Executive Summary / Key Takeaways

• Gyrodyne, LLC (GYRO) is operating under a liquidation basis, focused on maximizing value from its two remaining real estate properties, Flowerfield and Cortlandt Manor, through strategic entitlements and eventual sale, targeting dissolution by the end of 2026.
• As of March 31, 2025, net assets in liquidation stood at $30.81 million, translating to an estimated liquidating distribution of approximately $14.01 per common share based on 2.20 million shares outstanding.
• The value enhancement strategy hinges on securing favorable entitlements, a process currently facing legal challenges, particularly an ongoing appeal related to the Flowerfield subdivision approval, which introduces significant timeline risk.
• While lacking a distinct technology moat compared to larger peers, GYRO leverages its local market expertise and a service-oriented approach to maintain tenant relationships and occupancy during the wind-down phase.
• Key factors for investors to monitor are the outcome of the legal appeals, progress on entitlements for both properties (Flowerfield expected Q3 2025, Cortlandt Manor mid-2026), and the impact of macroeconomic conditions on real estate values and the cost of liquidation.

A Real Estate Wind-Down: The Gyrodyne Story

Gyrodyne, LLC embarked on a fundamental strategic shift effective September 1, 2015, transitioning from an operating real estate company to one focused on the orderly disposition of its assets and eventual dissolution. This pivot was solidified following a class action lawsuit settlement requiring property sales at or above 2014 appraised values, a condition the company reports it continues to meet for its remaining portfolio as of March 31, 2025. The core mandate for Gyrodyne's management and board since this transition has been clear: maximize the net value of the remaining properties for shareholders and efficiently wind down the company.

Today, Gyrodyne's business is centered on the management and, critically, the pursuit of entitlements for its two remaining real estate holdings: the Flowerfield property in St. James, New York (63 acres, including a 14-acre industrial park with 135,000 rentable square feet), and the Cortlandt Manor property in Cortlandt Manor, New York (13.8 acres with a 31,000 square foot medical center). These properties, located in Suffolk and Westchester Counties, represent the entirety of the company's physical asset base and the sole source of potential future distributions to shareholders.

The strategic narrative for Gyrodyne is one of value extraction rather than operational growth. Unlike traditional real estate investment trusts (REITs) that focus on acquiring, developing, and managing income-producing properties for long-term cash flow and appreciation, GYRO's objective is to enhance the saleability and price of its limited assets by increasing their development potential through the complex and often protracted land entitlement process. This involves navigating local zoning laws, environmental reviews, and community input, aiming to secure approvals that make the properties more attractive to developers.

In the broader real estate landscape, particularly within the healthcare and industrial niches where GYRO's properties reside, the competitive environment is dominated by larger, more diversified players such as Healthcare Realty Trust (HR), Medical Properties Trust (MPW), Sabra Health Care REIT (SBRA), and Omega Healthcare Investors (OHI). These competitors benefit from significant scale, diversified portfolios across geographies and property types, and robust access to capital markets. GYRO, in contrast, is a highly focused entity with a finite lifespan, competing not on operational scale or technological innovation in property management, but on its ability to successfully execute a complex entitlement strategy and secure favorable sale terms for its specific assets.

While larger peers are increasingly adopting sophisticated property technology integrations and exploring AI-driven management solutions to enhance efficiency (with companies like HR showing faster adoption and MPW investing more in R&D), GYRO's competitive positioning is not built upon a proprietary technology moat. Its "technology," in a loose sense, lies in its expertise in the local entitlement processes and its established relationships within the regional real estate and regulatory landscape. The competitive analysis suggests GYRO has shown some speed in adopting certain property tech integrations compared to HR, but lags in overall R&D investment compared to MPW. Its primary advantages stem from a service-oriented approach fostering tenant relationships and localized market knowledge, contributing to potentially higher occupancy rates in its specific East Coast markets compared to some peers. However, its smaller scale inherently leads to higher operating costs per unit compared to the efficiencies enjoyed by larger rivals.

The Entitlement Crucible and Financial Realities

The core of Gyrodyne's value enhancement strategy lies in its entitlement efforts. For Flowerfield, the company has pursued an eight-lot subdivision. While preliminary approval was granted in March 2022, this has been met with persistent legal challenges via an Article 78 proceeding. As of the May 5, 2025 filing, the Supreme Court had dismissed the initial petition (October 2024), but petitioners have appealed this dismissal (October 2024) and also appealed the denial of a motion to stay enforcement (April 2025), having perfected their appeal on the original petition in late April 2025. The company is vigorously defending these actions, but the outcome and timing remain significant uncertainties impacting the sale timeline. Despite these hurdles, the company anticipates receiving final subdivision approval for Flowerfield in the third quarter of 2025.

Concurrently, at Cortlandt Manor, the Town adopted a Medical Oriented Zoning District (MOD) in March 2023, designating density for 150,000 square feet of medical use and 4,000 square feet of retail. GYRO believes subdivision and site plan approval for this property could be received in mid-2026, contingent on contract timing. The pursuit of these entitlements is not inexpensive; the company incurred approximately $76,400 in land entitlement costs during Q1 2025 and estimates incurring an additional $1.21 million from April 2025 through the end of 2026. These costs, primarily engineering, legal, and real estate taxes, are viewed as necessary investments to position the properties for maximum value, although there is no guarantee that the resulting value increase will exceed the costs incurred.

