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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
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
001-36416*
 
 
NEW YORK REIT LIQUIDATING LLC
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Delaware
 
83-2426528
State or Other Jurisdiction of
Incorporation or Organization
 
I.R.S. Employer
Identification No.
 
2 Liberty Square, 9
th
Floor, Boston, MA
 
02109
Address of Principal Executive Offices
 
Zip Code
(617)
570-4750
Registrant’s Telephone Number, Including Area Code
 
 
Securities registered pursuant to Section 12(b) of the Exchange Act: None
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
N/A
 
N/A
 
N/A
Securities registered pursuant to Section 12(g) of the Exchange Act:
Units
(Title of class)
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒
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 and 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 at least the past
90 days.   
 Yes
  ☒    No  
☐  
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File to be submitted pursuant to Rule 405 of Regulation
S-T
(232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files
).    
Yes
  ☒    No  ☐ 
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. (Check one):
 
Large accelerated filer   ☐    Accelerated filer   ☒
Non-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 Exchange Act
 
Rule12b-2).    Yes  ☐    No  
☒  
As of November 1, 2020, there were 16,791,769 Units outstanding.
Documents incorporated by reference: None
 
*
New York REIT Liquidating LLC is the successor in interest to New York REIT, Inc. and files reports under the Commission file number for New York REIT, Inc.
 
 
 
Table of Contents
NEW YORK REIT LIQUIDATING LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
      
Page
 
  
Item 1.
    
       3  
       4  
       5  
Item 2.
       15  
Item 3.
       21  
Item 4.
       21  
  
Item 1.
       22  
Item 1A.
       22  
Item 2.
       22  
Item 3.
       22  
Item 4.
       22  
Item 5.
       22  
Item 6.
       22  
       24  
Table of Contents
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
NEW YORK REIT LIQUIDATING LLC
FORM
10-Q
SEPTEMBER 30, 2020
CONSOLIDATED STATEMENTS OF NET ASSETS
(Liquidation Basis)
(Unaudited, in thousands)
 
 
 
September
 
30,
 
2020
 
 
December
 
31,
 
2019
 
Asset
s
 
 
 
 
 
 
 
Investment in unconsolidated joint venture
   $ 269,040      $  265,516  
Cash and cash equivalents
     7,572        7,650  
Restricted cash held in escrow
     92,177        92,302  
Accounts receivable
     60        60  
  
 
 
    
 
 
 
Total Assets
     368,849        365,528  
Liabilities
       
Liability for estimated costs in excess of estimated receipts during liquidation
     2,290        2,348  
Accounts payable, accrued expenses and other liabilities
     253        389  
  
 
 
    
 
 
 
Total Liabilities
     2,543        2,737  
  
 
 
    
 
 
 
Commitments and Contingencies
  		 
Net assets in liquidation
  
$
366,306      $ 362,791  
  
 
 
    
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
3
Table of Contents
NEW YORK REIT LIQUIDATING LLC
FORM 10-Q SEPTEMBER 30, 2020
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Liquidation Basis)
(Unaudited, in thousands)
 
     Three Months Ended     Nine Months Ended  
     September 30,
2020 		    September 30,
2019 		    September 30,
2020 		    September 30,
2019 		 
Net assets in liquidation, beginning of period
   $ 366,850      $  360,584     $ 362,791      $  372,556  
Changes in net assets in liquidation:
          
Changes in liquidation value of investment in unconsolidated joint venture
     4,213        1,393       13,169        3,840  
Remeasurement of assets and liabilities
  
(559
)
 
     (324 )   
(2,0
98
)
     (1,141 ) 
  
 
 
    
 
 
   
 
 
    
 
 
 
Net changes in liquidation value
     3,654        1,069       11,071        2,699  
Liquidating distributions to unitholders
     (4,198 )       (1,679 )      (7,556 )       (15,281 ) 
  
 
 
    
 
 
   
 
 
    
 
 
 
Changes in net assets in liquidation
     (544 )       (610 )      3,515        (12,582 ) 
  
 
 
    
 
 
   
 
 
    
 
 
 
Net assets in liquidation, end of period
   $ 366,306      $ 359,974     $ 366,306      $ 359,974  
  
 
 
    
 
 
   
 
 
    
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
4
Table of Contents
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
Note 1 — Organization
New York REIT Liquidating LLC (the “Company”) was formed on November 7, 2018 and is the successor entity to New York REIT, Inc., (the “Predecessor”). The Predecessor was incorporated on October 6, 2009 as a Maryland corporation that qualified as a real estate investment trust for U.S. federal income tax purposes (“REIT”) beginning with its taxable year ended December 31, 2010. On April 15, 2014, the Predecessor listed its common stock on the New York Stock Exchange (“NYSE”) under the symbol “NYRT” (the “Listing”).
The sole purpose of the Company is to wind up the Company’s affairs and the liquidation of the Company’s assets with no objective to continue or to engage in the conduct of a trade or business, except as necessary for the orderly liquidation of the Company’s assets.
Substantially all of the Predecessor’s business was conducted through its operating partnership, New York Recovery Operating Partnership, L.P., a Delaware limited partnership (the “OP”).
On August 22, 2016, the Predecessor’s Board of Directors (the “Board”) approved a plan of liquidation to sell in an orderly manner all or substantially all of the assets of the Predecessor and its OP and to liquidate and dissolve the Predecessor and the OP (the “Liquidation Plan”), subject to stockholder approval (see Note 2). The Liquidation Plan was approved at a special meeting of stockholders on January 3, 2017. All of the assets held by the OP have been sold and the OP was dissolved prior to the conversion on November 7, 2018.
As of September 30, 2020, the Company’s only significant assets are a 50.1% equity interest in WWP Holdings LLC (“WWP”), which owns one property, known as Worldwide Plaza, aggregating 2.0 million rentable square feet, with an average occupancy of 97.3%, and a $90.7 million cash reserve to be utilized for improvements at the property owned by WWP. The property consists of office space, retail space and a garage representing 88%, 5% and 7%, respectively, of rentable square feet as of September 30, 2020.
The Company has no employees. Since March 8, 2017, all advisory duties are administered by Winthrop REIT Advisors, LLC (the “Winthrop Advisor”).
Note 2 – Liquidation Plan
The Liquidation Plan provides for an orderly sale of the Company’s assets, payment of the Company’s liabilities and other obligations and the winding down of operations and dissolution of the Company. The Predecessor was not, and the Company is not, permitted to make any new investments except to make protective acquisitions or advances with respect to its existing assets. The Company is permitted to satisfy any existing contractual obligations and fund required tenant improvements and capital expenditures at its real estate property owned by the joint venture in which the Company owns an interest (See Note 6).
The Liquidation Plan enables the Company to sell any and all of its assets without further approval of the unitholders and provides that liquidating distributions be made to the unitholders as determined by the Company’s board of managers (the “Board of Managers”). In order to comply with applicable laws, the Predecessor converted into a limited liability company. The conversion of the Predecessor to a limited liability company was approved by the stockholders on September 7, 2018 and became effective on November 7, 2018.
In October 2018, the Predecessor announced the withdrawal of its common stock (“Common Shares”) from listing on the NYSE in connection with the conversion. November 2, 2018 was the last day Common Shares were traded on the NYSE and the stock transfer books were closed as of 4:00 p.m. (Eastern Time) on such date. At the effective time of the conversion, each outstanding Common Share was converted into one unit of common membership interest in the LLC (a “Unit”), and holders of Common Shares automatically received one Unit (which Unit was in book entry form) for each Common Share held by such stockholder. Holders of Units should note that unlike Common Shares, which, in addition to being listed on the NYSE, were freely transferable, Units are not listed for trading and
 
