American Strategic Investment Co

Previous wording

These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the risks associated with the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on us, our tenants and the global economy and financial markets; the risk that any potential future acquisition by us is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all; and the risk that we may not meet the listing requirements of the New York Stock Exchange. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2023, this and our other Quarterly Reports on Form 10-Q and our other filings with the United States Securities and Exchange Commission (“SEC”).

Current wording

These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include anticipated benefits of our election to terminate our status as a real estate investment trust; whether we will be able to successfully acquire new assets or businesses; our ability to execute on our business plan and sell certain of our properties on commercially practicable terms, if at all; the risks associated with the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on us, our tenants and the global economy and financial markets; the potential adverse effects on inflationary conditions and higher interest rate environment; the risk that any potential future acquisition or disposition by us is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all; and the risk that we may not meet the listing requirements of the New York Stock Exchange. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2023, this and our other Quarterly Reports on Form 10-Q and our other filings with the United States Securities and Exchange Commission (“SEC”).

Previous wording

We are an externally managed company that owns a portfolio of commercial real estate located within the five boroughs of New York City, primarily Manhattan. Our real estate assets consist of office properties and certain real estate assets that accompany office properties, including retail spaces and amenities and parking garages that do not accompany office spaces. As of March 31, 2024, we owned seven properties consisting of 1.2 million rentable square feet, acquired for an aggregate purchase price of $783.5 million with an overall occupancy of 87.2%.

Current wording

We are an externally managed company that owns a portfolio of commercial real estate located within the five boroughs of New York City, primarily Manhattan. Our real estate assets consist of office properties and certain real estate assets that accompany office properties, including retail spaces and amenities and parking garages that do not accompany office spaces. As of June 30, 2024, we owned seven properties consisting of 1.2 million rentable square feet, acquired for an aggregate purchase price of $783.5 million with an overall occupancy of 85.9%.

Previous wording

New York City, where all of our properties are located, has been among the hardest hit locations in the country and fully reopened from relevant restrictions and lockdowns on March 7, 2022. The pace of recovery in the New York City office market from the COVID-19 pandemic continues to be challenged as leasing and occupancy trends for the broader market have slowed, leading political, community, and business leaders to propose repositioning plans for many New York City office assets that are experiencing high vacancy rates.

Current wording

New York City, where all of our properties are located, was among the hardest hit locations in the country and fully reopened from relevant restrictions and lockdowns on March 7, 2022. The pace of recovery in the New York City office market from the COVID-19 pandemic continues to be challenged as leasing and occupancy trends for the broader market have slowed, leading political, community, and business leaders to propose repositioning plans for many New York City office assets that are experiencing high vacancy rates.

Previous wording

Beginning in the third and fourth quarters of 2020, the operating results at 1140 Avenue of the Americas, 9 Times Square, 400 E. 67th Street - Laurel Condominium/200 Riverside Boulevard Garage and 8713 Fifth Avenue properties were negatively impacted by the COVID-19 pandemic causing cash trap events under the non-recourse mortgages for those properties to be triggered. Thus, we were not able to use excess cash flow, if any, from the properties while the cash trap events were active, to fund operating expenses at our other properties and other capital requirements. As of March 31, 2024 two of our mortgages aggregating $109.0 million in principal amount remained in a cash trap event, all as described in detail further below in the Liquidity and Capital Resources section.

Current wording

In addition, beginning in the third and fourth quarters of 2020, the operating results at (i) 1140 Avenue of the Americas, (ii) 9 Times Square, (iii) 400 E. 67th Street - Laurel Condominium/200 Riverside Boulevard Garage and (iv) 8713 Fifth Avenue properties were negatively impacted, causing covenant non-compliance or cash trap events under the respective non-recourse mortgages for those properties to be triggered. Thus, we have not been able to use excess cash flows, if any, from these properties while the cash trap events are active to fund operating expenses at our other properties and other capital requirements. As of June 30, 2024 two of our mortgages aggregating $109.0 million in principal amount remained in a cash trap events, as described in detail further below in the Liquidity and Capital Resources section.

Previous wording

The following table is a summary of our quarterly leasing activity during the first three months of 2024.

