stock price may make it more difficult to raise capital in the future; |
● | the influence of certain significant stockholders; |
● | limitations in our charter on transactions in our common stock by substantial stockholders, designed to protect our ability to utilize our NOLs and certain other tax attributes, may not succeed and/or may limit the liquidity of our common stock; |
● | certain provisions in our charter documents and Delaware law may have the effect of making more difficult or otherwise discouraging, delaying or deterring a takeover or other change of control of us; |
● | certain provisions in our charter documents may have the effect of limiting our stockholders’ ability to obtain a favorable judicial forum for certain disputes; and |
● | unanticipated difficulties which may arise and other factors which may be outside our control or that are not currently known to us or which we believe are not material. |
In evaluating such statements, you should specifically consider the risks identified under the section entitled “Risk Factors” in our 2023 Annual Report for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2024, as amended on April 29, 2024, and under the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q, any of which could cause actual results to differ materially from the anticipated results. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those contemplated by any forward looking statements. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere described in our 2023 Annual Report, this Form 10-Q and other reports filed with the SEC. All forward-looking statements speak only as of the date of this Form 10-Q or, in the case of any documents incorporated by reference in this Form 10-Q, the date of such document, in each case based on information available to us as of such date, and we assume no obligation to update any forward-looking statements, except as required by law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the disclosure required by this Item.
Item 4. Controls and Procedures
a)Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports 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 principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation,
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our principal executive officer and principal financial officer have concluded that as of June 30, 2024, our disclosure controls and procedures were effective.
b)Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, we are party to routine legal proceedings. Based on advice of counsel and available information, including current status or stage of proceedings, and taking into account accruals where they have been established, management currently believes that any liabilities ultimately resulting from litigation we are currently involved in will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity.
Item 1A. Risk Factors
Numerous factors affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this Quarterly Report, you should carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our 2023 Annual Report, which describe significant risks that may cause our actual results of operations in future periods to differ materially from those currently anticipated or expected.
We have a limited amount of unrestricted cash and liquidity. We expect to have insufficient cash and liquidity to pay operating expenses and other obligations beyond the next few months, which would have a material adverse effect on our business and financial condition. Our liquidity will be further limited if our Asset Management Agreement does not remain in place. If we are not successful in raising additional capital or entering into a strategic transaction, we will be forced to consider all available alternatives, including filing for bankruptcy protection, liquidating or dissolving.
We have a limited amount of unrestricted cash and liquidity available for working capital and our cash needs are variable under different circumstances. If the Asset Management Agreement does not remain in place and the related fees are not increased significantly, the Company’s cash and cash equivalents will not be sufficient to fund the Company’s operations and corporate expenses beyond the next few months, unless we are able to raise additional capital or enter into a strategic transaction, creating substantial doubt about our ability to continue as a going concern. There is no assurance that we will be successful in consummating any such strategic transaction or obtaining capital sufficient to meet our operating needs, in each case, on terms or a timeframe acceptable to us or at all. Even if a strategic transaction and/or other transaction is entered into, the benefits to shareholders, if any, of such transactions are uncertain. Further, in the event that we are unable to identify or consummate such transactions, we would be required to evaluate additional alternatives in restructuring our business and our capital structure, including but not limited to, filing for bankruptcy protection, liquidating, dissolving and/or seeking another out-of-court restructuring of our liabilities or liquidation. See Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources and Note 1 - Business to our consolidated financial statements for more information regarding our ability to continue as a going concern and related matters.
Following the departure of our president and chief executive officer, upon whom we have depended to operate our business, there can be no assurance that a replacement principal executive officer will be identified, which would adversely affect our business.
Under the terms of the Amendment to Mr. Messinger’s Employment Agreement, Mr. Messinger agreed to continue his employment as chief executive officer until the filing of this Quarterly Report on Form 10-Q. The Company is currently evaluating next steps for identifying a new principal executive officer, however no replacement for Mr. Messinger has been identified as of the date of this filing. Given our limited cash position, it will be difficult for the Company to attract a replacement principal executive officer, and there is no assurance that our efforts will be successful. In addition, under
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the Sarbanes-Oxley Act, the Company is required to have a principal executive officer certify that our disclosure controls and procedures are effective in ensuring that material information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. If the Company is unable to identify a replacement principal executive officer, it will not be able to make its required filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
Trading Arrangements
During the fiscal quarter ended June 30, 2024, none of our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act)
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Item 6. Exhibits
3.1 | |||
3.2 | |||
10.1 | |||
10.2 | Consulting Agreement, April 26, 2024, between TPHGreenwich Holdings LLC and Matthew Messinger.*¥ | ||
31.1* | |||
31.2* | |||
32.1** | |||
32.2** | |||
101* | The following materials from our Quarterly Report on Form 10-Q for the period ended June 30, 2024 formatted as inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023, (ii) Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2024 and June 30, 2023, (iii) Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and June 30, 2023, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and June 30, 2023, (v) Notes to Consolidated Financial Statements and (vi) Cover Page Interactive Data File. | ||
| |||
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
** | Furnished herewith |
¥ | Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit in accordance with the rules of the SEC. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TRINITY PLACE HOLDINGS INC. | |
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|
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Date: August 14, 2024 | By | /s/ Matthew Messinger |
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| MATTHEW MESSINGER |
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| PRESIDENT and CHIEF EXECUTIVE OFFICER |
|
| (Principal Executive Officer) |
|
|
|
Date: August 14, 2024 | By | /s/ Steven Kahn |
|
| STEVEN KAHN |
|
| CHIEF FINANCIAL OFFICER |
|
| (Principal Financial Officer) |
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