5
Table of Contents
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
generally are not transferable except by will, intestate succession or operation of law. Therefore, the recipients of Units do not have the ability to realize any value from these interests except from distributions made by the Company, the timing of which will be solely in the discretion of the Board of Managers. On October 26, 2018, the Board designated Randolph C. Read, P. Sue Perrotty, Craig T. Bouchard, Howard Goldberg and Joe C. McKinney, representing all the previous members of the Board, to serve as the initial members of the Board of Managers. On June 29, 2020, Joe C. McKinney and P. Sue Perrotty each resigned from the Board, effective July 29, 2020. Additionally, Joseph Moinian, the Company’s largest unitholder, was added as an Observer to the Company’s Board of Managers effective June 30, 2020 in an unpaid position with no voting rights in connection with Board matters.
The Company is deemed to be the same entity as the Predecessor with the same assets and liabilities as the Predecessor. In addition, the charter and bylaws of the Predecessor were replaced by the operating agreement of the Company. For tax purposes, the fair value of each Unit in the Company received by stockholders when the conversion became effective, which reflected the value of the remaining assets of the Company (net of liabilities), was equal to the average of the high and low trading prices for shares of the Predecessor’s common stock on the last three days on which the shares were traded on the NYSE.
The business of the Company is the same as the business of the Predecessor immediately preceding the conversion, which, consistent with the Liquidation Plan, consists of the continued ownership of the Predecessor’s interest in Worldwide Plaza, the only remaining property-related asset. Under its operating agreement, the business and affairs of the Company will be managed by or under the direction of its Board of Managers, and the sole purpose is winding up the affairs of the Company and the liquidation of its remaining asset. The Company will remain in existence until the earlier of (i) the distribution of all its assets pursuant to liquidation or (ii) November 7, 2022 which is four years from the effective time of the conversion. The term may be extended to such later date as the Board of Managers determines is reasonably necessary to fulfill the purposes of the Company.
The dissolution process and the amount and timing of future distributions to unitholders involves risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will be ultimately distributed to unitholders and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Consolidated Statement of Net Assets.
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.
The outbreak of the novel coronavirus
(“COVID-19”)
pandemic across many countries, including the United States, and government protective measures in response to the pandemic, have significantly slowed global economic activity and have caused significant volatility in financial markets. During the second quarter of 2020, WWP received rent relief requests from some of its retail and amenities tenants at the Worldwide Plaza property as a result of
COVID-19.
As of September 30, 2020, the property collected
100%
of the office rents that were due for the year to date period. With respect to the retail and amenities tenants of the property, approximately
 $1,138,000
of rents have not been paid as those tenants are seeking rent concessions for the time period during which they were required to be closed as a result of the COVID-19 pandemic. The unpaid rents represent approximately
1.2%
of total rents due at the property for the nine months ended September 30, 2020.
Management of WWP is evaluating each request on a tenant by tenant basis.
 
Not all tenant relief requests will result in the granting of relief and it is anticipated that a majority of any relief granted will be in the form of a deferral and not forgiveness. WWP does not plan to forgo any of its contractual rights under its lease agreements in connection with any relief requests. As of the date of this filing, WWP has granted concessions of less than $100,000 in the aggregate. To date, the impact of
COVID-19
has not been material to the Company, however, it is not possible to estimate the future impact of the pandemic at this time.
 
6
Table of Contents
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
 
Liquidation Basis of Accounting
As a result of the approval of the Liquidation Plan by the stockholders, the Company adopted the liquidation basis of accounting as of January 1, 2017 and for the periods subsequent to December 31, 2016 in accordance with GAAP. Accordingly, on January 1, 2017, the carrying value of the Company’s assets were adjusted to their liquidation value, which represented the estimated amount of cash that the Company expected to collect on disposal of assets as it carried out its liquidation activities under the Liquidation Plan. All properties have been sold except for the remaining interest in Worldwide Plaza. For purposes of liquidation accounting, the Company’s estimate of net assets in liquidation assumes a sale of Worldwide Plaza at September 30, 2021. The actual timing of sale has not yet been determined and is subject to future events and uncertainties. These estimates are subject to change based on the actual timing of the sale of the Company’s remaining property.
Liabilities are carried at their contractual amounts due as adjusted for the timing and other assumptions related to the liquidation process.
The Company accrues costs and revenues that it expects to incur and earn as it carries out its liquidation activities through the end of the projected liquidation period, which ends on September 30, 2021, to the extent it has a reasonable basis for estimation. Estimated costs expected to be incurred through the end of the liquidation period include corporate overhead costs associated with satisfying known and contingent liabilities and other costs associated with the winding down and dissolution of the Company. Revenues are based on current interest rate assumptions. These amounts are classified as a net liability for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statements of Net Assets. Actual costs and revenues may differ from amounts reflected in the consolidated financial statements due to the inherent uncertainty in estimating future events. These differences may be material. See Note 4 for further discussion. Actual costs incurred but unpaid as of September 30, 2020 and December 31, 2019 are included in accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Net Assets.
As a result of the change to the liquidation basis of accounting, the Company no longer presents a Consolidated Balance Sheet, a Consolidated Statement of Operations and Comprehensive Income (Loss), a Consolidated Statement of Changes in Equity or a Consolidated Statement of Cash Flows.
Use of Estimates
Certain of the Company’s accounting estimates are particularly important for an understanding of the Company’s financial position and results of operations and require the application of significant judgment by management. As a result, these estimates are subject to a degree of uncertainty. The Company is required to estimate all costs and revenue it expects to incur and earn through the end of liquidation including the estimated amount of cash it expects to collect on the disposal of its assets and the estimated costs to dispose of its assets. All of the estimates and evaluations are susceptible to change and actual results could differ materially from the estimates and evaluations.
Revenue Recognition
Under the liquidation basis of accounting, the Company accrues all revenue that it expects to earn through the end of liquidation to the extent it has a reasonable basis for estimation. The Company has no revenues other than interest income. These amounts are classified within liability for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statements of Net Assets.
Investment in Unconsolidated Joint Venture
The Company accounts for its investment in unconsolidated joint venture under the equity method of accounting because the Company exercises significant influence over but does not control the entity and is not considered to be the primary beneficiary.
 
