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Gyrodyne Company of America Inc. Reports Operating Results (10-Q)

November 09, 2011 | About:

Gyrodyne Company of America Inc. (NASDAQ:GYRO) filed Quarterly Report for the period ended 2011-09-30.

Gyrodyne Company Of America Inc. has a market cap of $103.4 million; its shares were traded at around $80.2 with and P/S ratio of 18.6.

Highlight of Business Operations:

Leasing – During the three months ending September 30, 2011, the Company entered into 11 new leases and lease extensions encompassing approximately 15,000 square feet and $264,000 in annual revenue and had 2 lease terminations encompassing approximately 4,000 square feet and $114,000 in annual revenue. The Company generated an increase in net deferred revenue of approximately $61,000.

The continued economic challenges for both small businesses and medical practitioners have impacted the Company s ability to renew leases at comparable rates if at all, without providing either rent abatements or comparable other lease incentives. During 2010 and 2011, medical office parks and industrial parks experienced degradation in both rental rates and occupancy. During the quarter, rental revenues were $1,224,553 and $1,206,799 for the three months ended September 30, 2011 and June 30, 2011, respectively, an increase of $17,754 or 1%. Although the Company successfully increased revenues during both the quarter and the nine-months ending September 30th, the Company continues to experience challenges to maintain both rental rates and occupancy.

Rental revenues are comprised solely of rental income and amounted to $1,224,553 and $1,248,784 for the three months ended September 30, 2011 and 2010, respectively, a decrease of $24,231 or 2%. The Flowerfield Industrial Park and the Fairfax Medical Center experienced a reduction in revenue of approximately $13,000 and $11,000, respectively. The Port Jefferson Professional Park also experienced a decrease in revenue of approximately $3,000 which was offset by a similar increase at the Cortlandt Manor Medical Center. The decrease during the quarter was attributable to a reduction in occupancy rate which was partially offset by contractual annual rent escalations.

Rental revenues are comprised solely of rental income and amounted to $3,691,533 and $3,650,138 for the nine months ended September 30, 2011 and 2010, respectively, an increase of $41,395 or 1%. The Fairfax Medical Center experienced approximately a $30,000 increase in revenue over the comparable prior period due to higher average occupancy rates combined with one tenant who exercised an early termination option on a rooftop cellular equipment lease at a cost of approximately $22,000. The Port Jefferson Professional Park experienced a net increase in occupancy rate combined with contractual escalations comprising approximately $20,000. Additionally, an increase of approximately $7,000 is due to the Cortlandt Manor property purchased in 2010 and the net impact of contractual escalations and renewals. The increases were partially offset by the Flowerfield Industrial Park which experienced a reduction in revenues of approximately $15,000. The Company foresees ongoing challenges in maintaining the revenue levels at the Industrial Park due to the economic factors facing its small business tenants and the degradation in vacancy rates and market rent rates at industrial parks in general, and Long Island specifically.

As of September 30, 2011, the Company had cash and cash equivalents, totaling $11,031,134. The Company anticipates that the combination of its current cash balance and cash flow from continuing operations will be adequate to fund business operations, condemnation litigation related fees and the debt amortization of our long term mortgages over the next twelve months. In addition to these ongoing requirements, the continued economic challenges for small businesses, including the lack of available credit to the real estate sector, and the uncertainty facing medical tenants brought about by the 2010 Federal health care reform legislation, could adversely affect our operating results. To address these risks and challenges, the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission to register a number of shares of the Company s common stock to be offered in a rights offering by the Company to its shareholders with gross proceeds (if all rights are exercised) of $9,210,000 or $10,210,000 if an over-allotment option is exercised. The Company received subscriptions for approximately 294,685 shares, greatly exceeding the maximum shares offered of 173,305, and the Company elected to exercise its overallotment option to issue an additional 19,336 shares to satisfy over-subscription requests. Shareholders were allocated 100% of their basic subscriptions. The rights offering resulted in 192,641 common shares issued, and net proceeds (after expenses) raised of $9,987,476. The revenues raised were included in the company s September 30th cash balance of $11,031,134. The proceeds are intended to be used for potential additional expenses in the condemnation litigation, pursuing development rights for the Flowerfield property, necessary capital improvements in our real estate portfolio and general working capital.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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