American Strategic Investment Co.

Note 1 —Organization

American Strategic Investment Co. (including, New York City Operating Partnership L.P., (the “OP”) and its subsidiaries, the “Company”) is an externally managed company that currently owns a portfolio of commercial real estate located within the five boroughs of New York City, primarily Manhattan. The Company’s real estate assets consist of office properties and certain real estate assets that accompany office properties, including retail spaces and amenities. As of June 30, 2025, the Company ownedsix properties consisting of 1.0 million rentable square feet.

Substantially all of the Company’s business is conducted through the OP and its wholly-owned subsidiaries. The Company’s advisor, New York City Advisors, LLC (the “Advisor”), manages the Company’s day-to-day business with the assistance of the Company’s property manager, New York City Properties, LLC (the “Property Manager”). The Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to the Company. The Company also reimburses these entities for certain expenses they incur in providing these services. Please see Note 9 — Related Party Transactions and Arrangements for additional information on the Company’s Advisor and affiliates of the Advisor, including ownership percentages.

Note 2 —Going Concern

The Company’s objectives when managing its capital are to seek to ensure that there are adequate capital resources to safeguard the Company’s ability to continue operating and maintain adequate levels of funding to support its ongoing operations. The Company’s management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued.

In the quarter ended June 30, 2025, the Company continued to incur recurring losses from operations and negative operating cash flows at some of its properties, an increasing current liabilities balance that exceeds current assets and incurred events of default on loans that encumber three of the Company’s six properties (Please see Note 5 - Mortgage Notes Payable, Net, for further discussion on the events of default). These conditions raised substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of issuance of the June 30, 2025 financial statements.

However, management has developed and is implementing a plan intended to alleviate the substantial doubt about the Company’s ability to continue as a going concern. The plan includes paying related party fees such as asset management fees, property management fees, reimbursable compensation costs, and reimbursable overhead costs in shares on a go forward basis and selling one of the Company's performing assets within the next twelve months. Further, the Advisor has the ability and willingness to lend funds to the Company pursuant to promissory notes for liquidity requirements as needed. Based on the implementation of the plan and the resulting improvements in the Company’s projected cash flows, the Company has concluded that substantial doubt about it’s ability to continue as a going concern is alleviated. Accordingly, the financial statements as of June 30, 2025 have been prepared assuming the Company will continue as a going concern.

The Company’s cash and cash equivalents and restricted cash totaled $12.8 million as of June 30, 2025, a decrease of $6.1 million from December 31, 2024. During the six months ended June 30, 2025, the decrease in cash was primarily due to the monthly expenses related to underperforming properties and cash sweeps at those same properties (please see Note 5 - Mortgage Notes Payable, Net, for further discussion on cash sweep events). Of the total amount of cash as of June 30, 2025, approximately $5.3 million is non-restricted cash available for general corporate purposes and $7.5 million is restricted cash related to the loans in default (please see Note 5 - Mortgage Notes Payable, Net for further discussion on the events of default).

As of June 30, 2025, the Company’s current mortgage payable liabilities on a consolidated basis totaled approximately $99.0 million. As of June 30, 2025, on a consolidated basis, the Company’s current liabilities far exceed current assets. The current loan liability consists entirely of a bank loan secured by the 1140 Avenues property that is in default and is non-recourse to the Company.

The Company intends to continue to focus on selling a performing property, entering into new leases and divest from underperforming assets. However, the Company cannot predict, with certainty, the outcome of these actions to generate liquidity.

The Company faces significant liquidity constraints due to a combination of factors, including sustained declines in rental income, constrained cash flow from operations, and ongoing debt service obligations. The Company’s portfolio consists primarily of office properties located in Manhattan, which have been adversely impacted by shifts in market demand following the COVID-19 pandemic. While management has successfully executed lease transactions to mitigate vacancy risk, new leases have been executed at market rental rates below prior contractual rates, resulting in decreased revenue compared to historical levels.