7
Table of Contents
NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
 
The investment in unconsolidated joint venture is recorded at its liquidation value, or net realizable value, which is comprised of an estimate of the expected sale proceeds upon disposition plus the estimated net cash flow from the venture during the liquidation period. The Company evaluates the net realizable value of its unconsolidated joint venture at each reporting period. Any changes in net realizable value will be reflected as a change in the Company’s net assets in liquidation. The liquidation value of the Company’s remaining investment in Worldwide Plaza as of September 30, 2020 and December 31, 2019 is based on estimated cash flow projections utilizing appropriate discount and capitalization rates as well as available market information.
Restricted Cash
At September 30, 2020 and December 31, 2019, restricted cash primarily consists of the $90.7 million capital improvement reserve for Worldwide Plaza and $1.4 million being held in escrow in connection with the sale of the Viceroy Hotel (the “Viceroy Escrow”). The Viceroy Escrow was established from proceeds of the sale of the Viceroy Hotel and was required to cover a potential seller’s obligation to fund any shortfalls to the New York Hotel Pension Fund should the Purchaser of the property withdraw from the Pension Fund without fully funding the then outstanding shortfall due to the Pension Fund.
Recent Accounting Pronouncements
There are no new accounting pronouncements that are applicable or relevant to the Company under the liquidation basis of accounting.
Note 4 - Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation
The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation. The Company currently estimates that it will have costs in excess of estimated receipts during the liquidation. These amounts can vary significantly due to, among other things, the timing and estimates for operating expenses, interest earned on reserves and the costs associated with the winding down of operations. These costs are estimated and are anticipated to be paid out over the liquidation period.
At September 30, 2020 and December 31, 2019, the Company had accrued the following net expenses expected to be incurred during liquidation (in thousands):
 
     September 30, 2020      December 31, 2019  
General and administrative expenses
   $ (2,290 )     $  (2,348 ) 
  
 
 
    
 
 
 
Liability for estimated costs in excess of estimated receipts during liquidation
   $ (2,290 )     $  (2,348 ) 
  
 
 
    
 
 
 
The change in the liability for estimated costs in excess of estimated receipts during liquidation for the nine months ended September 30, 2020 and 2019 are as follows (in thousands):
 
8
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NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
     January 1, 2020      Net Change
in Working
Capital (1) 		     Remeasurement
of Assets and
Liabilities 		     September 30,
2020 		 
Liabilities:
          
General and administrative expenses
   $  (2,348 )    $ 2,156      $ (2,098 )     $  (2,290 ) 
  
 
 
   
 
 
    
 
 
    
 
 
 
Total liability for estimated costs in excess of estimated receipts during liquidation
   $  (2,348 )    $ 2,156      $ (2,098 )     $  (2,290 ) 
  
 
 
   
 
 
    
 
 
    
 
 
 
 
     January 1, 2019      Net Change
in Working
Capital (1) 		     Remeasurement
of Assets and
Liabilities 		     September 30,
2019 		 
Liabilities:
         
General and administrative expenses
     (3,208 )      1,725        (1,141 )      (2,624 ) 
  
 
 
   
 
 
    
 
 
   
 
 
 
Total liability for estimated costs in excess of estimated receipts during liquidation
   $  (3,208 )    $  1,725      $  (1,141 )    $  (2,624 ) 
  
 
 
   
 
 
    
 
 
   
 
 
 
 
(1)
Represents changes in cash, restricted cash, accounts receivable, accounts payable and accrued expenses as a result of the Company’s operating activities for the nine months ended September 30, 2020 and 2019.
Note 5 – Net Assets in Liquidation
Net assets in liquidation decreased by $0.5 million during the three months ended September 30, 2020, primarily due to a liquidating distribution to unitholders of $4.2 million and a $0.6 million decrease due to a remeasurement of estimated costs. The decrease was offset by a net increase of $4.2 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
Net assets in liquidation increased by $3.5 million during the nine months ended September 30, 2020, primarily due to a net increase of $13.2 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations. The increase was offset by liquidating distributions to unitholders of $7.6 million and a $2.1 million decrease due to a remeasurement of estimated costs.
Net assets in liquidation decreased by $0.6 million during the three months ended September 30, 2019, primarily due to a liquidating distribution to unitholders of $1.7 million and a $0.3 million decrease due to a remeasurement of estimated costs. The decrease in net assets was offset by an increase of $1.4 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
Net assets in liquidation decreased by $12.6 million during the nine months ended September 30, 2019, primarily due to liquidating distributions to unitholders of $15.3 million and a $1.1 million decrease due to a remeasurement of estimated costs. The decrease in net assets was offset by an increase of $3.8 million in the estimated liquidation value of the Company’s investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
The net assets in liquidation at September 30, 2020, presented on an undiscounted basis include the Company’s proportionate share in Worldwide Plaza’s net assets which include a property value at $1.725 billion based on estimated cash flow projections utilizing appropriate discount and capitalization rates as well as available market information.
 
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NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
 
There were 16,791,769 Units outstanding at September 30, 2020. The net assets in liquidation as of September 30, 2020, if sold at their net asset value, would result in liquidating distributions of approximately $21.81 per Unit. On November 2, 2020, the Board of Managers declared a cash liquidating distribution of $0.25 per Unit payable on November
17
, 2020 to unitholders of record on November
10
, 2020, reducing the estimate of future liquidating distributions to $21.56 per Unit. The net assets in liquidation as of September 30, 2020 of $366.3 million, if sold at their net asset value, plus the cumulative liquidating distribution to unitholders of $1.012 billion ($60.26 per Unit) prior to September 30, 2020 would result in cumulative liquidating distributions to unitholders of $82.07 per Unit. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sale of the Company’s remaining investment, the performance of the underlying asset and any changes in the underlying assumptions of the projected cash flows.
Note 6 — Investment in Unconsolidated Joint Venture
On October 30, 2013, the Predecessor purchased a 48.9% equity interest in Worldwide Plaza for a contract purchase price of $220.1 million, based on the property value at that time for Worldwide Plaza of $1.3 billion less $875 million of debt on the property.
On June 1, 2017, the Predecessor acquired an additional 49.9% equity interest in Worldwide Plaza on exercise of the Predecessor’s option to purchase for a contract purchase price of $276.7 million, based on the option price of the property of approximately $1.4 billion less $875.0 million of debt on the property. The Predecessor’s joint venture partner exercised its right to retain 1.2% of the aggregate membership interests in Worldwide Plaza. Following the exercise of the option, the Company owned a total equity interest of 98.8% in Worldwide Plaza.
On October 18, 2017, the Predecessor sold a 48.7% interest in Worldwide Plaza to a joint venture managed by SL Green Realty Corp. and RXR Realty LLC based on an estimated underlying property value of $1.725 billion. In conjunction with the equity sale, there was a concurrent $1.2 billion refinancing of the existing Worldwide Plaza debt. The Predecessor received cash at closing of approximately $446.5 million from the sale and excess proceeds from the financing, net of closing costs which included $108.3 million of defeasance and prepayment costs. The new debt on Worldwide Plaza bears interest at a blended rate of approximately 3.98% per annum, requires monthly payments of interest only and matures in November 2027.
The Company has set aside $90.7 million of the proceeds in a separate account to fund future capital improvements to Worldwide Plaza. Following the sale of its interest, the Company now holds a 50.1% interest in Worldwide Plaza. The Company has determined that this investment is an investment in a variable interest entity (VIE). The Company has determined that it is not the primary beneficiary of this VIE since the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance. The Company accounts for this investment using the equity method of accounting.
The lease with one of the tenants at the Worldwide Plaza property contains a right of first offer in the event that Worldwide Plaza sells 100% of the property. The right requires Worldwide Plaza to offer the tenant the option to purchase 100% of the Worldwide Plaza property, at the price, and on other material terms, proposed by Worldwide Plaza to third parties. If, after a
45-day
period, that tenant does not accept the offer, Worldwide Plaza may then sell the property to a third party, provided that Worldwide Plaza will be required to
re-offer
the property to that tenant if it desires to sell the property for a purchase price (and other economic consideration) less than 92.5% of the initial purchase price contained in the offer to that tenant.
The following table lists the tenants whose annualized cash rent represented greater than
10
% of total annualized cash rent for the nine months ended September 30, 2020 and 2019, including annualized cash rent related to the Company’s unconsolidated joint venture:
 
