Gyrodyne Company of America Inc. Reports Operating Results (10-K)
Gyrodyne Company Of America Inc. has a market cap of $94.8 million; its shares were traded at around $73.47 with and P/S ratio of 19.6.
Highlight of Business Operations:Gyrodyne owns a 68 acre site called Flowerfield, primarily zoned for light industry, which is located approximately 50 miles east of New York City on the north shore of Long Island in the hamlet of St. James, New York. Flowerfield's location also places it in hydrological zone VIII, one of the most liberal with respect to effluent discharge rates. The Company currently has 127,062 square feet of rentable space located on approximately 10 acres of developed property at Flowerfield. As of December 31, 2010, there were 45 tenants, comprising 53 leases which include 4 long term tenants under month to month commitments. The annual base rent based on the rates in effect as of December 2010 is $1,637,000 which included month to month annualized base rent of $242,000 on approximately 17,800 square feet. The occupancy rate is 81% as of December 31, 2010. The Flowerfield property is located in Smithtown Township. Environmental studies are in the process of being updated and numerous other studies including archeological, ecological, and traffic have been conducted in connection with development plans -- all with no significant adverse findings. The Company believes that it will not incur material costs in connection with compliance with environmental laws. During the years ended December 31, 2010 and December 31, 2009, the Company had no material expenses related to environmental issues. Associated with the new mortgage loan secured by the Flowerfield Industrial Park, the Company agreed with the bank to an escrow balance of $250,000. The escrow will be released to the Company following the pending environmental testing provided the results are satisfactory to the bank.
On June 27, 2007, the Company acquired ten buildings in the Port Jefferson Professional Park in Port Jefferson Station, New York. The buildings were acquired for an aggregate purchase price of $8,850,000 or $225 per square foot. The buildings, located at 1-6, 8, 9 and 11 Medical Drive and 5380 Nesconset Highway in Port Jefferson Station, are situated on 5.16 acres with 39,329 square feet of rentable space. As of December 31, 2010, there were 22 tenants, comprising 21 leases, and one long term tenant under a month to month agreement, together renting space with an annual base rent of approximately $992,000, based on the tenant base and rates in effect on December 2010. The occupancy rate was 97% as of December 31, 2010. The Company funded $5,551,191 of the purchase price by the assumption of the existing mortgage debt on the property and the remainder in cash after adjustments. The property qualified for the deferral treatment under Section 1033 of the Internal Revenue Code.
On June 2, 2008, the Company acquired the Cortlandt Medical Center in Cortlandt Manor, New York. The property consists of five office buildings which are situated on 5.01 acres with 31,198 square feet of rentable space. The purchase price was $7 million or $231 per square foot. As of December 31, 2010, there were 13 tenants, comprising 14 leases, renting space with an annual base rent of approximately $979,000, based on the tenant base and rates in effect as of December 2010. The property was 100% occupied as of December 31, 2010. Of the $7 million purchase price for the property, the Company paid $1,750,000 in cash and received financing in the amount of $5,250,000. The property qualified for the deferral treatment under Section 1033 of the Internal Revenue Code.
On March 31, 2009, the Company acquired the Fairfax Medical Center in Fairfax, Virginia. The property consists of two office buildings which are situated on 3.5 acres with 57,621 square feet of rentable space. The purchase price was $12,891,000 or $224 per square foot. As of December 31, 2010, there were 30 tenants, comprising 31 leases, renting space with an annual base rent of $1,451,000, based on the rates in effect as of December 2010. The occupancy rate as of December 31, 2010 was 91%, which included one signed 2010 tenant who took possession of additional space in March 2011. Of the $12,891,000 purchase price, the Company paid $4,891,000 in cash and received financing in the amount of $8,000,000. The property qualified for the deferral treatment under Section 1033 of the Internal Revenue Code and completed the tax-efficient reinvestment program of the $26.3 million Advance Payment received in connection with the condemnation of the 245 acres of the Flowerfield property.
The original limited partnership investment of $1.1 million, which was made in 1965, has since yielded distributions to Gyrodyne of approximately $5.5 million in the aggregate. Due to recurring losses of the Grove, the investment is carried on the books of the Company at $0 as a result of recording the Company s pro-rata share of losses under the equity method of accounting. In fiscal 2000, when the Company s share of losses equaled the carrying value of the investment, the Company, pursuant to the equity method of accounting , no longer recorded the Company s share of losses. The Company does record the tax expense and deferred tax liability related to the Company s limited partnership interest in the tax losses of the Grove. The 2010 tax expense and year ended 2010 deferred tax liability related to the Grove is $109,000 and $1,315,000, respectively.
On December 29, 2010, the Company closed on a new term loan facility with a bank for $4 million. A portion of the proceeds was used to retire the outstanding line of credit with AWM of $1,750,000. The new loan has a maturity date of January 2, 2031 and a floating interest rate of prime + 100 basis points with a floor of 5%, to be adjusted once annually on its anniversary date. Lamb & Barnosky LLP represented AWM in connection with the new loan, and was paid closing fees of $2,045 by the Company. The Company agreed with the new lender to deposit $250,000 of the proceeds from the loan in an escrow account until the satisfactory completion of environmental testing and related receipt of a clearance certificate. The Company is not aware of any material environmental clean up costs that will be incurred to release the escrow.
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