Additionally, other companies may utilize different estimates that may impact comparability of
the
Company'sCompany’s results of operations to those of companies in similar businesses. Below is a discussion of the accounting policies that management considers to be most critical once the Company commences significant operations.critical. These policies require complex judgment in their application or estimates about matters that are inherently uncertain.
Impairment of Long-Lived Assets
On a periodic basis, we assess our properties for possible impairment and record any impairment charges identified. The first step is the identification of potential triggering events, such as significant decreases in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and the shorter of theoperating results, changes in useful life, or a plan to dispose of an asset. In the remaining lease term for tenant improvements and leasehold interests.
The Company are required to make subjective assessments as to the useful lives of the Company's properties for purposes of determining the amount of depreciation to record on an annual basis with respect to the Company's investments in real estate. These assessments have a direct impact on the Company's net income because if the Company were to shorten the expected useful lives of the Company's investments in real estate, the Company would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.
Purchase Price Allocation
The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on the Company's analysis of comparable properties in the Company's portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized. Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined 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.
The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company's evaluation of the specific characteristics of each tenant's lease and the Company's overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of the Company's existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, among other factors.
The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, the Company will utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Deferred Costs
Deferred costs may consist of deferred financing costs, deferred offering costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized 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.
Contractual Obligations
The following isresults of this first step indicate a summary of the Company's gross contractual obligations as of December 31, 2016:
| Contractual Obligations | | Total | | | Less than 1 year | | | 1-3 years | | | 3-5 years | | | More than 5 years | |
| Long-term debt obligations | | $ | 5,393,000 | | | $ | 231,000 | | | $ | 253,000 | | | $ | 277,000 | | | $ | 4,632,000 | |
| Capital and Operating Lease Obligations | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| Line of credit: | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| Interest | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| Principle | | | 8,190,000 | | | | 8,190,000 | | | | -- | | | | -- | | | | -- | |
| Purchase Obligations | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| Total | | $ | 13,583,000 | | | $ | 8,421,000 | | | $ | 253,000 | | | $ | 277,000 | | | $ | 4,632,000 | |
Contractual obligation table amount does not reflect the unamortized loan issuance costs of approximately $0.1 million for notes payable and approximately $0.2 million for the line of credit as of December 31, 2016.
Subsequent Events
During January 2017, the Company and MVP REIT, through MVP Detroit Center Garage, LLC ("MVP Detroit Center"), an entity owned by the Company and MVP REIT, acquired a multi-level parking garage consisting of approximately 1,275 parking spaces, located in Detroit, Michigan,triggering event for a purchase price of $55.0 million, plus acquisition and financing-related transaction costs. The Company owns a 80% equity interest in the MVP Detroit Center and MVP REIT owns an 20% equity interest. The parking garage will be operated by SP Plus Corporation ("SP+") under a long-term lease, where SP will be responsible for the first $572,000 in property, taxes, pay annual base rent of $3.4 million, and 80% of all gross revenue above $5.0 million. As part of the acquisition MVP Detroit Center entered into a $31.5 million loan agreement with Bank of America, N.A., with a term of 10 years, amortized over 25 years, with monthly principal and interest payments totaling approximately $194,000, bearing an annual interest rate of 5.52%, secured by the parking garage, and maturing in February 2027. In connection with this purchase the company paid a broker commission totaling 2% of the purchase price.
On February 1, 2017, the Company, through MVP St. Louis Broadway, LLC, a Delaware limited liability company ("Broadway"), an entity wholly owned by the Company, closed on the purchase of a parking lot consisting of approximately 161 parking spaces, located in St. Louis, Missouri, for a purchase price of $2.4 million in cash plus closing costs. The parking lot is under a 5 year lease with St. Louis Parking Co, ("St. Louis Parking"), a regional parking operator, under a modified net lease agreement where Broadway is responsible for property taxes above a $19,600 threshold, and St. Louis Parking pays for insurance and maintenance costs. St. Louis Parking pays annual rent of $180,000. In addition, the lease provides revenue participation with Broadway receiving 75% of gross receipts over $270,000.
On February 1, 2017, the Company, through MVP St. Louis Seventh & Cerre, LLC, a Delaware limited liability company ("7th & Cerre"), an entity wholly owned by the Company, closed on the purchase of a parking lot consisting of approximately 174 parking spaces, located in St. Louis, Missouri, for a purchase price of $3.3 million in cash plus closing costs. The parking lot is under a 5 year lease with St. Louis Parking, a regional parking operator, under a modified net lease agreement where 7th & Cerre is responsible for property taxes above a $14,885 threshold, and St. Louis Parking pays for insurance and maintenance costs. St. Louis Parking pays annual rent of $225,000. In addition, the lease provides revenue participation with 7th & Cerre receiving 75% of gross receipts over $345,000.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a smaller reporting company.
ITEM 8.FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
MVP REIT II, Inc.
We have audited the accompanying consolidated balance sheets of MVP REIT II, Inc. and subsidiaries (the "Company") as of December 31, 2016 and 2015, and the related consolidated statements of operations, equity and cash flows for the year ended December 31, 2016 and for the period from May 4, 2015 (date of inception) through December 31, 2015. Our audits also included the consolidated financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MVP REIT II, Inc. and subsidiaries as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for the year ended December 31, 2016 and for the period from May 4, 2015 (date of inception) through December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ RBSM LLP
New York, New York
March 24, 2017
MVP REIT II, Inc.
(A Maryland Corporation)
CONSOLIDATED BALANCE SHEETS
| | | December 31, 2016 | | | December 31, 2015 | |
| ASSETS | | | | | | |
| Cash | | $ | 4,885,000 | | | $ | 2,268,000 | |
| Cash - restricted | | | 100,000 | | | | -- | |
| Prepaid expenses | | | 283,000 | | | | 180,000 | |
| Accounts receivable | | | 208,000 | | | | -- | |
| Investments in MVP REIT, Inc. | | | 3,034,000 | | | | | |
| Land and improvements | | | 28,854,000 | | | | -- | |
| Buildings and improvements | | | 24,889,000 | | | | -- | |
| Investments in real estate and fixed assets | | | 53,743,000 | | | | -- | |
| Accumulated depreciation | | | (195,000 | ) | | | -- | |
| Total investments in real estate and fixed assets, net | | | 53,548,000 | | | | -- | |
| | | | | | | | | |
| Other assets | | | 4,575,000 | | | | -- | |
| Assets held for sale | | | 700,000 | | | | | |
| Investment in equity method investee | | | 1,150,000 | | | | -- | |
| Investments in cost method investee – held for sale | | | 836,000 | | | | -- | |
| Investments in cost method investee | | | 936,000 | | | | -- | |
| Total assets | | $ | 70,255,000 | | | $ | 2,448,000 | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Liabilities | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 485,000 | | | $ | 6,000 | |
| Security Deposit | | | 2,000 | | | | -- | |
| Due to related parties | | | 575,000 | | | | 32,000 | |
| Line of credit, net of unamortized loan issuance costs of approximately $0.2 million | | | 7,957,000 | | | | -- | |
| Deferred revenue | | | 45,000 | | | | -- | |
| Notes payable, net of unamortized loan issuance costs of approximately $0.1 million | | | 5,318,000 | | | | 106,000 | |
| Total liabilities | | | 14,382,000 | | | | 144,000 | |
| Commitments and contingencies | | | -- | | | | -- | |
| Equity | | | | | | | | |
| MVP REIT II, Inc. Stockholders' Equity | | | | | | | | |
| Preferred stock, $0.0001 par value, 1,000,000 shares authorized, none outstanding | | | -- | | | | -- | |
| Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, none outstanding | | | | | | | | |
| Non-voting, non-participating convertible stock, $0.0001 par value, no shares issued and outstanding | | | -- | | | | -- | |
| Common stock, $0.0001 par value, 98,999,000 shares authorized, 2,301,828 and 94,749 shares issued and outstanding as of December 31, 2016 and 2015, respectively | | | -- | | | | -- | |
| Additional paid-in capital | | | 56,143,000 | | | | 2,430,000 | |
| Accumulated deficit | | | (4,394,000 | ) | | | (126,000 | ) |
| Total MVP REIT II, Inc. Shareholders' Equity | | | 51,749,000 | | | | 2,304,000 | |
| Non-controlling interest – related party | | | 4,124,000 | | | | -- | |
| Total equity | | | 55,873,000 | | | | 2,304,000 | |
| Total liabilities and equity | | $ | 70,255,000 | | | $ | 2,448,000 | |
| | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
MVP REIT II, Inc.
(A Maryland Corporation)
CONSOLIDATED STATEMENT OF OPERATIONS
| | | For the Year Ended December 31, 2016 | | | For the period from May 4, 2015 (Date of Inception) through December 31, 2015 | |
| Revenues | | | | | | |
| Rental revenue | | $ | 1,602,000 | | | $ | -- | |
| Total revenues | | | 1,602,000 | | | | -- | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| General and administrative | | | 1,049,000 | | | | 119,000 | |
| Acquisition expenses | | | 2,472,000 | | | | -- | |
| Acquisition expenses – related party | | | 1,229,000 | | | | -- | |
| Operation and maintenance | | | 460,000 | | | | -- | |
| Operation and maintenance – related party | | | 197,000 | | | | -- | |
| Seminar | | | 16,000 | | | | -- | |
| Organizational costs | | | -- | | | | 6,000 | |
| Depreciation and amortization | | | 195,000 | | | | -- | |
| Total operating expenses | | | 5,618,000 | | | | 125,000 | |
| | | | | | | | | |
| Loss from operations | | | (4,016,000 | ) | | | (125,000 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Interest expense | | | (154,000 | ) | | | (1,000 | ) |
| Distribution income – related party | | | 34,000 | | | | -- | |
| Income from investment in equity method investee | | | 3,000 | | | | -- | |
| Total other expense | | | (117,000 | ) | | | (1,000 | ) |
| | | | | | | | | |
| Loss from continuing operations | | | (4,133,000 | ) | | | (126,000 | ) |
| | | | | | | | | |
| Discontinued operations, net of income taxes | | | | | | | | |
| Loss from assets held for sale, net of income taxes | | | (19,000 | ) | | | -- | |
| Total loss from discontinued operations | | | (19,000 | ) | | | -- | |
| | | | | | | | | |
| Provision for income taxes | | | -- | | | | -- | |
| | | | | | | | | |
| Net loss | | | (4,152,000 | ) | | | (126,000 | ) |
| Net income attributable to non-controlling interest – related party | | | 116,000 | | | | -- | |
| Net loss attributable to MVP REIT II, Inc.'s common stockholders | | $ | (4,268,000 | ) | | $ | (126,000 | ) |
| Basic and diluted loss per weighted average common share: | | | | | | | | |
| Loss from continuing operations attributable to MVP REIT II, Inc.'s common stockholders – basic and diluted | | $ | (3.85 | ) | | $ | (15.01 | ) |
| Loss from discontinued operations – basic and diluted | | $ | (0.02 | ) | | $ | -- | |
| Net loss attributable to MVP REIT II, Inc.'s common stockholders - basic and diluted | | $ | (3.87 | ) | | $ | (15.01 | ) |
| Distributions declared per common share | | $ | 0.66 | | | $ | -- | |
| Weighted average common shares outstanding, basic and diluted | | | 1,102,459 | | | | 8,396 | |
The accompanying notes are an integral part of these consolidated financial statements.
MVP REIT II, Inc.
(A Maryland Corporation)
CONSOLIDATED STATEMENTS OF EQUITYFor the Period from May 4, 2015 (Date of Inception) Through December 31, 2016
| | | Common stock | | | | | | | | | | | | | |
| | | Number of Shares | | | Par Value | | | Additional Paid-in Capital | | | Accumulated Deficit | | | Non-controlling interest | | | Total | |
| Balance, May 4, 2015 | | | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock – purchase | | | 94,749 | | | | | | | | 2,369,000 | | | | | | | | | | | | 2,369,000 | |
| Deferred offering costs | | | | | | | | | | | (1,086,000 | ) | | | | | | | | | | | (1,086,000 | ) |
| Contributions from the Sponsor (unreimbursed expenditures) | | | | | | | | | | | 1,147,000 | | | | | | | | | | | | 1,147,000 | |
| Net loss | | | | | | | | | | | | | | | (126,000 | ) | | | | | | | (126,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2015 | | | 94,749 | | | | -- | | | | 2,430,000 | | | | (126,000 | ) | | | -- | | | | 2,304,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock – Purchase | | | 2,159,504 | | | | -- | | | | 53,987,000 | | | | -- | | | | -- | | | | 53,987,000 | |
| Issuance of common stock – DRIP | | | 18,311 | | | | -- | | | | 458,000 | | | | -- | | | | -- | | | | 458,000 | |
| Issuance of common stock – Dividend | | | 29,264 | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| Investment from non-controlling interest | | | -- | | | | -- | | | | -- | | | | -- | | | | 6,584,000 | | | | 6,584,000 | |
| Distributions to non-controlling interest | | | -- | | | | -- | | | | -- | | | | -- | | | | (2,576,000 | ) | | | (2,576,000 | ) |
| Distributions to stockholders | | | -- | | | | -- | | | | (732,000 | ) | | | -- | | | | -- | | | | (732,000 | ) |
| Net (loss) income | | | -- | | | | -- | | | | -- | | | | (4,268,000 | ) | | | 116,000 | | | | (4,152,000 | ) |
| Balance, December 31, 2016 | | | 2,301,828 | | | $ | -- | | | $ | 56,143,000 | | | $ | (4,394,000 | ) | | $ | 4,124,000 | | | $ | 55,873,000 | |
The accompanying notes are an integral part of these consolidated financial statements.
MVP REIT II, Inc.
(A Maryland Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
| | | For the Year Ended December 31, 2016 | | | For the period from May 4, 2015 (Inception) through December 31, 2015 | |
| Cash flows from operating activities: | | | | | | |
| Net Loss | | $ | (4,152,000 | ) | | $ | (126,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: Income from investment in equity method investee | | | (3,000 | ) | | | -- | |
| Distribution from MVP REIT | | | (34,000 | ) | | | -- | |
| Amortization | | | 40,000 | | | | -- | |
| Depreciation expense | | | 195,000 | | | | -- | |
| Contribution from Sponsor for unreimbursed organizational expenses | | | -- | | | | 61,000 | |
| Changes in operating assets and liabilities | | | | | | | | |
| Cash - Restricted | | | (100,000 | ) | | | -- | |
| Due to related parties | | | 543,000 | | | | 32,000 | |
| Accounts payable | | | 479,000 | | | | 6,000 | |
| Loan fees | | | (348,000 | ) | | | -- | |
| Security deposits | | | 2,000 | | | | -- | |
| Deferred revenue | | | 45,000 | | | | -- | |
| Accounts receivable | | | (208,000 | ) | | | -- | |
| Prepaid expenses | | | (103,000 | ) | | | (180,000 | ) |
| Net cash used in operating activities | | | (3,644,000 | ) | | | (207,000 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of investment in real estate | | | (53,743,000 | ) | | | -- | |
| Investment in assets held for sale | | | (700,000 | ) | | | -- | |
| Investment in cost method investee – held for sale | | | (836,000 | ) | | | -- | |
| Investment in cost method investee | | | (1,994,000 | ) | | | -- | |
| Investment in equity method investee | | | (1,160,000 | ) | | | -- | |
| Investment in MVP REIT, Inc. | | | (3,000,000 | ) | | | -- | |
| Proceeds from non-controlling interest | | | 6,584,000 | | | | -- | |
| Payment of deposits on future acquisitions | | | (4,575,000 | ) | | | -- | |
| Net cash used in investing activities | | | (59,424,000 | ) | | | -- | |
| | | | | | | | | |
| Cash flows from financing activities | | | | | | | | |
| Proceeds from note payable – investment in equity method investee | | | 6,498,000 | | | | 151,000 | |
| Payments on note payable | | | (153,000 | ) | | | (45,000 | ) |
| Proceeds from of line of credit | | | 8,190,000 | | | | -- | |
| Distribution to non-controlling interest | | | (2,576,000 | ) | | | -- | |
| Distribution received from investment in equity method investee | | | 13,000 | | | | -- | |
| Proceeds from issuance of common stock - Sponsor | | | -- | | | | 200,000 | |
| Proceeds from issuance of common stock | | | 53,987,000 | | | | 2,169,000 | |
| Distribution made to common stockholders | | | (274,000 | ) | | | -- | |
| | | | | | | | | |
| Net cash provided by financing activities | | | 65,685,000 | | | | 2,475,000 | |
| | | | | | | | | |
| Net change in cash | | | 2,617,000 | | | | 2,268,000 | |
| Cash, beginning of period | | | 2,268,000 | | | | -- | |
| Cash, end of period | | $ | 4,885,000 | | | $ | 2,268,000 | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information: | | | | | | | -- | |
| Interest Paid | | $ | 154,000 | | | $ | -- | |
| Non-cash investing and financing activities: | | | | | | | | |
| Distributions - DRIP | | $ | (458,000 | ) | | $ | -- | |
| Contribution from Sponsor for unreimbursed deferred offering expenses | | $ | -- | | | $ | 1,147,000 | |
The accompanying notes are an integral part of these consolidated financial statements.
MVP REIT II, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016
Note A — Organization and Proposed Business Operations
MVP REIT II, Inc. (the "Company," "we," "us," or "our") is a Maryland corporation formed on May 4, 2015 and intends to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2016. As of December 31, 2016, the Company ceased all selling efforts for the initial public offering (the "Offering") of its common stock, $0.0001 par value per share, at $25.00 per share, pursuant to a registration statement on Form S-11 filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended. As of December 31, 2016, the Company raised approximately $56.4 million in the Offering before payment of deferred offering costs of approximately $1.1 million, contribution from the Sponsor of approximately $1.1 million and cash distributions of approximately $274,000. The Company has also registered $50 million in shares of common stock for issuance pursuant to a distribution reinvestment plan (the "DRIP") under which common stock holders may elect to have their distributions reinvested in additional shares of common stock at $25.00 per share.
The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. No more than 10% of the proceeds of this offering will be used for investment in Canadian properties. To a lesser extent, the Company may also invest in properties other than parking facilities.
The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the "Operating Partnership"). The Company plans to own substantially all of its assets and conduct its operations through the Operating Partnership. The Company's wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partner of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated in a manner that enables the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability, and (3) ensure that the Operating Partnership is not classified as a "publicly traded partnership" for purposes of Section 7704 of the Internal Revenue Code, which classification could result in the Operating Partnership being taxed as a corporation.
We utilize an Umbrella Partnership Real Estate Investment Trust ("UPREIT") structure to enable us to acquire real property in exchange for limited partnership interests in the Company's Operating Partnership from owners who desire to defer taxable gain that would otherwise normally be recognized by them upon the disposition of their real property or transfer of their real property to us in exchange for shares of the Company's common stock or cash.
As part of the Company's initial capitalization, we sold 8,000 shares of common stock for $200,000 to MVP Capital Partners II, LLC (the "Sponsor"), the sponsor of the Company. The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc., a Maryland corporation and Nasdaq-listed company that has provided notice of its intent to delist from Nasdaq, to be effective on or about March 30, 2017 ("VRM II"), and 40% by Vestin Realty Mortgage I, Inc., a Maryland corporation and OTC pink sheet company ("VRM I"), both which are managed by Vestin Mortgage, LLC, a Nevada limited liability company in which Michael Shustek owns a significant majority. The Company also sold 5,000 shares of common stock to VRM II in the Offering.
The Company's advisor is MVP Realty Advisors, LLC (the "Advisor"), a Nevada limited liability company, which is owned 60% by VRM II and 40% by VRM I. The Advisor is responsible for managing the Company's affairs on a day-to-day basis and for identifying and making investments on the Company's behalf pursuant to an advisory agreement between the Company and the Advisor (the "Advisory Agreement"). The Company has no paid employees.
From inception through December 31, 2016, the Company has paid approximately $732,000 in distributions, including issuing 18,311 shares of its common stock as DRIP and issuing 29,264 shares of its common stock as dividend in distributions to the Company's stockholders, all of which have been paid from offering proceeds and constituted a return of capital. The Company may pay distributions from sources other than cash flow from operations, including proceeds from the Offering and other stock sales, the sale of assets, or borrowings. The Company has no limits on the amounts it may pay from such sources. If the Company continues to pay distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted.
Capitalization
As of December 31, 2016, the Company had 2,301,828 shares of common stock issued and outstanding. During the year ended December 31, 2016, the Company had received consideration of approximately $54 million for the issuance of its common stock in connection with the Offering. In connection with its formation, the Company sold 8,000 shares of common stock to the Sponsor for $200,000.
On October 27, 2016, the Company filed a Form 8-K, summarizing the terms of its new Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share (the "Series A Convertible Redeemable Preferred Stock"), The Company also disclosed its intentions to offer up to $50 million in shares of the Series A Convertible Redeemable Preferred Stock, together with warrants (the "Warrants") to acquire the Company's common stock, in a Regulation D 506(c) private placement to accredited investors (the "private placement"). In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary (the "Articles Supplementary") to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company commenced the private placement of the Series A Convertible Redeemable Preferred Stock and the Warrants to accredited investors on November 1, 2016 and terminated the offering as of March 23, 2017. The Company raised an aggregate of $2,434,000 in proceeds, net of offering expenses, in the Series A private placement.
Stockholders may elect to reinvest distributions received from the Company in common shares by participating in the Company's DRIP. The stockholder may enroll in the DRIP by checking the appropriate box on the subscription agreement. The stockholder may also withdraw at any time, without penalty, by delivering written notice to the Company. Participants will acquire DRIP shares at a fixed price of $25.00 per share until (i) all such shares registered in the Offering are issued, (ii) the Offering terminates and the Company elects to deregister any unsold shares under the DRIP, or (iii) the Company's board decides to change the purchase price for DRIP shares or terminate the DRIP for any reason. Commencing no later than May 29, 2018 (the "Valuation Date"), which is 150 days following the second anniversary of the date to satisfy the minimum offering requirement in the Offering, if the DRIP is ongoing, the Company will adjust the price of shares offered in the DRIP to equal the net asset value ("NAV") per share. The Company will update the NAV per share at least annually following the Valuation Date and further adjust the per share price in the Company's DRIP accordingly. The Company has registered $50,000,000 in shares for issuance under the DRIP.
The Company may amend, suspend or terminate the DRIP for any reason, except that the Company may not amend the DRIP to eliminate a participant's ability to withdraw from the DRIP, without first providing 10 days prior written notice to participants.
In addition, the Company has a Share Repurchase Program ("SRP") that may provide stockholders who generally have held their shares for at least two years an opportunity to sell their shares to the Company, subject to certain restrictions and limitations. Prior to the date that the Company establishes an estimated value per share of common stock, the purchase price will be 95.0% of the purchase price paid for the shares if redeemed at any time between the second and third anniversaries of the purchase date, and 97.0% of the purchase price paid if redeemed after the third anniversary. After the Company establishes an estimated NAV per share of common stock, the purchase price will be 95.0% of the NAV per share for the shares if redeemed at any time between the second and third anniversaries of the purchase date, 97.0% of the NAV per share if redeemed at any time between the third and fifth anniversaries, and 100.0% of the NAV per share if redeemed after the fifth anniversary.
The number of shares to be repurchased during a calendar quarter is limited to the lesser of: (i) 5.0% of the weighted average number of shares of common stock outstanding during the prior calendar year, and (ii) those repurchases that can be funded from the net proceeds of the sale of shares under the DRIP in the prior calendar year plus such additional funds as may be reserved for that purpose by the Company's board of directors; provided however, that the above volume limitations shall not apply to repurchases requested in connection with the death or qualifying disability of a stockholder. The board of directors may also limit the amounts available for repurchase at any time at its sole discretion. The SRP will terminate if the shares of common stock are listed on a national securities exchange. Redemption requests other than those made in connection with the death or disability (as defined in the Internal Revenue Code of 1986, as amended (the "Code") of a stockholder will continue to be repurchased as of March 31st, June 30th, September 30th and December 31st of each year in accordance with the terms of the SRP. As of December 31, 2016, no shares had been redeemed.
On October 27, 2016, the Company filed a Form 8-K announcing, among other things, an amendment to the SRP providing for participation in the SRP by any holder of the Company's Series A Convertible Redeemable Preferred Stock, or any future board-authorized series or class of preferred stock that is convertible into common stock of the Company. Under the amendment, which becomes effective on November 26, 2016, a preferred stock holder may participate in the SRP by converting its preferred stock into common stock of the Company, and submitting such common shares for repurchase. The time period, for purposes of determining how long such stockholder has held the common shares submitted for repurchase, begins as of the date such preferred stockholder acquired the underlying preferred shares that were converted into common shares and submitted for repurchase.
Note B — Summary of Significant Accounting Policies
Basis of Accounting
The consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included.
Consolidation
The Company's consolidated financial statements include its accounts and the accounts of its subsidiaries, Operating Partnership and all of the following subsidiaries. All intercompany profits and losses, balances and transactions are eliminated in consolidation.
West 9th Street Properties II, LLC (1)
MVP San Jose 88 Garage, LLC
MCI 1372 Street, LLC
Cincinnati Race Street, LLC
St. Louis Washington, LLC
St. Paul Holiday Garage, LLC
Louisville Station Broadway, LLC
White Front Garage Partners, LLC
Cleveland Lincoln Garage Owners, LLC
MVP Houston Jefferson Lot, LLC
MVP Houston San Jacinto Lot, LLC
(1)In November 2016, Cleveland West 9th and 33740 Crown properties were merged into one holding company called West 9th Street Properties II, LLC, for the purposes of debt financing.
Under GAAP, the Company's consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, or in which the Company has a controlling interest. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, the Company's management considers factors such as an entity's purpose and design and the Company's ability to direct the activities of the entity that most significantly impacts the entity's economic performance, ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity's expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both.
Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company's share of its equity method investees' earnings or losses is included in other income in the accompanying consolidated statements of operations. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.
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 derivative financial instruments and hedging activities, as applicable.
Concentration
The Company had six parking tenants as of December 31, 2016. One tenant, Standard Parking + ("SP+"), represented a concentration for the year ended December 31, 2016, in regards to parking base rental revenue. During the year ended December 31, 2016, SP+ accounted for 43%, of the parking base rental revenue. Below is a table that summarizes base parking rent by tenant:
Parking Tenant | % of Total |
SP + | 42.44% |
ABM | 27.96% |
Interstate Parking | 12.82% |
Premier Parking | 10.92% |
Riverside Parking | 4.49% |
iPark Services | 1.37% |
Grand Total | 100.00% |
-71-
Acquisitions
The Company records the acquired tangible and intangible assets and assumed liabilities of acquisitions of all operating properties and those development and redevelopment opportunities that meet the accounting criteria to be accounted for as business combinations at fair value at the acquisition date. The Company assesses and considers fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that the Company deems appropriate. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an operating property acquisition generally include but are not limited to: land, buildings and improvements, construction in progress and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any.
The fair value of land is derived from comparable sales of land within the same submarket and/or region. The fair value of buildings and improvements, tenant improvements, and leasing costs are based upon current market replacement costs and other relevant market rate information.
The fair value of the above-market or below-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term and (ii) management's estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease for above-market operating leases and the initial non-cancellable term plus the term of any below-market fixed rate renewal options, if applicable, for below-market operating leases. The amounts recorded for above-market operating leases are included in deferred leasing costs and acquisition-related intangibles, net on the balance sheet and are amortized on a straight-line basis as a reduction of rental income over the remaining term of the applicable leases. The amounts recorded for below-market operating leases are included in deferred revenue and acquisition-related liabilities, net on the balance sheet and are amortized on a straight-line basis as an increase to rental income over the remaining term of the applicable leases plus the term of any below-market fixed rate renewal options, if applicable. The Company's below-market operating leases generally do not include fixed rate or below-market renewal options.
The fair value of acquired in-place leases is derived based on management's assessment of lost revenue and costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased. This fair value is based on a variety of considerations including, but not necessarily limited to: (1) the value associated with avoiding the cost of originating the acquired in-place leases; (2) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period; and (3) the value associated with lost rental revenue from existing leases during the assumed lease-up period. Factors considered by the Company in performing these analyses include an estimate of the carrying costs during the expected lease-up periods, current market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand at market rates.
In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related expenses. The amount recorded for acquired in-place leases is included in deferred leasing costs and acquisition-related intangibles, net on the balance sheet and amortized as an increase to depreciation and amortization expense over the remaining term of the applicable leases. If a lease were to be terminated or if termination were determined to be likely prior to its contractual expiration (for example resulting from bankruptcy), amortization of the related unamortized in-place lease intangible would be accelerated.
The determination of the fair value of any debt assumed in connection with a property acquisition is estimated by discounting the future cash flows using interest rates available for the issuance of debt with similar terms and remaining maturities.
The determination of the fair value of the acquired tangible and intangible assets and assumed liabilities of operating property acquisitions requires us to make significant judgments and assumptions about the numerous inputs discussed above. The use of different assumptions in these fair value calculations could significantly affect the reported amounts of the allocation of the Company's acquisition related assets and liabilities and the related amortization and depreciation expense recorded for such assets and liabilities. In addition, because the value of above and below market leases are amortized as either a reduction or increase to rental income, respectively, the Company's judgments for these intangibles could have a significant impact on the Company's reported rental revenues and results of operations.
Costs directly associated with all operating property acquisitions and those development and redevelopment acquisitions that meet the accounting criteria to be accounted for as business combinations are expensed as incurred. During the year ended December 31, 2016, the Company expensed approximately $1.2 million related party acquisition costs and $2.5 million of non-related party acquisition costs, for the purchase of an interest in 17 properties. During the period from May 4, 2015 (Inception) through December 31, 2015, the Company did not acquire any properties. The Company's acquisition expenses are directly related to the Company's acquisition activity and if the Company's acquisition activity was to increase or decrease, so would the Company's acquisition costs.
Impairment of Long Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property'sproperty’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. These factors require a subjective evaluation based on the specific property and market. If impairment exists, due to the inability to recover the carrying value of a property, the property is written down to fair value and an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.
Cash
Cash includes cashAcquisitions
All assets acquired and liabilities assumed in bank accounts.an acquisition of real estate accounted for as a business combination are measured at their acquisition date fair values. For acquisitions of real estate accounted for as an asset acquisition, the fair value of consideration transferred by the Company (including transaction costs) is allocated to all assets acquired and liabilities assumed on a relative fair value basis.
In making estimates of fair values for purposes of allocating purchase price, the Company will utilize several sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company deposits cash with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit up of $250,000. As of December 31, 2016 the Company had approximately $3.4 million in excess of the federally-insured limits. As of December 31, 2015 the Company was federally-insured for the full balance.
Restricted Cash
Restricted cash primarily consists of escrowed tenant improvement funds, real estate taxes, capital improvement funds, insurance premiums, and other amounts required to be escrowed pursuant to loan agreements.