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NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
 
          September 30,  
Property Portfolio
  
Tenant
   2020     2019  
Worldwide Plaza
  
Cravath, Swaine & Moore, LLP
     48.5 %      46.5 % 
Worldwide Plaza
  
Nomura Holdings America, Inc.
     30.7 %      32.5 % 
The termination, delinquency or
non-renewal
of any of the above tenants may have a material adverse effect on the Company’s operations. The lease with Cravath, Swaine & Moore, LLP expires in August 2024 and the tenant has informed Worldwide Plaza that they do not intend to enter into a new lease upon expiration of the existing lease.
The amounts reflected in the following tables are based on the financial information of Worldwide Plaza. Under liquidation accounting, equity investments are carried at net realizable value.
The condensed balance sheets as of September 30, 2020 and December 31, 2019 for Worldwide Plaza are as follows:
 
(In thousands)
   September 30,
2020 		     December 31,
2019 		 
Real estate
 assets,
 at cost
 
$
 
836,629
 
 
$
 
829,168
 
Less accumu
lated
depr
e
c
ia
tion
 and a
mor
t
ization
 
 
(252,029
)
 
 
 
(239,120
)
 
Total real estate
 asset
s, net
 
 
 
584,600
 
 
 
 
590,048
 
Cash and cash equivalents
 
 
 
53,011
 
 
 
 
45,477
 
Other asset
s
 
 
135,570
 
 
 
 
151,445
 
Total assets
 
$
 
773,181
 
 
$
 
786,970
 
Debt
   $ 1,250,232      $ 1,238,794  
Other liabilities
     165,199        153,331  
  
 
 
    
 
 
 
Total liabilities
     1,415,431        1,392,125  
Deficit
     (642,250 )       (605,155 ) 
  
 
 
    
 
 
 
Total liabilities and deficit
   $ 773,181      $ 786,970  
  
 
 
    
 
 
 
  
 
 
    
 
 
 
 
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NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
The condensed statements of operations for the three and nine months ended September 30, 2020 and 2019 for Worldwide Plaza are as follows:
 
    
Three Months Ended

September 30,
   
Nine Months Ended

September 30
,
 
(In thousands)
  
2020
    
2019
   
2020
    
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
   $33,703      $36,080     $102,806       $107,198
 
 
 
 
 
Operating expenses:
          
Operating expenses
     15,541        16,309       47,223        47,481
Depreciation and amortization
     5,050        7,584       15,148        22,721
  
 
 
    
 
 
   
 
 
    
 
 
Total operating expenses
     20,591        23,893       62,371        70,202
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
     13,112        12,187       40,435        36,996
Interest expense
     (19,422 )       (18,999 )      (57,840 )       (56,363 )
Net loss
 
 
 
$
(6,310
)
 
 
 
 
$ (6,812
)
 
 
 
 
$
(17,405
)
 
 
 
 
$
(19,367
)
 
Note 7 — Common Stock
The Company had 16,791,769 Units outstanding as of September 30, 2020 and December 31, 2019. The Company expects to make periodic liquidating distributions out of cash flow distributions received from Worldwide Plaza and proceeds from the ultimate sale of the Company’s interest in Worldwide Plaza, subject to satisfying its liabilities and obligations, in lieu of regular monthly dividends. On March 16, 2020, the Company paid a cash liquidating distribution of $0.10 per Unit. On May 19, 2020, the Company paid a cash liquidating distribution of $0.10 per Unit. On August 19, 2020, the Company paid a cash liquidating distribution of $0.25 per Unit. Through September 30, 2020, the Company paid aggregate liquidating distributions equal to $60.26 per share/unit. On November
2
, 2020, the Company declared a cash liquidating distribution of $0.25 per Unit payable on November
17
, 2020 to unitholders of record as of November
10
, 2020. There can be no assurance as to the actual amount or timing of future liquidating distributions unitholders will receive.
Note 8 — Commitments and Contingencies
Litigation and Regulatory Matters
In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no legal or regulatory proceedings pending or known to be contemplated against the Company from which the Company expects to incur a material loss.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company, through its joint venture, maintains environmental insurance for its properties that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. The Company has not been notified by any governmental authority of any
non-compliance,
liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the consolidated results of operations.
 
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NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
 