The Company’s cash outlays consist principally of professional fees, consultant fees, legal fees, insurance costs, auditing costs, general and administrative expenses, principal and interest expense on debts, property maintenance, property taxes, as well as other property related expenses that are not covered by tenants. To the extent the Company needs to raise additional capital to meet its obligations, there can be no assurance that financing will be available when needed. If the Company is unable to sell certain assets when anticipated at expected prices, the Company may not have sufficient cash to fund operations and commitments. Although there can be no assurance that external financing will be available on favorable terms when needed, the Advisor has indicated both the ability and willingness to lend funds to the Company pursuant to promissory notes to address liquidity requirements, if necessary.

Note 3 —Summary of Significant Accounting Policies

Basis of Accounting

The accompanying consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. The results of operations for the three and six months ended June 30, 2025 and 2024, respectively, are not necessarily indicative of the results for the entire year or any subsequent interim period.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2024, which are included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 19, 2025. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2025.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All inter-company accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. Substantially all the Company’s assets and liabilities are held by the OP. The Company has determined the OP is a VIE of which the Company is the primary beneficiary.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and fair value measurements, as applicable.

Continuing Adverse Impacts Since the COVID-19 Pandemic

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. New York City, where all of the Company’s properties are located, was among the hardest hit locations in the country and fully reopened from relevant restrictions and lockdowns on March 7, 2022. While the COVID-19 pandemic subsided and the Company’s properties remain accessible to all tenants, some tenants have vacated, terminated or otherwise did not renew their lease. The Company has incurred increased unreimbursed property operating expenses because the Company’s occupancy has not fully recovered to pre-pandemic levels, and these increased expenses have been compounded by inflation. The pace of recovery in the New York City office market from the COVID-19 pandemic continues to be challenging 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. Some businesses continue to maintain hybrid or all work-from-home arrangements in response to employee desire for more flexibility, which may lead to continued challenges in the commercial real estate market and potentially represents a long-term negative impact on the New York City real estate market. There can be no assurance that the Company will be able to lease all or any portion of the currently vacant space at any property on acceptable or favorable terms, or at all.

Cash Collection and Mortgage Covenant non-compliance

In prior periods, the COVID-19 pandemic caused certain of the Company’s tenants to be unable to make rent payments to the Company timely, or at all. Rent collections from the Company’s tenants have generally been timely in the quarters ended June 30, 2025 and 2024 and no new COVID-19 deferral or abatement agreements were entered into. As of June 30, 2025 and 2024 the occupancy and operating results at 1140 Avenue of Americas have not yet fully recovered, which has caused non-compliance of certain mortgage debt covenants or cash trap or cash sweep events under their non-recourse mortgages in the past several quarters and in the current quarter. In our 400 E. 67th Street property, one major tenant's lease expired and we subsequently entered in to a month to month lease with that tenant. This tenant later vacated the property during the year ended December 31, 2024 after the month to month lease ended. In addition at the Company’s 400 E. 67th Street property, another major tenant is paying through the end of their lease, which is September 2025; however, they moved out of the space in the third quarter of 2024. See Note 5 — Mortgage Notes Payable, Net for further details regarding the status of the debt covenants under the above mentioned mortgages as of June 30, 2025.

Revenue Recognition

The Company’s revenues, which are derived primarily from lease contracts, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. As of June 30, 2025, these leases had a weighted-average remaining lease term of 6.0 years. Because many of the Company’s leases provide for rental increases at specified intervals, straight-line basis accounting requires that the Company record a receivable for, and include in revenue from tenants, unbilled rent receivables that the Company will receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation. For new leases after acquisition, the commencement date is considered to be the date the tenant takes control of the space. For lease modifications, the commencement date is considered to be the date the lease modification is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. Pursuant to certain of the Company’s lease agreements, tenants are required to reimburse the Company for certain property operating expenses (recorded in total revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties. To the extent such costs exceed the applicable tenant’s base year, many but not all of the Company’s leases require the tenant to pay its allocable share of increases in operating expenses, which may include common area maintenance costs, real estate taxes and insurance. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.