Revenue Recognition
The Company's revenues, which are derived primarily from rental income, include rents thatwill also consider information obtained about each tenant pays in accordance with the terms of each lease reported onproperty as a straight-line basis over the initial term of the lease. Since manyresult of the Company's leases will provide for rental increases at specified intervals, straight-line basis accounting requirespre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expirationfair value of the initial term of the lease.
The Company will continually review receivables related to renttangible and unbilled rent receivablesintangible assets acquired and determine 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. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the Company's allowance for uncollectible accounts or record a direct write-off of the receivable after exhaustive efforts at collection.
Advertising Costs
Advertising costs incurred in the normal course of operations and are expensed as incurred. During the year ended December 31, 2016 and for the period from May 4, 2015 (date of inception) through December 31, 2015, the Company had no advertising costs.
Investments in Real Estate and Fixed Assets
Investments in real estate and fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are primarily 3 to 40 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
Purchase Price Allocation
intangible liabilities assumed.The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respectiverelative fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other
methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studiesvaluations performed by independent third parties or on the Company's analysis of comparable properties in the Company's portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable. The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into accountconsidering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.
Above-market and below-market in-place lease values for owned properties are recorded based on the presentThe value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles areis amortized as a decrease to rental incomedepreciation and amortization expense over the remaining term of the lease.
The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined 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.
The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company's evaluation of the specific characteristics of each tenant's lease and the Company's overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, among other factors.
The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building.lease. If a tenant terminates its lease
with us, the unamortized portion of the in-place lease
value and customer relationship intangibles is
chargedrecognized over the shortened lease term.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Mobile Infrastructure Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mobile Infrastructure Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to expense.as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the financial statements, the Company does not have sufficient cash on hand or available liquidity to repay its outstanding debt as a result of the event default caused by noncompliance with debt covenants, which raises substantial doubt about its ability to continue as a going concern. Managements' plans in regard to these matters are also described in Note B of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of Long-Lived Assets and Indefinite-Lived Intangible Assets – Evaluation of Impairment – Refer to Note B to the financial statements
Critical Audit Matter Description
The Company’s evaluation of real estate assets for impairment involves an initial assessment of each property to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of real estate assets are no longer recoverable. Possible indications of impairment may include significant decreases in operating results, changes in useful life, or a plan to dispose of an asset. When events or changes in circumstances exist, the Company evaluates its properties for impairment by comparing undiscounted future cash flows expected to result from the property's use and eventual disposition to the respective carrying amount. If the carrying amount of a property exceeds the undiscounted future cash flows, an analysis is performed to determine the fair value of the property.
The Company makes significant assumptions to evaluate properties for possible indications of impairment. Changes in these assumptions could have a significant impact on the properties identified for further analysis. For those properties where indications of impairment have been identified, the Company makes significant estimates and assumptions to determine the fair value using undiscounted future cash flows expected to result from the property's use and eventual disposition, including estimates and assumptions related to the rental and net operating income growth rates. No impairment losses were recorded for the years ended December 31, 2022 or 2021.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the identification and analysis of properties for possible indications of impairment, and our procedures related to the estimate of future undiscounted cash flows and the determination of fair value for unrecoverable properties, included the following, among others:
We evaluated the Company's identification and analysis of impairment indicators by:
| o | Searching for adverse asset-specific and market conditions through review of third-party industry reports, real estate industry news sources, board minutes, inquiries with management, and websites and financial reports, among other sources. |
| o | Independently evaluating impairment indicators, such as projected net operating income, and comparing the results of our analysis to the indicators identified by management. |
| o | Reviewing management’s specific property disposition plans and assessing for impairment properties with potential sales prices below the recorded property value. |
We evaluated the Company's estimate of undiscounted future cash flows and the determination of fair value for unrecoverable properties by:
| o | Comparing the projections included in management's estimate of future undiscounted cash flows to the Company's historical results and external market sources. |
| o | Assessing the rental and net operating income growth rates and terminal capitalization rate used to determine the terminal value of the properties against third party industry reports and recent comparable sales information. |
| o | Discussing with management the assumptions used in the Company's valuation models and evaluating the consistency of the assumptions used with evidence obtained in other areas of the audit. |
/s/ Deloitte & Touche LLP
Cincinnati, OH
March 22, 2023
We have served as the Company's auditor since 2021.
MOBILE INFRASTRUCTURE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
| | | As of December 31, | |
| | | 2022 | | | 2021 | |
ASSETS | |
Investments in real estate | | | | | | | | |
Land and improvements | | $ | 166,225 | | | $ | 166,224 | |
Buildings and improvements | | | 272,605 | | | | 254,379 | |
Construction in progress | | | 1,206 | | | | 89 | |
Intangible assets | | | 10,106 | | | | 9,756 | |
| | | | 450,142 | | | | 430,448 | |
Accumulated depreciation and amortization | | | (31,052 | ) | | | (22,873 | ) |
Total investments in real estate, net | | | 419,090 | | | | 407,575 | |
| | | | | | | | | |
Fixed assets, net | | | 210 | | | | 61 | |
Assets held for sale | | | 696 | | | | — | |
Cash | | | 5,758 | | | | 11,805 | |
Cash – restricted | | | 5,216 | | | | 4,891 | |
Prepaid expenses | | | 953 | | | | 676 | |
Accounts receivable, net | | | 1,849 | | | | 4,031 | |
Due from related parties | | | 156 | | | | — | |
Deferred offering costs | | | 2,086 | | | | — | |
Other assets | | | 99 | | | | 108 | |
Total assets | | $ | 436,113 | | | $ | 429,147 | |
LIABILITIES AND EQUITY | |
Liabilities | | | | | | | | |
Notes payable, net | | $ | 146,948 | | | $ | 207,153 | |
Revolving credit facility, net | | | 72,731 | | | | — | |
Accounts payable and accrued expenses | | | 16,351 | | | | 8,345 | |
Accrued preferred distributions | | | 8,504 | | | | 5,504 | |
Indemnification liability | | | 2,596 | | | | 2,000 | |
Liabilities held for sale | | | 968 | | | | — | |
Security deposits | | | 161 | | | | 166 | |
Due to related parties | | | 470 | | | | — | |
Deferred revenue | | | 376 | | | | 155 | |
Total liabilities | | | 249,105 | | | | 223,323 | |
| | | | | | | | | |
Equity | | | | | | | | |
Mobile Infrastructure Corporation Stockholders’ Equity | | | | | | | | |
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of December 31, 2022 and 2021) | | | — | | | | — | |
Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of December 31, 2022 and 2021) | | | — | | | | — | |
Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, 0.0001 par value, 1,000 shares authorized, no shares issued and outstanding | | | — | | | | — | |
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,762,375 shares issued and outstanding as of December 31, 2022 and 2021 | | | — | | | | — | |
Warrants issued and outstanding – 1,702,128 warrants as of December 31, 2022 and 2021 | | | 3,319 | | | | 3,319 | |
Additional paid-in capital | | | 193,176 | | | | 196,176 | |
Accumulated deficit | | | (109,168 | ) | | | (101,049 | ) |
Total Mobile Infrastructure Corporation Stockholders’ Equity | | | 87,327 | | | | 98,446 | |
Non-controlling interest | | | 99,681 | | | | 107,378 | |
Total equity | | | 187,008 | | | | 205,824 | |
Total liabilities and equity | | $ | 436,113 | | | $ | 429,147 | |
The accompanying notes are an integral part of these consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| | | For the Years Ended December 31, | |
| | | 2022 | | | 2021 | |
Revenues | | | | | | | | |
Base rental income | | $ | 8,345 | | | $ | 11,970 | |
Management income | | | 427 | | | | 4,466 | |
Percentage rental income | | | 20,329 | | | | 3,988 | |
Total revenues | | | 29,101 | | | | 20,424 | |
| | | | | | | | | |
Expenses | | | | | | | | |
Property taxes | | | 6,885 | | | | 5,382 | |
Property operating expense | | | 2,947 | | | | 1,583 | |
Interest expense | | | 12,912 | | | | 9,536 | |
Depreciation and amortization | | | 8,248 | | | | 5,850 | |
General and administrative | | | 8,535 | | | | 6,530 | |
Professional fees, net of reimbursement of insurance proceeds | | | 2,690 | | | | 2,645 | |
Organizational, offering and other costs | | | 5,592 | | | | — | |
Total expenses | | | 47,809 | | | | 31,526 | |
| | | | | | | | | |
Other income (expense) | | | | | | | | |
Loss on sale of real estate | | | (52 | ) | | | — | |
PPP loan forgiveness | | | 328 | | | | 348 | |
Other income | | | 106 | | | | 217 | |
Gain on consolidation of VIE | | | — | | | | 360 | |
Settlement of deferred management internalization | | | — | | | | 10,040 | |
Transaction expenses | | | — | | | | (12,224 | ) |
Total other income (expense) | | | 382 | | | | (1,259 | ) |
| | | | | | | | | |
Net loss | | | (18,326 | ) | | | (12,361 | ) |
Net loss attributable to non-controlling interest | | | (10,207 | ) | | | (1,297 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s stockholders | | $ | (8,119 | ) | | $ | (11,064 | ) |
| | | | | | | | | |
Preferred stock distributions declared - Series A | | | (216 | ) | | | (216 | ) |
Preferred stock distributions declared - Series 1 | | | (2,784 | ) | | | (2,784 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | | $ | (11,119 | ) | | $ | (14,064 | ) |
| | | | | | | | | |
Basic and diluted loss per weighted average common share: | | | | | | | | |
Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | | $ | (1.43 | ) | | $ | (1.82 | ) |
Weighted average common shares outstanding, basic and diluted | | | 7,762,375 | | | | 7,741,192 | |
The accompanying notes are an integral part of these consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands)
| | | Preferred stock | | | Common stock | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Additional | | | | | | | Non- | | | | | |
| | | Number of | | | | | | | Number of | | | | | | | | | | | Paid-in | | | Accumulated | | | controlling | | | | | |
| | | Shares | | | Par Value | | | Shares | | | Par Value | | | Warrants | | | Capital | | | Deficit | | | interest | | | Total | |
Balance, January 1, 2021 | | | 42,673 | | | $ | — | | | | 7,727,696 | | | $ | — | | | $ | — | | | $ | 198,769 | | | $ | (89,985 | ) | | $ | 2,034 | | | $ | 110,818 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of common stock | | | — | | | | — | | | | 34,679 | | | | — | | | | — | | | | 407 | | | | — | | | | — | | | | 407 | |
Issuance of OP units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 104,088 | | | | 104,088 | |
Issuance of warrants | | | — | | | | — | | | | — | | | | — | | | | 3,319 | | | | — | | | | — | | | | — | | | | 3,319 | |
Consolidation of VIE | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,553 | | | | 2,553 | |
Declared distributions – Series A ($75.00 per share) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (216 | ) | | | — | | | | — | | | | (216 | ) |
Declared distributions – Series 1 ($70.00 per share) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,784 | ) | | | — | | | | — | | | | (2,784 | ) |
Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (11,064 | ) | | | (1,297 | ) | | | (12,361 | ) |
Balance, December 31, 2021 | | | 42,673 | | | $ | — | | | | 7,762,375 | | | $ | — | | | $ | 3,319 | | | $ | 196,176 | | | $ | (101,049 | ) | | $ | 107,378 | | | $ | 205,824 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity based payments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,510 | | | | 2,510 | |
Declared distributions – Series A ($75.00 per share) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (216 | ) | | | — | | | | — | | | | (216 | ) |
Declared distributions – Series 1 ($70.00 per share) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,784 | ) | | | — | | | | — | | | | (2,784 | ) |
Net income (loss) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (8,119 | ) | | | (10,207 | ) | | | (18,326 | ) |
Balance, December 31, 2022 | | | 42,673 | | | $ | — | | | | 7,762,375 | | | $ | — | | | $ | 3,319 | | | $ | 193,176 | | | $ | (109,168 | ) | | $ | 99,681 | | | $ | 187,008 | |
The accompanying notes are an integral part of these consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | For the Years Ended December 31 | |
| | | 2022 | | | 2021 | |
Cash flows from operating activities: | | | | | | | | |
Net Loss | | $ | (18,326 | ) | | $ | (12,361 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | | | | | |
Depreciation and amortization expense | | | 8,248 | | | | 5,850 | |
Amortization of loan costs | | | 1,733 | | | | 346 | |
PPP loan forgiveness | | | (328 | ) | | | (348 | ) |
Loss on sale of real estate | | | 52 | | | | — | |
Amortization of right of use lease asset | | | — | | | | 28 | |
Equity based payment | | | 2,510 | | | | 144 | |
Income from or gain on consolidation of VIE | | | — | | | | (360 | ) |
Settlement of deferred management internalization | | | — | | | | (10,040 | ) |
Changes in operating assets and liabilities | | | | | | | | |
Due to related parties | | | 470 | | | | (192 | ) |
Accounts payable | | | 6,509 | | | | (4,080 | ) |
Indemnification liability | | | 596 | | | | 2,000 | |
Right of use lease liability | | | — | | | | (28 | ) |
Deferred offering costs | | | (2,086 | ) | | | — | |
Security deposits | | | (5 | ) | | | 16 | |
Other assets | | | 10 | | | | 86 | |
Deferred revenue | | | 221 | | | | 15 | |
Accounts receivable | | | 2,182 | | | | (2,882 | ) |
Prepaid expenses | | | (277 | ) | | | 1,746 | |
Net cash provided by (used in) operating activities | | | 1,509 | | | | (20,060 | ) |
Cash flows from investing activities: | | | | | | | | |
Capital expenditures | | | (2,408 | ) | | | (665 | ) |
Capitalized technology | | | (171 | ) | | | (46 | ) |
Purchase of investment in real estate | | | (17,513 | ) | | | (19,541 | ) |
Proceeds from sale of investment in real estate | | | 650 | | | | — | |
Net cash (used in) investing activities | | | (19,442 | ) | | | (20,252 | ) |
Cash flows from financing activities | | | | | | | | |
Proceeds from line of credit | | | 73,700 | | | | — | |
Proceeds from notes payable | | | — | | | | 3,866 | |
Payments on notes payable | | | (58,755 | ) | | | (6,343 | ) |
Issuance of OP Units | | | — | | | | 51,335 | |
Issuance of common stock | | | — | | | | 263 | |
Loan fees | | | (2,734 | ) | | | (154 | ) |
Net cash provided by financing activities | | | 12,211 | | | | 48,967 | |
Net change in cash, cash equivalents and restricted cash | | | (5,722 | ) | | | 8,655 | |
Initial consolidation of VIE | | | — | | | | 146 | |
Cash, cash equivalents and restricted cash, beginning of period | | | 16,696 | | | | 7,895 | |
Cash, cash equivalents and restricted cash, end of period | | $ | 10,974 | | | $ | 16,696 | |
| | | | | | | | | |
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | | | | | | | | |
Cash, cash equivalents at beginning of period | | | 11,805 | | | | 4,235 | |
Restricted cash at beginning of period | | | 4,891 | | | | 3,660 | |
Cash, cash equivalents and restricted at beginning of period | | $ | 16,696 | | | $ | 7,895 | |
| | | | | | | | | |
Cash and cash equivalents at end of period | | | 5,758 | | | | 11,805 | |
Restricted cash at end of period | | | 5,216 | | | | 4,891 | |
Cash, cash equivalents and restricted at end of period | | $ | 10,974 | | | $ | 16,696 | |
| | | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | | | | |
Interest Paid | | $ | 10,613 | | | $ | 9,882 | |
Non-cash investing and financing activities: | | | | | | | | |
Dividends declared not yet paid | | $ | 3,000 | | | $ | 3,000 | |
Consolidation of variable interest entities, net | | $ | — | | | $ | 3,181 | |
Assumption of debt through acquisition | | $ | — | | | $ | 44,478 | |
Acquisition of properties through OP units and warrants | | $ | — | | | $ | 56,074 | |
Amounts due from related party | | $ | 156 | | | $ | — | |
| Accrued capital expenditures | | $ | 1,371 | | | $ | — | |
The accompanying notes are an integral part of these consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Note A — Organization and Business Operations
Mobile Infrastructure Corporation (formerly known as The Parking REIT, Inc.) (the “Company,” “we,” “us” or “our”), is a Maryland corporation formed on May 4, 2015. The Company focuses on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. The Company targets both parking garage and surface lot properties primarily in top 50 U.S. Metropolitan Statistical Areas, with proximity to key demand drivers, such as commerce, events and venues, government and institutions, hospitality and multifamily central business districts.
As of December 31, 2022, the Company owned 44 parking facilities (including one property classified as held for sale) in 22 separate markets throughout the United States, with a total of 15,750 parking spaces and approximately 5.4 million square feet. The Company also owns approximately 0.2 million square feet of commercial space adjacent to its parking facilities.
The Company is the sole general partner of Mobile Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating Partnership, LP, a Maryland limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership, is the sole general partner of the Operating Partnership and owns approximately 45.8% of the common units of the Operating Partnership (the “OP Units”). Color Up, LLC, a Delaware limited liability company (“Color Up”) and HSCP Strategic III, LP, a Delaware limited partnership (“HS3”), are limited partners of the Operating Partnership and own approximately 44.2% and 10%, respectively, of the outstanding OP Units. Color Up is our largest stockholder and is controlled by the Company’s Chief Executive Officer and a director, Manuel Chavez, the Company’s President, Chief Financial Officer, and a director, Stephanie Hogue, and a director of the Company, Jeffrey Osher. HS3 is controlled by Mr. Osher.
The Company previously elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and operated in a manner that allowed the Company to qualify as a REIT through December 31, 2019. As a consequence of lease modifications entered into during the COVID-19 pandemic, the Company earned income from a number of tenants that did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for its taxable year ended December 31, 2020. Accordingly, the Company did not qualify for taxation as a REIT in 2020 and continues to be taxed as a C corporation. As a C corporation, the Company is not required to distribute any amounts to its stockholders.
Merger with Fifth Wall Acquisition Corp. III
On December 13, 2022, the Company and Fifth Wall Acquisition Corp. III (“FWAC”), a special purpose acquisition company sponsored by Fifth Wall Acquisition Sponsor III LLC ("Fifth Wall"), entered into a definitive merger agreement (the “Merger Agreement”). Upon closing of the merger (the “Merger”), FWAC will be the surviving entity and will be renamed “Mobile Infrastructure Corporation”. The combined company following the Merger (“New MIC”) expects to be publicly traded on the New York Stock Exchange under the ticker “BEEP.” Following the steps of the Merger as provided in the Merger Agreement:
| ● | each then issued and outstanding Class A Share of FWAC will convert, on a one-for-one basis, into one share of New MIC common stock; |
| ● | each then issued and outstanding share of the Company’s common stock will convert, on a 1.5-to-one basis, into one share of New MIC common stock; |
| ● | each share of the Company’s Series 1 and Series A preferred stock issued and outstanding will be converted into the right to receive one share of Series 1 and Series A preferred stock of New MIC; and |
| ● | each of the Company’s common stock warrants will become a warrant to purchase that number of shares of New MIC common stock equal to the product of (a) the number of shares of common stock that would have been issuable upon the exercise of such common stock warrant and (b) 1.5. |
Additionally, in connection with the execution of the Merger Agreement, FWAC entered into subscription agreements with an initial PIPE investor (the “Initial PIPE Investor”), pursuant to which the Initial PIPE Investor agreed to purchase from New MIC, prior to or substantially concurrently with the closing of the Merger, $10 million of common stock, par value $0.0001 per share, of New MIC (the “New MIC Common Stock”) at $10.00 per 1.2 shares. The Initial PIPE Investor is controlled by Jeffrey Osher, a member of the Company’s Board of Directors.
The Merger Agreement also contemplates other PIPE investments through the entry into one or more additional subscription agreements with one or more investors to purchase Class A Shares of FWAC, New MIC common stock, New MIC preferred stock or convertible notes of New MIC.
Pursuant to the Merger, the Operating Partnership will convert from a Maryland limited partnership to a Delaware limited liability company. As a limited liability company, the Operating Partnership will continue to be treated as a partnership and a disregarded entity for tax and accounting purposes.
During the year ended December 31, 2022, the Company incurred costs of approximately $2.1 million associated with the Merger. These costs are being accounted for as deferred offering costs in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 340,Other Assets and Deferred Costs and are reflected within deferred offering costs on our Consolidated Balance Sheets as of December 31, 2022.
Terminated Merger with Mobile Infrastructure Trust
On May 27, 2022, the Company entered into an Agreement and Plan of Merger (the “MIT Merger Agreement”) by and between the Company and Mobile Infrastructure Trust, a Maryland real estate investment trust (“MIT”), which is 100% owned by Bombe Asset Management LLC (“Bombe”), an Ohio limited liability company owned by Mr. Chavez and Ms. Hogue. Pursuant to the terms of the MIT Merger Agreement, the Company would merge with and into MIT, with MIT continuing as the surviving entity resulting from the transaction. Prior to and as a condition to the merger with MIT, MIT expected to undertake an initial public offering (the “MIT IPO”) of its common shares of beneficial interest. Also, in March 2022, the Company had entered into an agreement with MIT, requiring the Company to be allocated, bear and (where practicable) pay directly certain costs and expenses related to the merger with MIT and the MIT IPO.
In connection with the execution of the Merger Agreement with FWAC, the MIT Merger Agreement and the cost allocation agreement with MIT were terminated.
During the year ended December 31, 2022, the Company incurred costs of approximately $4.6 million pursuant to the cost allocation agreement with MIT. Such amounts are included on organizational, offering and other costs on the Consolidated Statements of Operations.
2021 Recapitalization
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII”), and Michael V. Shustek (“Mr. Shustek” and together with VRMI and VRMII, the “Former Advisor”) and Color Up, LLC (the “Purchaser”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”
On August 25, 2021, we completed the Transaction and as a result, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati, Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1.2 million square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which provides management of the Company with real-time information on the performance of its assets. Pursuant to the closing of the Transaction, the Operating Partnership issued 7,495,090 newly issued OP Units at $11.75 per unit for total consideration of $84.1 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with an estimated fair value of approximately $98.8 million and technology with an estimated fair value of $4.0 million. The Company also assumed long-term debt with an estimated fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. The estimated fair value of the warrants recorded as of the closing date of the Transaction was approximately $3.3 million. Transaction expenses not directly related to the acquisition of the three contributed real estate assets or issuance of OP Units of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Consolidated Statements of Operations.
Management assessed the potential accounting treatment for the Transaction by applying ASC 805 and determined that the Transaction did not result in a change of control. As a result, the three contributed real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, which required recognition of assets and liabilities at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisition.
Note B — Summary of Significant Accounting Policies
Basis of Accounting
The consolidated financial statements of the Company are prepared on the accrual basis of accounting and in accordance with principles generally accepted in the United States of America (“GAAP”) for financial information as contained in the FASB ASC, and in conjunction with rules and regulations of the SEC. In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included. Certain prior period amounts have been reclassified to conform to the current period presentation.
Going Concern
The accompanying consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has incurred net losses since its inception and anticipates net losses for the near future. As of December 31, 2022, the Company was not in compliance with all applicable covenants in agreements governing its debt, resulting in events of default. Additionally, based on the Company’s expected financial performance for the twelve-month period subsequent to the filing of the December 31, 2022 Form 10-K, the Company expects that it will not be in compliance with a financial covenant under the Revolving Credit Facility, which would result in another event of default. Such event allows the lender to accelerate the maturity of the debt under the Revolving Credit Facility which carries a balance of $73.7 million as of December 31, 2022. Further, our independent auditor has included an explanatory paragraph regarding our ability to continue as a “going concern” in its report on our financial statements for the year ending December 31, 2022, which constitutes an event of default under our Revolving Credit Facility at the time our financial statements for the year ending December 31, 2022 are filed. The Revolving Credit Facility also requires the Company to initiate an equity raise in order to achieve a fixed charge coverage ratio (“FCCR”) of 1.4 to 1.0 as of March, 31, 2023. The Company does not currently have sufficient cash on hand, liquidity or projected future cash flows to repay these outstanding amounts upon an event of default. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
In response to these conditions, management’s plans include the following:
| 1. | Capitalizing on recent business development initiatives that we anticipate will improve total revenues through increased utilization of our parking assets and in many cases at higher average ticket rates. |
| 2. | Management is budgeting reduced overhead costs in 2023 through the reduction or elimination of certain controllable expenses. |
| 3. | We are pursuing further amendments and/or extensions with respect to the Revolving Credit Facility, including waivers of noncompliance with covenants. |
| 4. | We have initiated equity raise or liquidity events, including the proposed merger with Fifth Wall Acquisition Corporation III. |
However, there can be no assurance that we will be successful in completing any of these options. As a result, management’s plans cannot be considered probable and thus does not alleviate substantial doubt about our ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts of liabilities that might result from the outcome of this uncertainty.
Consolidation
The consolidated financial statements include the accounts of the Company, the Operating Partnership, each of their wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest. For entities that meet the definition of a variable interest entity (“VIE”), the Company consolidates those entities when the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it possesses both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company continually evaluates whether it qualifies as the primary beneficiary and reconsiders its determination of whether an entity is a VIE upon reconsideration events. All intercompany activity is eliminated in consolidation.
Noncontrolling interests on our Consolidated Balance Sheets represent the portion of equity that we do not own in the entities we consolidate. Net income or loss attributable to non-controlling interest in our Consolidated Statements of Operations represents our partners’ share of net income or loss that is generally allocated on a pro-rata basis based on ownership percentage.
Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company’s share of its equity method investees’ earnings or losses is included in other income in the accompanying Consolidated Statements of Operations.
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 asset impairment and purchase price allocations to record investments in real estate, as applicable.
Concentration
The Company had fifteen and fourteen parking operators during the years ended December 31, 2022 and 2021, respectively. One tenant/operator, SP + Corporation (Nasdaq: SP) (“SP+”), represented 60.5% of the Company’s revenue, excluding commercial revenue, for both the years ended December 31, 2022 and 2021. Premier Parking Service, LLC represented 12.4% and 12.6% of the Company’s revenue, excluding commercial revenue, for the years ended December 31, 2022 and 2021, respectively.
In addition, the Company had concentrations in Cincinnati (19.2% and 20.8%), Detroit (12.5% and 13.8%), Chicago (8.7% and 9.5%), and Houston (7.8% and 8.5%) based on gross book value of real estate as of December 31, 2022 and 2021, respectively.
As of December 31, 2022 and 2021, 59.2% and 52.2% of the Company’s outstanding accounts receivable balance, respectively, was with SP+.
Acquisitions
All assets acquired and liabilities assumed in an acquisition of real estate accounted for as a business combination are measured at their acquisition date fair values. For acquisitions of real estate accounted for as an asset acquisition, the fair value of consideration transferred by the Company (including transaction costs) is allocated to all assets acquired and liabilities assumed on a relative fair value basis.
In making estimates of fair values for purposes of allocating purchase price, the Company will utilize a number ofseveral sources, including independent appraisalsthird-party valuations that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the Company'sCompany’s pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Organization, OfferingThe Company allocates the purchase price of acquired properties to tangible and Related Costs
Certain organizationidentifiable intangible assets acquired based on their relative fair values. Tangible assets include land, land improvements, buildings, fixtures and offering costs will be incurred bytenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the Advisor. Pursuant to the termsas-if vacant property value. Estimates of the Advisory Agreement, the Company will not reimburse the Advisor for these out of pocket costs and future organization and offering costs it may incur. Such costs shall include legal, accounting, printingvalue are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other offering expenses, including marketing,methods. Amounts allocated to land, land improvements, buildings and direct expensesfixtures are based on valuations performed by independent third parties or on the Company’s analysis of comparable properties in the Advisor's employeesCompany’s portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and employeesbelow-market lease rates, the value of in-place leases, and the Advisor's affiliatesvalue of customer relationships, as applicable. The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and others.
All direct offering costs incurred and or paid by us that are directly attributable to a proposed or actual offering, including sales commissions,the property valued as if any, were charged against the gross proceeds of the Offering and recorded as an offset to additional paid-in-capital. All indirect costs will be expensed as incurred.
Offering costs were reclassified from deferred costs to stockholders' equity when the Company commenced its Offering, and included all expenses incurredvacant. Factors considered by the Company in
connectionits analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.The value of lease intangibles is amortized to depreciation and amortization expense in our Consolidated Statements of Operations over the remaining term of the respective lease. If a tenant terminates its lease with its Offering asus, the unamortized portion of such date.
Stock-Based Compensation
The Company has a stock-based incentive award plan, which is accounted for under the guidance for share based payments. The expense for such awards will be included in general and administrative expenses andany lease intangible is recognized over the
vesting period or whenshortened lease term.
Impairment of Long-Lived Assets and Indefinite-Lived Intangible Assets
We periodically evaluate our long-lived assets, primarily investments in real estate, for indicators of impairment. When circumstances indicate the requirementscarrying value of a property maynot be recoverable, the Company reviews the assets for exercisepotential impairment. This review is based on an estimate of the award have been met (See Note G — Stock-Based Compensation).
Income Taxes
The Company has elected,future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and
operates ineventual 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 impairment exists, due to the inability to recover the carrying value of a
manner that will allow the Company, to qualify to be taxed as a REIT under Sections 856property through
860 of the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2016. If the Company qualifies for taxation as a REIT, it generally will not be subject to federal corporate income taxfuture undiscounted cash flows, we recognize an impairment loss to the extent
that the carrying value exceeds the estimated fair value of the property.When we determine that a property should be classified as held for sale, we recognize an impairment loss to the extent the property's carrying value exceeds its fair value less estimated cost to dispose of the asset.
At least annually, we review indefinite-lived intangible assets for indicators of impairment. We first evaluate qualitative factors to determine if it distributesis more likely than not that the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value. Such qualitative factors include the impact of macroeconomic conditions, changes in the industry or market, cost factors, and financial performance. If we then conclude that impairment exists, we will recognize a charge to earnings representing the difference between the carrying amount and the estimated fair value of the indefinite-lived intangible asset.
Cash
The Company considers all highly liquid investments purchased with an original maturity of its REIT taxablethree months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value and may consist of investments in money market accounts and money market funds. From time to time, the cash and cash equivalent balances at one or more of our financial institutions may exceed the Federal Depository Insurance Corporation coverage.
Balances of cash and cash equivalents held at financial institutions may, at times, be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company mitigates credit risk by placing cash and cash equivalents with major financial institutions.
Restricted Cash
Restricted cash primarily consists of escrowed tenant improvement funds, real estate taxes, capital improvement funds, insurance premiums and other amounts required to be escrowed pursuant to loan agreements.
Leases
The majority of the Company’s revenue is rental income to its stockholders,derived from leases of our real estate assets. We account for our leases in accordance with ASC Topic 842, Leases (“ASC 842”). The majority of the Company’s leases are structured such that tenants pay base rent and so long as it distributes at least 90% of its REIT taxable income. REITs are subjectpercentage rent in an amount equal to a numberdesignated percentage of other organizationalthe amount by which gross revenues at the property during any lease year exceed a negotiated base amount; tenants are also financially responsible for all, or substantially all, property-level operating and operational requirements. Even if the Company qualifies to be taxed as a REIT, it may bemaintenance expenses, subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.