Note 9 — Related Party Transactions and Arrangements
Winthrop Advisor and its Affiliates
The activities of the Liquidating LLC are administered by the Winthrop Advisor pursuant to the terms of an advisory agreement, as amended, (the “Advisory Agreement”) between the Company and the Winthrop Advisor.
The original term of the Advisory Agreement ended on November 7, 2018, the effective date of the conversion of the Company to a liquidating entity (the “Liquidation Date”). Since no notice of termination of the Advisory Agreement was received by either party, the Advisory Agreement automatically renewed for a
one-month
period and will continue to automatically renew for additional
one-month
terms unless otherwise terminated as described below. The Advisory Agreement is subject to automatic
one-month
renewal periods on the expiration of any renewal term, unless terminated by a majority of the Board of Managers or the Winthrop Advisor, upon written notice 45 days before the expiration of any renewal term and will automatically terminate at the effective time of the final disposition of the assets held by the Company. The Advisory Agreement may be terminated upon 15 days written notice by a majority of the Board of Managers if the Company’s chief executive officer resigns or is otherwise unavailable to serve as the Company’s chief executive officer for any reason and the Winthrop Advisor has not proposed a new chief executive officer acceptable to a majority of the Board of Managers. On July 12, 2018, the Company’s independent directors voted unanimously to appoint John Garilli as Chief Executive Officer upon the resignation of Wendy Silverstein from the position and accordingly did not exercise the Company’s right to terminate the Advisory Agreement.
Beginning on March 1, 2017, and continuing through the Liquidation Date, the Company paid Winthrop Advisor an asset management fee equal to 0.325% per annum of the cost of assets (as defined in the Advisory Agreement) up to $3.0 billion and 0.25% per annum of the cost of assets in excess of $3.0 billion.
Beginning with the fiscal quarter ending September 30, 2018 and ending on the Liquidation Date, the Company paid Winthrop Advisor a supplemental fee of $25,000 per quarter (prorated for any partial quarter) in addition to the base management fee.
Following the Liquidation Date, the Company pays to the Winthrop Advisor a monthly fee of $100,000 and a supplemental fee of $50,000 per quarter (prorated for any partial quarter) for any period that the principal executive and financial officers of the Company are required to certify the financial and other information contained in the Company’s quarterly and annual reports pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
 
On
October
30
, 2020, the Advisory Agreement was amended to reduce the monthly fee payable to the Winthrop Advisor to $83,333 effective August 1, 2020. All other terms of the Advisory Agreement remained unchanged.
In connection with the adoption of liquidation accounting, the Company accrues costs it expects to incur through the end of liquidation. As of September 30, 2020 and December 31, 2019, the Company has accrued asset management fees and compensation reimbursements totaling $1.2 million and $1.4 million, respectively, payable to the Winthrop Advisor representing management’s estimate of future asset management fees to final liquidation, provided there is no assurance that the contract will continue to be extended at the same terms, if at all. This amount is included in estimated costs in excess of estimated receipts during liquidation.
In connection with the payment of (i) any distributions of money or other property by the Company to its stockholders or unitholders during the term of the Advisory Agreement and (ii) any other amounts paid to the Company’s stockholders or unitholders on account of their shares of common stock or membership interests in the Company in connection with a merger or other change in control transaction pursuant to an agreement with the Company entered into after March 8, 2017 (such distributions and payments, the “Hurdle Payments”), in excess of $110.00 per share (the “Hurdle Amount”), when taken together with all other Hurdle Payments, the Company will pay an incentive fee to Winthrop Advisor in an amount equal to 10.0% of such excess (the “Incentive Fee”). The Hurdle Amount will be increased on an annualized basis by an amount equal to the product of (a) the Treasury Rate plus 200 basis points and (b) the Hurdle Amount minus all previous Hurdle Payments. Based on the current estimated undiscounted net assets in liquidation, the Winthrop Advisor would not be entitled to receive any such incentive fee.
 
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NEW YORK REIT LIQUIDATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)
 
The Company paid the Winthrop Advisor $317,000 and $1,017,000 for the three and nine month periods ended September 30, 2020 and $350,000 and $1,050,000 for the three and nine month periods ended September 30, 2019.
Note 10 — Economic Dependency
Under various agreements, the Company has engaged Winthrop Advisor, its affiliates and entities under common control with Winthrop Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset disposition decisions, as well as other administrative responsibilities for the Company including accounting services, transaction management and investor relations.
As a result of these relationships, the Company is dependent upon Winthrop Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 11 — Subsequent Events
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form
10-Q
and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except as disclosed in Notes 5, 7 and 9.
 
14
NEW YORK REIT LIQUIDATING LLC
September 30, 2020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of New York REIT Liquidating LLC and the notes thereto. As used herein, the terms “Company,” “Liquidating LLC,” “we,” “our” and “us” refer to New York REIT Liquidating LLC, a Delaware limited liability company, and, as required by context to New York REIT, Inc., a Maryland corporation (the “Predecessor”), to New York Recovery Operating Partnership LP, a Delaware Limited Partnership (the “OP”), and to their subsidiaries. We are externally managed by Winthrop REIT Advisors, LLC (the “Winthrop Advisor”). Capitalized terms used herein but not otherwise defined have the meaning ascribed to those terms in “Part I - Financial Information” included in the notes to consolidated financial statements and contained herein.
Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “estimates,” “expects,” “anticipates,” “intends,” “plans,” “would,” “may” or similar expressions in this Quarterly Report on Form
10-Q.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, public health crises, such as the novel coronavirus
(“COVID-19”)
pandemic, as well as those set forth in our Annual Report on Form
10-K
for the year ended December 31, 2019 and our Quarterly Report on form
10-Q
for the three months ended March 31, 2020 under “Forward Looking Statements” and “Item 1A. Risk Factors,” as well as our other filings with the Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based on information, judgments and estimates at the time they are made, to anticipate future results or trends.
Management’s Discussion and Analysis of Financial Condition and Results of Operations include a discussion of our unaudited consolidated interim financial statements and footnotes thereto. These unaudited interim financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which 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 amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Overview
On August 22, 2016 the Predecessor’s Board of Directors (the “Board”) approved a plan of liquidation to sell in an orderly manner all or substantially all of our assets and the assets of the OP (the “Liquidation Plan”), subject to stockholder approval. The Liquidation Plan was approved at a special meeting of stockholders on January 3, 2017.
The Liquidation Plan provides for an orderly sale of our assets, payment of our liabilities and other obligations and the winding down of operations and the dissolution of the Company. We are no longer permitted to make any new investments except to make protective acquisitions or advances with respect to our existing assets. We are permitted to satisfy any existing contractual obligations and pay for required tenant improvements and capital expenditures at our real estate property owned by the joint venture in which we own an interest.
In order to comply with applicable tax laws, the Predecessor converted into a limited liability company known as New York REIT Liquidating LLC. The conversion to the Company was approved by the stockholders on September 7, 2018 and became effective on November 7, 2018. The Liquidation Plan enables us to sell our assets without further approval of the stockholders or unitholders and provides that liquidating distributions be made to the stockholders as determined by the Board, and following the conversion, to our unitholders as determined by the Board of Managers.
 