Current wording

The following table is a summary of our quarterly leasing activity during the six months ended June 30, 2024:

Previous wording

Our total overall portfolio occupancy improved as of March 31, 2024 to 87.2% from a total portfolio occupancy of 84.0% as of March 31, 2023 from the following:

Current wording

Our total overall portfolio occupancy improved as of June 30, 2024 to 85.9% from a total portfolio occupancy of 85.1% as of June 30, 2023 from the following:

Previous wording

•Occupancy at 9 Times Square improved to 70.6% for the period ended March 31, 2024 as compared to 62.4% for period ended March 31, 2023. This improvement can be attributed to new leases signed during the year ended December 31, 2023.

Current wording

•Occupancy at 9 Times Square improved to 70.6% for the period ended June 30, 2024 as compared to 68.0% for period ended June 30, 2023. This improvement can be attributed to new leases signed during the year ended December 31, 2023.

Previous wording

•Occupancy at 1140 Avenue of the Americas increased to 77.1% for the period ended March 31, 2024 as compared to 74.6% for period ended March 31, 2023. This improvement can be attributed to new leases signed during the year ended December 31, 2023.

Current wording

•Occupancy at 1140 Avenue of the Americas increased to 79.3% for the period ended June 30, 2024 as compared to 74.6% for period ended June 30, 2023. This improvement can be attributed to new leases signed during the year ended December 31, 2023.

Previous wording

•Occupancy at 8713 Fifth Avenue remained the same at 88.6% as of March 31, 2024 and December 31, 2023. We signed a lease with a new tenant at this property in November 2021, that began occupying a portion of the leased space in the quarter ended March 31, 2023 and is expected to occupy the remainder of the space in the second quarter of the year ended December 31, 2024, which will bring the occupancy to 100.0%.

Current wording

•Occupancy at 8713 Fifth Avenue remained the same at 88.6% as of June 30, 2024 and June 30, 2023.

Previous wording

Net loss attributable to common stockholders was $7.6 million for the quarter ended March 31, 2024, as compared to $11.8 million for the quarter ended March 31, 2023. The change in net loss income attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations in the sections that follow.

Current wording

Net loss attributable to common stockholders was $91.9 million for the quarter ended June 30, 2024, as compared to $10.9 million for the quarter ended June 30, 2023. The change in net loss income attributable to common stockholders is discussed in detail for each line item of the consolidated statements of operations in the sections that follow.

Previous wording

We incurred$1.9 million in fees for asset and property management services paid to our Advisor and Property Manager for both the three months ended March 31, 2024 and 2023. See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on fees incurred from our Advisor and Property Manager. The Advisor was paid in cash for the January and February 2024 base management fee, however, the Advisor elected to receive shares in lieu of cash for the March 2024 base management fee. During the quarter ended March 31, 2023 the Advisor elected to receive shares in lieu of cash for the January 2023 base management fee, however, the management fee for February and March 2023 were paid in cash. The shares issued in lieu of cash for the quarters ended March 31, 2024 and 2023 were valued at $0.5 million, respectively.

Current wording

We incurred$1.9 million and $2.0 million in fees for asset and property management services paid to our Advisor and Property Manager for both the three months ended June 30, 2024 and 2023. See Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on fees incurred from our Advisor and Property Manager. The Advisor was paid in cash for the January, February and June 2024 base management fee, however, the Advisor elected to receive shares in lieu of cash for the March and May 2024 base management fee. Additionally, the Advisor elected to receive shares in lieu of cash for the April property management fee. During the quarter ended June 30, 2023 the Advisor elected to receive shares in lieu of cash for the January 2023 base management fee, however, the management fees for February through June 2023 were paid in cash. The shares issued in lieu of cash for the quarters ended June 30, 2024 and 2023 were valued at $1.0 million and zero, respectively.

Previous wording

Equity-based compensation decreased $2.1 million to $0.1 million for the three months ended March 31, 2024 compared to $2.2 million for the three months ended March 31, 2023. These amounts are comprised of restricted share amortization expense and the amortization of our multi-year outperformance award granted to the Advisor in August 2020 (the “2020 OPP”). The expense from the 2020 OPP is generally consistent period over period, however the third quarter of 2023 only includes expense through the end of the performance period, August 18, 2023 and resulted in a decrease in equity based compensation for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. See Note 11 — Equity-Based Compensation to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on the 2020 OPP and restricted shares of common stock.