The Company continually reviews receivables related to rent and unbilled rents receivable and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Under the leasing standard, the Company is required to assess, based on credit risk, if it is probable that the Company will collect virtually all of the lease payments at the lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable that it will collect virtually all of the lease payments (base rent and additional rent), the lease will continue to be accounted for on an accrual basis (i.e. straight-line). However, if the Company determines it is not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and the straight-line rent receivable accrued will be written off, as well as any accounts receivable, where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in operating revenue from tenants in accordance with current accounting rules, on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.

In accordance with lease accounting rules the Company records uncollectible amounts as reductions in revenue from tenants. During the six months ended June 30, 2025 and 2024, the Company had no such reductions in revenue which excludes rents from tenants on a cash basis not collected.

Accounting for Leases

Lessor Accounting

In accordance with the lease accounting standard, all leases as lessor prior to adoption were accounted for as operating leases. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than major part of remaining economic useful life of the asset (e.g., equal to or greater than 75%), the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or the asset so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases are evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. As of June 30, 2025, the Company did not have any leases as a lessor that would be considered as sales-type leases or financing under sales-leaseback rules.

As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.

Lessee Accounting

For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 8 — Commitments and Contingencies.

We are the lessee under a land lease which was previously classified as an operating lease prior to adoption of lease accounting and will continue to be classified as an operating lease under transition elections unless subsequently modified. This lease is reflected on the Company’s consolidated balance sheets and the rent expense is reflected on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If an impairment exists, due to the inability to recover the carrying value of a property, the Company would recognize an impairment loss in the consolidated statements of operations and comprehensive income to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held for use. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net loss because recording an impairment loss results in an immediate negative adjustment to earnings.

Recently Issued Accounting Pronouncements

Not Yet Adopted as of June 30, 2025

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures. The new standard expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. Public entities must apply the new standard to annual periods beginning after December 15, 2024. The Company will adopt the new guidance in its Annual Report on Form 10-K for the year ended December 31, 2025. The guidance is not expected to have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220) — Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. The new standard requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. Public entities must apply the new standard to annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements and disclosures.

Note 4 —Real Estate Investments

There were no real estate assets acquired or liabilities assumed during the six months ended June 30, 2025 or 2024. Also, there were no dispositions of real estate during the six months ended June 30, 2025 or 2024.

The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangibles and amortization and accretion of above- and below-market lease assets and liabilities, net, for the periods presented:

The following table provides the projected amortization expense and adjustments to revenues for the next five years as of June 30, 2025:

Significant Tenants

As of June 30, 2025 and June 30, 2024, there were no tenants whose annualized rental income on a straight-line basis, based on leases commenced, represented greater than 10% of total annualized rental income for all portfolio properties on a straight-line basis.

Assets Held for Use

When circumstances indicate the carrying value of a property classified as held for use may not be recoverable, the Company reviews the property for impairment. For the Company, the most common triggering events are (i) concerns regarding the tenant (i.e., credit or expirations) in the Company’s single-tenant properties or significant vacancy in the Company’s multi-tenant properties and (ii) changes to the Company’s expected holding period as a result of business decisions or non-recourse debt maturities. If a triggering event is identified, the Company considers the projected cash flows due to various performance indicators, and where appropriate, the Company evaluates the impact on its ability to recover the carrying value of the properties based on the expected cash flows on an undiscounted basis over its intended holding period. The Company makes certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessments of terminal values. Where more than one possible scenario exists, the Company uses a probability weighted approach in estimating cash flows. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future. If the undiscounted cash flows over the expected hold period are less than the carrying value, the Company reflects an impairment charge to write the asset down to its fair value.