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NEW YORK REIT LIQUIDATING LLC
September 30, 2020
 
In October 2018, we announced the withdrawal of our common stock from listing on the NYSE in connection with the conversion. November 2, 2018 was the last day on which shares of our common stock were traded on the NYSE and our stock transfer books were closed as of 4:00 p.m. (Eastern Time) on such date. At the effective time of the conversion, each outstanding share of common stock was converted into one unit of common membership interest in the LLC (a “Unit”), and holders of shares of our common stock automatically received one unit (which unit was in book entry form) for each share of our common stock held by such stockholder. Unlike shares of our common stock, which, in addition to being listed on the NYSE, were freely transferable, Units are not listed for trading and generally are not transferable except by will intestate succession or operation of law. Therefore, the holders of Units do not have the ability to realize any value from these interests except from distributions made by the Company, the timing of which will be solely in the discretion of the Board of Managers. On October 26, 2018, the Board designated Randolph C. Read, P. Sue Perrotty, Craig T. Bouchard, Howard Goldberg and Joe C. McKinney, representing all the previous members of the Board, to serve as the initial members of the Board of Managers. On June 29, 2020, Joe C. McKinney and P. Sue Perrotty each resigned from the Board, effective July 29, 2020. Mr. McKinney and Ms. Perrotty did not resign as a result of any disagreement with the Company on any matter relating to its operations, policies or practices. Additionally, Joseph Moinian, the Company’s largest unitholder, was added as an Observer to the Company’s Board of Managers effective June 30, 2020 in an unpaid position with no voting rights in connection with Board matters.
The Company is deemed to be the same entity as the Predecessor with the same assets and liabilities as the Predecessor. In addition, the charter and bylaws of the Predecessor were replaced by the operating agreement of the Company. For tax purposes, the fair value of each Unit in the Company received by stockholders when the conversion became effective, which reflected the value of the remaining assets of the Company (net of liabilities), was $14.00 per Unit and was equal to the average of the high and low trading prices for shares of the Predecessor’s common stock on the last three days on which the shares were traded on the NYSE.
The business of the Company is the same as the business of the Predecessor immediately preceding the conversion, which, consistent with the Liquidation Plan, consists of the continued ownership of the Predecessor’s interest in Worldwide Plaza, the only remaining property-related asset. Under its operating agreement, the business and affairs of the Company will be managed by or under the direction of its Board of Managers, and the sole purpose is winding up the affairs of the Company and the liquidation of its remaining asset. The Company will remain in existence until the earlier of (i) the distribution of all its assets pursuant to liquidation or (ii) four years from the effective time of the conversion. The term may be extended to such later date as the Board of Managers determines is reasonably necessary to fulfill the purposes of the Company.
The dissolution process and the amount and timing of distributions to unitholders involves risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will be ultimately distributed to unitholders, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Consolidated Statement of Net Assets. To date, liquidating distributions totaling $60.26 per common share/unit have been paid.
Liquidation Plan
As of the date of this Quarterly Report on Form
10-Q,
all of our property related assets have been sold except our remaining interest in Worldwide Plaza. For purposes of liquidation accounting, our estimate of net assets in liquidation value assumes a sale of Worldwide Plaza at September 30, 2021 based on a value of $1.725 billion. The actual timing of sale has not yet been determined and is subject to future events and uncertainties. These estimates are subject to change based on the actual timing of the sale of our remaining interest in Worldwide Plaza and the actual cash distributions received from the property during our holding period.
The net assets in liquidation of $366.3 million at September 30, 2020 are presented on an undiscounted basis. Our current estimate of the liquidation value of investment in unconsolidated joint venture includes Worldwide Plaza at $1.725 billion which is based on estimated cash flow projections utilizing appropriate discount and capitalization rates
 
16
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NEW YORK REIT LIQUIDATING LLC
September 30, 2020
 
as well as available market information. The current pandemic has not impacted our estimated value of Worldwide Plaza, as net operating income at the property has remained relatively steady throughout, and there has not been recent market activity that would infer a change in the market capitalization and discount rates. We will continue to monitor the current market and adjust the net realizable value of the investment, if necessary, at each reporting period. The timing of the sale of the property, and the ultimate value we receive from the sale, are subject to change. The capital plan includes targeted capital improvements aimed at maintaining the institutional quality of the building and an appropriate allocation to allow for critical tenant lease renewals and rolls. In addition, capital will be available for management to focus on repositioning the property primarily as it relates to
re-tenanting
and modernizing the space currently occupied by Cravath Swaine & Moore, LLP. We have set aside approximately $90.7 million from the refinancing proceeds to cover an estimate of our share of potential future leasing and capital costs at the property. To the extent the full $90.7 million reserve is not used, the balance is expected to be available for distribution to unitholders. Our joint venture partners have committed to contribute their
pro-rata
share of the budgeted capital investment. To date, all capital costs incurred at the property have been satisfied from operating cash flow of the property.
Management believes that the combined team of SL Green and RXR Realty will add the necessary talent, expertise and capital, along with the capital contributed by us, to bring this Class A asset with its investment grade tenant roster to its full potential. Management’s estimate, like any estimate or projection, is subject to various assumptions and uncertainties including the joint venture’s ability to execute on the business plan, tenants paying their rental obligations, the equity capital and financing markets and New York City market conditions generally. There is no assurance that the joint venture will be successful in taking these various actions and that these actions will, in fact, result in the estimated increase in the value of the property.
Current Activity
For the fiscal quarter ended September 30, 2020, there were no property sales.
Liquidity and Capital Resources
As of September 30, 2020, we had cash and cash equivalents of $7.6 million. Our total assets and undiscounted net assets in liquidation were $368.8 million and $366.3 million, respectively, at September 30, 2020.
Our principal demands for funds are to pay or fund operating expenses, capital expenditures and liquidating distributions to our unitholders. We believe that cash flow distributions we expect to receive from our investment in Worldwide Plaza will continue to provide adequate capital to fund our operating, administrative and other expenses incurred during liquidation. We currently estimate that our current cash balance is sufficient to cover approximately three years of net operating expenses at the Company. If cash flow distributions from Worldwide Plaza are suspended or lower than currently estimated as a result of the economic conditions caused by the
COVID-19
pandemic and government responses designed to stem the spread of the virus, we will still be able to satisfy our current operating, administrative and other expenses; however, it is likely that liquidating distributions to our unitholders would be suspended or reduced accordingly. Our principal sources and uses of funds are further described below.
Principal Sources of Funds
Cash Flows from Operating Activities
Our cash flows from operating activities are primarily dependent upon the occupancy level at Worldwide Plaza, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants at Worldwide Plaza and the level of operating and other costs, including general and administrative expenses and other expenses associated with carrying out our Liquidation Plan.
Rent collections for retail tenants at Worldwide Plaza were impacted by the
COVID-19
pandemic during the three and nine months ended September 30, 2020. It is still uncertain as to what the impact of the
COVID-19
pandemic and government responses thereto will be on rent collections at the property for the three months ended December 31, 2020 or for future quarters. During the three and nine months ended September 30, 2020, the property collected 100%
 