Per Share Data
exceptions. The Company
calculates basic income (loss) per share by dividing net income (loss)negotiates base rent, percentage rent and the base amount used in the calculation of percentage rent with the applicable tenant based on economic factors applicable to the particular parking facility and geographic market. In general, the Company expects that the rent received from tenants will constitute the majority of the gross receipts generated at such parking facility above the applicable negotiated threshold.A lease is determined to be an operating, sales-type, or direct financing lease using the criteria established in ASC 842. Leases will be considered either sales-type or direct financing leases if any of the following criteria are met:
| • | if the lease transfers ownership of the underlying asset to the lessee by the end of the term; |
| • | if the lease grants the lessee an option to purchase the underlying asset that is reasonably certain to be exercised; |
| • | if the lease term is for the major part of the remaining economic life of the underlying asset; or |
| • | if the present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset. |
If none of the criteria listed above are met, the lease is classified as an operating lease. Currently, all of the Company’s leases are classified as operating leases.
Certain of our lease agreements provide for the period by weighted-average sharestenant reimbursements of its common stock outstanding for the respective period. Diluted income per share takes into account the effect of dilutive instruments, such as stock optionsproperty taxes and convertible stock, but uses the average share price for the period in determining the number of incremental sharesother operating expenses that are to be added tovariable depending upon the weighted-average numberapplicable expenses incurred. These reimbursements are accrued as base rental income in our Consolidated Statements of shares outstanding. The Company had no outstanding common share equivalents during the year ended December 31, 2016 and for the period from May 4, 2015 (date of inception) through December 31, 2015.
Reportable Segments
We currently operate one reportable segment.
Accounting and Auditing Standards Applicable to "Emerging Growth Companies"
The Company is an "emerging growth company" under the Jumpstart Our Business Startups Act (the "JOBS Act"). For as long as the Company remains an "emerging growth company," which may be up to five fiscal years, the Company is not required to (1) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (2) provide an auditor's attestation report on management's assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (3) comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (4) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The Company intends to take advantage of such extended transition period. Since the Company will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, the Company's financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If the Company were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
Deferred Costs
Deferred costs may consist of deferred financing costs, deferred offering costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing. These costs are amortized 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 expensedOperations in the period in which
the applicable expenses are incurred. Certain assumptions and judgments are made in estimating the reimbursements at the end of each reporting period. The Company does not expect the actual results to materially differ from the estimated reimbursements.Lease receivables are reviewed each reporting period to determine whether or notit is determinedprobable that we will realize substantially all lease payments from our tenants. If it is not probable substantially all of the remaining lease payments from a tenant will be collected, we will recognize a charge to rental income for any accrued rent receivables, including straight-line receivables. Future rental income for that tenant will then be recognized on a cash basis, including any amounts relating to tenant reimbursement of expenses. Recording lease income on an accrual basis will resume for tenants once the Company believes the collection of rent for the remaining lease term is probable, which will generally be after a period of regular payments. Additionally, the Company records a general reserve based on a review of operating lease receivables at a company level to ensure they are properly valued based on analysis of historical bad debt, outstanding balances, and the current economic climate. As of December 31, 2022 and 2021, the reserve in accounts receivable for uncollectible amounts was $0.1 million.
Revenue Recognition
In 2020, as a result of the COVID-19 pandemic, the Company transitioned certain leases to management contracts. Under these contracts, the operator managed our real estate assets on our behalf and paid operating expenses from gross parking revenues. The operator was then required to remit an agreed upon percentage of the remainder to the Company. These management contracts were accounted for in accordance with ASC Topic 606,Revenue from Contracts with Customers and revenues associated with these management contracts are recorded as management income in the Consolidated Statements of Operations. During the course of 2021, the Company reverted all management contracts back to leases. There were no management contracts in effect after January 1, 2022 and all management income recognized during 2022 represents collections from operators subsequent to the termination of our management contract.
Investments in Real Estate
Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is recognized on a straight-line method over the estimated useful lives of each asset type. We periodically assess the reasonableness of useful lives which generally have the following lives, by asset class: up to 40 years for buildings, 15 years for land improvements, five years for fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests, generally one to 20 years.
Stock-Based Compensation
Stock-based compensation for equity awards is based on the grant date fair value of the equity awards and is recognized as general and administrative expense in our Consolidated Statement of Operations over the requisite service or performance period. Forfeitures are recognized as incurred. Certain equity awards are subject to vesting based upon the satisfaction of various service, market, or performance conditions.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when management determines that it is more likely than not that all or some portion of the deferred tax asset will not be realized. A full valuation allowance has been recorded for deferred tax assets due to the Company’s history of taxable losses.
The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the financingposition will not close.
Deferred offering costs represent professional fees, fees paidbe sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to
measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of December 31, 2022 and 2021.Reportable Segments
Our principal business is the ownership and operation of parking facilities. We do not distinguish our principal business, or group our operations, by geography or size for purposes of measuring performance. Accordingly, we have presented our results as a single reportable segment.
Note C — Acquisitions and Dispositions of Investments in Real Estate
2022
The following table is a summary of the one parking asset acquisition completed during the year ended December 31, 2022 (dollars in thousands).
| | | | | Date | | Property | | # | | Size / | | Commercial | | Purchase |
Property | | Location | | Acquired | | Type | | Spaces | | Acreage | | Sq. Ft. | | Price |
222 Sheridan Bricktown Garage LLC | | Oklahoma City, OK | | 6/7/2022 | | Garage | | 555 | | 0.64 | | 15,628 | | $ 17,513 |
The following table is a summary of the allocated acquisition value of the property acquired by the Company during the year ended December 31, 2022 (dollars in thousands).
| | | Land and | | | Building and | | | In-Place Lease | | | Total assets | |
| | | Improvements | | | improvements | | | Value | | | acquired | |
222 Sheridan Bricktown Garage LLC | | $ | 1,314 | | | $ | 16,020 | | | $ | 179 | | | $ | 17,513 | |
On September 1, 2022, the Company sold a parking lot located in Canton, Ohio for $0.7 million, resulting in a loss on sale of real estate of approximately $0.1 million. The Company received net proceeds of approximately $0.1 million after the repayment of the outstanding mortgage loan, interest and transaction costs.
In February 2023, the Company sold a parking lot located in Wildwood, NJ for $1.5 million and we anticipate recognizing an estimated gain on sale of real estate of approximately $0.7 million during the first quarter of 2023. The assets (substantially all real estate) and liabilities (substantially all mortgage debt) for this property were classified as held for sale on our Consolidated Balance Sheet as of December 31, 2022.
2021
The following table is a summary of the parking asset acquisitions completed during the year ended December 31, 2022 (dollars in thousands).
| | | Date | Property | | # | | | Size / | | | Retail | | | Purchase | |
Property | Location | Acquired | Type | | Spaces | | | Acreage | | | Sq. Ft. | | | Price | |
1W7 Carpark, LLC | Cincinnati, OH | 8/25/2021 | Garage | | | 765 | | | | 1.21 | | | | 18,385 | | | $ | 32,122 | |
222W7 Holdco, LLC | Cincinnati, OH | 8/25/2021 | Garage | | | 1625 | | | | 1.84 | | | | — | | | $ | 28,314 | |
322 Streeter Holdco, LLC | Chicago, IL | 8/25/2021 | Garage | | | 1154 | | | | 2.81 | | | | — | | | $ | 38,483 | |
2nd Street Miami Garage, LLC | Miami, FL | 9/9/2021 | Contract | | | 118 | | | | N/A | | | | — | | | $ | 3,253 | |
Denver 1725 Champa Street Garage, LLC | Denver, CO | 11/3/2021 | Garage | | | 450 | | | | 0.72 | | | | — | | | $ | 16,274 | |
The following table is a summary of the allocated acquisition value of all properties acquired by the Company for the year ended December 31, 2022 (dollars in thousands).
| | | Land and | | | Building and | | | In-Place Lease | | | Contract | | | Total assets | |
| | | Improvements | | | improvements | | | Value | | | Value | | | acquired | |
1W7 Carpark, LLC | | $ | 2,995 | | | $ | 28,819 | | | $ | 308 | | | $ | — | | | $ | 32,122 | |
222W7 Holdco, LLC | | | 4,391 | | | | 23,923 | | | | — | | | | — | | | | 28,314 | |
322 Streeter Holdco, LLC | | | 11,387 | | | | 27,096 | | | | — | | | | — | | | | 38,483 | |
2nd Street Miami Garage, LLC (a) | | | 93 | | | | — | | | | — | | | | 3,160 | | | | 3,253 | |
Denver 1725 Champa Street Garage, LLC | | | 7,414 | | | | 8,860 | | | | — | | | | — | | | | 16,274 | |
| | | $ | 26,280 | | | $ | 88,698 | | | $ | 308 | | | $ | 3,160 | | | $ | 118,446 | |
(a) | The value of in-place lease assets and the 2nd Street Miami Garage, LLC contract value are included in intangible assets on the consolidated balance sheet. The useful life of the in-place lease value at 1W7 Carpark, LLC is 5 years. The 2nd Street Miami Garage, LLC contract value has an indefinite life. |
There were no dispositions of real estate for the year ended December 31, 2021.
Note D — Intangible Assets
A schedule of the Company’s intangible assets and related accumulated amortization for the years ended December 31, 2022 and 2021 is as follows (dollars in thousands):
| | | 2022 | | | 2021 | |
| | | Gross carrying | | | Accumulated | | | Gross carrying | | | Accumulated | |
| | | amount | | | amortization | | | amount | | | amortization | |
In-place lease value | | $ | 2,564 | | | $ | 1,621 | | | $ | 2,398 | | | $ | 1,311 | |
Lease commissions | | | 165 | | | | 106 | | | | 152 | | | | 82 | |
Indefinite lived contract | | | 3,160 | | | | — | | | | 3,160 | | | | — | |
Acquired technology | | | 4,217 | | | | 561 | | | | 4,046 | | | | 133 | |
Total intangible assets | | $ | 10,106 | | | $ | 2,288 | | | $ | 9,756 | | | $ | 1,526 | |
Amortization of the in-place lease value, lease commissions and acquired technology are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. Amortization expense associated with intangible assets totaled $0.8 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively.
A schedule of future amortization of acquired intangible assets for the year ended December 31, 2022 and thereafter is as follows (dollars in thousands):
| | | Acquired in-place leases | | | Lease commissions | | | Technology | |
2023 | | $ | 320 | | | $ | 24 | | | $ | 448 | |
2024 | | | 303 | | | | 21 | | | | 443 | |
2025 | | | 189 | | | | 9 | | | | 443 | |
2026 | | | 102 | | | | 4 | | | | 443 | |
2027 | | | 29 | | | | 1 | | | | 415 | |
Thereafter | | | — | | | | — | | | | 1,464 | |
| | | $ | 943 | | | $ | 59 | | | $ | 3,656 | |
Note E — Notes Payable
As of December 31, 2022 and 2021, the principal balances on notes payable are as follows (dollars in thousands):
| | | Original Debt | | Monthly | | Balance as | | | | Term | | | | Interest | | Loan |
Loan (4) | | Amount | | Payment | | of 12/31/22 | | Lender | | (in Years) | | | | Rate | | Maturity |
MVP Milwaukee Old World | $ | 771 | | I/O | $ | 1,871 | | Vestin Realty Mortgage II | | 1 | | | | 7.50% | | 8/25/2023 |
Minneapolis Venture | $ | 2,000 | | I/O | $ | 4,000 | | Vestin Realty Mortgage II | | 1 | | | | 7.50% | | 8/25/2023 |
MVP Milwaukee Clybourn | $ | 191 | | I/O | $ | 191 | | Vestin Realty Mortgage II | | 1 | | | | 7.50% | | 8/25/2023 |
MVP Clarksburg Lot | $ | 476 | | I/O | $ | 379 | | Vestin Realty Mortgage II | | 1 | | | | 7.50% | | 8/25/2023 |
MVP Cincinnati Race Street | $ | 2,550 | | I/O | $ | 3,450 | | Vestin Realty Mortgage II | | 1 | | | | 7.50% | | 8/25/2023 |
MVP Memphis Poplar (3) | $ | 1,800 | | I/O | $ | 1,800 | | LoanCore | | 5 | | | | 5.38% | | 3/6/2024 |
MVP St. Louis (3) | $ | 3,700 | | I/O | $ | 3,700 | | LoanCore | | 5 | | | | 5.38% | | 3/6/2024 |
Mabley Place Garage | $ | 9,000 | $ | 44 | $ | 7,635 | | Barclays | | 10 | | | | 4.25% | | 12/6/2024 |
322 Streeter Holdco | $ | 25,900 | $ | 130 | $ | 25,352 | | American National Insurance Co. | | 5 | | * | | 3.50% | | 3/1/2025 |
MVP Houston Saks Garage | $ | 3,650 | $ | 20 | $ | 2,963 | | Barclays Bank PLC | | 10 | | | | 4.25% | | 8/6/2025 |
Minneapolis City Parking | $ | 5,250 | $ | 29 | $ | 4,379 | | American National Insurance, of NY | | 10 | | | | 4.50% | | 5/1/2026 |
MVP Bridgeport Fairfield Garage | $ | 4,400 | $ | 23 | $ | 3,664 | | FBL Financial Group, Inc. | | 10 | | | | 4.00% | | 8/1/2026 |
West 9th Properties II | $ | 5,300 | $ | 30 | $ | 4,497 | | American National Insurance Co. | | 10 | | | | 4.50% | | 11/1/2026 |
MVP Fort Worth Taylor | $ | 13,150 | $ | 73 | $ | 11,189 | | American National Insurance, of NY | | 10 | | | | 4.50% | | 12/1/2026 |
MVP Detroit Center Garage | $ | 31,500 | $ | 194 | $ | 27,625 | | Bank of America | | 10 | | | | 5.52% | | 2/1/2027 |
MVP Denver Sherman (1) | $ | 286 | $ | 2 | $ | 264 | | KeyBank | | 10 | | * | | 4.90% | | 5/1/2027 |
MVP Milwaukee Arena Lot (1) | $ | 2,142 | $ | 12 | $ | 1,977 | | KeyBank | | 10 | | * | | 4.90% | | 5/1/2027 |
MVP Denver 1935 Sherman (1) | $ | 762 | $ | 4 | $ | 703 | | KeyBank | | 10 | | * | | 4.90% | | 5/1/2027 |
MVP St. Louis Washington (1) | $ | 1,380 | $ | 24 | $ | 1,274 | | KeyBank | | 10 | | * | | 4.90% | | 5/1/2027 |
St. Paul Holiday Garage (1) | $ | 4,132 | $ | 8 | $ | 3,814 | | KeyBank | | 10 | | * | | 4.90% | | 5/1/2027 |
Cleveland Lincoln Garage (1) | $ | 3,999 | $ | 23 | $ | 3,691 | | KeyBank | | 10 | | * | | 4.90% | | 5/1/2027 |
MVP Indianapolis Meridian Lot (2) | $ | 938 | | I/O | $ | 938 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
MVP Louisville Broadway Station (2) | $ | 1,682 | | I/O | $ | 1,682 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
MVP Whitefront Garage (2) | $ | 6,454 | | I/O | $ | 6,454 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
MVP Houston Preston Lot (2) | $ | 1,627 | | I/O | $ | 1,627 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
MVP Houston San Jacinto Lot (2) | $ | 1,820 | | I/O | $ | 1,820 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
St. Louis Broadway (2) | $ | 1,671 | | I/O | $ | 1,671 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
St. Louis Seventh & Cerre (2) | $ | 2,057 | | I/O | $ | 2,057 | | Cantor Commercial Real Estate | | 10 | | ** | | 5.03% | | 5/6/2027 |
St Louis Cardinal Lot DST | $ | 6,000 | | I/O | $ | 6,000 | | Cantor Commercial Real Estate | | 10 | | | | 5.25% | | 5/31/2027 |
MVP Preferred Parking | $ | 11,330 | $ | 66 | $ | 11,257 | | Key Bank | | 10 | | ** | | 5.02% | | 8/1/2027 |
Less unamortized loan issuance costs | | | | | $ | (974) | | | | | | | | | | |
| | | | | | $ | 146,948 | | | | | | | | | | |
| (1) | The Company issued a promissory note to KeyBank for $12.7 million secured by the pool of properties. |
| (2) | The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by the pool of properties. |
| (3) | The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis 2013 and MVP Memphis Poplar. |
| (4) | The table above excludes mortgage debt related to the MVP Wildwood NJ Lot, LLC. This property was classified as held for sale as of December 31, 2022. As such, the $1.0 million outstanding principal and related unamortized loan issuance costs are reported as liabilities held for sale on the Consolidated Balance Sheets. |
* 2 Year Interest Only
** 10 Year Interest Only
I/O - Interest Only
In April 2022, the Company received notification from the Small Business Administration stating that the round two paycheck protection program loan was forgiven in full in the amount of $328,000. The forgiveness of this loan was recognized in the consolidated statements of operations for the year ended December 31,2022.
During 2021, VRMI and VRMII acquired $11.5 million of outstanding notes payable the Company had with various regulatory agencies,lenders. On July 5, 2022, VRMI merged with and other costs incurredinto Suncrest Holdings, LLC (“Suncrest”), an entity managed by an entity majority owned and controlled by Mr. Shustek, the Company’s former Chief Executive Officer. On July 11, 2022, Suncrest assigned and sold five of the six notes issued originally by VRMI to certain of the subsidiaries of the Company (collectively, the “VRMI Notes”) to VRMII. As a result, the obligations of Company subsidiaries under the five VRMI Notes, including all repayment obligations, are now owed to VRMII. All of the loans evidenced under the five VRMI Notes originally matured and were payable in full on August 25, 2022. However, in August 2022, the Company extended the term of the VRMI Notes to August 2023. In connection with registeringthis extension, the coupon rate was increased from 7.0% to sell7.5% and the Company paid VRMII a $0.6 million extension fee.
Reserve funds are generally required for repairs and replacements, real estate taxes, and insurance premiums. Some notes contain various terms and conditions including debt service coverage ratios and debt yield limits. As of December 31, 2022 and 2021, borrowers for three of the Company’s loans totaling $55.6 million and seven loans totaling $96.0 million, respectively, failed to meet certain loan covenants. As a result, we are subject to additional cash management procedures, which resulted in approximately $0.7 million and $1.0 million of restricted cash at December 31, 2022 and 2021, respectively. In order to exit cash management, certain debt service coverage ratios or debt yield tests must be exceeded for two consecutive quarters to return to less restrictive cash management procedures. As of December 31, 2022, $1.0 million of our restricted cash was for two borrowers that had consecutive debt service coverage ratios in excess of required amounts during 2022 and were in process of being released from cash management.
As of December 31, 2022, future principal payments on notes payable are as follows (dollars in thousands):
2023 | | $ | 13,048 | |
2024 | | | 16,012 | |
2025 | | | 29,091 | |
2026 | | | 22,708 | |
2027 | | | 67,063 | |
Thereafter | | | — | |
Total | | $ | 147,922 | |
Note F — Revolving Credit Facility
On March 29, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with KeyBank Capital Markets, as lead arranger, and KeyBank, National Association, as administrative agent. The Credit Agreement refinanced the Company’s then current loan agreements for certain properties. The Credit Agreement provides for, among other things, a $75.0 million revolving credit facility, originally maturing on April 1, 2023 (the “Revolving Credit Facility”). The Revolving Credit Facility may be increased by up to an additional $75.0 provided that no event of default has occurred and certain other conditions are satisfied. Borrowings under the Revolving Credit Facility bear interest at a Secured Overnight Financing Rate (“SOFR”) benchmark rate or Alternate Base Rate, plus a margin of between 1.75% and 3.00%, with respect to SOFR loans, or 0.75% to 2.00%, with respect to base rate loans, based on the Company’s leverage ratio as calculated under the Credit Agreement. The Credit Agreement is secured by a pool of properties and requires compliance with certain financial covenants. The Credit Agreement also includes financial covenants that require the Company to (i) maintain a total leverage ratio not to exceed 65.0%, (ii) not to exceed certain fixed charge coverage ratios, and (iii) maintain a certain tangible net worth.
On April 15, 2022, the Company drew on the Revolving Credit Facility to pay a loan in full with LoanCore in the amount of $37.9 million. The loan had a maturity date of December 9, 2022 and was secured by a pool of six properties. On April 21, 2022, the Company drew on the Revolving Credit Facility to pay two loans in full with Associated Bank in a combined amount of $18.2 million. The loans had maturity dates of May 1, 2022 and October 1, 2022, respectively, and were secured by two properties. On June 6, 2022, the Company drew on the Revolving Credit Facility for $17.6 million to fund the acquisition of 222 Sheridan Bricktown Garage LLC. As of December 31, 2022, the Company had drawn $73.7 million of the available $75.0 million in the Credit Agreement.
On November 17, 2022, the Company executed an amendment to the Credit Agreement which extends the maturity of the Revolving Credit Facility to April 1, 2024, amends certain financial covenants through the new term, and adds a requirement for the Company to use diligent efforts to pursue an equity raise or liquidity event by March 31, 2023. In connection with this extension, the Company paid an extension fee of $375,000 (plus fees), which is being deferred and amortized over the new term of the Revolving Credit Facility.
As of December 31, 2022, the balance of unamortized loan fees associated with the Revolving Credit Facility is $1.0 million which is being amortized to interest expense in the Consolidated Statements of Operations over the remaining term.
Note G — Leases
Lessee
From January 10, 2020 through closing of the Transaction the Company leased corporate office space in Las Vegas for its former headquarters. The lease was accounted for as an operating leases in accordance with ASC 842 and we recognized zero and $0.2 million of lease expense for the years ended December 31, 2022 and 2021, respectively, which is reported in general and administrative expense in our Consolidated Statements of Operations.
Lessor
All of the Company’s leases are classified as operating leases. The following table summarizes the components of operating lease revenue recognized during the years ended December 31, 2022 and 2021 included within the Company's Consolidated Statements of Operations (dollars in thousands):
| | | Year Ended December 31, | |
Lease revenue | | 2022 | | | 2021 | |
Fixed contractual payments | | $ | 7,107 | | | $ | 9,154 | |
Variable lease payments | | $ | 21,542 | | | $ | 6,939 | |
Straight-line rental income | | $ | 25 | | | $ | 135 | |
Future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of December 31, 2022, assuming no new or renegotiated leases or option extensions on lease agreements are executed, are as follows (dollars in thousands):
Years Ending December 31, | | Future lease payments due | |
2023 | | $ | 5,010 | |
2024 | | $ | 4,484 | |
2025 | | $ | 3,504 | |
2026 | | $ | 2,626 | |
2027 | | $ | 523 | |
Thereafter | | $ | — | |
Note H – Equity
Series A Preferred Stock
On November 1, 2016, the Company commenced an offering of up to $50 million in shares of the Company's common stock.Company’s Series A Convertible Redeemable Preferred Stock (“Series A Preferred Stock”), par value $0.0001 per share, together with warrants to acquire the Company’s Common Stock, in a Regulation D 506(c) private placement to accredited investors.
The holders of the Series A Preferred Stock are entitled to receive, when and as authorized by the Board of Directors and declared by the Company out of funds legally available for the payment of dividends, cash dividends at the rate of 5.75% per annum of the initial stated value of $1,000 per share. Since a Listing Event, as defined in the charter, did not occur by March 31, 2018, the cash dividend rate has been increased to 7.50%, until a Listing Event at which time, the annual dividend rate will be reduced to 5.75% of the stated value.
On March 24, 2020, the Company’s Board of Directors unanimously authorized the suspension of the payment of distributions on the Series A Preferred Stock; however, such distributions will continue to accrue in accordance with the terms of the Series A Preferred Stock. Since initial issuance, the Company had declared distributions of approximately $1.2 million of which approximately $0.6 million had been paid to Series A stockholders. As of December 31, 2016, 2022 and 2021, approximately $0.6 million and $0.4 million of Series A Preferred Stock distributions that were accrued and unpaid, respectively, are included in accounts payable and accrued expenses on the Consolidated Balance Sheet.
Series 1 Preferred Stock
On March 29, 2017, the Company fulfilledfiled with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its minimum offeringauthorized capital stock as shares of $2.0 million in subscriptionsSeries 1 Convertible Redeemable Preferred Stock (“Series 1 Preferred Stock”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1 Preferred Stock, together with warrants to acquire the Company’s common stock, to accredited investors.
The holders of the Series 1 Preferred Stock are entitled to receive, when and all deferred offering costs paidas authorized by the Sponsor were charged against the gross proceedsCompany’s Board of Directors and declared by us out of legally available funds, cumulative, cash dividends on each share at an annual rate of 5.50% of the Offeringstated value pari passu with the dividend preference of the Series A Preferred Stock and reclassifiedin preference to stockholders' equity.
Share Repurchase Program
The Companyany payment of any dividend on the Company’s common stock; provided that since a Listing Event, as defined in the charter, has
not occurred by April 7, 2018, the annual dividend rate on all Series 1 Preferred Stock shares has been increased to 7.00% of the stated value until the occurrence of a
Share Repurchase Program ("SRP") that enables stockholdersListing Event, at which time, the annual dividend rate will be reduced to
sell their5.50% of the stated value.Each holder of Series 1 Preferred Stock received, for every $1,000 in shares subscribed by such holder, detachable warrants to purchase 35 shares of the Company. UnderCompany’s common stock if the SRP, stockholders may request that the Company redeem all or any portion, subject to certain minimum conditions described below, if such repurchase does not impair the Company's capital or operations.
Prior to the time that the Company's shares areCompany’s common stock is listed on a national securities
exchange,exchange. Since a Listing Event did not occur on or prior to the
repurchasefifth anniversary of the final closing date of the offering (ie. January 31, 2023), the outstanding warrants automatically expired.On March 24, 2020, the Company’s Board of Directors unanimously authorized the suspension of the payment of distributions on the Series 1 Preferred Stock, however, such distributions will continue to accrue in accordance with the terms of the Series 1 Preferred Stock. Since initial issuance, the Company had declared distributions of approximately $14.3 million of which approximately $6.4 million had been paid to Series 1 Preferred Stock stockholders. As of December 31, 2022 and 2021, approximately $7.9 million and $5.1 million of Series 1 Preferred Stock distributions that were accrued and unpaid, respectively, are included in accounts payable and accrued expenses on the Consolidated Balance Sheet.
Warrants
On August 25, 2021, in connection with the closing of the Transaction, the Company entered into a warrant agreement (the “Warrant Agreement”) pursuant to which it issued to Color Up warrants to purchase up to 1,702,128 shares of common stock, at an exercise price of $11.75 per share will dependfor an aggregate cash purchase price of up to $20.0 million (the “Common Stock Warrants”). Each whole Common Stock Warrant entitles the registered holder thereof to purchase one whole share of common stock at a price of $11.75 per share, subject to customary adjustments, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or listing of the common stock on the lengthNasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange. The Common Stock Warrants will expire on August 25, 2026.
The Common Stock Warrants are classified as equity and recorded at the issuance date fair value. The issuance date fair value was determined using option pricing models and assumptions that were based on the individual characteristics of time investors have heldthe Common Stock Warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate.
Tender Offer
On October 5, 2021, Color Up initiated a Tender Offer (the “Offer”) to purchase up to 900,506 shares of common stock of the Company, at a price of $11.75 per share. On November 5, 2021, a total of 878,082 shares of common stock were validly tendered and not validly withdrawn pursuant to the Offer and Color Up accepted for purchase all such shares. Color Up initiated payment of an aggregate of approximately $10.3 million to the stockholders participating in the Offer.
Effective November 8, 2021, Color Up executed a subscription agreement with the Company pursuant to which Color Up acquired the remaining 22,424 shares of common stock not purchased through the Offer at $11.75 per share.
Securities Purchase Agreement
On November 2, 2021, the Company, entered into a securities purchase agreement (the “ Securities Purchase Agreement”) by and among the Company, the Operating Partnership, and HS3, pursuant to which the Operating Partnership issued and sold to HS3 (a) 1,702,128 newly issued OP Units; and (b) 425,532 newly-issued Class A units of limited partnership of the Operating Partnership (“Class A Units”) which entitle HS3 to purchase up to 425,532 additional OP Units (the “Additional OP Units”) at an exercise price equal to $11.75 per Additional OP Unit, subject to adjustment as follows:provided in the Class A Unit agreement, and HS3 paid to the Operating Partnership cash consideration of $20.0 million. The Company used proceeds from the Securities Purchase Agreement for working capital purposes, including expenses related to the Securities Purchase Agreement and the acquisition of two parking lots and related assets. The Additional OP Units are available to be exercised only upon completion of a Liquidity Event, as defined in the Securities Purchase Agreement.
Convertible Noncontrolling Interests
As of December 31, 2022, the Operating Partnership had approximately 17.0 million OP Units outstanding, excluding any equity incentive units granted. Under the terms of the Third Amended and Restated Limited Partnership Agreement, OP Unit holders may elect to exchange certain OP Units for shares of the Company’s Common Stock upon completion of a liquidity event. The OP Units outstanding as of December 31, 2022 are classified as noncontrolling interests within permanent equity on our consolidated balance sheets.
Dividend Reinvestment Plan
The Company has a Dividend Reinvestment Plan (“DRIP”) which allows its stockholders to invest distributions in additional shares of our common stock, subject to certain limits. Stockholders who elect to participate in the DRIP may choose to invest all or a portion of their cash distributions in shares of our common stock at a price equal to our most recent estimated value per share. On March 22, 2018, the Company suspended payment of distributions and as such there are currently no repurchasesdistributions to invest in the DRIP.
Share Repurchase Program
On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for the first two years unless shares are being repurchasedhardship repurchases in connection with a stockholder's death or disability (as defined in the Code).shareholder’s death. Repurchase requests made in connection with the death or disability of a stockholder willcan be repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once we havethe Company had established an estimated NAV per share, 100% of such amount as determined by the Company's boardCompany’s Board of directors,
Directors, subject to any special distributions previously made to the
Company’s stockholders. On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a stockholder’s death.Note I - Stock-Based Compensation
On May 27, 2022, the Operating Partnership issued long-term incentive equity awards in the form of Director LTIP units of the Operating Partnership (“Director LTIP Units”) to the Company's stockholders. Withfive independent directors in consideration for their accrued but unpaid director compensation fees. The Director LTIP Units will vest ratably in equal installments on each of the next three anniversaries of the grant date, subject to the director's continued employment, contractual or other service relationship with the Company or an affiliate of the Company on the vesting date. The grant date fair value was determined to be $15.47. Prior to the granting of the Director LTIP Units, the associated compensation was anticipated to be paid in cash, and as such, the expense was accrued as a liability in the Consolidated Balance Sheets. Upon vesting, the Director LTIP Units are redeemable in cash or shares, at the option of the holder. As a result, the Director LTIP Units are classified as a liability within accounts payable and accrued expenses in the Consolidated Balance Sheet as of December 31, 2022.