Current wording

Equity-based compensation decreased $2.1 million to $0.2 million for the three months ended June 30, 2024 compared to $2.3 million for the three months ended June 30, 2023. These amounts are comprised of restricted share amortization expense and the amortization of our multi-year outperformance award granted to the Advisor in August 2020 (the “2020 OPP”). The 2020 OPP expired on August 18, 2023. The three months ended June 30, 2023 contained $2.1 million of equity-based compensation expenses related to the 2020 OPP, whereas the three months ended June 30, 2024 did not contain any amortization related to the 2020 OPP. See Note 11 — Equity-Based Compensation to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details on the 2020 OPP and restricted shares of common stock.

Previous wording

General and administrative expenses decreased to $2.8 million for the three months ended March 31, 2024 from $3.2 million for three months ended March 31, 2023. The decrease in general and administrative expenses was primarily attributable to lower legal fees of approximately $0.2 million, a decrease of our New York annual capital base tax accrual of $0.2 million and lower professional fees for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

General and administrative expenses decreased to $2.0 million for the three months ended June 30, 2024 from $2.4 million for three months ended June 30, 2023. The decrease in general and administrative expenses was primarily attributable to (i) lower legal fees of approximately $0.3 million, (ii) a decrease in our insurances expenses of $0.1 million and (iii) a decrease of $0.1 million in other miscellaneous general and administrative expenses.

Previous wording

Total reimbursement expenses for administrative and personnel services provided by the Advisor during the three months ended March 31, 2024 and 2023 were $1.2 million ($0.9 million related tosalaries, wages, and benefits and$0.3 million related toadministrative and overhead expenses) and $1.0 million, ($0.8 million related tosalaries, wages, and benefits and$0.2 million related toadministrative and overhead expenses), respectively.

Current wording

These decreases were partially offset by an increase of $0.1 million of total reimbursement expenses for administrative and personnel services provided by the Advisor, which were$0.9 million ($0.8 million related tosalaries, wages, and benefits and$0.1 million related toadministrative and overhead expenses) during the three months ended June 30, 2024 and $0.8 million, ($0.7 million related tosalaries, wages, and benefits and$0.1 million related toadministrative and overhead expenses)during the three months ended June 30, 2023.

Previous wording

Depreciation and amortization expense decreased to $5.3 million for the three months ended March 31, 2024 as compared to $7.0 million for the three months ended March 31, 2023. The decrease was primarily due to a lower depreciable asset base between periods primarily relating to the 1140 Avenue of the Americas impairment charge recorded in the three month period ending December 31, 2023. For more information please see our Annual Report on Form 10-K filed with the SEC on April 1, 2024.

Current wording

Depreciation and amortization expense decreased to $5.2 million for the three months ended June 30, 2024 as compared to $6.7 million for the three months ended June 30, 2023. The decrease was primarily due to a lower depreciable asset base between periods primarily relating to the 1140 Avenue of the Americas impairment charge recorded in the three month period ending December 31, 2023. For more information please see our Annual Report on Form 10-K filed with the SEC on April 1, 2024.

Previous wording

Interest expense remained the same at$4.7 million for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, our weighted-average outstanding debt balance was $399.5 million, and had a weighted-average effective interest rate of 4.36% in each period. All of our mortgage debt is either fixed rate or swapped to fixed rate and, accordingly, we have not currently been affected by rising interest rates.

Current wording

Interest expense increased to$5.2 million for the three months ended June 30, 2024, as compared to$4.7 millionfor the three months ended June 30, 2023. The increase in interest expense can partially be attributed to the maturity of our $49.5 million notional, SOFR based “pay-fixed” interest rate swap in April 2024. During the three months ended June 30, 2024 and 2023, our weighted-average outstanding debt balance was $399.5 million, and had a weighted-average effective interest rate of 4.90% in each period. All of our mortgage debt was either fixed rate or swapped to fixed rate until the maturity of our interest rate swap secured by our 9 Times Square mortgage loan in April 2024. Upon maturity of the interest rate swap in April 2024, the interest rate on the loan secured by that property reverted to a floating variable interest rate.

