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GYRO - Gyrodyne Co. of America


Sullivcd
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Is the $99M settlement after all attorney's fees?  If they worked on contingency, they could get a third of the settlement.  Cheers!

 

From my understanding, that settlement is after attorney's fees. GYRO is also attempting to get the state to pay for reimbursement of the fees they paid to attorneys, that is supposed to be around $5M.

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I wonder if GYRO would have to pay taxes on these proceeds. They are a REIT and so do not have to pay taxes on most income as long as ~90% of it is paid out to shareholders, but that may apply only to operating income, not settlement income.

 

I read elsewhere that GYRO had been paying their attorney fees out of pocket along the way, so the $99M settlement should be after fees.  I am sure there will be other frictional costs.

 

I think the most likely risk is an appeal from the state of NY.  I am not sure how long it will take that appeal to be filed, and how long it will take to settle.  Could be months, could be years.  My guess is that this is the main reason that the stock is trading where it is -- discounting the value of the settlement until all hurdles are cleared.

 

I agree that it is an interesting situation.  The company has an interesting background.  By "interesting" I don't necessarily mean "profitable" :).

 

 

http://emdo.blogspot.com/2005/05/steamroller-at-flowerfields-newsday.html

 

...

 

Originally acquired back in the 1950s as a flight-test facility, the tract stands as the sole asset of Gyrodyne, a thinly traded corporation held by investors speculating that the ultimate sale of the property will yield a tidy windfall on their shares. South of Route 25A and adjacent the Stony Brook campus, the scenic "Flowerfields" has been described by its owners as among the most valuable real estate east of Manhattan.

 

Not all Gyrodyne shareholders have been happy, filing complaints with the Securities and Exchange Commission, accusing company executives with dragging their feet on potential land sales while pulling down large salaries for managing what amounts to a passive investment. The executives deny such claims, saying over the years they've been stymied trying to develop a $220 million golf course community, which would require a change in zoning.

 

The stock bumped up last year when the university expressed interest, but talks fell apart, the university accused Gyrodyne of bad faith, invoked its condemnation power, went to court, and won the right to seize the property at "fair market value," ostensibly to build Republican Gov. George Pataki's Center for Excellence in Wireless and Information Technology.

 

...

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I wonder if GYRO would have to pay taxes on these proceeds. They are a REIT and so do not have to pay taxes on most income as long as ~90% of it is paid out to shareholders, but that may apply only to operating income, not settlement income.

 

Right. There is also the potential of them investing in like properties. That's what they did to minimize the tax impact of the Stony Brook advance payment.

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  • 8 months later...

The stock is back around $72 when this stock was talked about in the above posts. Now the NY State has filed an appeal and the decision by the appellate court wont be made until no later than August 9th. So the wait will be awhile but it be worth it as some have commented that the ruling wont be overturned. Any thoughts? As of now I think it represents a good buying point.

 

Also Parsad could you move this topic to investment ideas?

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At last, I found the link of the insider transactions. There has been a series of transactions especially with the COO selling shares. This has been going on for a while, so it is hard to tell what to make of it. Because you would think insiders would hold their shares if the court was going to rule in their favor.

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Doing a $10.2 million rights offering. I guess they were worried they were going to run out of cash while appeal drags out. Surprised stock is not down more today.

 

From the S-3 filing:

 

The net proceeds from the rights offering will depend on the number of subscription rights that are exercised.  If we issue all [•] shares available in the rights offering, we estimate that the net proceeds from the sale of our common stock offered in the rights offering, after deducting estimated offering expenses, will be approximately $9 million or, if the over-allotment is fully subscribed and issued, then the net proceeds would be approximately $10 million.  We estimate that the expenses of the rights offering will be approximately $210,000.

 

We intend to use the net proceeds received for pursuing our rights in the condemnation litigation, funding the costs associated with development rights on the Flowerfield property, making necessary capital improvements to our real estate portfolio and general working capital.  However, we do not have any current plans for allocating specific dollar amounts to any of these intended uses.  Initially, we will invest the net proceeds from the rights offering temporarily in liquid short-term securities and REIT qualified investments.

 

ValueSlant

valueslant.com

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Noticed they have not announced a subscription price yet. Will be interesting to see where it is priced.

 

Does anybody have an opinion on the appeal? I think the state's case still looks pretty weak.

 

GYRO is a fascinating stock, problem I have is that if somehow they lose the appeal the stock will probably sink to 30 or maybe even less and they have minimal ongoing operations. So even though stock has come done from the 80s it still seems too binary to me.

 

ValueSlant

valueslant.com

 

 

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Noticed they have not announced a subscription price yet. Will be interesting to see where it is priced.

 

Does anybody have an opinion on the appeal? I think the state's case still looks pretty weak.

 

GYRO is a fascinating stock, problem I have is that if somehow they lose the appeal the stock will probably sink to 30 or maybe even less and they have minimal ongoing operations. So even though stock has come done from the 80s it still seems too binary to me.

 

ValueSlant

valueslant.com

 

 

 

 

I looked at this one before and passed.  I think people took Graham's view of litigation as an undervalued asset and overblown as a liability a bit too far on this one.  In this case the entire basis for investing, at least at the lofty levels it reached, was the litigation outcome.  The problem is that NO ONE can predict what will happen in a litigation.  Verdicts are reached which are completely inexplicable.  It's been a while, but when I looked at this I actually didn't think the state's case was that weak.  It was at least strong enough, in my view, that the outcome (i.e. favorable to GYRO) was not a foregone conclusion.  There wasn't enough MOS to risk it.  Just my 2 cents.

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  • 1 month later...

Good news, A lot of investors took advantage of the rights offering although it diluted shares outstanding  but it shows confidence that investors find GYRO undervalued and provides an opportune time to snatch up shares. On Oct 24th there will be a hearing of the appeal, it would be great if the decision could be made that day but I wont keep my hopes up.

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Oral arguments were given 10/24/2011 to the NYS Court of Appeals.  I was there.  The tone of the questions by the three Judges to the Attorney representing the state gave me the distinct impression that they were not buying the States case.  One suggested that the States case was "hyperbole".  One Judge suggested that they might consider granting the state a new trial, but limit the case to the proper density of a residential development. Even if this were to happen, I consider the result as a win for GYRO as the award should be much closer to the Court of Claims verdict, and with interest accruing at 9%, may very well be a higher number than the current $100mm judgment. 

 

No decision was made, and these are just my impressions.  The market appears to agree.

 

P.S.  I haven't read the VIC writeup, but would be interested in their thesis.

 

 

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