Impairment Charges

The Company recorded an impairment charge of $7.1 million on its 1140 Avenue property during the three and six months ended June 30, 2025. This charge was recognized to reduce the property's carrying value to its estimated fair value.

The Company recorded impairment charges totaling $13.1 million for the three and six months ended June 30, 2025, related to its 400 E. 67th Street/200 Riverside property. These charges were recognized to reduce the carrying value of the property to its estimated fair value.

The Company recorded impairment charges totaling $10.3 million for the three and six months ended June 30, 2025, related to its 196 Orchard Street property. These charges were recognized to reduce the carrying value of the property to its estimated fair value.

The Company recorded $84.7 million of impairment charges in the three and six months ended June 30, 2024 on its 9 Times Square property. This impairment charge was recorded to reduce the carrying value of the property to its estimated fair value. The property was sold in December of 2024.

For additional information and disclosures related to the Company’s impairment charges, see Note 5 — Mortgage Notes Payable, Net.

Note 5 —Mortgage Notes Payable, Net

The Company’s mortgage notes payable, net as of June 30, 2025 and December 31, 2024 are as follows:

(1)These mortgage notes payable are currently either in an event of default, in breach of a debt covenant that may result in further restrictions as specified by the terms of the covenants or a cash sweep event of a debt covenant that may result in further restrictions as specified by the terms of the covenants. For more information please see“Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation”section below.

(2)Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

(3)The Company was informed by the lender on February 19, 2025 that the Company was in default under the loan agreement governing the loan secured by the non-recourse mortgage on the property for failure to make certain scheduled interest payments, and on April 7, 2025 the Company was informed by the lender that the principal balance due under such loan agreement had been accelerated and all amounts under such loan agreement were due and payable. In June 2025, the lender commenced a legal action in the State of New York against the OP and the Company’s subsidiary borrower under such loan agreement demanding, among other things, the court initiate foreclosure proceedings with respect to the property and, in July 2025, that such court appoint a receiver for the property. For more information, please see “Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation” section below.

(4) The Company was informed by the lender pursuant to letters dated in November 2024, December 2024, January 2025 and June 2025 that the Company was in default under the loan agreement governing the loan secured by the non-recourse mortgage on the property for events that first occurred in the third and fourth quarters of 2023, specifically the Company’s failure to establish a cash management account for excess cash sweeps over monthly debt service requirements failure to cooperate with the lender to cure the alleged cash management procedure failures, and failure to pay outstanding amounts due under such loan agreement beginning in April 2025. The Company responded to notices of default sent in November 2024, December 2024 and January 2025, rejecting the assertions made by the lender, and has not received a response from the lender. The Company has not responded to the notice of default received in June 2025. The lender has not accelerated any portion of the loan. For more information, please see “Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation” section below.

Collateral and Principal Payments

Real estate assets and intangible assets of $436.2 million, at cost (net of below-market lease liabilities), as of June 30, 2025 have been pledged as collateral to the Company’s mortgage notes payable and are not available to satisfy the Company’s other obligations unless first satisfying the mortgage note payable on the property. The Company is required to make payments of interest on its mortgage notes payable on a monthly basis.

The following table summarizes the scheduled aggregate principal payments subsequent to June 30, 2025:

(1) On April 7, 2025, the Company was informed by the lender under the loan secured by the 1140 Avenue of the Americas property that the principal balance due under the loan agreement had been accelerated and all amounts under such loan agreement were due and payable.

Debt Covenant Non-Compliance, Cash Sweep Events, Notices of Defaults and of Acceleration and Foreclosure Litigation

1140 Avenue of the Americas

The Company has breached both a debt service coverage provision and a reserve fund provision under its non-recourse mortgage secured by the 1140 Avenue of the Americas property in each of the last 20 quarters ended June 30, 2025. The principal amount of the loan was $99.0 million as of June 30, 2025. 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. As of June 30, 2025 and December 31, 2024 the Company had $0.4 million and $1.6 million, respectively, in cash that is retained by the lender and maintained in restricted cash on the Company’s consolidated balance sheet as of those dates. In addition, the debt service payment for the months of April, May and June under this non-recourse mortgage were not made in full by the rental income from the property collected in the cash management accounts under control of the lender.

