Company Background and History
Trinity Place Holdings Inc. (TPHS) is a real estate holding, investment, development, and asset management company that has undergone a significant transformation in recent years. Founded in 2012 as a successor to Syms Corporation, Trinity Place Holdings has evolved from a retail company to a diversified real estate enterprise, actively managing a portfolio of properties in New York City and beyond.
The company's history can be traced back to 1983, when Syms Corporation, a discount retail chain, was established. Syms grew to become a prominent player in the off-price apparel market, known for its tagline "An Educated Consumer is Our Best Customer." However, the company faced challenges in the changing retail landscape and filed for Chapter 11 bankruptcy in 2011. Out of this bankruptcy, Trinity Place Holdings emerged in 2012 as a real estate-focused entity, tasked with managing Syms' remaining assets and charting a new course for the company.
Trinity Place Holdings was formed as part of the reorganization of Syms Corp., inheriting not only real estate holdings but also intellectual property and approximately $350 million in federal net operating loss carryforwards (NOLs). In the years following its formation, the company focused on managing its real estate portfolio and intellectual property assets. These assets included the mixed-use property at 77 Greenwich Street in Lower Manhattan, the multi-family apartment building at 237 11th Street in Brooklyn, and the retail property in Paramus, New Jersey. Additionally, Trinity controlled various intellectual property assets in the consumer sector, including the FilenesBasement.com brand and the rights to the Running of the Brides event.
Early Challenges and Transition
The company faced several challenges during its early years. In 2018, Trinity submitted a claim to its insurance carrier for property damage and business interruption at the 237 11th Street property due to construction defects. However, the claim was denied, leading Trinity to file a lawsuit against the insurance carrier, previous owners, and contractors of the property. This litigation has been ongoing, with the ultimate outcome remaining uncertain. Furthermore, the development and sale of residential condominium units at the 77 Greenwich Street property have been subject to changing market conditions and construction delays.
Under the leadership of CEO Matthew Messinger, Trinity Place Holdings began to reshape its business model, transitioning from a retail-centric approach to a more diversified real estate strategy. The company's portfolio now includes a mix of residential, commercial, and mixed-use properties, with a primary focus on the New York City metropolitan area.
Key Projects and Assets
One of Trinity Place Holdings' flagship projects is the 77 Greenwich Street development in Lower Manhattan. This mixed-use project, which includes a 90-unit residential condominium tower, retail space, and a New York City elementary school, has been a significant undertaking for the company. As of September 30, 2024, the company had closed on the sale of 44 residential condominium units, with 46 remaining units to sell as of November 14, 2024. TPHS entered into an agreement with the New York City School Construction Authority (SCA) to construct a school as part of the condominium development, for which the SCA agreed to pay TPHS $41.5 million for the school condominium unit and reimburse TPHS for the construction costs, including a $5 million construction supervision fee. As of September 30, 2024, TPHS had received an aggregate of $46.4 million from the SCA, with $176,000 remaining to be paid.
In addition to 77 Greenwich Street, Trinity Place Holdings also owns a 105-unit, 12-story multi-family apartment building located at 237 11th Street in Brooklyn, New York. Due to water damage and other construction defects, TPHS has filed legal claims against the prior ownership team and contractors to recover the costs incurred for repairs and remediation, which were completed as of December 31, 2021. Management expects TPHGreenwich to recover some portion of these costs through the litigation or settlement negotiations, although the amount and timing are uncertain.
The company also owns a retail property in Paramus, New Jersey. This property consists of a one-story and partial two-story, 77,000 square foot freestanding building and a 4,000 square foot outparcel building, primarily leased to Restoration Hardware Holdings, Inc. TPHGreenwich is exploring options for a potential sale of this property.
The company's real estate portfolio has been managed through its subsidiary, TPHGreenwich Holdings LLC, which became 95% owned by Trinity Place Holdings and 5% owned by an affiliate of the lender under the company's corporate credit facility as part of the Recapitalization Transactions that closed on February 14, 2024.