Also on May 27, 2022, the Operating Partnership granted an aggregate of 1,500,000 Performance Units of the Operating Partnership (“PUs”) to the executive officers of the Company pursuant to performance unit award agreements entered into with respect to all other repurchases, priorthe PUs. The PUs vest, subject to the continued employment of the executive officers, upon the achievement of a 50% market condition and a 50% performance condition. The performance period for the market and performance conditions are May 27, 2022 through December 31, 2025 and May 27, 2022 through December 31, 2027, respectively, subject to the executive’s continued performance of the services of the Company, the Operating Partnership or an affiliate. The grant date that we establish anfair value of the 750,000 PUs with market conditions was estimated valueat $8.95 per unit using a Monte Carlo simulation for the future stock prices of the Company and its corresponding peer group. The 750,000 PUs subject to a performance condition will vest if the Company’s adjusted funds from operations per share of common stock is at least $1.25 for four consecutive quarters prior to the purchase price will be 95.0%fourth quarter of 2025 and then for an additional four consecutive quarters prior to December 31, 2027. The PUs subject to a performance condition were deemed not probable of achievement as of December 31, 2022. The probability of achievement of the purchase price paid forperformance condition will continue to be assessed throughout the shares,performance period.
PUs are subject to restrictions on transfer and may be subject to a risk of forfeiture if redeemed at any time between the second and third anniversariesexecutive ceases to be an employee of the purchase date, and 97.0%Company, the Operating Partnership or an affiliate prior to vesting of the purchase priceaward. Each vested PU is entitled to receive a dividend equivalent payment equal to the dividend paid if redeemed afteron the third anniversary. After we establish an estimated NAV per sharenumber of common stock, the purchase price will be 95.0%shares of OP Units issued. Each unvested PU is entitled to receive 10% of the NAV per share for distributions payable on OP Units.
On August 23, 2022, the shares, if redeemed at any time between the second and third anniversariesBoard granted 272,341 LTIP Units of the purchase date, 97.0%Operating Partnership to Mr. Chavez and Ms. Hogue, in lieu of full satisfaction of the NAV per share if redeemed at any time between the thirdCompany’s obligation to issue to Mr. Chavez and fifth anniversaries, and 100.0% of the NAV per share if redeemed after the fifth anniversary. In the event that the Company does not have sufficient funds available to repurchase all of the shares for which repurchase requests have been submitted in any quarter, we will repurchase the shares on a pro rata basis on the repurchase date. The SRP will be terminated if the Company's shares become listed for trading on a national securities exchange or if the Company's board of directors determines that it is in the Company's best interest to terminate the SRP.
The Company is not obligated to repurchaseMs. Hogue restricted shares of common stock under their respective employment agreements with the share repurchase program. The number of shares to be repurchased during the calendar quarter is limited to the lesser of: (i) 5%Company (the “Executive LTIP Units”). As of the weighted average numberoriginal grant date, the Executive LTIP Units were to vest in full only upon the occurrence of shares outstanding during thea Liquidity Event (as defined in Mr. Chavez and Ms. Hogue’s respective employment agreements) prior calendar year, and (ii) those repurchases that could be funded from the net proceeds of the sale of shares under the DRIP in the prior calendar year plus such additional funds as may be reserved for that purpose by the Company's board of directors; provided, however, that the above volume limitations shall not apply to repurchases requested August 25, 2024. On December 13, 2022, in connection with the death or qualifying disabilityMerger, the agreements granting these Executive LTIP Units were amended to require a service condition for a period of one year from a stockholder.. BecauseLiquidity Event. The modified grant date fair value of these limitations, the Company cannot guarantee that the Company willExecutive LTIP Units was determined to be able to accommodate all repurchase requests.
The Company will repurchase shares as$15.00 per unit. These Executive LTIP Units were deemed not probable of March 31st, June 30th, September 30th, and December 31st of each year. Each stockholder whose repurchase request is approved will receive the repurchase payment approximately 30 days following the end of the applicable quarter, effectiveachievement as of the last day of such quarter. The Company refers to the last day of such quarter as the repurchase date. If funds available for the Company's share repurchase program are not sufficient to accommodate all requests, shares will be repurchased as follows: (i) first, repurchases due to the death of a stockholder, on the basis of themodification date of the request for repurchase; (ii) next, in the discretion of the Company's board of directors, repurchases because of other involuntary exigent circumstances, such as bankruptcy; (iii) next, repurchases of shares held by stockholders subject to a mandatory distribution requirement under the stockholder's IRA; and (iv) finally, all other repurchase requests based upon the postmark of receipt. If the Stockholder's repurchase request is not honored during a repurchase period, the Stockholder will be required to resubmit the request to have it considered in a subsequent repurchase period.
On October 27, 2016, the Company filed a Form 8-K announcing, among other things, an amendment to the SRP providing for participation in the SRP by any holder of the Company's Series A Convertible Redeemable Preferred Stock, or any future board-authorized series or class of preferred stock that is convertible into common stock of the Company. Under the amendment, which becomes effective on November 26, 2016, a preferred stock holder may participate in the SRP by converting its preferred stock into common stock of the Company, and submitting such common shares for repurchase. The time period, for purposes of determining how long such stockholder has held the common shares submitted for repurchase, begins as of the date such preferred stockholder acquired the underlying preferred shares that were converted into common shares and submitted for repurchase.
The board of directors may, in its sole discretion, terminate, suspend or further amend the share repurchase program upon 30 days' written notice without stockholder approval if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the stockholders. Among other things, we may amend the plan to repurchase shares at prices different from those described above for the purpose of ensuring the Company's dividends are not "preferential" for incomes tax purposes. Any notice of a termination, suspension or amendment of the share repurchase program will be made via a report on Form 8-K filed with the SEC at least 30 days prior to the effective date of such termination, suspension or amendment. The board of directors may also limit the amounts available for repurchase at any time in its sole discretion. Notwithstanding the foregoing, the share repurchase program will terminate if the shares of common stock are listed on a national securities exchange. As of December 31, 2016, no shares are eligible2022.The following table sets forth a roll forward of all incentive equity awards for redemption (other than in connection with a death or disability of a stockholder).
Distribution Reinvestment Plan
Pursuant to the DRIP stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving cash. No dealer manager fees or selling commissions are paid with respect to shares purchased pursuant to the DRIP. Participants purchasing shares pursuant to the DRIP have the same rights and are treated in the same manner as if such shares were issued pursuant to the Offering. The board of directors may designate that certain cash or other distributions be excluded from the DRIP. The Company has the right to amend any aspect of the DRIP or terminate the DRIP with ten days' notice to participants. Shares issued under the DRIP are recorded to equity in the accompanying balance sheets in the period distributions are declared. We have issued a total of 18,311 shares of common stock under the DRIP as of December 31, 2016.
Non-controlling Interests
The FASB issued authoritative guidance for non-controlling interests in December 2007, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest.
Note C — Commitments and Contingencies
Litigation
In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company.
Environmental Matters
As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. We do not believe that compliance with existing laws will have a material adverse effect on the Company's financial condition or results of operations. However, we cannot predict the impact of any unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.
Note D – Investments in Real Estate
As of December 31, 2016, the Company had the following Investments in Real Estate:
| Property | Location | Date Acquired | Property Type | Investment Amount | Size / Acreage | # Spaces | Retail /Office Square Ft. | Ownership % |
| MVP San Jose 88 Garage, LLC | San Jose, CA | 6/15/2016 | Garage | $3,575,500 | 1.33 | 328 | N/A | 100.0% |
| MCI 1372 Street, LLC | Canton, OH | 7/8/2016 | Lot | $700,000 | 0.44 | 68 | N/A | 100.0% |
| MVP Cincinnati Race Street Garage, LLC | Cincinnati, OH | 7/8/2016 | Garage | $4,500,000 | 0.63 | 350 | N/A | 100.0% |
| MVP St. Louis Washington, LLC | St Louis, MO | 7/18/2016 | Lot | $3,000,000 | 0.39 | 63 | N/A | 100.0% |
| MVP St. Paul Holiday Garage, LLC | St Paul, MN | 8/12/2016 | Garage | $8,200,000 | 0.85 | 285 | N/A | 100.0% |
| MVP Louisville Station Broadway, LLC | Louisville, KY | 8/23/2016 | Lot | $3,050,000 | 1.25 | 165 | N/A | 100.0% |
| Cleveland Lincoln Garage Owners, LLC | Cleveland, OH | 10/19/2016 | Garage | $7,316,950 | 1.20 | 536 | 45,272 | 100.0% |
| MVP Houston Jefferson Lot, LLC | Houston, TX | 11/22/2016 | Lot | $700,000 | 0.52 | 76 | N/A | 100.0% |
| MVP Houston San Jacinto Lot, LLC | Houston, TX | 11/22/2016 | Lot | $3,200,000 | 0.65 | 85 | 240 | 100.0% |
| White Front Garage Partners, LLC | Nashville, TN | 9/30/2016 | Garage | $9,196,800 | 0.26 | 155 | N/A | 80.0% |
| MVP Cleveland West 9th, LLC | Cleveland, OH | 5/11/2016 | Lot | $2,894,250 | 2.16 | 254 | N/A | 51.0% |
| 33740 Crown Colony, LLC | Cleveland, OH | 5/17/2016 | Lot | $1,545,300 | 0.54 | 82 | N/A | 51.0% |
Investment in Real Estate continued:
Property | Location | Zoning | Height Restriction | Parking Tenant | Lease Commencement Date | Lease Term |
MVP San Jose 88 Garage, LLC | San Jose, CA | DC | Unlimited | ABM | 6/15/2016 | 1 year management agreement |
MCI 1372 Street, LLC | Canton, OH | B-5 | 375 FT | ABM | 7/8/2016 | 5 years |
MVP Cincinnati Race Street Garage, LLC | Cincinnati, OH | DD-A | 500 FT. | SP + | 9/1/2016 | 5 years |
MVP St. Louis Washington, LLC | St Louis, MO | CBD I | 100 FT. | SP + | 7/21/2016 | 5 years |
MVP St. Paul Holiday Garage, LLC | St Paul, MN | B-5 | Unlimited | Interstate Parking | 8/12/2016 | 10 years |
MVP Louisville Station Broadway, LLC | Louisville, KY | CBD I | Unlimited | Riverside Parking | 8/23/2016 | 5 years |
Cleveland Lincoln Garage Owners, LLC | Cleveland, OH | SI-E5 / GR-E5 | 250 FT. | SP + | 10/25/2016 | 5 years |
MVP Houston Jefferson Lot, LLC | Houston, TX | NONE | Unlimited | iPark Services | 12/1/2016 | 10 years |
MVP Houston San Jacinto Lot, LLC | Houston, TX | NONE | Unlimited | iPark Services | 12/1/2016 | 10 years |
White Front Garage Partners, LLC | Nashville, TN | CBD I | Unlimited | Premier Parking | 10/1/2016 | 10 years |
MVP Cleveland West 9th, LLC | Cleveland, OH | CBD LLR-B4 | 175 FT. | SP + | 5/11/2016 | 5 years |
33740 Crown Colony, LLC | Cleveland, OH | LLR-D5 | 250 FT. | SP + | 5/17/2016 | 5 years |
Note E — Related Party Transactions and Arrangements
The transactions described in this Note were approved by a majority of the Company's board of directors (including a majority of the independent directors) not otherwise interested in such transaction as fair and reasonable to the Company and on terms and conditions no less favorable to the Company than those available from unaffiliated third parties.
Ownership of Company Stock
As of December 31, 2016, the Company's Sponsor owned 8,000 shares and VRM II owned 5,000 shares of the Company's outstanding common stock.
Ownership of MVP REIT
On November 5, 2016, the Company purchased 338,409 shares of MVP REIT common stock from an unrelated third party for $3.0 million or $8.865 per share. During the year ended
December 31, 2016, MVP REIT paid us, approximately $34,000 in distributions, related to2022:| | | As of December 31, 2022 | |
| | | Number of Incentive Equity Awards | | | Weighted Avg Grant FV Per Share | |
Balance - January 1, 2022 | | | — | | | $ | — | |
Granted | | | 1,782,027 | | | | 12.65 | |
Vested | | | — | | | | — | |
Forfeited | | | — | | | | — | |
Total unvested units | | | 1,782,027 | | | $ | 12.65 | |
The Company recognized $2.5 million and $0.1 million of amortization of stock-based compensation for the Company's ownership of their common stock.
Acquisition Expense
During the yearyears ended December 31, 2016, JNL Parking, a brokerage 2022 and consulting company specializing2021, respectively, which is included in general and administrative expenses in the parking industry and co-founded by the Advisor's former Chief Investment Officer and former Chief Technology Officer (their employment ended during August 2016), earned feesConsolidated Statements of Operations. The remaining unrecognized compensation cost of approximately $78,000, equal$4.2 million for PUs with market conditions is expected to a 1% commission on purchases. JNL Parking may continue to receive broker fee frombe recognized over the Company,remaining derived service period of 12 months. No amortization was recognized for deals in which John Roy and Lance Miller actedthe Executive LTIPs or PUs with performance conditions as brokers, after their employment ended with the Company.
Ownershipthey were deemed not probable of the Advisor
VRM I and VRM II own 40% and 60%, respectively,achievement. The unrecognized compensation cost of the Advisor. Neither VRM I nor VRM II paid any up-front consideration for$15.7 million of these ownership interests, but eachawards will be responsible for its proportionate sharerecognized once the performance conditions are deemed to be probable of future expenses of the Advisor. The operating agreement of the Advisor provides that once VRM I and VRM II have been repaid in full for any capital contributions to the Advisor or for any expenses advanced on the Advisor's behalf, or capital investment, and once they have received an annualized return on their capital investment of 7.5%, then Michael Shustek will receive 40% of the net profits of the Advisor.
Fees Paid in Connection with the Offering – Common Stock
Various affiliates of the Company are involved in this offering and the Company's operations including MVP American Securities, LLC, or ("MVP American Securities"), which is a broker-dealer and member of the Financial Industry Regulatory Authority, Inc., or FINRA. MVP American Securities is owned by MS MVP Holdings, LLC which is owned and managed by Mr. Shustek. Additionally, the Company's board of directors, including a majority of the Company's independent directors, may engage an affiliate of the Advisor to perform certain property management services for us.
The Company's Sponsor or its affiliates will pay selling commissions of up to 6.5% of gross offering proceeds from the sale of shares in the primary offering without any right to seek reimbursement from the Company.
The Company's sponsor or its affiliates also may pay non-affiliated selling agents a one-time fee separately negotiated with each selling agent for due diligence expenses, subject to the total underwriting compensation limitation set forth below. We expect such due diligence expenses to average up to 1% of total offering proceeds at the maximum offering amount. Such commissions and fees will be paid by the Company's sponsor or its affiliates (other than the Company) without any right to seek reimbursement from the Company's company.
Fees Paid in Connection with the Offering – Preferred Stock
In connection with the private placement of the Series A preferred stock, the Company will pay selling commissions of up to 6.0% of gross offering proceeds from the sale of shares in the private placement, including sales by affiliated and non-affiliated selling agents.
The Company may pay non-affiliated selling agents a one-time fee separately negotiated with each selling agent for due diligence expenses of up to 2.0% of gross offering proceeds. The Company may also pay a dealer manager fee to MVP American Securities of up to 2.0% of gross offering proceeds from the sale of the shares in the private placement as compensation for acting as dealer manager.
Fees Paid in Connection with the Operations of the Company
The Advisor or its affiliates will receive an acquisition fee of 2.25% of the purchase price of any real estate provided, however, the Company will not pay any fees when acquiring loans from affiliates. During the year ended December 31, 2016, approximately $1.2 million in acquisition fees have been earned by the Advisor.
The Advisor or its affiliates will be reimbursed for actual expenses paid or incurred in the investment. During the year ended December 31, 2016, no acquisition expenses have been reimbursed to the Advisor.
The Advisor or its affiliates will receive a monthly asset management fee at an annual rate equal to 1.0% of the cost of all assets then held by the Company, or the Company's proportionate share thereof in the case of an investment made through a joint venture or other co-ownership arrangement. The Company will determine the Company's NAV, on a date not later than the Valuation Date. Following the Valuation Date, the asset management fee will be based on the value of the Company's assets rather than their historical cost. Asset management fees for the year ended December 31, 2016 were approximately $197,000.
The Company will reimburse the Advisor or its affiliates for costs of providing administrative services, subject to the limitation that we will not reimburse the Advisor for any amount by which the Company's operating expenses, at the end of the four preceding fiscal quarters (commencing after the quarter in which we make the Company's first investment), exceed the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income connection with the selection or acquisition of an investment, whether or not the Company ultimately acquires, unless the excess amount is approved by a majority of the Company's independent directors. We will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives a separate fee, such as an acquisition fee, disposition fee or debt financing fee, or for the salaries and benefits paid to the Company's executive officers. In addition, we will not reimburse the Advisor for rent or depreciation, utilities, capital equipment or other costs of its own administrative items. During the year ended December 31, 2016, no operating expenses have been incurred by the Advisor.
Fees Paid in Connection with the Liquidation or Listing of the Company's Real Estate Assets
For substantial assistance in connection with the sale of investments, as determined by the independent directors, we will pay the Advisor or its affiliate the lesser of (i) 3.0% of the contract sale price of each real estate-related secured loan or other real estate investment or (ii) 50% of the customary commission which would be paid to a third-party broker for the sale of a comparable property. The amount paid, when added to the sums paid to unaffiliated parties, may not exceed either the customary commission or an amount equal to 6.0% of the contract sales price. The disposition fee will be paid concurrently with the closing of any such disposition of all or any portion of any asset. During the year ended December 31, 2016, no disposition fees have been earned by the Advisor.
After the Company's stockholders have received a return of their net capital invested and a 6.0% annual cumulative, non-compounded return, then the Company's Advisor will be entitled to receive 15.0% of the remaining proceeds. We will pay this subordinated performance fee only upon one of the following events: (i) if the Company's shares are listed on a national securities exchange; (ii) if the Company's assets are sold or liquidated; (iii) upon a merger, share exchange, reorganization or other transaction pursuant to which the Company's investors receive cash or publicly-traded securities in exchange for their shares; or (iv) upon termination of the Company's advisory agreement. During the year ended December 31, 2016, no subordinated performance fees have been earned by the Company's Advisor.
Note F — Economic Dependency
Under various agreements, the Company has engaged or will engage the Advisor and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition services, the sale of shares of the Company's common stock available for issue, as well as other administrative responsibilities for the Company including accounting services and investor relations. In addition, the Sponsor pays selling commissions in connection with the sale of the Company's shares in the Offering and the Advisor pays the Company's organization and offering expenses.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note G — Stock-Based Compensation
achievement.Long-Term Incentive Plan
The Company'sCompany’s board of directors has adopted a long-term incentive plan which we will the Company may use to attract and retain qualified directors, officers, employees and consultants. The Company'sCompany’s long-term incentive plan will offer these individuals an opportunity to participate in the Company'sCompany’s growth through awards in the form of, or based on, the Company'sCompany’s common stock. WeThe Company currently anticipateanticipates that weit will not issue awards under the Company'sCompany’s long-term incentive plan, although we it may do so in the future, including possible equity grants to the Company'sCompany’s independent directors as a form of compensation.
The long-term incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company's affiliates'Company’s affiliates selected by the board of directors for participation in ourthe Company’s long-term incentive plan. Stock options granted under the long-term incentive plan will not exceed an amount equal to 10% of the outstanding shares of ourthe Company’s common stock on the date of grant of any such stock options. Stock options may not have an exercise price that is less than the fair market value of a share of ourthe Company’s common stock on the date of grant.
Our boardThe Company’s Board of directorsDirectors or a committee appointed by our boardits Board of directorsDirectors will administer the long-term incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the long-term incentive plan if the grant or vesting of the awards would jeopardize ourthe Company’s status as a REIT under the Code (if applicable) or otherwise violate the ownership and transfer restrictions imposed under ourits charter. Unless otherwise determined by our boardthe Company’s Board of directors, Directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.
The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between our companythe Company and ourits stockholders that causes the per-share value of ourthe Company’s common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the long-term incentive plan will be adjusted proportionately and the boardBoard of directorsDirectors will make such adjustments to the long-term incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the long-term incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.
Our boardThe Company’s Board of directors Directors may in its sole discretion at any time determine that all or a portion of a participant'sparticipant’s awards will become fully vested. The board may discriminate among participants or among awards in exercising such discretion. The long-term incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by our boardthe Board of directorsDirectors and stockholders, unless extended or earlier terminated by our boardthe Board of directors. Our boardDirectors. The Company’s Board of directors Directors may terminate the long-term incentive plan at any time. The expiration or other termination of the long-term incentive plan will not, without the participant'sparticipant’s consent, have an adverse impact on any award that is outstanding at the time the long-term incentive plan expires or is terminated. Our boardThe Board of directors Directors may amend the long-term incentive plan at any time, but no amendment will adversely affect any award without the participant'sparticipant’s consent and no amendment to the long-term incentive plan will be effective without the approval of ourthe Company’s stockholders if such approval is required by any law, regulation or rule applicable to the long-term incentive plan. During the year ended December 31, 2016, There are no grants have been made awards outstanding under the long-term incentive plan.
Note H – Recent Accounting Pronouncements
In April 2015, J — Employee Benefit PlanEffective July 1, 2019, the FASB issued ASU 2015-03, ImputationCompany began participating in 401(k) Safe Harbor Plan (the “Plan”), which is a defined contribution plan covering all eligible employees. Under the provisions of Interest: Simplifying the PresentationPlan, participants may direct the Company to defer a portion of Debt Issuance Costs, ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs relatedtheir compensation to borrowings be presentedthe Plan, subject to limitations in the balance sheet as a direct deduction from the carrying amountCode. The Company provides for an employer matching contribution equal to 100% of the borrowing, consistent with debt discounts. The ASU does not affectfirst 6% of eligible compensation contributed by each employee, which is funded in cash. All contributions vest immediately.
Total expense recorded for the amount or timingmatching 401(k) contribution in the years ended December 31, 2022 and 2021 was approximately $147,000 and $46,000, respectively.
Note K – Earnings (Loss) Per Share
Basic and diluted loss per weighted average common share (“EPS”) is calculated by dividing net income (loss) attributable to the Company’s common stockholders, including any participating securities, by the weighted average number of expensesshares outstanding for debt issuance costs.the period. The Company adopted ASU 2015-03 effective January 1, 2016 on a retrospective basis, by recasting all prior periods shown to reflectincludes the effect of adoption,participating securities in basic and diluted earnings per share computations using the effecttwo-class method of whichallocating distributed and undistributed earnings when the two-class method is not material.
In March 2016,more dilutive than the
FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting ("ASU 2016-07"). ASU 2016-07 eliminates the requirement that when an investment qualifies for use of the equity methodtreasury stock method. Outstanding warrants were antidilutive as a result of
an increasethe net loss for the years ended December 31, 2022 and 2021 and therefore were excluded from the dilutive calculation. The Company includes unvested PUs as contingently issuable shares in the
levelcomputation of
ownershipdiluted EPS once the market criteria is met, assuming that the end of the reporting period is the end of the contingency period. The Company had 150,000 additional performance units that were granted to our executive officers on May 27, 2022, which are considered antidilutive to the dilutive loss per share calculation for the year ended December 31, 2022. The Company did not have any additional dilutive shares resulting in basic loss per share equaling dilutive loss per share for the year ended December 31, 2021.The following table reconciles the numerator and denominator used in computing the Company’s basic and diluted per-share amounts for net loss attributable to common stockholders for the years ended December 31, 2022 and 2021 (dollars in thousands):
| | | 2022 | | | 2021 | |
Numerator: | | | | | | | | |
Net loss attributable to MIC | | $ | (11,119 | ) | | $ | (14,064 | ) |
Net loss attributable to participating securities | | | — | | | | — | |
Net loss attributable to MIC common stock | | $ | (11,119 | ) | | $ | (14,064 | ) |
Denominator: | | | | | | | | |
Basic and dilutive weighted average shares of Common Stock outstanding | | | 7,762,375 | | | | 7,741,192 | |
Basic and diluted loss per weighted average common share: | | | | | | | | |
Basic and dilutive | | $ | (1.43 | ) | | $ | (1.82 | ) |
Note L – Variable Interest Entities
The Company, through a wholly owned subsidiary of its Operating Partnership, owns a 51.0% beneficial interest or degreein MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”). MVP St. Louis is the owner of influence, an investor must adjusta 2.56-acre, 376-vehicle commercial parking lot, known as the Cardinal Lot.
At the time of its initial investment, the Company concluded that MVP St. Louis was a VIE and that the power to direct the activities that most significantly impact the economic performance of MVP St. Louis was held by MVP Parking DST, LLC (the “Manager”) and certain subsidiaries of the Manager. As a result, the investment results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. Therefore, upon qualifyingMVP St. Louis was accounted for using the equity method of accounting no retroactive adjustmentthrough August 25, 2021.
In connection with the closing of the investment is required. ASU 2016-07 is effective for annual and interim periods beginning after December 15, 2016 and early adoption is permitted. We do not currently have significant investments that are accounted for by a method other thanTransaction, the equity method and do not expect ASU 2016-07 to have a significant impact on our consolidated financial condition and results of operations.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspectsformer advisor of the
accounting for employee share-based payment transactions, includingCompany, MVP Realty Advisors, LLC (“MVPRA”) transferred ownership of the
accounting for income taxes, forfeitures,Manager to Mr. Chavez. This change in structure was deemed a reconsideration event and
statutory tax withholding requirements,the Company concluded that it was the primary beneficiary of the MVP St. Louis. As a result, the Company began consolidating its investment in MVP St. Louis and MVP St. Louis Cardinal Lot Master Tenant, LLC, which had total assets of approximately $12.0 million (substantially all real estate investments) and liabilities of approximately $6.2 million (substantially all mortgage debt) as
wellof August 25, 2021. These assets and liabilities were recorded at fair value as
classificationof the date of consolidation, and a gain of approximately $0.4 million was recognized in the
statementConsolidated Statement of
cash flows. ASU 2016-07 is effective for annualOperations. MVP St. Louis and
interim periods beginning after MVP St. Louis Cardinal Lot Master Tenant, LLC had total assets of approximately $12.6 million (substantially all real estate investments) and liabilities of approximately $6.2 million (substantially all mortgage debt) as of December 15, 2016 and early adoption is permitted. We are currently assessing the potential impact of ASU 2016-09 on our consolidated financial condition and results of operations.31, 2022.
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. This update provides guidance on how to record eight specific cash flow issues. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and a retrospective transition method should be applied. Note M — Income Taxes
The Company is currently evaluatingpreviously elected to be taxed as a REIT for federal income tax purposes and operated in a manner that allowed the effect of this update on its consolidated financial statements.
Note I - Acquisitions
| Property | Location | Date Acquired | Property Type | # Spaces | Size / Acreage | Retail /Office Square Ft. | Investment Amount | Ownership % |
| MVP Cleveland West 9th, LLC | Cleveland, OH | 5/11/2016 | Lot | 254 | 2.16 | N/A | $2,894,250 | 51.00% |
| 33740 Crown Colony, LLC | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $1,545,300 | 51.00% |
| MVP San Jose 88 Garage, LLC | San Jose, CA | 6/15/2016 | Garage | 328 | 1.33 | N/A | $3,575,500 | 100.00% |
| MCI 1372 Street, LLC | Canton, OH | 7/8/2016 | Lot | 68 | 0.44 | N/A | $700,000 | 100.00% |
| MVP Cincinnati Race Street Garage, LLC | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $4,500,000 | 100.00% |
| MVP St. Louis Washington, LLC | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $3,000,000 | 100.00% |
| MVP St. Paul Holiday Garage, LLC | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,200,000 | 100.00% |
| MVP Louisville Station Broadway, LLC | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,050,000 | 100.00% |
| White Front Garage Partners, LLC | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $9,196,800 | 80.00% |
| Cleveland Lincoln Garage Owners, LLC | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.2 | 45,272 | $7,316,950 | 100.00% |
| MVP Houston Jefferson Lot, LLC | Houston, TX | 11/22/2016 | Lot | 76 | 0.52 | N/A | $700,000 | 100.00% |
| MVP Houston San Jacinto Lot, LLC | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,200,000 | 100.00% |
The following table isCompany to qualify as a summaryREIT through December 31, 2019. As a consequence of the acquisitionsCOVID-19 pandemic, the Company earned management income in lieu of lease income from a number of distressed tenants, which did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the year ended December 31, 2016.
| | | Assets | | | Liabilities | | | | |
| | | Land and Improvements | | | Building and improvements | | | Total assets acquired | | | Notes Payable Assumed | | | Net assets and liabilities acquired | |
| | | | | | | | | | | | | | | | |
West 9th Properties II | | $ | 5,675,000 | | | | -- | | | $ | 5,675,000 | | | $ | -- | | | $ | 5,675,000 | |
| 33740 Crown Colony | | | 3,030,000 | | | | -- | | | | 3,030,000 | | | | -- | | | | 3,030,000 | |
| San Jose 88 Garage | | | 1,073,000 | | | | 2,503,000 | | | | 3,576,000 | | | | -- | | | | 3,576,000 | |
| MCI 1372 Street | | | 700,000 | | | | -- | | | | 700,000 | | | | -- | | | | 700,000 | |
| Cincinnati Race Street | | | 2,142,000 | | | | 2,358,000 | | | | 4,500,000 | | | | -- | | | | 4,500,000 | |
| St. Louis Washington | | | 3,000,000 | | | | -- | | | | 3,000,000 | | | | -- | | | | 3,000,000 | |
| St. Paul Holiday Garage | | | 1,673,000 | | | | 6,527,000 | | | | 8,200,000 | | | | -- | | | | 8,200,000 | |
| Louisville Station Broadway | | | 3,050,000 | | | | -- | | | | 3,050,000 | | | | -- | | | | 3,050,000 | |
| White Front Garage | | | 3,116,000 | | | | 8,379,000 | | | | 11,495,000 | | | | -- | | | | 11,495,000 | |
| Cleveland Lincoln Garage | | | 2,195,000 | | | | 5,122,000 | | | | 7,317,000 | | | | | | | | 7,317,000 | |
| Houston Jefferson * | | | 700,000 | | | | -- | | | | 700,000 | | | | -- | | | | 700,000 | |
| Houston San Jacinto | | | 3,200,000 | | | | -- | | | | 3,200,000 | | | | -- | | | | 3,200,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | $ | 29,554,000 | | | $ | 24,889,000 | | | $ | 54,443,000 | | | $ | -- | | | $ | 54,443,000 | |
* On January 11, 2017,2020. Accordingly, the Company received an unsolicited offerdid not qualify for taxation as a REIT in 2020 and continues to purchasebe taxed as a C corporation. As a C corporation, the Houston Jefferson lotCompany is subject to federal income tax on its taxable income at regular corporate rates.A full valuation allowance for approximately $2.0 million, withdeferred tax assets was historically provided each year since the Company believed that as a 90-day due diligence period. The propertyREIT it was purchased formore likely than not that it would not realize the benefits of its deferred tax assets. As a long-term hold; however, our advisor and board of directors believe thattaxable C Corporation, the offer received justified the sale of the property.