Previous wording

Property operating expenses remained the same at $8.4 million for the three months ended March 31, 2024 and 2023. Property expenses for the three months ended March 31, 2024 and 2023 consisted of utility maintenance, real estate taxes, janitorial services, and other property expense related services.

Current wording

Property operating expenses remained the same at $16.8 million for the six months ended June 30, 2024 and 2023 for the six months ended June 30, 2023. Property operating expenses for the six months ended June 30, 2024 primarily consisted of utility maintenance, real estate taxes, janitorial services, and other property expense related services.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of$5.3 million as compared to $5.3 million as of December 31, 2023. Under the guarantee of certain enumerated recourse liabilities of the borrower under one of our mortgage loans, we are required to maintain a minimum net worth in excess of $175.0 million and minimum liquid assets (i.e. cash and cash equivalents) of $10.0 million, which includes cash and cash equivalents and restricted cash, which totaled $14.1 million as of March 31, 2024.

Current wording

As of June 30, 2024, we had cash and cash equivalents of$5.2 million as compared to $5.3 million as of December 31, 2023. Under the guarantee of certain enumerated recourse liabilities of the borrower under one of our mortgage loans, we are required to maintain a minimum net worth in excess of $175.0 million and minimum liquid assets (i.e. cash and cash equivalents) of $10.0 million, which includes cash and cash equivalents and restricted cash, which totaled $13.1 million as of June 30, 2024.

Previous wording

We had restricted cash of $8.8 million as of March 31, 2024 as compared to $7.5 million as of December 31, 2023. Our restricted cash balance includes cash sweeps for 1140 Avenue of the Americas of $2.6 million and $2.5 million, as of March 31, 2024 and December 31, 2023, respectively, and the remaining balance of restricted cash is comprised of various escrow accounts and other cash accounts with restricted uses. We are able to use a portion of our restricted cash for certain property operating expenses and capital expenditures. For certain property operating expenses and capital expenditures specifically related to our 1140 Avenue of the Americas property, lender approval is required to use any of the cash that is held in restricted cash accounts resulting from the breach of covenants on the loan secured by that property (see below). As a result, some of the property operating expenses and capital expenditures that will be paid with restricted cash may reside in accounts payable and accrued expenses on our consolidated balance sheet as of March 31, 2024.

Current wording

We had restricted cash of $7.9 million as of June 30, 2024 as compared to $7.5 million as of December 31, 2023. Our restricted cash balance includes cash sweeps for 1140 Avenue of the Americas of $1.6 million and $2.5 million, as of June 30, 2024 and December 31, 2023, respectively, and the remaining balance of restricted cash is comprised of various escrow accounts and other cash accounts with restricted uses. We are able to use a portion of our restricted cash for certain property operating expenses and capital expenditures. For certain property operating expenses and capital expenditures specifically related to our 1140 Avenue of the Americas property, lender approval is required to use any of the cash that is held in restricted cash accounts resulting from the breach of covenants on the loan secured by that property (see below). As a result, some of the property operating expenses and capital expenditures that will be paid with restricted cash may reside in accounts payable and accrued expenses on our consolidated balance sheet as of June 30, 2024.

Previous wording

As of March 31, 2024, we are operating under two cash traps at both 1140 Avenue of the Americas and 8713 Fifth Avenue, which together, represent 23% of the rentable square feet in our portfolio as of March 31, 2024. As of March 31, 2024 and December 31, 2023, there was $2.6 million and $2.5 million, respectively, of cash maintained in a segregated and restricted cash account resulting from the breach of covenants on the loan secured by our 1140 Avenue of the Americas property. The remaining cash that is classified as restricted cash on the consolidated balance sheet are held in escrow accounts. As of March 31, 2024 our 8713 Fifth Avenue property has not generated excess cash after debt service and there is no related cash maintained in a segregated and restricted cash account for that property. We may not access the cash from the 1140 Avenue of the Americas property without lender approval unless and until the various breaches have been cured. Excess cash generated by the 1140 Avenue of the Americas property continues to be deposited in a separate cash management account until the borrower under the loan is able to comply with all of the applicable covenants.