Financially, operating under a liquidation basis means the company's statements reflect estimated net realizable values rather than ongoing profitability. As of March 31, 2025, Gyrodyne reported net assets in liquidation of $30.81 million, a modest increase of $216,077 from $30.60 million at December 31, 2024. This increase was attributed mainly to higher rental revenue ($181,000) and savings in rental and general/administrative expenses, partially offset by increased land development fees ($50,000).

Based on the March 31, 2025 net asset value and 2.20 million shares outstanding, the estimated liquidating distribution stands at $14.01 per share. This estimate is a projection based on anticipated sale proceeds, future operating cash flows (which are negative on an annual basis, as rental income is less than operating, G&A, capital, and entitlement costs), and estimated liquidation expenses, including selling costs ($2.98 million estimated remaining), retention bonuses ($1.97 million estimated remaining), and final dissolution costs ($1.50 million estimated).

Liquidity is managed to bridge the gap until asset sales. As of March 31, 2025, cash and cash equivalents were $5.79 million. A rights offering in March 2024 generated $4.4 million, intended to fortify the cash position through the liquidation period. The company also benefits from vendor payment deferrals and a deferred compensation plan for officers and directors. Total loans payable were $11.09 million, secured by portions of the Flowerfield and Cortlandt Manor properties. The company intends to seek modifications to loans maturing before the anticipated 2026 liquidation completion to ensure sufficient capital.

Compared to peers, GYRO's financial metrics under the liquidation basis are not directly comparable to the revenue growth, operating margins, or ROIC seen in operating REITs like HR, MPW, SBRA, or OHI. Those companies report positive gross and net margins (ranging from 62% to 99% gross margin and -52% to 39% net margin for 2024 data), reflecting ongoing operations. GYRO's financial story is solely about the terminal value of its assets net of liabilities and liquidation costs. Its estimated distribution per share is the key metric, rather than traditional earnings or cash flow per share from operations.

Risks and the Path Forward

The path to dissolution is fraught with risks that could materially impact the estimated distribution and timeline. The most immediate is the legal challenge to the Flowerfield subdivision. An unfavorable outcome or prolonged litigation could significantly delay or even jeopardize the planned disposition of this asset, potentially forcing a sale on less favorable terms or extending the liquidation timeline beyond 2026, increasing costs.

Valuation risk is also inherent. The estimated net realizable value of the properties relies on market conditions, successful entitlements, and the ability to find willing buyers at anticipated prices. Macroeconomic factors, including elevated interest rates and persistent inflation, continue to weigh on commercial real estate markets, potentially impacting sale prices and the availability of financing for prospective buyers. Changes in these conditions could lead to actual sale proceeds differing significantly from current estimates.

Furthermore, the projections for future operating and liquidation costs are subject to uncertainty. Delays in the timeline, unforeseen expenses related to property maintenance, legal fees (especially concerning the Article 78 proceeding), or changes in market conditions could increase costs, reducing the net proceeds available for distribution. The company's reliance on rental income, which is less than its ongoing expenses, means it is burning cash until asset sales occur, making the timing of dispositions critical.

Regulatory risks extend beyond the current legal challenge, including potential delays in securing final site plan approvals which are expected to be conditions to closing for purchase agreements. The healthcare industry's regulatory environment also poses indirect risk, as changes could impact the financial health and lease commitments of GYRO's medical office tenants.

Despite these risks, Gyrodyne is actively pursuing its strategy. JLL Capital Markets is conducting a national marketing campaign to identify buyers. The company's focus remains on achieving the highest and best use for the properties through entitlements while remaining open to offers for undivided parcels if they present a more attractive timing or value proposition.

Conclusion

Gyrodyne represents a unique investment proposition centered entirely on the successful execution of a liquidation plan. The core thesis is that the estimated net realizable value of its two remaining properties, enhanced by strategic entitlement efforts, will yield a final distribution to shareholders significantly above the current market price (though the current market price is not the focus here, the emphasis is on the estimated $14.01 value). As of March 31, 2025, the estimated distribution stands at $14.01 per share, with a target completion of the liquidation process by the end of 2026.

The success of this plan hinges on navigating the complex entitlement processes and resolving the ongoing legal challenges, particularly concerning the Flowerfield property. While the company lacks the scale and technological advantages of larger real estate players, its value proposition is distinct: it is a time-bound opportunity to realize value from specific, potentially underutilized assets. Investors in GYRO are essentially making a bet on the company's ability to overcome regulatory and legal hurdles, execute timely sales in a challenging market, and manage its costs effectively through the wind-down period. The estimated distribution provides a clear target, but the inherent uncertainties in the timeline and final net proceeds necessitate careful consideration of the significant risks involved. The outcome of the legal appeals and the pace of entitlement approvals will be critical determinants of the final shareholder value realized.