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spk01: Good morning and welcome to the New York City REIT fourth quarter and full year 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I would now like to turn the conference over to Louisa Cuatro, Executive Vice President. Please go ahead.
spk02: Thank you, operator. Good morning, everyone, and thank you for joining us for NYC's fourth quarter and full year 2021 earnings call. This event is being webcast in the investor relations section of NYC's website at www.NewYorkCityREIT.com. Joining me today on the call to discuss the quarter's results are Mike Weil, NYC's chief executive officer, and Chris Masterson, NYC's chief financial officer. The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. We refer all of you to our SEC filings, including this 10-K file for the year ended December 31, 2020, filed on March 29, 2021, and all subsequent SEC filings for more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this call are made only as of the date of this call. As stated in our SEC filings, NYC disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. Also during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable gap measure is available in our earnings release. Please also refer to our earnings release for more detailed information about what we consider to be implied investment grade tenants, a term we will use throughout today's call. I'll now turn the call over to Michael Weil, Chief Executive Officer of New York City REIT. Please go ahead, Mike.
spk05: Thanks, Louisa. Good morning and thank you for joining us. Today we'll discuss the strong return that NYC achieved for shareholders in 2021 and how our proactive asset and property management initiatives have helped us successfully navigate two years of pandemic impacts. Thankfully, it appears that New York has turned another corner as COVID positivity rates drops and vaccination rates soar. The statewide rollback of pandemic-related regulations and mandates paves the way for workers to return to offices en masse and for the vibrancy of New York City to return to normal. Because we've long been preparing for it, New York City REIT is well positioned to benefit as New Yorkers return to their offices and tourists return in significant numbers. For the period between the beginning of 2021 through March 1st, 2022, we delivered an exceptional total return to shareholders of 55% based on stock price appreciation and dividends paid. This outperformed the S&P 500 by over 36%. and a group of New York City-focused peer REITs by over 31%. Through these unprecedented times, NYC has continued to outperform the market and our peers. Nonetheless, we believe that there remains significant potential for our pure play New York City portfolio, which is marked by investment grade and government agency tenants, and which has proven resilience over the last two years to create meaningful value for years to come. Over the last year, we recorded growing rent collection across our portfolio. In the fourth quarter, we collected 96% of the original cash rent due for the period, a 4% increase from 92% of the amount due in the third quarter, and a 14% improvement from amount due in the fourth quarter of 2020. In addition, we collected 100% of the deferred rent that was due in the third and fourth quarters of 2021 pursuant to approved agreements. Our annual report on Form 10-K will provide additional detail on cash collections. As the largest, densest city in the country, the impact of COVID on New York City was perhaps deeper and longer lasting than anywhere else in the United States. In light of this, we remain pleased with the results of our proactive asset management and property management functions, which have maintained rent collection throughout the pandemic. Our asset management team remains engaged with our tenants, working towards a complete recovery from pandemic-related challenges. We work closely with our tenants to reach agreements that allow them to continue their operations and remain in our buildings. Where no agreement was possible, such as the space formerly leased to Notel, Icon Parking, and Quick Park, we rapidly signed new leases and licensing agreements to replace the prior tenants. Along these lines, Last year, we launched a coworking office, Innovate NYC, at 1140 Avenue of the Americas, in space that was already set up, furnished, and with some licensees in place from the previous coworking tenant. Last year, we also executed two leases which contained percentage rent clauses, tying a portion of rent from key retail tenants to sales that we expected to increase over time while their businesses began to rebound from pandemic lows. Since execution, Both tenants have performed exceptionally well and, as a result, have nearly returned to original cash rent levels much sooner than expected. These leases are another example of how, at every opportunity, we've been responsive, creative, and innovative in our approach to managing our portfolio. Specifically, we've signed leases with former tenants of Notel and leased up much of the space at 9 Times Square and 123 William Street, in the year since NoTel declared bankruptcy. Through March 1, 2022, we've replaced more than 69% of the 71,200 square feet formerly occupied by NoTel with credit worthy rent paying tenants. These leases have a weighted average remaining lease term of seven years and combined annualized straight line rent of almost $2.5 million, or 64% of the previous NoTel rent. Recently, LHI executed a full five-year lease for additional space after previously signing a two-year license, not only extending but growing their occupancy. Our team has done an amazing job leasing and licensing the former no-tell space in only 13 months. The remaining high-quality turnkey space is being actively marketed, and we believe it will be very attractive to new tenants who are establishing or reestablishing physical office space as COVID abates. Last quarter, we finalized a seamless transfer of management of our parking garages to a new operator. In connection with the transition, we agreed to a $1.4 million termination fee payment from the former operator. The transfer of responsibility for these garages couldn't have been better executed, and we're happy to have a new partner running these properties. Our