Current wording

As of June 30, 2024, we are operating under two cash traps at both 1140 Avenue of the Americas and 8713 Fifth Avenue, which together, represent 23% of the rentable square feet in our portfolio as of June 30, 2024. As of June 30, 2024 and December 31, 2023, there was $1.6 million and $2.5 million, respectively, of cash maintained in a segregated and restricted cash account resulting from the breach of covenants on the loan secured by our 1140 Avenue of the Americas property. The remaining cash that is classified as restricted cash on the consolidated balance sheet are held in escrow accounts. As of June 30, 2024 our 8713 Fifth Avenue property has not generated excess cash after debt service and there is no related cash maintained in a segregated and restricted cash account for that property. We may not access the cash from the 1140 Avenue of the Americas property without lender approval unless and until the various breaches have been cured. Excess cash generated by the 1140 Avenue of the Americas property continues to be deposited in a separate cash management account until the borrower under the loan is able to comply with all of the applicable covenants.

Previous wording

We do not currently have a commitment for a corporate-level revolving credit facility or any other corporate-level indebtedness, and there can be no assurance we would be able to obtain corporate-level financing on favorable terms, or at all. We do not currently anticipate incurring additional indebtedness secured by our existing properties, however, despite a tightening of the credit markets, we expect to be able to continue to use debt financing as a source of capital especially if we acquire additional properties.

Current wording

We do not currently have a commitment for a corporate-level revolving credit facility or any other corporate-level indebtedness, and there can be no assurance we would be able to obtain corporate-level financing on favorable terms, or at all.

Previous wording

We breached both a debt service coverage provision and a reserve fund provision under our non-recourse mortgage secured by the 1140 Avenue of the Americas property in each of the last 15 quarters ended March 31, 2024. The principal amount of the loan was $99.0 million as of March 31, 2024. These breaches are not events of default, rather they require excess cash, if any, generated at the property (after paying operating costs, debt service and capital/tenant replacement reserves) to be held in a segregated account as additional collateral under the loan. The covenants for this loan may be cured if we satisfy the required debt service coverage ratio for two consecutive quarters, whereupon the additional collateral will be released. We can remain subject to this reserve requirement through maturity of the loan without further penalty or ramifications. As of March 31, 2024 and December 31, 2023 we had$2.6 million and$2.5 million in cash that is retained by the lender and maintained in restricted cash on our consolidated balance sheet as of those dates.

Current wording

We have breached both a debt service coverage provision and a reserve fund provision under our non-recourse mortgage secured by the 1140 Avenue of the Americas property in each of the last 16 quarters ended June 30, 2024. The principal amount of the loan was $99.0 million as of June 30, 2024. These breaches are not events of default, rather they require excess cash, if any, generated at the property (after paying operating costs, debt service and capital/tenant replacement reserves) to be held in a segregated account as additional collateral under the loan. The covenants for this loan may be cured if we satisfy the required debt service coverage ratio for two consecutive quarters, whereupon the additional collateral will be released. We can remain subject to this reserve requirement through maturity of the loan without further penalty or ramifications. As of June 30, 2024 and December 31, 2023 we had $1.6 million and$2.5 million in cash that is retained by the lender and maintained in restricted cash on our consolidated balance sheet as of those dates.

Previous wording

We breached a debt service coverage ratio covenant under the non-recourse mortgage secured by 8713 Fifth Avenue in each of the last 15 quarters ended March 31, 2024. The principal amount for the loan was $10.0 million as of March 31, 2024. The breach of this covenant did not result in an event of default but rather triggered an excess cash flow sweep period. We have the ability to avoid the excess cash flow sweep period by electing to fund a reserve in the amount of $125,000 of additional collateral in cash or as a letter of credit. As of the date of filing this Quarterly Report on Form 10-Q, we had not yet determined whether we will do so, and have not previously done so. If we do not elect to continue to fund the $125,000 additional collateral in a subsequent quarter, then the excess flow sweep period would commence in such quarter and continue until the covenant breaches are cured in accordance with the terms of the loan agreement. Additionally, in the event that the debt service coverage ratio covenant remains in breach at or below the current level for two consecutive calendar quarters and the lender reasonably determines that such breach is due to the property not being prudently managed by the current manager, the lender has the right, but not the obligation, to require that we replace the current manager with a third party manager chosen by us. This property did not generate any excess cash since the breach occurred and thus no cash has ever been trapped related to this property. We signed a lease with a tenant at this property in November 2021. The tenant and began occupying a portion of the leased space in the quarter ended March 31, 2023 and is expected to occupy the remainder of the space in the quarter ending June 30, 2024, which will bring the occupancy to 100%. We anticipate complying with the debt service coverage ratio under the non-recourse mortgage once the space is occupied.