Pro forma results of the Company
The following table of pro forma consolidated results of operations of the Company has evaluated its deferred tax assets for the year ended December 31, 20162022, which consist primarily of net operating losses and forits investment in the Operating Partnership. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period from May 4, 2015 (Date of Inception) through ended December 31, 2015, and assumes that2022. Such objective evidence limits the acquisitions were completedability to consider other subjective evidence, such as of May 4, 2015 (Date of Inception).
| | | December 31, 2016 | | | December 31, 2015 | |
| Revenues from continuing operations | | $ | 4,081,000 | | | $ | 1,695,000 | |
| Net loss available to common stockholders | | $ | (2,081,000 | ) | | $ | (1,273,000 | ) |
| Net loss available to common stockholders per share – basic | | $ | (1.89 | ) | | $ | 152.11 | |
| Net loss available to common stockholders per share – diluted | | $ | (1.89 | ) | | $ | 152.11 | |
Note J – Investmentour projections for future growth. Despite substantial growth in Equity Method Investee
MVP Denver 1935 Sherman, LLC
On February 12, 2016,property-level operations, the Company along with MVP REIT, through MVP Denver 1935 Sherman, LLC ("MVP Denver"),has continued to generate a Nevada limited liability company owned 24.49% bynet loss and as such the Company and 75.51% by MVP REIT, closed on the purchase ofhas determined that it will continue to record a parking lot for approximately $2.4 million in cash, of which the Company's share was approximately $0.6 million. The parking lot is located at 1935 Sherman Avenue, Denver, Colorado (the "Denver parking lot"). The Denver parking lot consists of approximately 18,765 square feet and has approximately 72 parking spaces. The Denver parking lot is leased by SP Plus Corporation, a national parking operator, under a net lease agreement where MVP Denver is responsible for property taxes and SP Plus Corporation pays for all insurance and maintenance costs. SP Plus Corporation pays annual rent of $120,000. In addition, the lease provides revenue participation with MVP Denver receiving 70% of gross receipts over $160,000. The term of the lease is for 10 years.
Houston Preston Lot
On November 22, 2016, the Company and MVP REIT, through MVP Houston Preston Lot, LLC, a Delaware limited liability company ("MVP Preston"), an entity wholly owned by the Company, closed on the purchase of a parking lot consisting of approximately 46 parking spaces, located in Houston, Texas, for a purchase price of $2.8 million in cash plus closing costs, of which our portion was $560,000. We hold a 20% ownership interest in Houston Preston, while MVP REIT holds an 80% ownership interest in Houston Preston. The parking lot is under a 10 year lease with iPark Services LLC ("iPark"), a regional parking operator, under a modified net lease agreement where MVP Preston is responsible for property taxes above a $38,238 threshold, and iPark pays for insurance and maintenance costs. iPark pays annual rent of $228,000. In addition, the lease provides revenue participation with MVP Preston receiving 65% of gross receipts over $300,000. The term of the lease is for 10 years.
The following is a summary of the Company's portion of the purchase per the agreement:
| | | | | | | Ownership | |
| Property Name | Purchase Date | | Purchase Price | | | MVP REIT II | | | MVP REIT | |
| | | | | | | | | | | |
| MVP Denver 1935 Sherman | 02/12/2016 | | $ | 600,000 | | | | 24.49 | % | | | 75.51 | % |
| | | | | | | | | | | | | | |
| MVP Houston Preston | 11/22/2016 | | | 560,000 | | | | 20.00 | % | | | 80.00 | % |
| | | | | | | | | | | | | | |
| Total | | | $ | 1,160,000 | | | | | | | | | |
Note K – Investment in Cost Method Investee
Minneapolis Venture, LLC and Minneapolis City Parking, LLC
On January 6, 2016, the Company along with MVP REIT closed on the purchase of two parking lots located in Minneapolis for a purchase price of approximately $15.5 million in cash plus closing costs. The purchase was accomplished through Minneapolis Venture, LLC, a limited liability company (the "Minneapolis Venture") owned jointly by the Company and MVP REIT, of which the Company owns 12.91%. The Company's share of the purchase price was approximately $2.0 million plus the Company's share of the closing costs.
The first parking lot is located at 1022 Hennepin Avenue (the "Hennepin lot"). The Hennepin lot consists of approximately 90,658 square feet and has approximately 270 parking spaces. The second parking lot is located at 41 10th Street North (the "10th Street lot"). The 10th street lot consists of approximately 107,952 square feet and has approximately 185 parking spaces. SP Plus Corporation will lease the Hennepin lot and 10th Street lot under a net lease agreement pursuant to which the Minneapolis Venture will be responsible for property taxes and SP Plus Corporation will pay for all insurance and maintenance costs. SP Plus Corporation will pay a cumulative annual rent of $800,000. In addition, the lease provides revenue participation with Minneapolis Venture receiving 70.0% of gross receipts over $1,060,000 but not in excess of $1,300,000 plus 80.0% of annual gross receipts in excess of $1,300,000. The term of the lease is for 5 years. During April 2016, the Hennepin lot was put into a new entity Minneapolis City Park. During June 2016, Minneapolis Venture entered into a purchase and sales agreement (the "PSA") to sell the 10th Street lot "as is" to a third party for approximately $6.1 million, which was cancelled. During February 2017, the Company entered into a letter of intent to sell a portion of the property (approximately 2.2 acres) to an unrelated third party for $3.0 million. The remaining portion of the property will be retained by the Company and will be leased to a parking operator.
MVP Bridgeport Fairfield Garage, LLC
On March 30, 2016, the Company along with MVP REIT, through MVP Bridgeport Fairfield Garage, LLC, a Delaware limited liability company ("MVP Bridgeport"), an entity owned 10% by the Company and 90% by MVP REIT, closed on the purchase of a multi-level parking garage consisting of approximately 878 parking spaces, together with approximately 4,349 square feet of retail space, located in Bridgeport, Connecticut (the "Bridgeport lot"), for a purchase price of $7.8 million in cash, plus closing costs, of which the Company's share was approximately $0.8 million. The Bridgeport lot is leased by SP Plus Corporation under a net lease agreement where MVP Bridgeport is responsible for property taxes above a $100,000 threshold, and SP Plus Corporation pays for insurance and maintenance costs. SP Plus Corporation pays annual rent of $400,000. In addition, the lease provides revenue participation with MVP Bridgeport receiving 65% of gross receipts over $775,000. The term of the lease is for 10 years.
The following is a summary of the Company's portion of the initial investments:
| | | | | | | Ownership | |
| Property Name | Purchase Date | | Purchase Price | | | MVP REIT | | | MVP REIT II | |
| | | | | | | | | | | |
| MVP Bridgeport Fairfield | 03/30/2016 | | | 792,000 | | | | 90.00 | % | | | 10.00 | % |
| Minneapolis City Parking | 01/06/2016 | | | 1,178,000 | | | | 87.09 | % | | | 12.91 | % |
| | | | | | | | | | | | | | |
| Total | | | $ | 1,970,000 | | | | | | | | | |
Note L — Investment in Cost Method Investee – Held for Sale
Minneapolis Venture, LLC and Minneapolis City Parking, LLC
On January 6, 2016, the Company along with MVP REIT closed on the purchase of two parking lots located in Minneapolis for a purchase price of approximately $15.5 million in cash plus closing costs. The purchase was accomplished through Minneapolis Venture, LLC, a limited liability company (the "Minneapolis Venture") owned jointly by the Company and MVP REIT, of which the Company owns 12.91%. The Company's share of the purchase price was approximately $2.0 million plus the Company's share of the closing costs. The first parking lot is located at 1022 Hennepin Avenue (the "Hennepin lot"). The Hennepin lot consists of approximately 90,658 square feet and has approximately 270 parking spaces. The second parking lot is located at 41 10th Street North (the "10th Street lot"). The 10th street lot consists of approximately 107,952 square feet and has approximately 185 parking spaces. SP Plus Corporation will lease the Hennepin lot and 10th Street lot under a net lease agreement pursuant to which the Minneapolis Venture will be responsible for property taxes and SP Plus Corporation will pay for all insurance and maintenance costs. SP Plus Corporation will pay a cumulative annual rent of $800,000. In addition, the lease provides revenue participation with Minneapolis Venture receiving 70.0% of gross receipts over $1,060,000 but not in excess of $1,300,000 plus 80.0% of annual gross receipts in excess of $1,300,000. The term of the lease is for 5 years. During April 2016, the Hennepin lot was put into a new entity Minneapolis City Park. During June 2016, Minneapolis Venture entered into a PSA to sell the 10th Street lot to a third party for approximately $6.1 million. The property is being sold as is and there can be no assurance that the PSA will close.
The following is a summary of the Company's portion of the initial investments:
| | | | | | | Ownership | |
| Property Name | Purchase Date | | Purchase Price | | | MVP REIT | | | MVP REIT II | |
| | | | | | | | | | | |
| MVP Minneapolis Venture | 01/06/2016 | | $ | 822,000 | | | | 87.09 | % | | | 12.91 | % |
| | | | | | | | | | | | | | |
| Total | | | $ | 822,000 | | | | | | | | | |
Note M — Line of Credit
On October 5, 2016, the Company, throughfull valuation allowance against its Operating Partnership, and MVP REIT, (the "REITs") through a wholly owned subsidiary (the "Borrowers") entered into a credit agreement (the "Unsecured Credit Agreement") with KeyBank, National Association ('KeyBank") as the administrative agent and KeyBank Capital Markets ("KeyBank Capital Markets") as the lead arranger. Pursuant to the Unsecured Credit Agreement, the Borrowers were provided with a $30 million unsecured credit facility (the "Unsecured Credit Facility"), which may be increased up to $100 million, in minimum increments of $10 million. The Unsecured Credit Facility has an initial term of two years, maturing on October 5, 2018, and may be extended for a one-year period if certain conditions are met and upon payment of an extension fee. The Unsecured Credit Facility has an interest rate calculated based on LIBOR Rate plus 2.25% or Base Rate plus 1.25%, both as provided in the Unsecured Credit Agreement. The Base Rate is calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%. Payments under the Unsecured Credit Facility are interest only and are due on the first day of each quarter. The obligations of the Borrowers of the Unsecured Credit Agreement are joint and several. The REITs have entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement.
As of December 31, 2016, the REITs had 13 properties listed on the line of credit, which provided an available draw of approximately $25.7 million, and had drawn approximately $13.0 million, of which our portion of the current draw was approximately $8.2 million, based on our pro-rate ownership of the properties listed on the line of credit. Based on the 13 properties on the line of credit as of December 31, 2016, the REITs had an additional draw of approximately $12.7 million. For the year ended December 31, 2016, we had accrued approximately $56,000 in interest expense, amortized approximately $37,000 in loan fees and $6,000 in unused line fees associated with our draw. In addition, as of December 31, 2016, the REITs had an available draw of approximate $12.7 million. On January 11, 2017, the REITs use approximately $12.5 million from the line of credit to acquire the Detroit Center Garage described in Note R – Subsequent Events.
Note N — Notes Payable
In November 2016, we financed a 12-month insurance policy for Directors and Officers liability, with an annual interest rate of 3.8%. The agreement required a down payment of $25,000 and nine monthly payments of $14,000 beginning on November 3, 2016. As of December 31, 2016, the outstanding balance of the note was approximately $0.1 million.
During October 2016, Cleveland West 9th and 33740 Crown Colony issued a promissory note to American National Insurance Company of New York for a $5.3 million loan secured by real properties located in Cleveland, OH, of which we own a 49% interest in these entities. The loan has a term of 10 years, has an annual interest rate of 4.5% and is payable in monthly installment payments of principal and interest totaling approximately $30,000, maturing in October 2026.
Total interest expense incurreddeferred tax assets for the year ended
December 31, 2016 was $39,000. Total loan amortization cost2022. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its Consolidated Statements of Operations in the period in which such changes in circumstances occur.The provision for income taxes for the yearyears ended December 31, 2016 was $2,800. 2022 and 2021 consisted of the following, which is included in general and administrative expense in the Consolidated Statements of Operations (dollars in thousands):
| | | 2022 | | | 2021 | |
Current | | | | | | | | |
Federal | | | — | | | | — | |
State | | | 29 | | | | 31 | |
Total Current | | $ | 29 | | | $ | 31 | |
| | | | | | | | | |
Deferred | | | | | | | | |
Federal | | | — | | | | — | |
State | | | — | | | | — | |
Total Deferred | | | — | | | | — | |
Total | | $ | 29 | | | $ | 31 | |
The Company did not have any notes payable duringfollowing table presents a reconciliation of the period from May 4, 2015 (Inception) through statutory corporate U.S. federal income tax rate to the Company’s effective tax rate as of December 31, 2015.
As of 2022:| | | 2022 | | | 2021 | |
Tax at U.S. statutory rate | | | 21.00 | % | | | 21.00 | % |
State taxes, net of federal effect | | | 2.29 | % | | | 5.16 | % |
Non-Deductible Expenses | | | 0.89 | % | | | 0.64 | % |
Change in Valuation Allowance | | | (24.54 | )% | | | (27.08 | )% |
Effective income tax rate | | | — | | | | — | |
The balances for deferred taxes for the years ended December 31, 2016, future principal payments2022 and 2021 consisted of the following (dollars in thousands):
| | | Year Ended December 31, | |
| | | 2022 | | | 2021 | |
Deferred Tax Assets: | | | | | | | | |
NOL Carryforward | | $ | 14,030 | | | $ | 11,307 | |
Intangible Assets | | | 4,676 | | | | 5,661 | |
Investment in Operating Partnership | | | 8,388 | | | | 10,576 | |
Gross deferred tax assets | | $ | 27,094 | | | $ | 27,544 | |
Less valuation allowance | | | (27,094 | ) | | | (27,544 | ) |
Total deferred tax assets | | $ | — | | | $ | — | |
Deferred Tax Liabilities: | | | | | | | | |
Straight-line Rent | | | — | | | | — | |
Total deferred tax liabilities | | $ | — | | | $ | — | |
Total net deferred taxes | | $ | — | | | $ | — | |
Note N — Fair Value
A fair value measurement is based on the notes payableassumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:
| 2017 | | $ | 231,000 | |
| 2018 | | | 124,000 | |
| 2019 | | | 129,000 | |
| 2020 | | | 135,000 | |
| 2021 | | | 142,000 | |
| Thereafter | | | 4,632,000 | |
| Total | | $ | 5,393,000 | |
Principal payments table amount does not reflect the unamortized loan issuance cost of $75,000 as of December 31, 2016.
As of December 31, 2016, the principal balances on notes payable are as follows:
| Property | Location | Current Loan Balance | Interest Rate | Loan Maturity |
| D&O Financing | N/A | $ 112,000 | 3.81% | 8/3/2017 |
West 9th Properties II, LLC | Cleveland, OH | 5,281,000 | 4.50% | 10/25/2026 |
| | Less unamortized loan issuance costs | (75,000) | | |
| | Total | $ 5,318,000 | | |
Note O — Fair Value
As of December 31, 2016, the Company had no financial assets and liabilities utilizing Level 1 or Level 2. The Company had assets and liabilities utilizing Level 3 inputs including investments in equity and cost method investees.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, our degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. | | Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| | Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable. |
| | Level 3 – Model-derived valuations with unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability will be classified in its entiretyfor disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level of input that is significant to the measurement of fair value.
Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are
set to reflect those that market participants would use in pricing the asset or liability at the measurement date. measurement.The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation, such as the recent illiquidity in the auction rate securities market. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition may cause ourCompany's financial instruments include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. Due to be reclassified from Level 1 to Level 2 or Level 3 and/or vice versa.
Our valuation techniques will be consistent with at least onetheir short maturities, the carrying amounts of the three possible approaches: the market approach, income approach and/or cost approach. Our Level 1 inputs are based on the market approach and consist primarily of quoted prices for identical items on active securities exchanges. Our Level 2 inputs are primarily based on the market approach of quoted prices in active markets or current transactions in inactive markets for the same or similar collateral that do not require significant adjustment based on unobservable inputs. Our Level 3 inputs are primarily based on the income and cost approaches, specifically, discounted cash flow analyses, which utilize significant inputs based on our estimates and assumptions.
The following table presents the valuation of our financialthese assets and liabilities
approximate fair value. The estimated fair value of the Company’s debt (including notes payable and the Revolving Credit Facility) was derived using Level 2 inputs and approximate $207.4 million and $161.2 million as of
December 31, 20162022 and 2021, respectively.Our real estate assets are measured and recognized at fair value on a recurringnonrecurring basis by input levels:
| | | Quoted Prices in Active Markets For Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Balance at 12/31/16 | | | Carrying Value on Balance Sheet at 12/31/16 | |
Assets Investment in equity method investee | | $ | -- | | | $ | -- | | | $ | 1,150,000 | | | $ | 1,150,000 | | | $ | 1,150,000 | |
| Investment in cost method investee – held for sale | | | | | | $ | -- | | | $ | 836,000 | | | $ | 836,000 | | | $ | 836,000 | |
| Investment in cost method investee | | $ | -- | | | $ | -- | | | $ | 936,000 | | | $ | 936,000 | | | $ | 936,000 | |
Note P — Assets held for sale
As of December 31, 2016,when we had a 100% ownership interest in one property that was listed as held for sale, with a carryingdetermine an impairment has occurred. To estimate fair value of approximately $700,000. This property was acquired on November 22, 2016. This property is accounted for atthe Company may use internally developed valuation models or independent third-parties. In either case, the fair value of real estate may be based on a number of approaches including the income capitalization approach, sales comparable approach or discounted cash flow approach. Each of these approaches utilized estimates and assumptions regarding an appraisal. During assets’ future performance and cash flows as well as market conditions, capitalization rates and discount rates which are all considered Level 2 inputs.Note O — Commitments and Contingencies
The nature of the Company’s business exposes our properties, the Company, the Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted below, or routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company.
The Company has previously disclosed stockholder class action lawsuits alleging direct and derivative claims against the Company, certain of its then-officers, then-directors, the Former Advisor and/or Mr. Shustek captioned Arthur Magowski v. The Parking REIT, Inc., et. al, No.24-C-19003125 (filed on May 31, 2019), Michelle Barene v. The Parking REIT, Inc., et. al, No.24-C-19003527 (filed on June 27, 2019) and SIPDA Revocable Trust v. The Parking REIT, Inc., et al, Case No.2:19-cv-00428 (filed on March 2017, Houston Jefferson12, 2019). As a result of the Transaction, the Settlement Agreement (as defined in the Purchase Agreement) was entered into subject to completion of Color Up’s Tender Offer (as defined in the Purchase Agreement) for up to 900,506 shares of the Company’s outstanding Common Stock at $11.75 per share. Upon the expiration of the Tender Offer on November 5, 2021, the terms of the Settlement Agreement were satisfied and the prior lawsuits settled.
The Company has previously disclosed that the SEC was conducting an investigation relating to the Company. On March 11, 2021, the SEC notified the Company that they do not intend to recommend an enforcement action by the Commission against the Company.
The SEC investigation also related to the conduct of the Company’s former chairman and chief executive officer, Mr. Shustek. On July 29, 2021, the SEC filed a civil lawsuit against Mr. Shustek and his advisory firm Vestin Mortgage LLC, alleging violations of the securities laws (Case 2-21-civ-01416-JCM-BNW, U.S. District Court, District of Nevada). The SEC seeks disgorgement, injunctions, and bars against Mr. Shustek, and related penalties. Pursuant to the Transaction, Mr. Shustek's right to indemnification by the Company for certain claims related to the SEC's investigation shall not exceed $2 million. This liability was recognized by the Company upon the closing of the Transaction and is included in indemnification liability on our Consolidated Balance Sheet. Effective as of the closing of the Transaction, Mr. Shustek resigned as Chief Executive Officer and director of the Company.
On August 25, 2021, the Company also entered into an Assignment of Claims, Causes of Action, and Proceeds Agreement, or the Assignment of Litigation Agreement, pursuant to which the Company assigned to the Former Advisor certain claims and claim proceeds that the Company had against Ira S. Levine, Levine Law Group, Inc. (or any other name by which a firm including Ira Levine was known), Edwin Herbert Bentzen IV and Andrew Fenton. The Settlement Agreement is not related to the Assignment of Litigation Agreement.
In January 2023, the 43rd District Court of Parker County, Texas entered summary judgment in favor of the plaintiff, John Roy, who alleges he is due a commission relating to a proposed sale of the Fort Worth Taylor parking facility which was never consummated. The Company has filed an appeal. As a result of the court’s summary judgment, we recognized a charge of $0.7 million for the full estimated amount of damages (including legal fees and costs). The $0.7 million was recognized within organizational, offering and other costs in our Consolidated Statements of Operations and indemnification liability on our Consolidated Balance Sheets.
Note P — Related Party Transactions and Arrangements
Two of the Company’s assets, 1W7 Carpark and 222W7, are currently operated by PCA, Inc., dba Park Place Parking. Park Place Parking is a private parking operator that is wholly owned by relatives of the Company’s CEO. The Company’s CEO is neither an owner nor beneficiary of Park Place Parking. Park Place Parking has been operating these assets for five and four years, respectively. Both assets were acquired with their management agreements in place and at the same terms under which they were operating prior to the Transaction. As of December 31, 2022 and 2021, respectively, the Company recorded a balance of approximately $0.1 million from Park Place Parking which is included in accounts receivable, net on the Consolidated Balance Sheets and has been paid subsequent to December 31 within terms of the lease agreement.
In May 2022, the Company entered into a PSA to selllease agreement with ProKids, an Ohio not-for-profit. An immediate family member of the property "as is" to a third party for approximately $2.0 million.
The followingCompany’s CEO is a summarymember of the resultsBoard of operationsTrustees and President-Elect of that organization. ProKids leased 21,000 square feet of vacant unfinished commercial space in a 531,000 square foot building in Cincinnati, Ohio for 120 months. ProKids will invest in the tenant improvements in this space and ultimately use it as their headquarters location. ProKids will have no rent due to the Company throughout the lease term, other than a rental fee on parking spaces used by the ProKids staff and visitors. As of December 31, 2022, ProKids does not owe the Company rental income related to the assets held for sale for period from November 22, 2016 (acquisition) to December 31, 2016:
| | For period of November 22, 2016 (acquisition) to December 31, 2016 | |
| | | |
| Revenue | | $ | 5,000 | |
| Expenses | | | (22,000 | ) |
| Net loss | | $ | (19,000 | ) |
Note Q — Income Tax
Income Taxes and Distributions
As a REIT, it generally will not be subject to federal income tax on taxable income distributed to the stockholders. In 2016, thelease agreement.The Company has no distributable taxable income. In addition,agreed to pay for certain tax return preparation services of Color Up and certain member entities of Color Up. The Company has incurred $129,490 related to these services which is reflected in general and administrative expenses in the Company does not have any subsidiaries elected to be treated as TRSs pursuant to the Code to participate in services that would otherwise be considered impermissible for REITS and are subject to federal and stateconsolidated statements of income tax at regular corporate tax rates.
Tax Treatment of Distributions
For federal income tax purposes, distributions to stockholders are characterized as ordinary income, capital gain distributions, or nontaxable distributions. Nontaxable distributions will reduce U.S. stockholders' basis (but not below zero) in their shares. The income tax treatment for distributions reportable for the year ended
December 31, 20162022. In connection with the Transaction, the Company owes approximately $469,231 to certain member entities of Color Up relating to prorated revenues for the month of August 2021 of the three properties contributed by Color Up. The accrual was established in the fourth quarter of 2021 and is reflected within due to related parties on the Consolidated Balance Sheets. Additionally, in connection with the Transaction, the Company is due approximately $156,000 from Color Up as consideration for OP Units then issued which is reflected within due from related parties on the Consolidated Balance Sheets.
License Agreement
On August 25,2021, the Company entered into a Software License and Development Agreement, or the License Agreement, with an affiliate of Bombe, or the Supplier, pursuant to which the Company granted to the Supplier a limited, non-exclusive, non-transferable, worldwide right and license to access certain software and services for a fee of $5,000 per month.
Tax Matters Agreement
On August 25,2021, the Company, the Operating Partnership and Color Up entered into the Tax Matters Agreement, or the Tax Matters Agreement, pursuant to which the Operating Partnership agreed to indemnify Color Up and certain affiliates and transferees of Color Up, together, the Protected Partners, against certain adverse tax consequences in connection with (1) (i) a taxable disposition of certain specified properties and (ii) certain dispositions of the Protected Partners’ interest in the Operating Partnership, in each case, prior to the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied); and (2) the Operating Partnership’s failure to provide the Protected Partners the opportunity to guarantee a specified amount of debt of the Operating Partnership during the period ending on the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied). In addition, and for so long as the Protected Partners own at least 20% of the units in the Operating Partnership received in the Transaction, the Company agreed to use commercially reasonable efforts to provide the Protected Partners with similar guarantee opportunities.
Note Q – Revision of Previously Issued Quarterly Financial Information (Unaudited)
During the year ended December 31, 2022, the Company identified certain errors impacting our first, second, and third quarterly filings of 2022. A summary of such errors is outlined in the tables below and include errors related to the cut-off and classification of accruals, cash, prepaids and expenses, accounting and record keeping for tenant billings and deposits, accounting related to interest expense and loan fee amortization, elimination of intercompany receivables and payables, and corrections related to the calculation of noncontrolling interest.
Management assessed the materiality of these errors and concluded the misstatements were not material to the unaudited financial statements for the periods ended March 31, 2022, June 30, 2022 and September 30, 2022. Presented below are revisions to the previously issued quarterly financial statements for the effect of the revisions on the consolidated balance sheets and statements of operations as of and for the period May 4, 2015 (Date of inception) through Decemberthree months ended March 31, 2015 is as follows:2022, three and six months ended June 30, 2022, and three and nine months ended September 30, 2022, respectively.