Financials
Trinity Place Holdings' financial performance has been impacted by the various challenges facing the real estate industry, including the effects of the COVID-19 pandemic. In the nine months ended September 30, 2024, the company reported a net loss of $6.05 million, compared to a net loss of $29.04 million in the same period of the prior year. The decrease in net loss was primarily due to the gain on contribution to the joint venture TPHGreenwich, which was partially offset by declines in rental revenues and sales of residential condominium units.
For the most recent fiscal year (2023), TPHS reported revenue of $33.42 million, a net loss of $39.02 million, and negative operating cash flow (OCF) and free cash flow (FCF) of $5.47 million. In the most recent quarter (Q3 2024), the company reported revenue of $397,000, a net loss of $1.07 million, and negative OCF and FCF of $1.25 million.
The significant decrease in revenue, net income, OCF, and FCF from the prior year period was primarily due to the Recapitalization Transactions that occurred on February 14, 2024. As a result of these transactions, the company transferred its real estate assets and liabilities to the TPHGreenwich joint venture, in which the company now holds a 95% interest. Consequently, TPHS no longer directly records the rental revenues, operating expenses, and financing costs associated with the real estate properties. The company's primary business is now owning intellectual property assets and acting as an asset manager for the properties owned by TPHGreenwich.
Liquidity
As of September 30, 2024, Trinity Place Holdings had total cash and restricted cash of $1.3 million, of which approximately $505,000 was cash and cash equivalents, and approximately $743,000 was restricted cash. The company's liquidity position has been a concern, as its cash and cash equivalents may not be sufficient to fund its operations and corporate expenses beyond the next few months, unless it is able to raise additional capital or enter into a strategic transaction.
Following the Recapitalization Transactions, TPHS no longer has any direct debt on its balance sheet, resulting in a debt-to-equity ratio of 0 as of September 30, 2024. The debt is now held at the TPHGreenwich joint venture level. The company no longer has access to a corporate credit facility, as that was transferred to TPHGreenwich as part of the Recapitalization Transactions.
TPHS's current ratio and quick ratio both stand at 1.10, indicating that the company has just enough current assets to cover its current liabilities. However, this narrow margin underscores the ongoing liquidity challenges faced by the company.
In response to these liquidity challenges, Trinity Place Holdings has been exploring a range of strategic and financing alternatives to maximize shareholder value. The company previously engaged financial advisors Houlihan Lokey and Ackman-Ziff to assist in identifying and evaluating potential alternatives, including securing an equity and/or debt financing, refinancing of existing debt, and/or a sale or merger of the company.
Risks and Challenges
Trinity Place Holdings' transformation has not been without its risks and challenges. The company's reliance on external sources of capital to fund its operations, the potential termination of its Asset Management Agreement with TPHGreenwich, and the departure of key personnel, such as CEO Matthew Messinger, who transitioned to a consultant role in August 2024, pose significant risks to the company's future.
Additionally, Trinity Place Holdings is subject to risks associated with its investment in TPHGreenwich, including the potential lack of distributions from the joint venture. The company is also subject to extensive covenants and consent rights under the Stock Purchase Agreement, many of which survive indefinitely following the closing of the Recapitalization Transactions.
Future Outlook
Despite these challenges, Trinity Place Holdings remains committed to navigating through the transformation and positioning the company for long-term success. The company's substantial federal, state, and local net operating loss carryforwards, as well as its intellectual property assets, provide potential avenues for value creation, should the company be able to execute on its strategic initiatives.
TPHS is currently in a transitional period following the Recapitalization Transactions, which have significantly changed the composition of its business and financial profile. The company's future prospects will largely depend on its ability to effectively manage the TPHGreenwich joint venture and its intellectual property assets, as well as its success in exploring strategic alternatives to maximize shareholder value.
As Trinity Place Holdings continues to evolve, investors will closely monitor the company's ability to generate consistent revenue, improve its liquidity position, and capitalize on the opportunities presented by its real estate portfolio and tax attributes. The outcome of the company's strategic review process and its ability to attract a new strategic partner will be critical in determining the path forward for Trinity Place Holdings.