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NEW YORK REIT LIQUIDATING LLC
September 30, 2020
 
of the office rents that were due. As of September 30, 2020, approximately $1,138,000 of rents due from the retail and amenities tenants of the property has not been paid, as those tenants are seeking rent concessions for the time period during which they were required to be closed as a result of the
COVID-19
pandemic. Negotiations with tenants are ongoing. At this time, it is anticipated that a majority of rent concessions will be in the form of a rent deferral and not rent forgiveness, resulting in a delay in collections and not a reduction in collections. To date, Worldwide Plaza has granted rent concession of less than $100,000 in the aggregate. See Note 3 to our consolidated financial statements included elsewhere in this Quarterly Report on Form
10-Q
for additional information regarding the impacts and risks we face relating to the
COVID-19
pandemic.
During the nine months ended September 30, 2020 we received net distributions of $9.6 million in respect of our interest in Worldwide Plaza.
Sales Proceeds
In connection with the Liquidation Plan, we plan to sell all of our assets.
Principal Use of Funds
Capital Expenditures
As of September 30, 2020, we owned a 50.1% interest in the joint venture that owns Worldwide Plaza. In connection with the leasing of the property, the joint venture entered into agreements with its tenants to provide allowances for tenant improvements. These allowances require the joint venture to fund capital expenditures up to amounts specified in the lease agreements. Our share of capital expenditures for the nine months ended September 30, 2020 was funded from property cash flow.    
In October 2017 we set aside approximately $90.7 million from the proceeds of our sale of a 48.7% interest in Worldwide Plaza to cover estimated future leasing and capital improvement costs at the property. Our joint venture partners have committed to contribute their
pro-rata
share of the budgeted capital investment. To date, none of the $90.7 million has been utilized.
Liquidating Distributions
Until such time as we are able to dispose of our remaining asset, the actual amount and timing of, and record dates for, future liquidating distributions will be determined by our Board of Managers and will depend upon the timing and amount of cash flow distributions we receive from our Worldwide Plaza joint venture and the amounts deemed necessary by our Board of Managers to pay or provide for our liabilities and obligations. The timing and amount of our final liquidating distribution will be dependent on the timing and proceeds of the sale of our remaining interest in Worldwide Plaza. As the Company is treated as a partnership for federal and state income tax purposes, any such liquidating distributions on the Units will be deemed a return of capital.
Cash Flows
Our level of liquidity based upon cash and cash equivalents decreased by approximately $0.1 million from $7.7 million at December 31, 2019 to $7.6 million at September 30, 2020.
The holders of Common Shares approved the Liquidation Plan on January 3, 2017, and we adopted the liquidation basis of accounting effective January 1, 2017. We did not make any acquisitions in new investments in 2020, and, in accordance with the Liquidation Plan, no further acquisitions are expected.
Our primary sources of
non-operating
cash flow for the nine months ended September 30, 2020 include:
 
  •  
$9.6 million net distributions in respect of our interest in Worldwide Plaza.
 
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Our primary uses of
non-operating
cash flow for the nine months ended September 30, 2020 include:
 
  •  
$7.6 million for liquidating distributions to unitholders.
Our primary sources of
non-operating
cash flow for the nine months ended September 30, 2019 include:
 
  •  
$8.3 million net distributions in respect of our interest in Worldwide Plaza.
Our primary uses of
non-operating
cash flow for the nine months ended September 30, 2019 include:
 
  •  
$15.3 million for liquidating distributions to unitholders.
Contractual Obligations
We did not have any contractual debt or lease obligations as of September 30, 2020.
Comparability of Financial Data From Period to Period
Results of Operations
Our remaining asset continues to perform in a manner that is relatively consistent with prior reporting periods. We have experienced no significant changes in occupancy or rental rates at Worldwide Plaza.
Occupancy and Leasing
As of September 30, 2020, Worldwide Plaza was 97.3% leased, compared to 96.3% as of September 30, 2019.
Changes in Net Assets in Liquidation
Net assets in liquidation decreased by $0.5 million during the three months ended September 30, 2020, primarily due to a liquidating distribution to unitholders of $4.2 million and a $0.6 million decrease due to a remeasurement of estimated costs. The decrease was offset by an increase of $4.2 million in the estimated liquidation value of our investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
Net assets in liquidation increased by $3.5 million during the nine months ended September 30, 2020, primarily due to a net increase of $13.2 million in the estimated liquidation value of our investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations. The increase was offset by liquidating distributions to unitholders of $7.6 million and a $2.1 million decrease due to a remeasurement of estimated costs.
Net assets in liquidation decreased by $0.6 million during the three months ended September 30, 2019, primarily due to a liquidating distribution to unitholders of $1.7 million and a $0.3 million decrease due to a remeasurement of estimated costs. The decrease in net assets was offset by an increase of $1.4 million in the estimated liquidation value of our investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
Net assets in liquidation decreased by $12.6 million during the nine months ended September 30, 2019 primarily due to liquidating distributions to unitholders of $15.3 million and a $1.1 million decrease due to a remeasurement of estimated costs. The decrease in net assets was offset by an increase of $3.8 in the estimated liquidation value of our investment in Worldwide Plaza related to the estimated distributions to be received from working capital at the property and property operations.
 
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The net assets in liquidation at September 30, 2020, which are presented on an undiscounted basis, includes Worldwide Plaza valued at $1.725 billion which is based on estimated cash flow projections utilizing appropriate discount and capitalization rates as well as available market information in the accompanying consolidated financial statements, resulting in estimated future liquidating distributions of approximately $21.81 per Unit. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the next 12 months and costs to dispose of the Company’s remaining investment in Worldwide Plaza. As of October 18, 2017, Worldwide Plaza is managed by a joint venture of SL Green and RXR Realty, two of the largest owner operators in New York City. We, along with our joint venture partners, are committed to investing significant additional capital into Worldwide Plaza to further improve and reposition the asset which we believe includes embedded opportunities to roll leases to increase the value of the property. Any changes in the future market value of Worldwide Plaza, if any, will be evaluated at each reporting period and will be reflected in the Statement of Net Assets in liquidation at such times. Management’s estimate, like any estimate or projection, is subject to various assumptions and uncertainties including the joint venture’s ability to execute on the business plan, tenants paying their rental obligations, the equity capital and financing markets and New York City market conditions generally. There is no assurance that the joint venture will be successful in taking these various actions and that these actions will, in fact, result in an estimated increase in the value of the property.
Our unaudited financial statements included in this Quarterly Report on Form
10-Q
are prepared on the liquidation basis of accounting and accordingly include an estimate of the liquidation value of our assets and other estimates, including estimates of anticipated cash flow, timing of asset sales and liquidation expenses. These estimates update estimates that we have previously provided. These estimates are based on multiple assumptions, some of which may prove to be incorrect, and the actual amount of liquidating distributions we pay to you may be more or less than these estimates. We cannot assure you of the actual amount or timing of liquidating distributions you will receive pursuant to the Liquidation Plan.
Tax Status
We are taxed as a partnership for federal and state income tax purposes. Accordingly, no provision or benefit for income taxes is made in the consolidated financial statements. All distributions from the Liquidating LLC will be considered a return of capital for tax purposes. Unitholders will receive a Schedule
K-1
from the Liquidating LLC annually reflecting their allocable share of the Liquidating LLC’s income, loss, gains and deductions.
Inflation
Many of Worldwide Plaza’s leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions.
Off-Balance
Sheet Arrangements
We have no
off-balance-sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Significant Accounting Estimates and Critical Accounting Policies
Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. Subsequent to the adoption of the Liquidation Plan, we are required to estimate all costs and income we expect to incur and earn through the end of liquidation including the estimated amount of cash we expect to collect on the disposal of our assets and the estimated costs to dispose of our assets.
 