asset management team has also been very busy working on lease renewals. encouraging current tenants to execute renewals well before the lease expiration. For the full year of 2021, we executed 17 new leases for over 200,000 square feet that added approximately $7.4 million of annualized straight-line rent. In addition to new leases, we completed four lease renewals, including a five-year lease extension with an AA2 credit-rated tenant that increased annualized straight-line rent from the tenant by $300,000. We also have a forward leasing pipeline of over 14,000 square feet that will increase occupancy to 84% if these leases commence. At year end, our $852.7 million, 1.2 million square foot portfolio had occupancy of 82.9% and a weighted average remaining lease term of 6.9 years. Of course, All the good work and progress we've made throughout our portfolio is done for the purpose of continuing to grow and improve our quarterly and annual results. I'm happy to report that our leasing and asset management initiatives have begun to reflect well in our numbers. I'll let Chris give more details, but quarter over quarter revenue grew by 53%, adjusted EBITDA grew to $11.9 million from $4.1 million, and core FFO increased by over $7 million to $7.1 million. Comparing the fourth quarters of 2020 and 2021, revenue more than doubled and cash NOI increased by 74% to $7.1 million. Our balance sheet remains strong with net leverage of 40% and over six years of weighted average debt maturity. We remain highly confident in the long term strength of New York City real estate, based on our fundamental belief in the necessity of New York City office and retail space. we've built a pure play New York City portfolio that features a mix of large investment grade tenants, including city national bank CBS TD bank and state government agencies. As of December 31. NYC's top 10 tenants were 72% investment grade or implied investment grade rated and have an average remaining lease term of 9.6 years, which we believe increases the quality and stability of earnings in our portfolio. We've continued to drive New York City REIT forward during the last year, negotiating leases with new and existing tenants and growing rent collection across the portfolio. With a 55% total return since the beginning of 2021, and through March 1st, 2022. And the current trading price that we believe is a significant discount to our NAV. We believe that our New York City portfolio is well positioned for the investment community to realize substantial gains as the market starts to appreciate the value being built. I'll turn it over to Chris Masterson to go over the fourth quarter and full year financials. Chris, can you take us through the results?
spk03: Thanks, Mike. Revenue was $70.2 million for the year ended December 31st, 2021. Revenue for the fourth quarter was $24.2 million compared to $9.9 million in the fourth quarter of 2020 and $15.8 million in the third quarter of 2021. Revenue for the fourth quarter and full year of 2021 includes income from the accelerated amortization of the remaining unamortized balance of below market lease liabilities of approximately $7.7 and $7.9 million, respectively, which is recorded in revenue from tenants in the consolidated statements of operations. Revenue for the fourth quarter and full year 2021 also includes $1.4 million and $1.5 million in termination fees, respectively. The company's full year gap net loss attributable to common stockholders was $39.5 million compared to a net loss of $41 million in 2020. Net loss for the quarter was $3.8 million compared to net losses of $16.6 million in the fourth quarter 2020 and $11.1 million in the prior quarter. Cash NOI for the fourth quarter was $7.1 million, a 74% increase compared to $4.1 million in the fourth quarter of 2020 and a 24% increase over the last quarter. For the fourth quarter of 2021, our FFO attributable to common stockholders, was 4.9 million compared to negative 8.9 million in the same quarter of 2020 and negative 2.9 million in the third quarter of 2021. Core FFO was 7.1 million in the fourth quarter or 53 cents per share from negative 6.8 million or negative 53 cents per share in the fourth quarter of 2020. And it increased from negative 0.7 million or negative 6 cents per share in the third quarter. As always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, supplemental, and Form 10-K. NYC maintains a conservative balance sheet with no debt maturity scheduled within the next three years and prudent net leverage at 40.1%. We ended the fourth quarter with net debt of $393.3 million at a weighted average effective interest rate of 4.4%, and a weighted average remaining debt term of 5.1 years. With that, I'll turn the call back to Mike for some closing remarks.
spk05: Great. Thank you, Chris. We believe that our Manhattan-focused New York City portfolio is resilient and well-positioned to deliver significant long-term value as COVID-19 continues to abate. Our independent directors, myself and the advisor and its affiliates, have each separately demonstrated the depth of our commitment to NYC's long-term value by increasing our NYC ownership. In total, as of March 1st, NYC's independent board members owned over 57,000 shares of NYC, and separately, our advisor and its affiliates owned over 1 million shares. This alignment of interest drives the proactive approach to asset management that we believe has helped us successfully navigate the last two years. In addition to owning a significant number of shares, we've been able to leverage the substantial resources of our advisor throughout COVID to release vacant space, replace tenants, and increase rent collections by utilizing the asset management and property management expertise of the platform. Despite being a micro-cap company, we have access to resources that have allowed us to be proactive on these fronts. During this time, we've worked with our tenants and licensees to sign new leases and agreements, collect over 96% of the original cash rents due in the fourth quarter, and replace tenants and operators who have surrendered their space. We believe there is significant upside potential and that we have positioned the company to benefit from a full post-COVID return to normalcy. With that, operator, please open the lines for questions.