| | | As of March 31, 2022 | | | As of June 30, 2022 | | | As of September 30, 2022 | |
| | | As reported | | | Adjustments | | | As Corrected | | | As reported | | | Adjustments | | | As Corrected | | | As reported | | | Adjustments | | | As Corrected | |
| | | (in thousands) | | | (in thousands) | | | (in thousands) | |
Consolidated Balance Sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Buildings and improvements | | $ | 254,482 | | | $ | (156 | ) | | $ | 254,326 | | | $ | 271,046 | | | $ | (156 | ) | | $ | 270,890 | | | $ | 271,964 | | | $ | (156 | ) | | $ | 271,808 | |
Fixed assets, net | | | 56 | | | | (43 | ) | | | 13 | | | | 296 | | | | (81 | ) | | | 215 | | | | 207 | | | | - | | | | 207 | |
Cash | | | 9,418 | | | | (548 | ) | | | 8,870 | | | | 8,623 | | | | (441 | ) | | | 8,182 | | | | 5,862 | | | | - | | | | 5,862 | |
Cash – restricted | | | 5,043 | | | | 333 | | | | 5,376 | | | | 5,357 | | | | 226 | | | | 5,583 | | | | 6,721 | | | | - | | | | 6,721 | |
Prepaid expenses | | | 462 | | | | 194 | | | | 656 | | | | 544 | | | | (138 | ) | | | 406 | | | | 1,021 | | | | (13 | ) | | | 1,008 | |
Accounts receivable | | | 3,312 | | | | (197 | ) | | | 3,115 | | | | 2,494 | | | | (291 | ) | | | 2,203 | | | | 2,578 | | | | (85 | ) | | | 2,493 | |
Due from related parties | | | - | | | | 156 | | | | 156 | | | | - | | | | 156 | | | | 156 | | | | - | | | | 156 | | | | 156 | |
Other assets | | | 103 | | | | (47 | ) | | | 56 | | | | 121 | | | | (127 | ) | | | (6 | ) | | | 64 | | | | - | | | | 64 | |
Notes payable, net | | | 205,965 | | | | - | | | | 205,965 | | | | 150,299 | | | | (37 | ) | | | 150,262 | | | | 148,278 | | | | - | | | | 148,278 | |
Revolving Credit Facility, net | | | - | | | | - | | | | - | | | | 72,106 | | | | 290 | | | | 72,396 | | | | 72,648 | | | | 195 | | | | 72,843 | |
Accounts payable and accrued liabilities | | | 15,589 | | | | (954 | ) | | | 14,635 | | | | 18,530 | | | | (856 | ) | | | 17,674 | | | | 21,604 | | | | (119 | ) | | | 21,485 | |
Security Deposit | | | 166 | | | | (46 | ) | | | 120 | | | | 185 | | | | (46 | ) | | | 139 | | | | 97 | | | | 61 | | | | 158 | |
Deferred revenue | | | 99 | | | | (35 | ) | | | 64 | | | | 101 | | | | (35 | ) | | | 66 | | | | 372 | | | | - | | | | 372 | |
Accumulated deficit | | | (102,855 | ) | | | 370 | | | | (102,485 | ) | | | (104,541 | ) | | | (305 | ) | | | (104,846 | ) | | | (106,692 | ) | | | (40 | ) | | | (106,732 | ) |
Non-controlling interest | | | 104,906 | | | | 850 | | | | 105,756 | | | | 102,986 | | | | (352 | ) | | | 102,634 | | | | 101,609 | | | | (56 | ) | | | 101,553 | |
| | | Three Months Ended March 31, 2022 | |
| | | As reported | | | Adjustments | | | As Corrected | |
| | | (in thousands, except per share data) | |
| | | | | | | | | | | | | |
Consolidated Statement of Operations: | | | | | | | | | | | | |
Base rent income | | $ | 2,051 | | | $ | (120 | ) | | $ | 1,931 | |
Management agreement | | | - | | | | 427 | | | | 427 | |
Percentage rent | | | 4,329 | | | | 127 | | | | 4,456 | |
Property taxes | | | 1,836 | | | | (205 | ) | | | 1,631 | |
Property operating expense | | | 837 | | | | 16 | | | | 853 | |
General and administrative | | | 1,506 | | | | 9 | | | | 1,515 | |
Professional fees | | | 1,988 | | | | (520 | ) | | | 1,468 | |
Depreciation and amortization | | | 1,967 | | | | 43 | | | | 2,010 | |
Interest expense | | | (2,539 | ) | | | 83 | | | | (2,457 | ) |
Other income | | | 15 | | | | 46 | | | | 61 | |
Net loss | | | (4,278 | ) | | | 1,220 | | | | (3,058 | ) |
Net income attributable to non-controlling interest | | | (2,472 | ) | | | 850 | | | | (1,622 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | | | (2,556 | ) | | | 370 | | | | (2,186 | ) |
Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | | $ | (0.33 | ) | | $ | 0.05 | | | $ | (0.28 | ) |
| | | Three Months Ended June 30, 2022 | | | Six Months Ended June 30, 2022 | |
| | | As reported | | | Adjustments | | | As Corrected | | | As reported | | | Adjustments | | | As Corrected | |
| | | (in thousands, except per share data) | | | (in thousands, except per share data) | |
Consolidated Statement of Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Base rent income | | $ | 2,122 | | | $ | (120 | ) | | $ | 2,002 | | | $ | 4,173 | | | $ | (120 | ) | | $ | 4,053 | |
Management agreement | | | 427 | | | | (427 | ) | | | (0 | ) | | | 427 | | | | (114 | ) | | | 313 | |
Percentage rent | | | 4,856 | | | | 175 | | | | 5,031 | | | | 9,185 | | | | 271 | | | | 9,456 | |
Property taxes | | | 1,844 | | | | (105 | ) | | | 1,739 | | | | 3,680 | | | | (105 | ) | | | 3,575 | |
Property operating expense | | | 731 | | | | (32 | ) | | | 699 | | | | 1,568 | | | | (97 | ) | | | 1,471 | |
General and administrative | | | 1,882 | | | | (44 | ) | | | 1,838 | | | | 3,388 | | | | (44 | ) | | | 3,344 | |
Professional fees | | | 532 | | | | (38 | ) | | | 494 | | | | 1,562 | | | | (387 | ) | | | 1,175 | |
Organizational, offering and other costs | | | 1,567 | | | | 309 | | | | 1,876 | | | | 2,525 | | | | 197 | | | | 2,722 | |
Depreciation and amortization | | | 2,021 | | | | 43 | | | | 2,064 | | | | 3,988 | | | | 43 | | | | 4,031 | |
Interest expense | | | (3,168 | ) | | | (198 | ) | | | (3,366 | ) | | | (5,707 | ) | | | (250 | ) | | | (5,957 | ) |
Other income | | | 15 | | | | 46 | | | | 61 | | | | 30 | | | | 46 | | | | 76 | |
Net loss | | | (3,997 | ) | | | (656 | ) | | | (4,653 | ) | | | (8,275 | ) | | | 225 | | | | (8,050 | ) |
Net income attributable to non-controlling interest | | | (2,311 | ) | | | (352 | ) | | | (2,663 | ) | | | (4,783 | ) | | | 126 | | | | (4,657 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | | | (2,436 | ) | | | (305 | ) | | | (2,741 | ) | | | (4,992 | ) | | | 99 | | | | (4,893 | ) |
Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | | $ | (0.31 | ) | | $ | (0.04 | ) | | $ | (0.35 | ) | | $ | (0.64 | ) | | $ | 0.01 | | | $ | (0.63 | ) |
| | | Three Months Ended September 30, 2022 | | | Nine Months Ended September 30, 2022 | |
| | | As reported | | | Adjustments | | | As Corrected | | | As reported | | | Adjustments | | | As Corrected | |
| | | (in thousands, except per share data) | | | (in thousands, except per share data) | |
Consolidated Statement of Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
Base rent income | | $ | 2,173 | | | $ | 120 | | | $ | 2,293 | | | $ | 6,346 | | | $ | 120 | | | $ | 6,466 | |
Management agreement | | | - | | | | - | | | | - | | | | 427 | | | | (114 | ) | | | 313 | |
Percentage rent | | | 6,245 | | | | (187 | ) | | | 6,058 | | | | 15,430 | | | | (187 | ) | | | 15,243 | |
Property taxes | | | 1,912 | | | | (106 | ) | | | 1,806 | | | | 5,592 | | | | (106 | ) | | | 5,486 | |
Property operating expense | | | 501 | | | | (17 | ) | | | 484 | | | | 2,069 | | | | (97 | ) | | | 1,972 | |
General and administrative | | | 2,455 | | | | 44 | | | | 2,499 | | | | 5,843 | | | | (9 | ) | | | 5,834 | |
Professional fees | | | 525 | | | | (47 | ) | | | 478 | | | | 2,087 | | | | (326 | ) | | | 1,761 | |
Organizational, offering and other costs | | | 2,168 | | | | (197 | ) | | | 1,971 | | | | 4,693 | | | | - | | | | 4,693 | |
Depreciation and amortization | | | 2,137 | | | | (43 | ) | | | 2,094 | | | | 6,125 | | | | (43 | ) | | | 6,082 | |
Interest expense | | | (3,387 | ) | | | (288 | ) | | | (3,675 | ) | | | (9,094 | ) | | | (383 | ) | | | (9,477 | ) |
Other income | | | 123 | | | | (107 | ) | | | 16 | | | | 153 | | | | (107 | ) | | | 46 | |
Net loss | | | (4,596 | ) | | | (96 | ) | | | (4,692 | ) | | | (12,871 | ) | | | (89 | ) | | | (12,960 | ) |
Net income attributable to non-controlling interest | | | (2,445 | ) | | | (56 | ) | | | (2,501 | ) | | | (7,228 | ) | | | (52 | ) | | | (7,280 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | | | (2,901 | ) | | | (40 | ) | | | (2,941 | ) | | | (7,893 | ) | | | (37 | ) | | | (7,930 | ) |
Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | | $ | (0.37 | ) | | $ | (0.01 | ) | | $ | (0.38 | ) | | $ | (1.02 | ) | | $ | 0.01 | | | $ | (1.01 | ) |
| | | 2016 | | | 2015 | |
| Ordinary | | $ | -- | | | $ | -- | |
| Capital Gain | | | - | | | | - | |
| Return of Capital | | | 732,000 | | | | -- | |
| | | $ | 732,000 | | | $ | -- | |
Note R — Subsequent Events
– Quarterly Financial Data (Unaudited)The following subsequent events interim financial statements for the quarterly periods in 2022 are unaudited and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the periods presented. Information for the three months ended March 31, 2022, June 30, 2022, and September 30, 2022 have been evaluated through the dateadjusted to correct immaterial errors. See Note Q, Revision of this filing with the SEC.
During January 2017, the Company and MVP REIT, through MVP Detroit Center Garage, LLC ("MVP Detroit Center"), an entity owned by the Company and MVP REIT, acquired a multi-level parking garage consisting of approximately 1,275 parking spaces, located in Detroit, Michigan,Previously Issued Quarterly Financial Information, for a purchase price of $55.0 million, plus acquisition and financing-related transaction costs. The Company owns an 80% equity interest in the MVP Detroit Center and MVP REIT owns an 20% equity interest. The parking garage will be operated by SP Plus Corporation ("SP+") under a long-term lease, where SP will be responsible for the first $572,000 in property taxes, pay annual base rent of $3.4 million, and 80% of all gross revenue above $5.0 million. As part of the acquisition MVP Detroit Center entered into a $31.5 million loan agreement with Bank of America, N.A., with a term of 10 years, amortized over 25 years, with monthly principal and interest payments totaling approximately $194,000, bearing an annual interest rate of 5.52%, secured by the parking garage, and maturing in February 2027. In connection with this purchase the company paid a broker commission totaling 2% of the purchase price.
On February 1, 2017, the Company, through MVP St. Louis Broadway, LLC, a Delaware limited liability company ("Broadway"), an entity wholly owned by the Company, closed on the purchase of a parking lot consisting of approximately 161 parking spaces, located in St. Louis, Missouri, for a purchase price of $2.4 million in cash plus closing costs. The parking lot is under a 5 year lease with St. Louis Parking Co, ("St. Louis Parking"), a regional parking operator, under a modified net lease agreement where Broadway is responsible for property taxes above a $19,600 threshold, and St. Louis Parking pays for insurance and maintenance costs. St. Louis Parking pays annual rent of $180,000. In addition, the lease provides revenue participation with Broadway receiving 75% of gross receipts over $270,000.
On February 1, 2017, the Company, through MVP St. Louis Seventh & Cerre, LLC, a Delaware limited liability company ("7th & Cerre"), an entity wholly owned by the Company, closed on the purchase of a parking lot consisting of approximately 174 parking spaces, located in St. Louis, Missouri, for a purchase price of $3.3 million in cash plus closing costs. The parking lot is under a 5 year lease with St. Louis Parking, a regional parking operator, under a modified net lease agreement where 7th & Cerre is responsible for property taxes above a $14,885 threshold, and St. Louis Parking pays for insurance and maintenance costs. St. Louis Parking pays annual rent of $225,000. In addition, the lease provides revenue participation with 7th & Cerre receiving 75% of gross receipts over $345,000.
additional information.| | | For the 2022 Three Months Ended | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | |
| | | (in thousands, except per share data) | |
Revenues | | | | | | | | | | | | | | | | |
Base rental income | | $ | 1,931 | | | $ | 2,002 | | | $ | 2,293 | | | $ | 2,119 | |
Management income | | | 427 | | | | - | | | | - | | | | - | |
Percentage rental income | | | 4,456 | | | | 5,031 | | | | 6,058 | | | | 4,785 | |
Total revenues | | $ | 6,814 | | | $ | 7,033 | | | $ | 8,351 | | | $ | 6,904 | |
| | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | |
Property taxes | | $ | 1,631 | | | $ | 1,739 | | | $ | 1,806 | | | $ | 1,709 | |
Property operating expense | | | 853 | | | | 699 | | | | 484 | | | | 912 | |
Interest expense | | | 2,457 | | | | 3,366 | | | | 3,675 | | | | 3,415 | |
Depreciation and amortization | | | 2,010 | | | | 2,064 | | | | 2,094 | | | | 2,080 | |
General and administrative | | | 1,515 | | | | 1,838 | | | | 2,499 | | | | 2,683 | |
Professional fees, net of reimbursement of insurance proceeds | | | 1,468 | | | | 494 | | | | 478 | | | | 250 | |
Organizational, offering and other costs | | | - | | | | 1,876 | | | | 1,971 | | | | 1,745 | |
Total expenses | | $ | 9,933 | | | $ | 12,075 | | | $ | 13,007 | | | $ | 12,794 | |
| | | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Loss on sale of real estate | | $ | - | | | $ | - | | | $ | (52 | ) | | $ | - | |
PPP loan forgiveness | | | - | | | | 328 | | | | - | | | | - | |
Other income | | | 61 | | | | 61 | | | | 16 | | | | (32 | ) |
Total other income (expense) | | $ | 61 | | | $ | 389 | | | $ | (36 | ) | | $ | (32 | ) |
| | | | | | | | | | | | | | | | | |
Net loss | | $ | (3,058 | ) | | $ | (4,653 | ) | | $ | (4,692 | ) | | $ | (5,923 | ) |
Net loss attributable to non-controlling interest | | | (1,622 | ) | | | (2,663 | ) | | | (2,501 | ) | | | (3,422 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s stockholders | | $ | (1,436 | ) | | $ | (1,990 | ) | | $ | (2,191 | ) | | $ | (2,501 | ) |
| | | | | | | | | | | | | | | | | |
Preferred stock distributions declared - Series A | | | (54 | ) | | | (54 | ) | | | (54 | ) | | | (54 | ) |
Preferred stock distributions declared - Series 1 | | | (696 | ) | | | (696 | ) | | | (696 | ) | | | (696 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | | $ | (2,186 | ) | | $ | (2,740 | ) | | $ | (2,941 | ) | | $ | (3,251 | ) |
| | | | | | | | | | | | | | | | | |
Basic and diluted loss per weighted average common share: | | | | | | | | | | | | | | | | |
Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | | $ | (0.28 | ) | | $ | (0.35 | ) | | $ | (0.38 | ) | | $ | (0.42 | ) |
Weighted average common shares outstanding, basic and diluted | | | 7,762,375 | | | | 7,762,375 | | | | 7,762,375 | | | | 7,762,375 | |
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 20162022
(dollars in thousands)
| | | | | | | | | | | | | | | | Costs Capitalized Subsequent to | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Initial Cost | | | Acquisition | | | Gross Carrying Amount at December 31, 2022 (1) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Life on | |
| | | | | | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | | | | | | | | | | | which depr | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | in latest | |
| | | | | | | | | Land and | | | | Buildings and | | | | | | | | Carrying | | | | | | | | Building and | | | | | | | | Depreciation | | | | Date | | | | statement is | |
Description | ST | | Encumbrance | | | Improvements | | | Improvements | | | Improvements | | | Costs | | | Land | | | Improvements | | | Total | | | (2) | | | Acquired | | | computed | |
West 9th Street (3) | OH | | $ | 4,497 | | | $ | 5,675 | | | $ | — | | | $ | 243 | | | $ | — | | | $ | 5,918 | | | $ | — | | | $ | 5,918 | | | $ | 60 | | | | 2016 | | | | 15 | |
Crown Colony (3) | OH | | | — | | | | 3,030 | | | | — | | | | 19 | | | | — | | | | 2,954 | | | | — | | | | 2,954 | | | | 7 | | | | 2016 | | | | 15 | |
Cincinnati Race Street | OH | | | 3,450 | | | | 2,142 | | | | 2,358 | | | | 1,870 | | | | — | | | | 1,904 | | | | 3,966 | | | | 5,870 | | | | 943 | | | | 2016 | | | | 39,15 | |
St Louis Washington | MO | | | 1,274 | | | | 3,000 | | | | — | | | | 7 | | | | — | | | | 1,637 | | | | — | | | | 1,637 | | | | 2 | | | | 2016 | | | | 15 | |
St Paul Holiday Garage | MN | | | 3,814 | | | | 1,673 | | | | 6,527 | | | | 385 | | | | — | | | | 1,673 | | | | 6,912 | | | | 8,585 | | | | 1,145 | | | | 2016 | | | | 39,15 | |
Louisville Station | KY | | | 1,682 | | | | 3,050 | | | | — | | | | 57 | | | | — | | | | 3,007 | | | | — | | | | 3,007 | | | | 22 | | | | 2016 | | | | 15 | |
Whitefront Garage | TN | | | 6,454 | | | | 3,116 | | | | 8,380 | | | | 176 | | | | — | | | | 3,116 | | | | 8,556 | | | | 11,672 | | | | 1,407 | | | | 2016 | | | | 39,15 | |
Cleveland Lincoln Garage | OH | | | 3,691 | | | | 2,195 | | | | 5,122 | | | | 5,163 | | | | — | | | | 1,378 | | | | 8,377 | | | | 9,755 | | | | 1,789 | | | | 2016 | | | | 39,15 | |
Houston Preston | TX | | | 1,627 | | | | 2,800 | | | | — | | | | 20 | | | | — | | | | 2,820 | | | | — | | | | 2,820 | | | | 7 | | | | 2016 | | | | 15 | |
Houston San Jacinto | TX | | | 1,820 | | | | 3,200 | | | | — | | | | 50 | | | | — | | | | 3,250 | | | | — | | | | 3,250 | | | | 18 | | | | 2016 | | | | 15 | |
MVP Detroit Center Garage | MI | | | 27,625 | | | | 7,000 | | | | 48,000 | | | | 743 | | | | — | | | | 7,000 | | | | 48,743 | | | | 55,743 | | | | 7,504 | | | | 2017 | | | | 39,15 | |
St. Louis Broadway | MO | | | 1,671 | | | | 2,400 | | | | — | | | | — | | | | — | | | | 2,400 | | | | — | | | | 2,400 | | | | — | | | | 2017 | | | | N/A | |
St. Louis Seventh & Cerre | MO | | | 2,057 | | | | 3,300 | | | | — | | | | — | | | | — | | | | 3,300 | | | | — | | | | 3,300 | | | | — | | | | 2017 | | | | N/A | |
MVP Preferred Parking | TX | | | 11,257 | | | | 15,800 | | | | 4,700 | | | | 720 | | | | — | | | | 15,230 | | | | 5,250 | | | | 20,480 | | | | 857 | | | | 2017 | | | | 39,15 | |
MVP Raider Park Garage | TX | | | * | | | | 2,005 | | | | 9,057 | | | | 2,713 | | | | — | | | | 2,005 | | | | 11,770 | | | | 13,775 | | | | 1,741 | | | | 2017 | | | | 39,15 | |
MVP PF Memphis Poplar 2013 | TN | | | 1,800 | | | | 3,658 | | | | — | | | | 24 | | | | — | | | | 3,670 | | | | 12 | | | | 3,682 | | | | 17 | | | | 2017 | | | | 15 | |
MVP PF St. Louis 2013 | MO | | | 3,700 | | | | 5,041 | | | | — | | | | — | | | | — | | | | 5,041 | | | | — | | | | 5,041 | | | | 36 | | | | 2017 | | | | 15 | |
Mabley Place Garage | OH | | | 7,635 | | | | 1,585 | | | | 19,018 | | | | 971 | | | | — | | | | 1,360 | | | | 17,214 | | | | 18,574 | | | | 2,339 | | | | 2017 | | | | 39,15 | |
MVP Denver Sherman | CO | | | 264 | | | | 705 | | | | — | | | | — | | | | — | | | | 705 | | | | — | | | | 705 | | | | — | | | | 2017 | | | | N/A | |
MVP Fort Worth Taylor | TX | | | 11,189 | | | | 2,845 | | | | 24,405 | | | | 5 | | | | — | | | | 2,845 | | | | 24,410 | | | | 27,255 | | | | 3,169 | | | | 2017 | | | | 39,15 | |
MVP Milwaukee Old World | WI | | | 1,871 | | | | 2,003 | | | | — | | | | 8 | | | | — | | | | 2,003 | | | | 8 | | | | 2,011 | | | | 24 | | | | 2017 | | | | 15 | |
MVP Houston Saks Garage | TX | | | 2,963 | | | | 4,931 | | | | 5,221 | | | | 177 | | | | — | | | | 3,713 | | | | 4,116 | | | | 7,829 | | | | 604 | | | | 2017 | | | | 39,15 | |
MVP Milwaukee Wells | WI | | | * | | | | 4,994 | | | | — | | | | — | | | | — | | | | 4,374 | | | | — | | | | 4,374 | | | | 83 | | | | 2017 | | | | 15 | |
MVP Wildwood NJ Lot (4) | NJ | | | 1,000 | | | | 1,631 | | | | — | | | | — | | | | — | | | | 696 | | | | — | | | | 696 | | | | — | | | | 2017 | | | | N/A | |
MVP Indianapolis City Park | IN | | | * | | | | 2,056 | | | | 8,557 | | | | 114 | | | | — | | | | 2,056 | | | | 8,671 | | | | 10,727 | | | | 1,146 | | | | 2017 | | | | 39,15 | |
MVP Indianapolis WA Street Lot | IN | | | * | | | | 5,618 | | | | — | | | | — | | | | — | | | | 5,618 | | | | — | | | | 5,618 | | | | 27 | | | | 2017 | | | | 15 | |
MVP Minneapolis Venture | MN | | | 4,000 | | | | 4,013 | | | | — | | | | 109 | | | | — | | | | 4,013 | | | | 109 | | | | 4,122 | | | | 1 | | | | 2017 | | | | N/A | |
MVP Indianapolis Meridian Lot | IN | | | 938 | | | | 1,573 | | | | — | | | | — | | | | — | | | | 1,523 | | | | — | | | | 1,523 | | | | 7 | | | | 2017 | | | | 15 | |
MVP Milwaukee Clybourn | WI | | | 191 | | | | 257 | | | | — | | | | — | | | | — | | | | 257 | | | | — | | | | 257 | | | | 3 | | | | 2017 | | | | 15 | |
MVP Milwaukee Arena | WI | | | 1,977 | | | | 4,631 | | | | — | | | | 22 | | | | — | | | | 4,641 | | | | 12 | | | | 4,653 | | | | — | | | | 2017 | | | | N/A | |
MVP Clarksburg Lot | WV | | | 379 | | | | 701 | | | | — | | | | — | | | | — | | | | 611 | | | | — | | | | 611 | | | | 3 | | | | 2017 | | | | 15 | |
MVP Denver 1935 Sherman | CO | | | 703 | | | | 2,533 | | | | — | | | | — | | | | — | | | | 2,533 | | | | — | | | | 2,533 | | | | — | | | | 2017 | | | | N/A | |
MVP Bridgeport Fairfield Garage | CT | | | 3,664 | | | | 498 | | | | 7,555 | | | | 12 | | | | — | | | | 498 | | | | 7,567 | | | | 8,065 | | | | 1,027 | | | | 2017 | | | | 39,15 | |
Minneapolis City Parking | MN | | | 4,379 | | | | 9,633 | | | | — | | | | — | | | | — | | | | 7,513 | | | | — | | | | 7,513 | | | | 100 | | | | 2017 | | | | 15 | |
MVP New Orleans Rampart | LA | | | * | | | | 8,105 | | | | — | | | | — | | | | — | | | | 7,835 | | | | — | | | | 7,835 | | | | — | | | | 2018 | | | | N/A | |
MVP Hawaii Marks | HI | | | * | | | | 9,119 | | | | 11,715 | | | | 421 | | | | — | | | | 8,570 | | | | 11,435 | | | | 20,005 | | | | 1,406 | | | | 2018 | | | | 39,15 | |
1W7 Carpark | OH | | | * | | | | 2,995 | | | | 28,762 | | | | 18 | | | | — | | | | 2,995 | | | | 28,780 | | | | 31,775 | | | | 988 | | | | 2021 | | | | 39,15 | |
222W7 | OH | | | * | | | | 4,391 | | | | 23,879 | | | | 85 | | | | — | | | | 4,391 | | | | 23,964 | | | | 28,355 | | | | 823 | | | | 2021 | | | | 39 | |
322 Streeter | IL | | | 25,352 | | | | 11,387 | | | | 27,035 | | | | 405 | | | | — | | | | 11,387 | | | | 27,440 | | | | 38,827 | | | | 941 | | | | 2021 | | | | 39 | |
2nd Street | FL | | | — | | | | 93 | | | | — | | | | — | | | | — | | | | 93 | | | | — | | | | 93 | | | | — | | | | 2021 | | | | N/A | |
Denver 1725 Champa Street Garage | CO | | | * | | | | 7,414 | | | | 8,860 | | | | 362 | | | | — | | | | 7,414 | | | | 9,222 | | | | 16,636 | | | | 275 | | | | 2021 | | | | 39 | |
Bricktown | OK | | | * | | | | 1,314 | | | | 16,020 | | | | 32 | | | | — | | | | 1,314 | | | | 16,052 | | | | 17,366 | | | | 241 | | | | 2022 | | | | 39 | |
MVP St. Louis Cardinal Lot DST | MO | | | 6,000 | | | | 11,660 | | | | 19 | | | | — | | | | — | | | | 11,660 | | | | 19 | | | | 11,679 | | | | 1 | | | | 2017 | | | | N/A | |
| | | | $ | 148,922 | | | $ | 175,770 | | | $ | 265,190 | | | $ | 14,931 | | | $ | — | | | $ | 166,921 | | | $ | 272,605 | | | $ | 439,526 | | | $ | 28,763 | | | | | | | | | |
| | | Initial Cost | | Gross Carrying Amount at December 31, 2016 |
| Description | ST | Encumbrance | Land | Buildings and Improvements | Total | Cost Capitalized Subsequent to Acquisition | Land | Building and Improvements | Total | Accumulated Depreciation (1) | Date Acquired | Rentable Square Feet |
West 9th Street | | -- | $5,675,000 | -- | $5,675,000 | -- | $5,675,000 | -- | $5,675,000 | -- | 2016 | n/a |
| Crown Colony | | -- | $3,030,000 | -- | $3,030,000 | -- | $3,030,000 | -- | $3,030,000 | -- | 2016 | n/a |
| San Jose | | -- | $1,073,000 | $2,503,000 | $3,576,000 | -- | $1,073,000 | $2,503,000 | $3,576,000 | 35,000 | 2016 | n/a |
| MCI 1372 Street | | -- | $700,000 | -- | $700,000 | -- | $700,000 | -- | $700,000 | -- | 2016 | n/a |
| Cincinnati Race Street | | -- | $2,142,000 | $2,358,000 | $4,500,000 | -- | $2,142,000 | $2,358,000 | $4,500,000 | 29,000 | 2016 | n/a |
| St Louis Washington | | -- | $3,000,000 | -- | $3,000,000 | -- | $3,000,000 | -- | $3,000,000 | -- | 2016 | n/a |
| St Paul Holiday Garage | | -- | $1,673,000 | $6,527,000 | $8,200,000 | -- | $1,673,000 | $6,527,000 | $8,200,000 | 62,000 | 2016 | n/a |
| Louisville Station | | -- | $3,050,000 | -- | $3,050,000 | -- | $3,050,000 | -- | $3,050,000 | -- | 2016 | n/a |
| Whitefront Garage | | -- | $3,116,000 | $8,379,000 | $11,495,000 | -- | $3,116,000 | $8,379,000 | $11,495,000 | 45,000 | 2016 | n/a |
| Cleveland Lincoln Garage | | -- | $2,195,000 | $5,122,000 | $7,317,000 | -- | $2,195,000 | $5,122,000 | $7,317,000 | 24,000 | 2016 | n/a |
| Houston San Jacinto | | -- | $3,200,000 | -- | $3,200,000 | -- | $3,200,000 | -- | $3,200,000 | -- | 2016 | n/a |
| | | -- | $28,854,000 | $24,889,000 | $53,743,000 | $- | $28,854,000 | $24,889,000 | $53,743,000 | $195,000 | | |
| | (1) | The initial costs of buildings are depreciated over 39 years using a straight-line method of accounting; improvements capitalized subsequent to acquisition are depreciated over the shorter of the lease term or useful life, generally ranging from one to 20 years. |
The aggregate gross cost
| (1) | The aggregate gross cost of property included above for federal income tax purposes approximately $413.3 million as of December 31, 2022. |
| (2) | The initial costs of buildings are depreciated over 39 years using a straight-line method of accounting; improvements capitalized subsequent to acquisition are depreciated over the shorter of the lease term or useful life, generally ranging from one to 20 years. |
| (3) | These properties are held by West 9th St. Properties II, LLC |
| (4) | Wildwood lot classified as held for sale at December 31, 2022 |
| * | Property financed under the Revolving Credit Facility |
The following table reconciles the historical cost of total real estate held for investment for the years ended December 31, 2016 2022 and for the period May 4, 2015 (Date of inception) through December 31, 2015:
| | | 2016 | | | 2015 | |
| Total real estate held for investment, inception (prior) | | $ | -- | | | $ | -- | |
| Additions during period: | | | -- | | | | -- | |
| Acquisitions | | | 53,743,000 | | | | -- | |
Total real estate held for investment, end of year | | $ | 53,743,000 | | | $ | -- | |
2021 (dollars in thousands):| | | 2022 | | | 2021 | |
Balance at beginning of period | | $ | 420,603 | | | $ | 292,076 | |
Additions during period: | | | | | | | | |
Acquisitions | | | 17,334 | | | | 126,651 | |
Improvements | | | 2,289 | | | | 1,876 | |
Deductions during period: | | | | | | | | |
Dispositions | | | (700 | ) | | | — | |
Impairments | | | — | | | | — | |
Balance at close of period | | $ | 439,526 | | | $ | 420,603 | |
| (1) | This amount does not include intangible assets and construction in progress totaling approximately $10.1 million and $1.2 million, respectively, as of December 31, 2022 and approximately $9.8 million and $0.1 million as of December 31, 2021, respectively. |
The following table reconciles the accumulated depreciation for the yearyears ended December 31, 2016 2022 and for the period May 4, 2015 (Date2021 (dollars in thousands):
| | | 2022 | | | 2021 | |
Balance at beginning of period | | $ | 21,348 | | | $ | 15,890 | |
Deductions during period: | | | — | | | | — | |
Depreciation of real estate | | | 7,415 | | | | 5,458 | |
Balance at close of period | | $ | 28,763 | | | $ | 21,348 | |
| | | 2016 | | | 2015 | |
| Accumulated depreciation, inception (prior) | | $ | -- | | | $ | -- | |
| Additions during period: | | | -- | | | | -- | |
| Depreciation of real estate | | | 195,000 | | | | -- | |
| Accumulated depreciation, end of year | | $ | 195,000 | | | $ | -- | |
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in ourthe Company’s reports under the Exchange Act is processed, recorded, processed, summarized, and reported within the time periods specified in the SEC'sSEC’s rules and forms, and that such information is accumulated and communicated to management, including ourthe Chief Executive Officer ("CEO") and Chief Financial Officer, ("CFO"), as appropriate, to allow for timely decisions regarding required financial disclosure. In connection with
As required by SEC Rule 13a-15(b), the preparation of this Report on Form 10-K, managementCompany carried out an evaluation, under the supervision and with the participation of our CEOmanagement, including the Chief Executive Officer and CFO, as of December 31, 2016,Chief Financial Officer, of the effectiveness of the design and operation of ourthe disclosure controls and procedures as such term is defined under Rule 13a-15(e) under the Exchange Act. Based upon management's evaluation, our CEO and CFO concluded that, as of December 31, 2016, our2022, the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of that time, the disclosure controls and procedures are designed at a reasonable assurance level and arewere not effective due to provide reasonable assurance that information we are required to disclosethe material weaknesses in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within our company have been or will be detected. Even effective internal control over financial reporting can only provide reasonable assurance with respect to financial statement preparation. Furthermore, because of changes in conditions,described below. Notwithstanding the effectiveness of internal control over financial reporting may vary over time. Ouridentified material weaknesses, management, including our CEOChief Executive Officer and CFO, does not expect thatChief Financial Officer, believes the consolidated financial statements included in this Annual Report fairly represent, in all material respects, our controlsfinancial condition, results of operations and procedures will prevent all errors.
The certificationscash flows as of our CEO and CFO required under Section 302 offor the Sarbanes-Oxley Act have been filed as Exhibits 31.1 and 31.2 to this report.
Management'speriods presented in accordance with U.S. Generally Accepted Accounting PrinciplesManagement’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our Company's assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management has conducted an assessment, including testing, of the effectiveness of our internal control over financial reporting as of
December 31,
2016.2022. In making itsour assessment of internal control over financial reporting, management used the criteria in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"(“COSO”). Based on this assessment, management, with the participation of the Chief Executive Officer and Chief Financial Officers, believesOfficer, concluded that, as of December 31,
2016,2022, the Company'sCompany’s internal control over financial reporting iswas not effective based on those criteria.Auditor Attestation
This annual report does not include an attestation report of our registered public accounting firm regardingdue to the material weaknesses in internal control over financial
reporting. Management's report wasreporting described below.Material Weaknesses in Internal Control over Financial Reporting
Management identified material weaknesses in our internal control over financial reporting in connection with our assessment as of and for the year ended December 31, 2022. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not subjectbe prevented or detected on a timely basis.
Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to: (i) the lack of appropriate segregation of duties within the accounting and finance groups; (ii) the lack of formal and effective controls over user access to attestation bycertain information systems to ensure adequate restriction of users and privileged access to transaction processing applications; and (iii) inappropriate application of GAAP.
