American Strategic Investment Co - Ordinary Shares (NYC) 9 Aug 24 2024 Q2 Earnings call transcript

American Strategic Investment Company's second quarter earnings call, held on a sunny morning, was filled with positive news and strategic plans for the company's future. The call, led by Senior Vice President Curtis Parker, included insights from CEO Michael Anderson and CFO Michael LeSanto, providing a comprehensive update on the company's performance and future strategies.

Strong Financial Performance and Strategic Moves

The company reported an adjusted EBITDA growth of nearly 50% compared to the second quarter of 2023, a significant achievement for American Strategic Investment Company. This growth was attributed to a reduction in G&A and operating expenses, coupled with successful leasing efforts. The occupancy rate also expanded by 80 basis points to 85.9%, demonstrating the strength of the company's portfolio management approach.

A major strategic move was the signing of a nonbinding agreement to sell the property at 9 Times Square for $63.5 million, which became definitive last week. This sale, if completed, would reduce leverage on the balance sheet and generate net proceeds of approximately $13.5 million, strengthening the company's cash position. However, there's no guarantee that the sale will close, as emphasized by the company.

Looking Ahead: Diversification and Future Opportunities

Michael Anderson shared that the company intends to use the proceeds from any disposition to diversify its portfolio into higher-yielding assets. This strategic move underscores the company's commitment to enhancing shareholder value and positions American Strategic Investment Company for future success. The marketing process for the sale of 123 William Street and 196 Orchard is ongoing, with potential for significant net proceeds.

A Focus on Quality Tenants and Strategic Location

The company's focus on resilient industries like finance and healthcare, along with strategic location in desirable transit-oriented areas, has resulted in a strong tenant base, including several large investment-grade firms. With a portfolio weighted average remaining lease term of 6.3 years and 81% of the top tenants being investment grade or implied investment grade, American Strategic Investment Company's portfolio stability is evident.

Navigating the Market and Future Outlook

The company's strong performance this quarter, marked by increased occupancy and growing adjusted EBITDA, is a direct result of strategic portfolio management efforts. The divestment of certain Manhattan assets is expected to generate substantial cash proceeds and reduce leverage, paving the way for expansion into new higher-yielding opportunities.

Bryan Maher, an analyst from B. Riley Securities, inquired about the redeployment of proceeds from the sale of 123 William and 196 Orchard, to which Michael Anderson responded with a vision of investing in the New England region and operating business type investments. The marketing process for these assets has begun, and there's potential for both properties to be under contract by year-end.

The sale of 9 Times Square, with a nonrefundable deposit in place, is expected to close by mid-fourth quarter. Despite a slight dip in occupancy at 123, the company is seeing increased interest from existing tenants looking to expand, along with a general increase in leasing activity.

In light of the recent CNBC piece on the possible bottoming of the office market, Michael Anderson acknowledged the potential for increased interest in leasing activity in office buildings, particularly in the Midtown and financial district markets. With return to work requirements increasing, tenants are looking to expand their footprint, leading to a shift in pricing favoring landlords.

As American Strategic Investment Company moves forward with its divestment and reinvestment strategy, it remains committed to providing updates on its progress. The company's focus on value creation, strategic portfolio management, and proactive asset management positions it well for future success. The future looks bright for American Strategic Investment Company, as it continues to navigate the market and capitalize on opportunities to maximize shareholder value.