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NEW YORK REIT LIQUIDATING LLC
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Investment in Unconsolidated Joint Venture
We account for our investment in unconsolidated joint venture under the equity method of accounting because we exercise significant influence over, but do not control the entity and are not considered to be the primary beneficiary. Under liquidation accounting, the investment in unconsolidated joint venture is recorded at its net realizable value. We evaluate the net realizable value of our unconsolidated joint venture at each reporting period. Any changes in net realizable value will be reflected as a change in our net assets in liquidation. The liquidation value of our remaining investment in Worldwide Plaza as of September 30, 2020 is based on estimated cash flow projections utilizing appropriate discount and capitalization rates as well as available market information.
Recent Accounting Pronouncement
There are no new accounting pronouncements that are applicable or relevant to the Company under the liquidation basis of accounting.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2020, we had $601.2 million of unconsolidated mortgage debt reflecting our pro rata share of Worldwide Plaza’s total mortgage debt of $1.2 billion. This debt consisted of fixed-rate secured mortgage notes payable. Changes in market interest rates have no impact on interest due on the notes.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the SEC 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 Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
As of September 30, 2020 an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e)
under the Securities Exchange Act of 1934). Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2020.
Other Matters
There have been no changes in our internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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September 30, 2020
 
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The information related to litigation and regulatory matters contained in Note 8 — Commitments and Contingencies of our notes to the consolidated financial statements included in this Quarterly Report on Form
10-Q
is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form
10-Q,
we are not a party to, and none of our properties are subject to, any material pending legal proceedings.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in our Annual Report on Form
10-K
for the year ended December 31, 2019 and our Quarterly Report on Form
10-Q
for the three months ended March 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
On October 30, 2020, the Advisory Agreement was amended to reduce the monthly fee payable to the Winthrop Advisor to $83,333 effective August 1, 2020. All other terms of the Advisory Agreement remained unchanged.
Item 6. Exhibits.
The exhibits listed on the Exhibit Index are included, or incorporated by reference, in this Quarterly Report on Form
10-Q.
 
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EXHIBIT INDEX
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form
10-Q
for the quarter ended September 30, 2020 (and are numbered in accordance with Item 601 of Regulation
S-K).
 
Exhibit No.
  
Description
  10.1*    Amendment No. 4 to Advisory Agreement, dated as of October 30, 2020, among New York REIT Liquidating LLC and Winthrop REIT Advisors LLC
  31.1*    Certification of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1*    Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS    XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH    Inline XBRL Taxonomy Extension Schema Document
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104    Cover Page Interactive Data File (embedded within Inline XBRL document)
 
*
Filed herewith
 
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NEW YORK REIT LIQUIDATING LLC
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
NEW YORK REIT LIQUIDATING LLC
By:  
/s/    John Garilli        
  John Garilli
  Chief Executive Officer, President, Chief Financial Officer, Treasurer and Secretary (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
 
Date:
November 4, 2020
 
24

Exhibit 10.1

AMENDMENT NO. 4 TO ADVISORY AGREEMENT

This AMENDMENT NO. 4 TO ADVISORY AGREEMENT is made as of October 30, 2020 by and among New York REIT Liquidating LLC, a Delaware limited partnership (together with its subsidiaries, the “Company”), and Winthrop REIT Advisors LLC, a Delaware limited liability company (the “Service Provider”).

RECITALS

WHEREAS, New York REIT Inc. (the “REIT”), New York Recovery Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), and the Service Provider entered into that certain Advisory Agreement, dated as of December 19, 2016, pursuant to which the Company and the Operating Partnership appointed Service Provider to (i) serve during the Interim Period as their exclusive advisor with respect to the POL Matters and provide those services set forth in section 3(a) thereof, and (ii) serve as their advisor from and after the Transition Date, to perform the Services set forth therein in each case on the terms and subject to the conditions set forth in the Advisory Agreement and subject to the supervision of the Board (as amended by that certain Amendment No. 1 to Advisory Agreement, made as of February 28, 2018, by that certain Amendment No. 2 to Advisory Agreement, made as of June 6, 2018, and by that certain Amendment No. 3 to Advisory Agreement, made as of August 7, 2018, the “Advisory Agreement”);

WHEREAS, on or about November 7, 2018, the REIT was converted into the Company and, as a result thereof, the Company became a party to the Advisory Agreement;

WHEREAS, the Operating Partnership has liquidated all of its assets and has been dissolved; and

WHEREAS, pursuant to Section 23 of the Advisory Agreement, the Company and the Service Provider desire to make certain amendments to the Advisory Agreement;

NOW, THEREFORE, in consideration of the promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Capitalized Terms. Capitalized terms used herein but not specifically defined herein shall have the meaning ascribed to such terms in the Advisory Agreement.

2. Asset Management Fee. Effective as of August 1, 2020, the “Post-Conversion Fee” shall be equal to $83,333.33 per month (prorated for any partial month).

3. Effect of the Agreement. Except as modified by this Amendment No. 4, all of the terms of the Advisory Agreement are hereby ratified and confirmed and shall remain in full force and effect. This Amendment No. 4 shall be construed as one with the Advisory Agreement, and the Advisory Agreement shall, where context requires, be read and construed so as to incorporate this Amendment No. 4.

4. General Provisions. The terms and provisions of Sections 22 through 30 (inclusive) of the Advisory Agreement are hereby incorporated by reference as if set forth herein in their entirety and shall apply mutatis mutandis to this Amendment No. 4.

[Signature Page Follows]

 

2

IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 4 as of the date and year first above written.

 

NEW YORK REIT LIQUIDATING LLC
By:  

/s/ Randolph C. Read

Name:   Randolph C. Read
Title:   Chairman
WINTHROP REIT ADVISORS LLC
By:  

/s/ Michael Ashner

Name:   Michael Ashner
Title:   Chief Executive Officer

[signature page to Amendment No. 4]

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES

EXCHANGE ACT OF 1934, AS AMENDED

I, John Garilli, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of New York REIT Liquidating LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the sole certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. As the sole certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated this 4th day of November, 2020     By:  

/s/    John Garilli        

      John Garilli
      Chief Executive Officer, President, Chief Financial Officer, Treasurer and Secretary (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1

SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The undersigned, who is the Chief Executive Officer, President, Chief Financial Officer, Treasurer and Secretary of New York REIT Liquidating LLC (the “Company”), hereby certifies as follows:

The Quarterly Report on Form 10-Q of the Company which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated this 4th day of November, 2020     By:   /s/    John Garilli        
      John Garilli
      Chief Executive Officer, President, Chief Financial Officer, Treasurer and Secretary (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)