spk01: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question today comes from Brian Maher with B. Reilly Securities. Your line is now open.
spk04: Hey, Brian. Good morning, Michael and Chris, and thanks for those comments. Maybe you start with Chris. On the amortization of below-market lease liabilities,
spk03: can you give us some you know some color on what triggered that you know certainly wasn't something we were expecting in our model so that was actually due to the termination of the parking garage lease in the fourth quarter so when that was terminated we accelerated all of the amortization related to the blue market lease and now we brought in the the new operator who now going forward we're going to continue to have the the rent from that operator
spk04: Okay. And then moving on to 123 William Street and Nine Times Square, it seems like, you know, during the quarter occupancy stayed pretty steady despite, you know, back selling some of the no-tell space. You know, is there any notable vacancies there that we should be thinking about for our model?
spk05: Brian, you mean upcoming vacancies? I just want to make sure I answer the question. No, I'm sorry, go ahead.
spk04: Yeah, just, you know, what's going on at those two properties as it relates to backfilling no-till versus other existing tenants? Is there any movement there that would impact how we're thinking about occupancy, you know, as we kind of move through 2022? Yeah, we look at net positive absorption at both of those buildings. Okay. Okay. And then at Avenue of the Americas, what drove the occupancy dip there? And then maybe kind of a two-part question. You know, when you look out to the full year of 2022, how should we think about occupancy, you know, maybe ending the year, give or take?
spk05: As we don't give specific, we don't give guidance, as you know, We see the leasing activity in the New York City market being strong in 2022, coming off of the second half of 2021, also being very active and securing a number of new tenants in the building. So we continue to see the occupancy in the portfolio increasing and the The pipeline for activity, meaning deals that are near execution, as we've talked about, represents about one percentage point of additional occupancy, but that pipeline is of deals. There's a lot more behind that that is not at a point that we are discussing it in the public setting.
spk04: Got it. But kind of longer term, when you look at the portfolio as it is now, and I think you talk about this to a degree on the necessity retail rate, do you have an idea in your head where, you know, 83, 84% occupancy can go, you know, two, three, five years out with the recovery?
spk05: Absolutely. Absolutely. This portfolio should be, we anticipated growing into the kind of 95, 96% occupancy over time. It is leasable space. It's second generation space, meaning most of it has been tenanted before, so we don't have raw build out, which of course is potentially more expensive. So Chris Chow, who heads up the asset management team, We feel that these assets are well positioned. We like where they are in the city and what the tenant roster looks like. And we are seeing new tenants coming into the market. We're seeing existing tenants that are renewing and expanding. So we're very positive on the fact that it may look a little bit different, but Corporate tenants are coming back into their offices. We're seeing it now in 2022. The spring should be a very positive experience from that aspect as well. So we will continue to see users and we will continue to grow the occupancy.
spk04: Great. And maybe just one last one for me. You've talked in the past you know, to a degree about the acquisition, you know, outlook, you know, what are you seeing? I mean, you guys have a strong balance sheet. You can certainly be doing, you know, something out there, you know, are there deals that you're seeing that are catching your attention? And do you think we might hear something in 2022?
spk05: Um, we would like to be growing the company and we will continue to monitor the, um, acquisition pipeline. We haven't seen anything that we felt was positive addition to the portfolio. We've looked at a number of assets where it was kind of a distressed seller type of situation where the impact of COVID and the required capital that they were facing So there will definitely be great opportunities in New York City for the types of assets that we look to acquire. We will continue to be Manhattan-focused, and I do look forward to identifying and talking about potential acquisitions. Thanks, Michael.
spk04: That's all for me.
spk05: All right. Thanks, Brian.
spk01: There are no further questions at this time. Mr. Weil, I turn the call back over to you.
spk05: Great. Well, thank you all for joining us. As you heard from our presentation today, we really had a great 2021. The company is seeing very positive results. We continue to be focused on growth of occupancy, growth of earnings, and this is a really exciting time for the company. The outperformance that we have experienced in 2021 and coming into 2022, something that we're very proud of, not only as we compare against the S&P, but as we also compare against our New York City peers of publicly traded REITs. And we will continue to execute, and we look forward to talking to everybody soon. So thank you very much.
spk01: This concludes today's conference call. Thank you for attending. You may now disconnect.
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