Current wording

We have breached a debt service coverage ratio covenant under the non-recourse mortgage secured by 8713 Fifth Avenue in each of the last 16 quarters ended June 30, 2024. The principal amount for the loan was $10.0 million as of June 30, 2024. The breach of this covenant did not result in an event of default but rather triggered an excess cash flow sweep period. The excess cash flow sweep period will continue until the covenant breaches are cured in accordance with the terms of the loan agreement. This property has not generated any excess cash since the breach occurred and thus no cash has ever been trapped related to this property.

Previous wording

We entered a lease sweep period under the non-recourse mortgage secured by 400 E. 67th Street/200 Riverside Blvd. in the three months ended March 31, 2024, resulting from a near-maturity lease with a major tenant at the property set to expire in the second quarter of 2024 that, as of March 31, 2024, was not renewed or extended. The principal amount for the loan was $50.0 million as of March 31, 2024. Under the loan agreement, a lease sweep period is triggered when (i) the date that is twelve months prior to the end of the term of the major lease, (ii) the date required by the major tenant to give notice of its exercise of a renewal option, (iii) any major tenant lease is surrendered or terminated prior to the expiration date, (iv) if the major tenant discontinues its operations and the major tenants long term debt is not rated lower than investment grade, (v) any material default under the major tenant’s lease, (vi) any major tenant insolvency proceeding. Under the lease sweep period, any excess cash generated, if any, is to be held in a segregated reserve account controlled by the lender as additional collateral.

Current wording

We entered a lease sweep period under the non-recourse mortgage secured by 400 E. 67th Street/200 Riverside Blvd. in the six months ended June 30, 2024, resulting from a near-maturity lease with a major tenant at the property set to expire in the third quarter of 2024. The principal amount for the loan was $50.0 million as of June 30, 2024. Under the loan agreement, a lease sweep period is triggered when (i) the date that is twelve months prior to the end of the term of the major lease, (ii) the date required by the major tenant to give notice of its exercise of a renewal option, (iii) any major tenant lease is surrendered or terminated prior to the expiration date, (iv) if the major tenant discontinues its operations and the major tenants long term debt is not rated lower than investment grade, (v) any material default under the major tenant’s lease, (vi) any major tenant insolvency proceeding. Under the lease sweep period, any excess cash generated, if any, is to be held in a segregated reserve account controlled by the lender as additional collateral.

Previous wording

As of March 31, 2024 we had $1.1 million retained by the lender in a restricted cash account on our consolidated balance sheet. We may exit the lease sweep period when the major tenant executes a renewal or extension option.

Current wording

As of June 30, 2024 we had $2.5 million retained by the lender in a restricted cash account on our consolidated balance sheet. We may exit the lease sweep period when the major tenant executes a renewal or extension option beyond the terms described above.

Previous wording

Any cash that is restricted for the remaining breaches on 1140 Avenue of the Americas and 8713 Fifth Avenue mortgages (as disclosed above) are not available to be used for other corporate purposes. Restricted cash related to 400 E. 67th Street/200 Riverside Blvd. lease sweep period is also not available to be used for other corporate purposes. There is no assurance that we will be able to cure these breaches. Moreover, if we experience additional lease terminations, due to tenant bankruptcies or otherwise, or tenants placed on a cash basis continue to not pay rent, it is possible that certain of the covenants on other loans may be breached and we may also become restricted from accessing excess cash flows from those properties. Except as described herein, we were in compliance with the remaining covenants under our mortgage notes payable as of March 31, 2024.