The Company was informed by the lender on February 19, 2025 that the Company was in default under the loan agreement for failure to make certain scheduled interest payments. The Company made the payments in question in full on the same day the default notice was received by the Company as a cure for the February event of default. On April 7, 2025, the lender notified the Company that the principal balance due under such loan agreement had been accelerated and all amounts under such loan agreement were due and payable as a result of a default described in the notice, together with interest at the default rate set forth in the loan document, which is a rate annum equal to the lesser of (i) the maximum nonusurious interest rate or (ii)five percent (5%) above the interest rate of 4.109% per annum. Such amounts include, but are not limited to, the $99.0 million principal amount of the mortgage note.

On June 27, 2025, the trustee appointed to act on behalf of the lenders filed a complaint with the Supreme Court of the State of New York in the County of New York (the “Court”), naming the OP and the Company’s subsidiary borrower under such loan agreement as defendants, requesting the Court initiate foreclosure proceedings on the mortgage on the property and that the OP and such borrower pay the lenders the amount of the debt, inclusive of certain accrued fees and expenses, remaining unsatisfied after the sale of the property. On July 21, 2025, the trustee filed a motion with the Court to appoint a receiver with respect to the property. On August 6, 2025, the Company filed its answer to such complaint, which admitted in part, denied in part the material allegations and stated that the Company has insufficient knowledge and information upon which to form a belief as to whether it has, as of yet, unstated affirmative defenses available. Notwithstanding the OP being named as defendant in the complaint, the complaint does not allege events giving rise to a recourse obligation by the OP under the guaranty agreement related to the loan agreement, and the Company does not believe that any of the allegations against the OP are sufficient to trigger any such recourse obligation of the OP under the guaranty agreement.

8713 Fifth Avenue

The Company has breached the first part of a two-part test debt service coverage ratio covenant under the non-recourse mortgage secured by 8713 Fifth Avenue in each of the last 20 quarters ended June 30, 2025. The second part of the test is a lender’s right to require replacement of management ratio which is discussed below. The principal amount for the loan was $10.0 million as of June 30, 2025. The breach of the first part of this covenant did not result in an event of default but rather triggered an excess cash flow sweep period that has been ongoing. 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.

Separately, in the event that the debt service coverage ratio is in breach of the lenders right to require replacement of management ratio fortwo consecutive calendar quarters and the lender reasonably determines that such breach is due to the property being imprudently managed by the current manager, the lender has the right, but not the obligation, to require that the Company replace the current manager with a third party manager chosen by the Company. As of June 30, 2025 the Company is no longer in breach of the lenders right to require replacement of management.

400 E. 67th Street/200 Riverside Blvd.

The Company entered a lease sweep period under the non-recourse mortgage secured by 400 E. 67th Street/200 Riverside Blvd. in the year ended December 31, 2024, resulting from a near-maturity lease with a major tenant at the property which expired in the third quarter of 2024. The principal amount for the loan was $50.0 million as of June 30, 2025. Under the loan agreement, a lease sweep period is triggered, when (i) the date that istwelve 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. As of June 30, 2025 and December 31, 2024 the Company had $4.1 million and $4.2 million, respectively, in cash swept that is retained by the lender and recorded within restricted cash on the Company’s consolidated balance sheet.