Management’s Remediation Plan
We have identified and implemented, and continue to implement, certain remediation efforts to improve the effectiveness of our registered public accounting firm pursuantinternal control over financial reporting and disclosure controls and procedures. These remediation efforts are ongoing. The following remedial actions have been identified and initiated as of December 31, 2022:
| ● | We have hired a Chief Accounting Officer and will hire (as needed) and train additional accounting resources with appropriate levels of experience and reallocating responsibilities across the finance organization. This measure provides for segregation of duties and ensures that the appropriate level of knowledge and experience will be applied based on the risk and complexity of transactions and tasks under review. |
| ● | We will continue to educate control owners and enhance policies to ensure appropriate restrictions related to user access and privileged access are in place. |
| ● | We have re-evaluated the permissions of user roles within our accounting system and have re-assigned access to individuals in order to establish more appropriate segregation of duties. |
| ● | We have enhanced internal control documentation for key controls to ensure the assignment of preparers and reviewers, and establishing policies for the formal sign-off of key controls. |
| ● | Beginning with the third quarter of 2022, we established a formal Disclosure Committee to enhance governance by management for the oversight of internal controls over financial reporting, including disclosure controls and procedures. |
| ● | We have provided access to accounting literature and research to enable the control owners in evaluating technical accounting pronouncements for certain transactions, in addition to utilizing third party resources when appropriate. |
| ● | Through our continued remediation efforts, we have identified and recorded certain accounting adjustments during the third and fourth quarters of 2022 that were considered immaterial, individually and in the aggregate, to our consolidated financial statements taken as a whole for the affected periods. Our continued remediation activities will include the designing of internal control policies and practices that directly respond to these accounting adjustments. |
While progress has been made to rulesenhance our internal control over financial reporting, we are still in the process of designing, implementing, documenting, and testing the Securitieseffectiveness of these processes, procedures and Exchange Commissioncontrols. Additional time is required to complete the implementation and to assess and ensure the sustainability of these procedures. We will continue to devote time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls are fully implemented, have operated for a sufficient period of time and management has concluded that permit us to provide only management's report in this annual report.
these controls are operating effectively through testing.Changes in Internal Control Over Financial Reporting
As required by Rule 13a-15(d) underAside from identification of the Exchange Act, our management, including our CEOmaterial weaknesses described above and CFO,the actions taken as described in Management's Remediation Initiatives above to improve the Company’s internal control over financial reporting, there has evaluatednot been any change in our internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter of 2016three months ended December 31, 2022, that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the fourth fiscal quarter of 2016.
ITEM 9B.
OTHER INFORMATION
ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company will rely on the Advisor to manage the day-to-day activitiesDirectors, Executive Officers and to implement the Company's investment strategy, subject to the supervision of our board of directors. The Advisor performs its duties and responsibilities as the Company's fiduciary pursuant to an advisory agreement. The Advisor is managed by Michael V. Shustek.
Directors and Executive Officers
The following table sets forth the names, ages as of March 24, 2017 and positionsSignificant EmployeesAs of the individuals who serve asdate of this Annual Report, our directors, and executive officers and significant employees are as of March 24, 2017:
follows:Name | Age | Title |
| | Age | | Title |
Michael V. ShustekManuel Chavez III | 58 | 46 | | Chief Executive Officer and Director (Chairman) |
Ed BentzenStephanie Hogue | 40 | 44 | | President, Chief Financial Officer, Treasurer, Secretary and Director |
Allen Wolff(1)Kyle Brown | 45 | 41 | | Chief Accounting Officer |
Jeffrey B. Osher | | 46 | | Independent Director |
Lorrence T. Kellar (1)(2) | | 85 | | Independent Director |
Danica Holley (1) | | 50 | | Independent Director |
Damon Jones | | 47 | | Independent Director |
Shawn Nelson (1)(3) | | 55 | | Independent Director |
| David Garfinkle (4) | | 55 | | Independent Director |
David Chavez(1) | 51(1) | Independent DirectorMember of the audit committee |
Erik Hart | 46(2) | Independent Director |
John E. Dawson(1) | 59 | Independent Director |
(1)Member of the audit committee.
The following table sets forth the names, ages as of March 24, 2017 and positions of the individuals who serve as directors, executive officers and certain significant employees of MVP Realty Advisors (the Advisor) or our affiliates:
Name | Age | TitleAudit committee financial expert |
| | (3) | Mr. Nelson retired from the Board, effective December 31, 2022. |
Michael V. Shustek | 58(4) | President & Chief Executive OfficerEffective January 31, 2023, Mr. Garfinkle was elected to the Board to fill Mr. Nelson's vacancy. |
Ed Bentzen | 40 | Chief Financial Officer |
Michael V. Shustek Manuel Chavez has been Chief Executive Officer, President, Secretary and the Chairman of the board of directors of the Company since its inception and serves as the Chief Executive Officer of our Advisor. He has also served as our Chief Executive Officer and a director of MVP REIT, Inc. since its inception, Chairman of the Board since August 2021. Mr. Chavez is and has been the chief executive officer and founder of Directors, Chief Executive OfficerBombe Asset Management LLC (“Bombe”), a Cincinnati, Ohio-based alternative asset management firm affiliated with Color Up, LLC, a Delaware limited liability company and the purchaser under the Equity Purchase and Contribution Agreement with the Company (“Color Up” or the “Purchaser”), since 2017. Mr. Chavez held various positions of increasing responsibility at Parking Company of America, Inc. from 1999 to 2017. Mr. Chavez is also chief executive officer and a manager of Color Up. Mr. Chavez currently holds positions with the Greater Cincinnati Port Authority, the Cincinnati State Technical and Community College, the Cincinnati Art Museum and the Cincinnati Regional Business Committee.
Mr. Chavez was selected to serve as a director of Vestin Group since April 1999the Company because of his significant real estate experience and a director and CEO of Vestin Realty Mortgage II, Inc. and Vestin Realty Mortgage I, Inc. since January 2006. In July 2012, Mr. Shustek became a principal of MVP American Securities. During January 2013, Mr. Shustek became the sole owner of MVP American Securities.
In February 2004, Mr. Shustek became the President of Vestin Group. In 2003, Mr. Shustek became the Chief Executive Officer of Vestin Originations, Inc. In 1995, Mr. Shustek founded Del Mar Mortgage, and has been involved in various aspectsexpansive knowledge of the real estate industry,
in Nevadaand his relationships with chief executives and other senior management at numerous real estate companies. Based on the foregoing, the Board believes that Mr. Chavez will bring a unique and valuable perspective to our Board.Stephanie Hogue has served as our President, Secretary and a member of the Board since 1990. In 1993, he founded ForeclosuresAugust 2021 and as Interim Chief Financial Officer from November 2021 to August 23, 2022 when she was appointed as Chief Financial Officer. Ms. Hogue has been the chief investment officer and managing partner of Nevada,Bombe since 2020. From 2017 to 2020, Ms. Hogue was managing director and New York branch manager at PricewaterhouseCoopers Corporate Finance LLC, and from 2010 to 2017, Ms. Hogue was a director at PricewaterhouseCoopers Corporate Finance LLC. Ms. Hogue is also a manager of Color Up. Ms. Hogue currently serves on the board of governors of Public Media Connect, Inc., a company specializing in non-judicial foreclosures. In 1997, Mr. Shustek was involved in the initial founding of Nevada First Bank, with thenon-profit organization that owns southwest Ohio’s largest initial capital base of any new state charter in Nevada's history. In 1993, Mr. Shustek also started Shustek Investments, a company that originally specialized in property valuations for third-party lenders or investors.
Mr. Shustek has co-authored two books, entitled "Trust Deed Investments," on the topic of private mortgage lending,Public Broadcasting Service member television stations, and "If I Can Do It, So Can You." Mr. Shustek is a guest lecturer at the University of Nevada, Las Vegas, where he also has taught a course in Real Estate Law and Ethics. Mr. Shustek received a Bachelor of Science degree in Finance at the University of Nevada, Las Vegas. As our founder and CEO, Mr. Shustek is highly knowledgeable with regard to our business operations. In addition, his participation on our board of directors is essential to ensure efficient communication between the Board and management.
Ed Bentzen was appointed as our Chief Financial Officer (CFO) on June 14, 2016. In addition, Mr. Bentzen was appointed the CFO of MVP REIT on June 14, 2016. From August 2013, Mr. Bentzen has been the Chief Financial Officer of Western Funding, Inc., a subsidiary of Westlake Financial Services, a company that specializes in sub-prime auto financing. From January, 2013 to August, 2013, Mr. Bentzen was the Assistant Vice President of Finance for Western Funding and from October, 2010 through January, 2013, he was the corporate controller of Western Funding. Previous to his experience at Western Funding, Mr. Bentzen served in the capacity of Financial Analyst from January 2006 to April 2007 and then as corporate controller from April 2007 to October 2010 of Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc., which are the owners of MVP Realty Advisors, LLC, the Advisor to the Company. Mr. Bentzen received his BS in Hotel Administration from the University of Nevada Las Vegas in 1999 and his Masters of Science in Accountancy from the University of Nevada Las Vegas in 2007. In 2005 he passed the Certified Internal Auditor's exam and received his CIA Certification from the Institute of Internal Auditors (currently inactive status).
Independent Directors of MVP REIT II, Inc.
John E. Dawson is one of our independent directors. He has also been a director of MVP REIT, Inc. since its inception. Hethe Indian Hill Club.Ms. Hogue was selected to serve as a director of Vestin Group from March 2000 to December 2005, was a directorthe Company because of Vestin Realty Mortgage II, Inc., from March 2007 until he resignedher significant experience in November 2013finance, capital markets and was a director for Vestin Realty Mortgage I, Inc. from March 2007 until January 2008.
Since January of 2015 Mr. Dawson has been a Partner at the International law firm of Dickinson Wright PLLC. Mr. Dawson was a partner of the Las Vegas law firm of Lionel Sawyer & Collins from 2005 until its closinginvesting in
December of 2014. Previous to that, from 1995 to 2005, Mr. Dawson was a partner at the law firm of Marquis & Aurbach. Mr. Dawson received his Bachelor's Degree from Weber Stateinfrastructure and
his Juris Doctor from Brigham Young University. Mr. Dawson received his Masters of Law (L.L.M.) in Taxation from the University of San Diego in 1993. Mr. Dawson was admitted to the Nevada Bar in 1988 and the Utah Bar in 1989.
David Chavez is one of our independent directors. Since 2009, Mr. Chavezreal estate assets.Kyle Brown has served as Chief Executive Officer of Assured Strategies, LLC, a strategic consulting, coaching and advisory firm. From 1996 to 2007, Mr. Chavez served as Chief ExecutiveAccounting Officer of the Chavez & Koch,Company since July 2022. Mr. Brown, previously served as Vice President, Technical Accounting Research for Ventas, Inc. (NYSE: VTR), a Professional Corporation, Certified Public Accountants (CPA's), Ltd., certified public accounting firm, andpublicly-traded healthcare REIT, from 1995 to 1996,December 2021 until July 2022, where he was a private businessresponsible for providing technical accounting support and analysis across the organization to implement policies in response to recently issued accounting standards and completing regulatory financial consultant. From 1991statement filings. Prior to 1995that, Mr. Chavez workedBrown served as Director, Technical Accounting Research at Ventas, Inc. from October 2014 to December 2021. Mr. Brown graduated from Xavier University with Arthur Andersen's Las Vegas office, taking several companies public, and working on auditing as well as consulting. Mr. Chavez received a Bachelor of Science in Business Administration, Degree, withAccountancy and is a concentration in Accounting, fromCertified Public Accountant and member of the UniversityAmerican Institute of Nevada, Las Vegas.
Erik A. Hart is oneCertified Public Accountants (AICPA).Independent Directors of our independent directors. Since May 2012, Mr. Hartthe Company
Jeffrey B. Osher has served as Managing Partner for Romandad Partners and the Romandad Trust. Previous to that, from 2001 to July 2013, Mr. Hart practiced law at The Law Offices of Erik A. Hart, and from 1998 to 2001, Mr. Hart was a lawyer for the Business Affairs and Business Development Department of the Spelling Entertainment Group, Inc., formerly Republic Entertainment, Inc. Mr. Hart received his Bachelor's Degree from the University of the Pacific, and his Juris Doctor from McGeorge School of Law. Mr. Hart is a member of the California BarBoard since August 2021. Mr. Osher founded No Street Capital LLC, an investment management firm, in 2018. Prior to founding No Street Capital, LLC, Mr. Osher served as a portfolio manager at Harvest Capital Strategies, LLC, an SEC-registered investment advisor, from 2005 to 2018, and reactivatedas an analyst from 2002 to 2005. Prior to his California bar licensetenure at Harvest Capital Strategies, LLC, Mr. Osher was an analyst at The Dowd Company where he focused on technology and planemerging growth companies. He has served on the board of directors of the Seal Family Foundation since 2016. He has also served on the board of directors of Green Dot Corporation (NYSE: GDOT) since 2020 and was an advisor to keep it active indefinitely.
Allen Wolff the Green Dot Corporation’s board of directors from 2017 to 2020. He is
onealso a manager of
our independent directors. Since December 2014, Color Up and a control person of HS3 which is the approximate 10% limited partner of the Operating Partnership.Mr. Wolff Osher was selected to serve as a director of the Company due to his significant experience in financial services and investment and his experience as an executive and a public company director.
Lorrence T. Kellar has served as Chief Financial Officera member of the Board since August 2021. Mr. Kellar has been a trustee of Acadia Realty Trust (NYSE: AKR) since November 2003. Mr. Kellar was vice president at Continental Properties, a retail and residential developer, from 2002 until his retirement in 2009, a director of Spar Group, Inc., from 2003 to 2019 and chairman of Multi-Color Corporation from 1995 to 2012. Prior to joining Continental Properties, Mr. Kellar served as vice president of real estate with Kmart Corporation for NTN Buzztime,six years and served with The Kroger Co., the United States’ largest supermarket company, for 31 years where his final position was group vice president of finance and real estate. Mr. Kellar currently serves as an emeritus trustee of Public Media Connect, Inc. (NYSE MKT: NTN), a social entertainmentnon-profit organization that owns southwest Ohio’s largest Public Broadcasting Service member television stations and integratedan emeritus trustee of the Cincinnati Ballet.
Mr. Kellar was selected to serve as a director of the Company due to his significant management and public company experience, including in the real estate industry and as a public company executive and director and member of the audit committee.
Danica Holley has served as a member of the Board since August 2021. Ms. Holley has served as the chief operating officer of Global Medical REIT Inc. (NYSE: GMRE) since March 2016. Ms. Holley’s business development and management experience spans more than 18 years with an emphasis on working in an international environment. She has extensive experience in international program management, government procurement, and global business rollouts and start-ups. As executive director for Safe Blood International Foundation since April 2008, she oversaw national health initiatives in Africa and Asia, including an Ebola response project. Ms. Holley has held management positions as director of strategy, corporate business development for WorldSpace, Inc. from 1997 to 2000, director of marketing platform. Previousfor corporate and business at ISI Professional Services from 2000 to 2001 and director of administration at Tanzus Development from 1996 to 1997 and SK&I Architectural Design Group, LLC from 2003 to 2007.
Ms. Holley was selected to serve as a director of the Company due to her significant business development and management experience, including as an executive officer at a publicly traded REIT that has had a similar growth trajectory to the Company.
Damon Jones has served as a member of the Board since August 2021. Mr. Jones has served as the chief communications officer of The Procter & Gamble Company (NYSE: PG) since April 2020. He served as vice president, global communications & advocacy at P&G from July 2018 to April 2020, and prior to that, as director, global company communications from July 2013August 2015 to December 2014,June 2018. Prior to that, Mr. WolffJones held various other positions with increasing responsibility at P&G since 1997.
Mr. Jones was selected to serve as a director of the Company due to his significant communications experience and his experience as a public company executive.
David Garfinkle has served as Co-Founder and Financial Strategist for PlumDiggity, LLC, a financial and marketing strategy firm. Frommember of the Board since January 2011 to July 2013,2023. Mr. WolffGarfinkle has served as Chief Financial Officer and director for 365 Retail Markets, LLC, a micro-market self-checkout POS technology firm, and from January 2006 to January 2011, Mr. Wolff served as Co-Founder and Chief Financial Officer of Paysimple, Inc., a provider of payment management solutions. From January 2003 to July 2009, Mr. Wolff served asthe Executive Vice President and Chief Financial Officer of The Conclave Group, LLC,CoreCivic, Inc. (NYSE: CXW), a real estate industry publication serving 12,000 apartment communities nationwide.public company and the nation’s largest owner of partnership, correctional, detention and residential reentry facilities in the U.S., since May 2014 and prior to that as its Vice President of Finance and Controller from February 2001 to May 2014. From 1996 to 2001, Mr. Wolff receivedGarfinkle served as Vice President and Controller for Bradley Real Estate, Inc., a publicly traded REIT. Prior to joining Bradley Real Estate, Inc., Mr. Garfinkle was a Senior Manager at KPMG Peat Marwick, LLP. Mr. Garfinkle is a Certified Public Accountant and holds a bachelors’ degree in business administration from St. Bonaventure University. He also serves as a board member and as a member of the executive committee of Junior Achievement of Middle Tennessee, having previously served as the chair of that organization’s finance committee.
Mr. Garfinkle was selected to serve as a director of the Company due to his Bachelor's Degreesignificant management and public company experience, including at a publicly traded REIT.
Family Relationships
There are no family relationships among any of the current executive officers and directors of the Company.
CORPORATE GOVERNANCE
Board of Directors & Stockholders’ Agreement
Effective August 25, 2021, pursuant to the Charter and bylaws, and as contemplated by the Stockholders’ Agreement dated August 25, 2021 (the “Stockholders’ Agreement”) between the Company and Color Up, the number of directors was increased from four to seven and Manuel Chavez, Stephanie Hogue, Jeffrey Osher, Lorrence Kellar and Damon Jones were designated as nominees to the University of Michigan,Board (the “Color Up Designated Directors”) by Color Up (and the Board nominated Danica Holley as a nominee to the Board to join Shawn Nelson as an incumbent director (the “Incumbent Director” and, his Master of Business Administration Degree fromtogether with the R.H. Smith School of BusinessColor Up Designated Directors, “New Directors”) and Messrs. Chavez, Osher, Kellar, Jones, and Meses. Hogue and Holley were elected to the Board, with terms expiring at the University of Maryland.
Our directorsAnnual Meeting and executive officers will serve until their successors are duly elected and qualify. Our officers will devote such portionUpon the retirement of their timeShawn Nelson effective December 31, 2022, Mr. Garfinkle was appointed to our affairs as is required for the performance of their duties, but they are not requiredBoard to devote all of their time to us.
CORPORATE GOVERNANCE
Board of Directors
We operatefill the vacancy and Mr. Garfinkle shall be considered an Incumbent Director under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. The board of directors is responsible for directing the management of our business and affairs. The board of directors has retained the Advisor to manage our day-to-day affairs and to implement our investment strategy, subject to the board of directors' direction, oversight and approval.
We have a total of five directors, four of whom are independent of us, the Advisor, our Sponsor and our respective affiliates as determined in accordance with the North American Securities Administrators Association's Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007, or the NASAA REIT Guidelines. The NASAA REIT Guidelines require our charter to define an independent director as a director who is not and has not for the last two years been associated, directly or indirectly, with our Sponsor or the Advisor. A director is deemed to be associated with our Sponsor or the Advisor if he or she owns any interest in, is employed by, is an officer or director of, or has any material business or professional relationship with our Sponsor, the Advisor or any of their affiliates, performs services (other than as a director) for us, or serves as a director or trustee for more than three REITs sponsored by our Sponsor or advised by the Advisor. A business or professional relationship will be deemed material per se if the gross revenue derived by the director from our Sponsor, the Advisor or any of their affiliates exceeds five percent of (1) the director's annual gross revenue derived from all sources during either of the last two years or (2) the director's net worth on a fair market value basis. An indirect relationship is defined to include circumstances in which the director's spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is or has been associated with us, our Sponsor, the Advisor or any of its affiliates. Our board has determined that each of Allen Wolff, David Chavez, Erik Hart and John Dawson qualifies as an independent director under the NASAA REIT Guidelines.
We refer to our directors who are not independent as our "affiliated directors." Currently, our only affiliated director is Michael V. Shustek
Our charter provides that the number of directors shall be five which number may be increased or decreased as set forth in the bylaws. Our charter also provides that a majority of the directors must be independent directors and that at least one of the independent directors must have at least three years of relevant real estate experience. The independent directors will nominate replacements for vacancies among the independent directors.
Our board of directors is elected by our common stockholders on an annual basis. Any director may resign at any time and may be removed with or without cause by the stockholders upon the affirmative vote of stockholders entitled to cast at least a majority of all the votes entitled to be cast generally in the election of directors. The notice of any special meeting called to remove a director will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director will be removed.
At such time as we are subject to Subtitle 8 of the MGCL, we have elected to provide that a vacancy following the removal of a director or a vacancy created by an increase in the number of directors or the death, resignation,
adjudicated incompetence or other incapacity of a director may be filled only by a vote of a majority of the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred and, in the case of an independent director, the director must also be nominated by the remaining independent directors.
Responsibilities of Directors
The responsibilities of the members of the board of directors include:
| · | approving and overseeing our overall investment strategy, which will consist of elements such as investment selection criteria, diversification strategies and asset disposition strategies; |
| · | approving and overseeing our debt financing strategies; |
| · | approving joint ventures and other such relationships with third parties; |
| · | approving a potential liquidity transaction; |
| · | determining our distribution policy and authorizing distributions from time to time; and |
| · | approving amounts available for repurchases of shares of our common stock. |
The directors are accountable to us and our stockholders as fiduciaries. This means that the directors must perform their duties in good faith and in a manner each director believes to be in our best interests. Further, our directors must act with such care as an ordinarily prudent person in a like position would use under similar circumstances, including exercising reasonable inquiry when taking actions. The directors are not required to devote all of their time to our business and are only required to devote such time to our affairs as their duties require. The directors meet quarterly or more frequently as necessary.
We will follow investment guidelines adopted by our board of directors and the investment and borrowing policies described in this report unless they are modified by our directors. Our board of directors may establish further written policies on investments and borrowings and shall monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled and are in the best interests of our stockholders. Any change in our investment objectives as set forth in our charter must be approved by the stockholders.
In order to reduce or eliminate and address certain potential conflicts of interest, our charter requires that a majority of our board of directors (including a majority of the independent directors) not otherwise interested in the transaction approve any transaction with any of our directors, our Sponsor, the Advisor, or any of their affiliates. The independent directors will also be responsible for reviewing from time to time but at least annually (1) the performance of the Advisor and determining that the compensation to be paid to the Advisor is reasonable in relation to the nature and quality of services performed; (2) that our total fees and expenses are otherwise reasonable in light of our investment performance, our net assets, our net income, the fees and expenses of other comparable unaffiliated REITs and other factors deemed relevant by our independent directors; and (3) that the provisions of the advisory agreement are being carried out. Each such determination shall be reflected in the applicable board minutes.
Board Committees
Our board of directors may establish committees it deems appropriate to address specific areas in more depth than may be possible at a full board of directors meeting, provided that the majority of the members of each committee are independent directors.
Audit Committee
The audit committee will meet on a regular basis, at least quarterly and more frequently as necessary. The audit committee's primary function will be to assist the board of directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of internal controls which management has established and the audit and financial reporting process. The audit committee is comprised of three directors, all of whom are independent directors and one of whom is deemed an audit committee financial expert. Our audit committee consists of John Dawson, David Chavez and Allen Wolff. The Board also determined that Mr. Dawson meets the audit committee financial expert requirements. For the years ended December 31, 2016 and 2015, the audit committee held __ and zero meetings, respectively.
Nominating and Corporate Governance Committee
We do not have a separate nominating and corporate governance committee. We believe that our board of directors is qualified to perform the functions typically delegated to a nominating and corporate governance committee and that the formation of a separate committee is not necessary at this time. Instead, our full board of directors performs functions similar to those which might otherwise normally be delegated to such a committee, including, among other things, developing a set of corporate governance principles, adopting a code of ethics, adopting objectives with respect to conflicts of interest, monitoring our compliance with corporate governance requirements of state and federal law, establishing criteria for prospective members of our board of directors, conducting candidate searches and interviews, overseeing and evaluating our board of directors and our management, evaluating from time to time the appropriate size and composition of our board of directors and recommending, as appropriate, increases, decreases and changes to the composition of our board of directors and formally proposing the slate of directors to be elected at each annual meeting of our stockholders.
Compensation Committee
Our board of directors believes that it is appropriate for our board of directors not to have a standing compensation committee based upon the fact that our executive officers and our affiliated directors do not receive compensation directly from us for services rendered to us, and we do not intend to pay compensation directly to our executive officers or our affiliated directors. Our independent directors receive certain compensation from us, which is described in more detail under "Item 11. Executive Compensation."
Stockholders’ Agreement.Code of Ethics
We haveThe Company has adopted a Code of Business Conduct and Ethics or the Code(the “Code of Ethics,Ethics”), which contains general guidelines for conducting ourthe Company’s business and is designed to help directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. The Code of Ethics applies to all of ourthe Company’s officers, including ourthe Company’s principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions, andas well as all members of our board of directors.the Board. The Code of Ethics covers topics including, but not limited to, conflicts of interest, record keeping and reporting, payments to foreign and U.S. government personnel and compliance with laws, rules and regulations. We will provide to any person without charge a copy of ourThe Code of Ethics including any amendments or waivers,is available on the Company’s website at https://mobileit.com under “Investor Relations-Corporate Governance.” A printed copy of the Code of Ethics may be obtained by shareholders upon written request delivered to our principal executive officethe Company’s Secretary at the address listed on the cover page of this annual report.
Board Meetings and Annual Stockholder Meeting
The boardReport. We intend to satisfy any disclosure requirements regarding any amendments to, or waivers from, provisions of directors held one meeting during the fiscal year ended December 31, 2016. Each director attended at least 75%Code of his board and committee meetings in 2016. Although we do not have a formal policy regarding attendanceEthics by members ofposting such information on our board of directors at our Annual Meeting of Stockholders, we encourage all of our directors to attend.
website as promptly as practicable, as may be required by applicable SEC rules.Communication with Directors
We haveThe Company has established procedures for stockholders or other interested parties to communicate directly with our board of directors.the Board. Such parties can contact the boardBoard by mail at: John Dawson, Chairmanat the following address: Board of the MVP REIT II Audit Committee,Directors of Mobile Infrastructure Corporation, c/o Corporate Secretary, 888030 W. Sunset Road, Suite 240, Las Vegas, Nevada 89148.
4th Street, Cincinnati, Ohio 45202; or by emailing secretary@mobileIT.com.The chairman of the audit committeeSecretary will receive all communications made by these means and will distribute such communications to such member or members of our board of directorsthe Board as he or she deemsthey deem appropriate, depending on the facts and circumstances outlined in the communication received. For example, if any questions regarding accounting, internal controls and auditing matters are received, they will be forwarded by the chairman of the audit committeeSecretary to the members of the audit committeeAudit Committee for review.
ITEM 11.
EXECUTIVE COMPENSATION
Executive Officers
We do not currently have any employees nor do we currently intend to hire any employees who will be compensated directly by us. Each of ourSummary Compensation Table
For the year ended December 31, 2022, the Company’s named executive officers includingfor purposes of this Annual Report are (i) each person who served as the Company’s principal executive officer who serves as a director, is employed by our Sponsorduring the year—Manuel Chavez III; and also serves as an(ii) each executive officer of the Advisor. EachCompany, whether or not they remained with the Company at the end of these individuals receivesthe year, who received annual compensation from our Sponsorof more than $100,000—Stephanie Hogue (collectively, the “named executive officers”).
The following “Summary Compensation Table” and footnotes summarize the total compensation (rounded to the nearest thousand) of the Company’s named executive officers for the year ended December 31, 2022.
| | | | | | | | | | | | | Stock | | | | All Other | | | | | | |
| | | Fiscal | | Salary | | | Bonus | | | Awards | | | | Compensation | | | | | | |
Name and Principal Position | | Year | | ($) | | | ($) | | | ($) | | | | ($) | | | Total ($) | | |
Manuel Chavez | | 2022 | | $ | 600,000 | | | $ | — | | | $ | 4,195,313 | | (2) | | $ | — | | | $ | 4,795,313 | | |
Chief Executive Officer | | 2021 | | $ | 234,190 | | | $ | — | | | $ | — | | | | $ | — | | | $ | 234,190 | | (3) |
Stephanie Hogue | | 2022 | | $ | 450,000 | | | $ | — | | | $ | 2,517,188 | | (4) | | $ | — | | | $ | 2,967,188 | | |
President, Chief Financial Officer, Treasurer and Secretary | | 2021 | | $ | 141,346 | | | $ | — | | | $ | — | | | | $ | — | | | $ | 141,346 | | |
| (1) | Fiscal year 2021 contains compensation for Mr. Chavez and Ms. Hogue from August 25, 2021 through December 31, 2021 following the closing of the Transaction. |
| (2) | In accordance with the 2021 Employment Agreements (defined below), Mr. Chavez is eligible to receive a target annual bonus of no more than 33.33% of his Base Salary (as defined in the 2021 Employment Agreements), as determined by the Compensation Committee for services provided to the Company during 2022. Mr. Chavez has elected to receive his 2022 annual bonus in equity and the Compensation Committee determined such equity would be in the form of LTIP Units. On February 28, 2023, Mr. Chavez was granted 13,550 fully vested LTIP Units granted in lieu of his target annual bonus. In accordance with the 2021 Employment Agreement, Mr. Chavez is also eligible to receive a target equity bonus of no more than $1,000,000 for services provided to the Company during 2022. The Compensation Committee determined such equity would be in the form of LTIP Units. On February 28, 2023, Mr. Chavez was granted 67,751 LTIP Units as his target equity bonus. Mr. Chavez is also eligible to receive stock awards including the 937,500 Performance Units that are subject to certain market, performance and service-based conditions, granted to Mr. Chavez on May 27, 2022 and 170,213 LTIP Units that are subject to completion of a Liquidity Event and certain service-based conditions, granted on August 23, 2022. The grant date fair values of all of the Performance Units and LTIP Units were determined in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. Of those 937,500 Performance Units, the grant date fair value of 468,750 of those Performance Units was determined using a Monte Carlo valuation simulation model resulting in a grant date fair value of $4,195,313, the vesting of which is subject to certain market and performance conditions. As required pursuant to SEC disclosure rules, the grant-date fair values of the awards included in the table above were computed based on the probable outcomes of the performance conditions as of the applicable grant date; for purposes of calculating the grant-date fair value of the remaining 468,750 Performance Units and the LTIP Units, the achievement of certain performance, service and liquidity event-based conditions was deemed not probable on the date of grant in accordance with US GAAP and, accordingly, no value is included in the table for these awards. Assuming achievement of the performance, service and liquidity event conditions, the grant date fair value of the remaining 468,750 Performance Units and the LTIP Units, is $7,251,563 and $2,791,493, respectively. Mr. Chavez’s LTIP Units will vest one year from a Liquidity Event, subject to certain change in control or termination conditions. |
| (3) | As of December 31, 2022, the compensation earned by Mr. Chavez for fiscal year 2021 was unpaid. |
| (4) | In accordance with the 2021 Employment Agreements (defined below), Ms. Hogue is eligible to receive a target annual bonus of no more than 33.33% of her Base Salary (as defined in the 2021 Employment Agreements), as determined by the Compensation Committee for services provided to the Company during 2022. Ms. Hogue has elected to receive her 2022 annual bonus in equity and the Compensation Committee determined such equity would be in the form of LTIP Units. On February 28, 2023, Ms. Hogue was granted 10,163 fully vested LTIP Units in lieu of her target annual bonus. In accordance with the 2021 Employment Agreement, Ms. Hogue is also eligible to receive a target equity bonus of no more than $600,000 for services provided to the Company during 2022. The Compensation Committee determined such equity would be in the form of LTIP Units. On February 28, 2023, Ms. Hogue was granted 40,650 LTIP Units as her target equity bonus. Ms. Hogue is also eligible to receive stock awards including 562,500 Performance Units that are subject to certain market, performance and service-based conditions, granted to Ms. Hogue on May 27, 2022 and 102,128 LTIP Units that are subject to completion of a Liquidity Event and certain service-based conditions, granted on August 23, 2022. The grant date fair values of all of the Performance Units and LTIP Units were determined in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. Of those 562,500 Performance Units, the grant date fair value of 281,250 of those Performance Units was determined using a Monte Carlo valuation simulation model resulting in a grant date fair value of $2,517,188, the vesting of which are subject to certain market and performance conditions. As required pursuant to SEC disclosure rules, the grant-date fair values of the awards included in the table above were computed based on the probable outcomes of the performance conditions as of the applicable grant date; for purposes of calculating the grant-date fair value of the remaining 281,250 Performance Units and the LTIP Units, the achievement of certain performance, service and liquidity event-based conditions was deemed not probable on the date of grant in accordance with US GAAP and, accordingly, no value is included in the table for these awards. Assuming achievement of the performance, service and liquidity event conditions, the grant date fair value of the remaining 281,250 Performance Units and the LTIP Units, is $4,350,938 and $1,674,899, respectively. Ms. Hogue’s LTIP Units will vest one year from a Liquidity Event, subject to certain change in control or termination conditions. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
During the years ended December 31, 2022 and 2021, no grants were made under the Long-Term Incentive Plan (the “Plan”) and there were no outstanding unvested equity awards as of either date. The Plan provides up to 500,000 shares may be issued under the terms of the Plan. The Plan was approved by the Board of Directors.