Current wording

We were in compliance with the remaining covenants under our other mortgage notes payable as of June 30, 2024, and we continue to monitor compliance with those provisions. If we experience additional lease terminations, due to tenant bankruptcies or otherwise, or tenants placed on a cash basis revenue recognition continue to not pay rent, it is possible that certain of the covenants on other loans may be breached and we may also become restricted from accessing excess cash flows from those properties. Similar to the loans discussed above, our other mortgages also contain cash management provisions that are not considered events of default, and as such, acceleration of principal would only occur upon an event of default.

Previous wording

During the year ended December 31, 2023 and the three months ended March 31, 2024, we were also able to preserve cash through an arrangement with our Advisor. Pursuant to the Advisory Agreement, the Advisor had agreed to elect to accept shares of our common stock in lieu of cash for the base asset management fee as well as for the property management fee and reimbursement expenses (see Note 14 — Subsequent Events) to the Advisor. For the months described below, the Company paid asset management fees in shares in lieu of cash. For more information see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details).

Current wording

During the year ended December 31, 2023 and the six months ended June 30, 2024, we were also able to preserve cash through an arrangement with our Advisor. Pursuant to the Advisory Agreement, the Advisor has the option to elect to receive shares of our common stock in lieu of cash for the asset management, property management, and administrative services it provides us with. For the months described below, the Company paid related party fees in shares in lieu of cash. For more information see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.

Previous wording

(1)Retroactively adjusted for the effects of the Reverse Stock Split (see Note 1 for additional information).

Current wording

(1)Retroactively adjusted for the effects of the Reverse Stock Split (see Note 1 for additional information to our consolidated financials statements included in this Quarterly Report on Form 10-Q).

Previous wording

We had an increase in occupancy level to 87.2%across our portfolio as of March 31, 2024, as compared to 86.7% as of December 31, 2023. The changes in occupancy were as follows:

Current wording

We had an increase in occupancy level to 85.9%across our portfolio as of June 30, 2024, as compared to 86.7% as of December 31, 2023. The changes in occupancy were as follows:

Previous wording

•Occupancy at 123 William Street increased to 92.5% as of March 31, 2024 compared to 91.4% as of December 31, 2023. The increase was due to the signing of anew lease during the three months ended March 31, 2024.

Current wording

•Occupancy at 123 William Street decreased to 88.8% as of June 30, 2024 compared to 91.4% as of December 31, 2023. The decrease in occupancy was due to a lease amendment and a tenant occupying less space during the six months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2024, we funded an aggregate of $0.4 million of capital expenditures primarily for tenant and building improvements at 123 William Street, 9 Times Square 1140 Avenue of the Americas, and 8713 Fifth Avenue. We may invest in additional capital expenditures to further enhance the value of our properties. Additionally, many of our lease agreements with tenants include provisions for tenant improvement allowances.

Current wording

For the six months ended June 30, 2024, we funded an aggregate of $0.6 million of capital expenditures primarily for tenant and building improvements at 123 William Street, 9 Times Square, 1140 Avenue of the Americas, and 8713 Fifth Avenue. We may invest in additional capital expenditures to further enhance the value of our properties. Additionally, many of our lease agreements with tenants include provisions for tenant improvement allowances.

Previous wording

We had no acquisitions or dispositions during the three months ended March 31, 2024 or 2023.

Current wording

To further augment our liquidity, we may also further dispose of properties. We had no acquisitions or dispositions during the three or six months ended June 30, 2024 or 2023.

Previous wording

We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of March 31, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.5%. To help mitigate the adverse impact of inflation, approximately 84% of our leases with our tenants contain rent escalation provisions which increase the cash rent that is due under these leases over time by an average cumulative increase of 2.2% per year. These provisions generally increase rental rates during the terms of the leases either at fixed rates or other measures. As of March 31, 2024, based on straight-line rent, approximately 84% are fixed rate, scheduled escalation increases recorded on a straight-line basis, and 16% do not contain any escalation provisions.

Current wording

We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of June 30, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.0%. To help mitigate the adverse impact of inflation, approximately 83% of our leases with our tenants contain rent escalation provisions which increase the cash rent that is due under these leases over time by an average cumulative increase of 2.2% per year. These provisions generally increase rental rates during the terms of the leases either at fixed rates or other measures. As of June 30, 2024, based on straight-line rent, approximately 83% are fixed rate, scheduled escalation increases recorded on a straight-line basis, and 17% do not contain any escalation provisions.