On November 19, 2024, the lender sent a notice to the Company alleging that the Company was in default under the loan agreement governing the loan secured by the non-recourse mortgage on the property for events that occurred in the third and fourth quarters of 2023, specifically the Company’s failure to establish a cash management account for excess cash sweeps over monthly debt service requirements. The lender had been remitting excess cash on their own accord until the period of cash sweep was put into effect in 2024 as described above. In that notice of default, the lender asserted the Company owes an estimated $1.0 million in excess cash to be deposited into the loan reserve account. The Company responded to such notice of default on February 20, 2025 rejecting the assertions made by the lender, which the Company believed were without merit as a result of the lender's failure to implement a cash management account and the Company’s inability to take such action unilaterally due to the mechanics for receipt of lease payments provided for by the loan agreement. Beginning in March 2025, the lender began charging default interest to the Company, currently totaling $3.3 million. On June 10, 2025, the lender sent a second notice to the Company alleging defaults under such loan agreement as a result of (i) the Company’s failure to pay the outstanding amount due thereunder beginning in April 2025 and (ii) the Company’s failure to cooperate with the lender to comply with the aforementioned cash management procedures. The second default notice reaffirmed that, as a result of the aforementioned defaults, interest was accruing at the default rate under the loan agreement and made a demand that all unpaid amounts due under the loan agreement be paid. As of the date of this Quarterly Report on Form 10-Q, the Company has not responded to the second default notice, but while the Company cannot predict the ultimate outcome of legal matters, the Company currently believes that it is not probable a liability has been incurred with respect to the alleged default from the November 19, 2024 notice and intends to continue to challenge the charge of default interest by the lender associated with that notice. Further, the Company incurred a liability as of June 30, 2025 in relation to the June 10, 2025 default notice.

Other Debt Covenants

The Company was in compliance with the remaining covenants under its other mortgage notes payable as of June 30, 2025 and, it continues to monitor compliance with those provisions. If the Company experiences 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 the Company may also become restricted from accessing excess cash flows from those properties. Similar to the loans discussed above, the Company’s 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.

The loan agreements for 123 William Street, 8713 Fifth Avenue and 196 Orchard do not contain cross-default provisions such that the default matters related to 1140 Avenue of the Americas or 400 E. 67th Street/200 Riverside Boulevard, and the acceleration of the outstanding obligation under the loan agreement related to the 1140 Avenues of the Americas property, is not expected to have an impact on those properties under such loan agreements.

Note 6 —Fair Value of Financial Instruments

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the instrument. This alternative approach also reflects the contractual terms of the instrument, as applicable, including the period to maturity, and may use observable market-based inputs, including interest rate curves and implied volatilities, and unobservable inputs, such as expected volatility. The guidance defines three levels of inputs that may be used to measure fair value:

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Financial Instruments That Are Not Reported at Fair Value

The Company is required to disclose at least annually the fair value of financial instruments for which it is practicable to estimate the value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature.

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of borrowing arrangements.

The fair values of the Company’s financial instruments that are not reported at fair value on the consolidated balance sheet are reported below:

(1)The Company recorded impairment charges of $7.1 million during the three months ended June 30, 2025 and $66.1 million during the year ended December 31, 2024 for its 1140 Avenues of the Americas property. As a result, the Company adjusted the fair value of the property’s mortgage to the current carrying value of the property.

(2)The Company recorded impairment charges of $3.1 million and $9.9 million during the three months ended June 30, 2025 for its 400 E. 67th Street and 200 Riverside properties, respectively, and $25.8 million during the year ended December 31, 2024 for its 400 E. 67th Street property. As a result, the Company adjusted the fair value of the 400 E. 67th Street/200 Riverside allocable mortgage balance to the property's current carrying value.

As of June 30, 2025, the Company recognized impairments on the 1140 Avenue of the Americas, 400 East 67th Street, 200 Riverside, and 196 Orchard Street properties based on the Company’s estimates of fair value. The fair value of the 1140 Avenue of the Americas, 400 East 67th Street, and 196 Orchard Street properties was determined using discounted cash flow models, while the fair value of the 200 Riverside property was determined using a sales comparison approach. The significant assumptions used in the valuation models included a capitalization rate of 7.0% and a discount rate of 8.5% for each property.