On May 27, 2022, the Compensation Committee and the Board each approved performance-based equity awards (the “Performance Awards”) to each of Mr. Chavez and Ms. Hogue.
In approving the Performance Awards, the Committee and the Board recognized the Company’s interest in rewarding, incentivizing and retaining Mr. Chavez and Ms. Hogue, through the award of certain Performance Units in the Operating Partnership, with the goal of creating appropriate incentives for Mr. Chavez and Ms. Hogue to continue to grow the value of the Company over the long-term. The Performance Awards approved by the Compensation Committee and the Board, including the disinterested directors, are aligned with the interests of the Company’s stockholders. The principal objective of the Performance Awards is to link Mr. Chavez’s and Ms. Hogue’s long-term compensation opportunities with significant long-term stockholder value creation.
Pursuant to the performance unit award agreements entered into with respect to the Performance Awards (the “Performance Award Agreements”), Mr. Chavez was awarded 937,500 Performance Units and Ms. Hogue was awarded 562,500 Performance Units, which will vest only to the extent that the market price of the Company’s Common Stock and the Company’s AFFO per share of common stock achieve specified targets during the performance periods, as further described herein. Pursuant to the applicable Performance Award Agreement, subject to the continued employment of Mr. Chavez and Ms. Hogue, respectively, fifty percent (50%) of his or her services, including services performedrespective Performance Units will vest if the market price of the Company’s Common Stock is $25.00 per share, based on a 90-day weighted average price, at any time from the date of grant through December 31, 2025. Pursuant to the applicable Performance Award Agreement, subject to the continued employment of Mr. Chavez and Ms. Hogue, respectively, fifty percent (50%) of his or her respective Performance Units will vest if the Company’s AFFO per share of common stock is at least $1.25 for usfour consecutive quarters prior to the fourth quarter of 2025 and then for an additional four consecutive quarters prior to December 31, 2027. Per share amounts are subject to adjustment, in the Advisor. AsCompensation Committee’s discretion, in the event of any stock split, stock dividend or other similar adjustment to the number of shares of common stock outstanding. The Compensation Committee and the Board believe that the vesting requirements of the Performance Awards encourage long-term equity holding by Mr. Chavez and Ms. Hogue, further aligning the interests of Mr. Chavez and Ms. Hogue with the creation of stockholder value over the long-term.
The Performance Units are a class of partnership interests of the Operating Partnership. Once vested, the Performance Units are convertible into common units of the Operating Partnership after a one-year holding period on a one-for-one basis. Common Units are redeemable for shares of the Company’s Common Stock, on a one-for-one basis, or cash at the Company’s option, pursuant and subject to the terms and provisions of the partnership agreement of the Operating Partnership.
Upon Mr. Chavez’s or Ms. Hogue’s death, disability or termination of employment without Cause (as defined in their respective employment agreements), the Performance Units shall continue to be held by Mr. Chavez or Ms. Hogue, or their respective estates or heirs, as applicable, and shall otherwise vest, not vest, be forfeited or cancelled in accordance with the terms of the applicable Performance Award Agreement.
On August 23, 2022, each of Mr. Chavez and Ms. Hogue entered into an LTIP Unit Award Agreement (the “LTIP Agreements”) pursuant to which 170,213 and 102,128 LTIP Units, respectively, were granted to Mr. Chavez and Ms. Hogue, subject to the vesting and other terms and conditions set forth in the applicable LTIP Agreement. On December 13, 2022, each of Mr. Chavez and Ms. Hogue entered into a First Amendment to LTIP Unit Agreement, pursuant to which the 170,213 and 102,128 LTIP Units previously granted to Mr. Chavez and Ms. Hogue, respectively, will vest in full only upon the occurrence of a Liquidity Event (defined in the 2021 Employment Agreements as an initial public offering and/or listing of the Company’s Common Stock on the Nasdaq Global Market, the Nasdaq Global Select Market, or the NYSE, each, a Trading Market) prior to August 25, 2024, provided that the executive remains continuously employed with the Company, the Operating Partnership or an affiliate through the one year anniversary of the Liquidity Event, unless the executive is terminated by the Company, the Operating Partnership or such affiliate without Cause or resigns for Good Reason (as defined in the 2021 Employment Agreements) within one hundred and eighty (180) days of a Liquidity Event or one year after the Liquidity Event.
The LTIP Units are a class of partnership interest of the Operating Partnership. Once vested, each LTIP Unit is convertible at the option of the holder into a common unit of limited partnership interest in the Operating Partnership subject to the holding period set forth in the Partnership Agreement. Each common unit acquired upon the conversion of an LTIP Unit is redeemable by the holder for shares of the Company’s Common Stock on a one-for-one basis. The Company may elect, at its option, to pay cash in lieu of issuing shares of common stock for all or any redeemed partnership unit.
Outstanding Equity Awards at 2022 Fiscal Year End
The following table sets forth certain information with respect to all outstanding equity awards held by each named executive officer as of December 31, 2022.
| | | Stock Awards | |
| | | | | | | | | | | Equity Incentive Plan Awards: | | | Equity Incentive Plan awards: | |
| | | Number of units | | | Market value of units that | | | Number of unearned units | | | Market or payout value of unearned | |
Name | | that have not vested | | | have not vested | | | that have not vested | | | units that have not vested | |
Manuel Chavez (1) | | | 1,107,713 | | | $ | 4,195,313 | | | | — | | | | — | |
Stephanie Hogue (2) | | | 664,628 | | | $ | 2,517,188 | | | | — | | | | — | |
| (1) | Mr. Chavez’s unvested stock awards consist of (i) 937,500 performance units of the Operating Partnership that vest upon satisfaction of certain performance criteria, and (ii) 170,213 LTIP Units of the Operating Partnership that vest upon the occurrence of a liquidity event and certain other requirements, all of which are subject to the terms, provisions and other requirements of the applicable performance unit or LTIP unit award agreements. On May 27, 2022, Mr. Chavez was granted a stock award of 937,500 Performance Units, the vesting of which is subject to certain market conditions. Of the 937,500 Performance Units, 468,750 have a grant date fair value of $4,195,313 determined in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. For purposes of calculating the grant-date fair value of the remaining 468,750 Performance Units, the achievement of certain performance and liquidity event-based conditions was deemed not probable on the date of grant in accordance with US GAAP and, accordingly, no value is included in the table for these awards. On August 23, 2022, Mr. Chavez was granted 170,213 LTIP Units, the vesting of which is subject to completion of a Liquidity Event which was deemed not probable on the grant date in accordance with US GAAP and certain service-based conditions. Assuming achievement of the performance, service and liquidity event conditions, the grant date fair value of the remaining 468,750 Performance Units and the LTIP awards is $7,251,563 and $2,791,493, respectively. Mr. Chavez’s LTIP Units will vest one year from a Liquidity Event, subject to certain change in control or termination conditions. |
| (2) | Ms. Hogue’s unvested stock awards consist of (i) 562,500 performance units of the Operating Partnership that vest upon satisfaction of certain performance criteria, and (ii) 102,128 LTIP Units of the Operating Partnership that vest upon the occurrence of a liquidity event and certain other requirements, all of which are subject to the terms, provisions and other requirements of the applicable performance unit or LTIP unit award agreements. On May 27, 2022, Ms. Hogue was a granted stock award of 562,500 Performance Units, the vesting of which is subject to certain market conditions. Of the 562,500 Performance Units, 281,250 Performance Units have a grant date fair value of $2,517,188 determined in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. For purposes of calculating the grant-date fair value of the remaining 281,250 Performance Units, the achievement of certain performance and liquidity event-based conditions was deemed not probable on the date of grant in accordance with US GAAP and, accordingly no value is included in the table for these awards. On August 23, 2022, Ms. Hogue was granted 102,128 LTIP Units, the vesting of which is subject to completion of a Liquidity Event which was deemed not probable on the grant date in accordance with US GAAP and certain service-based conditions. Assuming achievement of the performance, service and liquidity event conditions, the grant date fair value of the 281,250 Performance Units and the LTIP awards is $4,350,938 and $1,674,899, respectively. Ms. Hogue’s LTIP Units will vest one year from a Liquidity Event, subject to certain change in control or termination conditions. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Our Employment Agreements and certain of the LTIP Unit Award Agreements provide for severance payments and vesting of units of the Operating Partnership (which are convertible into shares of our common stock) to our named executive officers in certain circumstances in connection with a qualifying termination, including following a change in control of the Advisor, these individuals will manage our day-to-day affairsCompany as further described below.
Employment Agreements
2021 Employment Agreements
In connection with their employment, the Company entered into employment agreements (collectively, the “2021 Employment Agreements”) with each of Manuel Chavez and carry outStephanie Hogue on August 25, 2021. The previous Compensation Committee retained an independent compensation consultant in 2021 to assist in determining Mr. Chavez’s and Ms. Hogue’s compensation packages under the directives2021 Employment Agreements.
The following is a brief summary and discussion of our boardthe terms of directorsthe 2021 Employment Agreements, as amended:
Term. Each of the 2021 Employment Agreements provides for a three-year initial term that commences on the Employment Effective Date (as defined in each of the review2021 Employment Agreements) and selectionends on the third anniversary of investment opportunitiessuch date. Thereafter, the employment term extends automatically for successive one-year periods unless either the executive or the Company provides notice of non-renewal to the other party at least ninety (90) days before the end of the then-existing term.
Duties. The 2021 Employment Agreements provide that the Chief Executive Officer and will oversee and monitor our acquired investments to ensure they are consistent with our investment objectives. The duties that these executive officersthe President will perform on our behalfduties and provide services to us that are customarily associated with the duties, authorities and responsibilities of persons in similar positions as well as such other duties as may be assigned from time to time. The 2021 Employment Agreements also provide that the executives generally will also servedevote substantially all of their business time and attention to fulfill the corporate governance obligationsbusiness and affairs of these persons as our appointed officers pursuant to our charter and bylaws. As such, these duties will involvethe Company, except that the executives may engage in certain outside activities that do not materially interfere with the performance of corporate governance activitiestheir duties, including serving as an officer and other capacities with respect to Color Up and its affiliates.
Compensation. The 2021 Employment Agreements provide that require the attentionChief Executive Officer and President will receive an annual initial base salary of $600,000 and $450,000, respectively. The Chief Executive Officer and President will be eligible to receive a target annual bonus of not more than 33.33% of their base salary, and each will be eligible to receive an annual equity award of not more than $1,000,000, and $600,000 in restricted shares of common stock, respectively. Each annual equity award shall vest equally in annual installments over a three-year period. The amounts and conditions for the payment and vesting (as applicable) of each target annual incentive award and each annual equity award will be determined by the Compensation Committee. The Chief Executive Officer and President have the right to elect to receive their base salary and their target annual bonus payments in the form of restricted shares of common stock. The Compensation Committee has the discretion to award any compensation set forth in the 2021 Employment Agreements in shares of the Company or in limited partnership units of the Operating Partnership, including LTIP Units and Performance Units (each as defined in the Partnership Agreement). Each of the executives will be eligible to participate in employee benefit programs made available to the Company’s employees from time to time and to receive certain other perquisites, each as set forth in their respective 2021 Employment Agreements. In addition, the Chief Executive Officer and the President will receive $2,000,000 and $1,200,000 in unvested restricted shares of common stock, respectively, which shares shall vest only upon the occurrence of a Liquidity Event, within three years of the effective date of the 2021 Employment Agreements, provided that the Chief Executive Officer and President, respectively, remain employed with the Company on the date of the Liquidity Event, unless such officer is terminated by the Company without Cause or resigns for Good Reason within 180 days of a Liquidity Event. The Compensation Committee retained an independent compensation consultant to assist in determining the Chief Executive Officer’s and President’s compensation packages.
On August 23, 2022, the Company entered into a First Amendment to the 2021 Employment Agreements (collectively, the “First Amendments”). Pursuant to the terms of the First Amendments, among other things, each of Mr. Chavez and Ms. Hogue acknowledged that: (i) the Company’s grant of LTIP Units pursuant to the LTIP Agreements to each of Mr. Chavez and Ms. Hogue is in lieu and full satisfaction of the Company’s obligation to issue to them restricted shares of the Company’s Common Stock as set forth therein; (ii) the Compensation Committee of the Board has the discretion to award any compensation pursuant to the 2021 Employment Agreements in shares of the Company’s Common Stock or in limited partnership units of the Operating Partnership; and (iii) the potential merger of the Company with or into MIT, would not constitute a Change in Control (as defined in the 2021 Employment Agreements).
On December 13, 2022, the Company entered into a Second Amendment (collectively, the “Second Amendments”) to the 2021 Employment Agreements. Pursuant to the terms of the Second Amendments, among other things, each of Mr. Chavez and Ms. Hogue acknowledged that: (i) the 170,213 and 102,128 LTIP Units, respectively, previously granted to Mr. Chavez and Ms. Hogue, will vest in full only upon the occurrence of a Liquidity Event prior to August 25, 2024, provided that the executive remains continuously employed with the Company, the Operating Partnership or an affiliate through the one year anniversary of the Liquidity Event, unless the executive is terminated by the Company, the Operating Partnership or such affiliate without Cause or resigns for Good Reason within one hundred and eighty (180) days of a Liquidity Event or one year after the Liquidity Event; and (ii) the Merger will not constitute a Change in Control.
Severance Payments. The 2021 Employment Agreements provide that, subject to the execution of a release and other conditions set forth in the 2021 Employment Agreements, upon a “qualifying termination” (as defined in the 2021 Employment Agreements), the executives will be entitled to severance based on a multiple of the total of each executive’s then-current annual base salary plus the amount of the Target Bonus Amount (as defined in the 2021 Employment Agreements) for the Company’s most recently completed fiscal year prior to termination (referred to herein as “total cash compensation”). If the qualifying termination results from the death or disability of the executive, the executive will be entitled to severance equal to one times (1x) their total cash compensation. If the executive is terminated by the Company without Cause, the executive quits for Good Reason or the Company elects not to renew the term of the 2021 Employment Agreements, then the executive will be entitled to severance equal to two times (2x) their total cash compensation. In the event that any qualifying termination occurs on or within twelve (12) months after a change in control of the Company, the executives will be entitled to severance equal to three times (3x) their total cash compensation.
Upon termination where severance is due and payable, the 2021 Employment Agreements also provide that the executives will be entitled to receive (a) unpaid base salary earned through the termination date; (b) any restricted shares of common stock that have vested as of the termination date; (c) all other equity-based awards held by executive, to the extent subject to time-based vesting, will vest in full at the termination date; (d) health insurance coverage, including through COBRA, for an 18 month period following the termination date; and (e) reimbursements of unpaid business expenses.
Non-Competition, Non-Solicitation and Confidentiality. The 2021 Employment Agreements provide that for a two-year period following the termination of an executive’s employment with us, each of the executives will not solicit our employees or consultants or any of our corporate officers, including signing certifications required undercustomers, vendors or other parties doing business with us. Pursuant to the Sarbanes-Oxley Act of 2002, as amended, for filing with our periodic reports. Although we will reimburse the Advisor for certain expenses incurred in connection with providing these services to us, we do not intend to pay any compensation directly to our executive officers.
Independent Directors
We pay2021 Employment Agreements, each of
ourthe executives has agreed not to compete with us for a period of two years following the termination of their employment with us. Each 2021 Employment Agreement also contains covenants relating to the treatment of confidential information, company property and certain other matters. The 2021 Employment Agreements also contain a non-disparagement covenant.DIRECTOR COMPENSATION
In fiscal 2022, each independent directorsdirector earned an annual retainer of $30,000 (to be prorated$70,000, pro-rated for aany partial term), plusyear of service. An additional $15,000 was earned by the chair of the audit committee chairperson receives an additional $5,000and $10,000 was earned by the chairs of the compensation committee and the nominating and governance committee, pro-rated for any partial year of service. The Board has determined that, unless otherwise elected by the directors, the independent directors shall receive their annual retainer (to be prorated for a partial term). Each independent director also will receive $1,000 for each meetingin the form of LTIP Units of the board of directors attended in-person or by telephone.
Operating Partnership.All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attending meetings of the boardBoard. Directors who are also employees of directors. If a director is also one of our officers, we willthe Company are not payentitled to any compensation to such person for services rendered as a director.
Independent Directors
On May 27, 2022, the Compensation Committee and the Board each approved long-term incentive equity awards in the form of LTIP Units to each of the Company’s non-employee directors with respect to their accrued but unpaid director compensation fees as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Accrued Director Fees”). The Compensation Committee and the Board approved the issuance of LTIP Units in an amount determined based on each such director’s Accrued Director Fees divided by $11.75, which was the Company’s latest NAV per share of the Company’s Common Stock determined by the Board as of such date. The LTIP Units vest ratably in equal installments on each of the first three anniversaries of the date of grant, with vesting accelerating in the event of death, disability, retirement or a change in control, other than certain transactions whereby voting securities of the Company continue to represent a majority of the combined voting power of the successor entity after the transaction or in which no person or group owns 50% of the combined voting power of the successor entity. On February 28, 2023, the Compensation Committee awarded each non-employee director the LTIP Units for their accrued director fees for fiscal 2022, which were determined based on their fees earned from their annual retainer divided by $14.76, which is the Company’s current NAV determined by the Board in August 2022.
The following table sets forth information with respect to our independent director compensation during the fiscal year ended December 31, 2016:
| Name | | Fees Earned or Paid in Cash | | | Stock Awards ($) | | | Option Awards ($) | | | Non-Equity Incentive Plan Compensation ($) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | | All Other Compensation (1)($) | | | Total ($) | |
| | | | | | | | | | | | | | | | | | | | | | |
| Allen Wolff | | $ | 48,500 | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 48,500 | |
| David Chavez | | $ | 47,500 | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 47,500 | |
| Erik Hart | | $ | 46,500 | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 46,500 | |
| John Dawson | | $ | 54,750 | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 54,750 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 197,250 | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | $ | 197,250 | |
2022: | | | Fees Earned or | | | | | | | | | |
| | | Paid in Cash | | | Stock Awards | | | Total | |
Name | | ($) (2) | | | ($) (3) | | | ($) | |
Jeffrey B. Osher | | $ | 80,000 | | | $ | 24,583 | | | $ | 104,583 | |
Lorrence Kellar | | | 85,000 | | | | 28,333 | | | | 113,333 | |
Danica Holley | | | 70,000 | | | | 23,333 | | | | 93,333 | |
Damon Jones | | | 80,000 | | | | 24,583 | | | | 104,583 | |
Shawn Nelson (1) | | | 70,000 | | | | 13,007 | | | | 83,007 | |
Total | | $ | 385,000 | | | $ | 113,839 | | | $ | 498,839 | |
(1) | Amount represents reimbursement(1) | Effective December 31, 2022, Mr. Shawn Nelson retired from the Board of travelDirectors. The Compensation Committee determined Mr. Nelson’s retirement was a ‘qualifying termination’ under Mr. Nelson’s LTIP Unit Award Agreement dated May 27, 2022 (for his fiscal 2021 accrued director fees) and other expenses incurred byhis LTIP Unit Award Agreement dated February 28, 2023 (for his fiscal 2022 accrued director fees) and accelerated the vesting of his LTIP Units thereunder. |
| (2) | Reflects stock awards granted in May 2022 for services provided through December 31, 2021. Director compensation for the fiscal year ended December 31, 2022 was accrued and paid on February 28, 2023 in the form of LTIP Units in the following amounts: Jeff Osher – 5,420; Lorrence Kellar – 5,758; Danica Holley – 4,742; Damon Jones – 5,420; and Shawn Nelson – 4,742. |
| (3) | Amounts reflect the fair value of LTIP Units of the Operating Partnership awarded to the independent directors to attend variouson May 27, 2022 for accrued but unpaid director meetings.fees from August 21, 2021 through December 31, 2021. |
Compensation Committee Interlocks and Insider Participation
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Long-Term Incentive Plan
The Company’s board of directors has adopted a long-term incentive plan (the “Plan”) which the Company may use to attract and retain qualified directors, officers, employees and consultants. The Plan will offer these individuals an opportunity to participate in the Company’s growth through awards in the form of, or based on, the Company’s common stock. There are no awards outstanding under the Plan and the Company currently does not anticipate that it will issue awards under the Plan, although it may do so in the future, including possible equity grants to the Company’s independent directors as a form of compensation.
Directors and Executive Officers
The following table sets forth the total number and percentage of common stock beneficially owned as of March 22, 2022, by:
| • | Each director; |
| • | Each of our named executive officers set forth in the section entitled “Executive Compensation – Summary Compensation Table” in this Annual Report; and |
| • | All current executive officers and directors as a group. |
| | | Common Shares Beneficially Owned | |
Name and Address* | | Number | | | Percent | |
Manuel Chavez1 | | | 2,624,831 | | | 33.81 | % |
Stephanie Hogue1 | | | 2,624,831 | | | 33.81 | % |
Jeffrey B. Osher1 | | | 2,624,831 | | | 33.81 | % |
Lorrence T. Kellar | | | — | | | — | |
Danica Holley | | | — | | | — | |
Damon Jones | | | — | | | — | |
David Garfinkle | | | — | | | — | |
| | | | | | | | |
All directors and executive officers as a group (7 persons) | | | 2,624,831 | | | 33.81 | % |
* | Unless otherwise noted, (i) the percentage ownership is calculated based on 7,762,375 shares of our total outstanding Common Stock as of March 17, 2023, and (ii) the business address of the individuals named above is c/o Mobile Infrastructure Corporation, 30 W. 4th Street, Cincinnati, Ohio 45202. |
1 | Based on a Schedule 13D/A filed with the SEC by Mr. Chavez, Ms. Hogue, Mr. Osher, Color Up and HSCP Strategic III, L.P., a Delaware limited partnership and member of Color Up (“HS3”), on November 9, 2021, as amended. The shares of Common Stock are directly owned by Color Up. The amounts reported in the above table exclude and are not diluted for the: (i) the 7,495,090 shares of Common Stock which may be issued to Color Up upon redemption of the 7,495,090 OP Units of the Operating Partnership of which the Company is the sole general partner; (ii) the 1,702,128 shares of Common Stock which may be issued upon redemption of the 1,702,128 OP Units issued to HS3 on November 4, 2021 in the Securities Purchase Transaction; (iii) the 425,532 shares of Common Stock which may be issued upon redemption of the 425,532 Additional OP Units which HS3 may purchase upon exercise of the 425,532 Class A Units issued to HS3 on November 2, 2021 in the Securities Purchase Transaction, subject to adjustment as provided in the Class A Unit Agreement; (iv) the 411,967 shares of Common Stock which may be issued upon redemption of the 411,967 OP Units which may be issued upon the conversion of LTIP Units held by Chavez, Osher and Hogue, and (v) 1,500,000 OP Units which may be issued upon the conversion of the Performance Units held by Chavez and Hogue. The Issuer may elect, at its option, to pay cash in lieu of issuing shares of Common Stock for all or any redeemed OP Units, all as further described below in “Certain Relationships and Related Transactions, and Director Independence”. The Company may elect, at its option, to pay cash in lieu of issuing shares of Common Stock for all or any redeemed OP Units. The amounts included in the above table also exclude the shares of Common Stock issuable upon the exercise of warrants held by Color Up. Color Up has sole dispositive power over all 2,624,831 shares of Common Stock and sole voting power over all 2,624,831 shares of Common Stock. Each of Mr. Chavez, Ms. Hogue, Mr. Osher and HS3 has shared dispositive power over all shares of Common Stock and shared voting power over all shares of Common Stock. |
Security Ownership
Principal Stockholders
Shown below is certain information as of March 21, 2017,17, 2023, with respect to beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act, of 1934, as amended (the "Exchange Act"), of shares of common stockCommon Stock by the only persons or entities known to us to be a beneficial owner of more than 5% of the outstanding shares of common stock.Common Stock. Unless otherwise noted, the percentage ownership is calculated based on 2,490,6857,762,375 shares of our common stockCommon Stock outstanding as of March 21, 2017.
17, 2023.Beneficial Owner | | Beneficial Ownership | | Percent of Class | |
Color Up, LLC1 | Sole voting and investment power of 2,624,831 shares1 | | | 33.81 | % |
Manuel Chavez | | | | | |
Stephanie Hogue | | | | | |
Jeffrey B. Osher | | | | | |
30 W. 4th Street | | | | | |
Cincinnati, Ohio 45202 | | | | | |
| | | | | | |
The following table sets forth the total number and percentage of our common stock beneficially owned as of March 21, 2017, by:
·HSCP Strategic III, L.P.1 | Shared investment power of 2,624,831 shares1 | | | 33.81 | % |
503 Montgomery Street, Suite 1250 | | | | | |
San Francisco, California 94111 | | | | | |
1 | Based on a Schedule 13D/A filed with the SEC by Mr. Chavez, Ms. Hogue, Mr. Osher, Color Up and HSCP Strategic III, L.P., a Delaware limited partnership and member of Color Up (“HS3”), on November 9, 2021, as amended. The shares of Common Stock are directly owned by Color Up. The amounts reported in the above table exclude and are not diluted for the: (i) the 7,495,090 shares of Common Stock which may be issued to Color Up upon redemption of the 7,495,090 OP Units of the Operating Partnership of which the Company is the sole general partner; (ii) the 1,702,128 shares of Common Stock which may be issued upon redemption of the 1,702,128 OP Units issued to HS3 on November 4, 2021 in the Securities Purchase Transaction; (iii) the 425,532 shares of Common Stock which may be issued upon redemption of the 425,532 Additional OP Units which HS3 may purchase upon exercise of the 425,532 Class A Units issued to HS3 on November 2, 2021 in the Securities Purchase Transaction, subject to adjustment as provided in the Class A Unit Agreement; (iv) the 411,967 shares of Common Stock which may be issued upon redemption of the 411,967 OP Units which may be issued upon the conversion of LTIP Units held by Chavez, Osher and Hogue, and (v) 1,500,000 OP Units which may be issued upon the conversion of the Performance Units held by Chavez and Hogue. The Issuer may elect, at its option, to pay cash in lieu of issuing shares of Common Stock for all or any redeemed OP Units, all as further described below in “Certain Relationships and Related Transactions, and Director Independence”. The Company may elect, at its option, to pay cash in lieu of issuing shares of Common Stock for all or any redeemed OP Units. The amounts included in the above table also exclude the shares of Common Stock issuable upon the exercise of warrants held by Color Up. Color Up has sole dispositive power over all 2,624,831 shares of Common Stock and sole voting power over all 2,624,831 shares of Common Stock. Each director; |
· | Our chief executive officer, chief financial officerof Mr. Chavez, Ms. Hogue, Mr. Osher and the officersHS3 has shared dispositive power over all shares of our manager who function as the equivalentCommon Stock and shared voting power over all shares of our executive officers; andCommon Stock. |
· | All executive officers and directors as a group. |
Unless otherwise noted, the percentage ownership is calculated based on 2,490,685 shares of our total outstanding common stock and 2,678 shares of our total outstanding preferred stock as of March 21, 2017:
| | | | | Common Shares Beneficially Owned | | Preferred Shares Beneficially Owned |
| Beneficial Owner | | Address | | Number | | Percent | | Number | | Percent |
| Michael V. Shustek | | 8880 W. Sunset Rd Las Vegas, NV 89148 | | 8,579 | | <1% | | -- | | -- |
| Ed Bentzen | | 8880 W. Sunset Rd Las Vegas, NV 89148 | | -- | | -- | | -- | | -- |
| Allen Wolff | | 7275 Sitio Lima Carlsbad, CA 92009 | | -- | | -- | | *26.5 | | 1.32% |
| David Chavez | | 28 Strada Prinicipale Henderson, NV 89011 | | -- | | -- | | -- | | -- |
| Erik Hart | | 4004 Murphy Rd. Memphis, IN 47143 | | -- | | -- | | -- | | -- |
| John E. Dawson | | 1321 Imperia Drive Henderson, NV 89052 | | ** 4,390 | | <1% | | -- | | -- |
| | | | | | | | | | | |
| | | | | | | | | | | |
| All directors and executive officers as a group | | | | 12,969 | | <1% | | 26.5 | | 1.32% |
* Along with the purchase of these 26.5 shares, Mr. Wolff received 750 warrants. The Warrants may be exercised after the 90th day following the occurrence of a Listing Event, at an exercise price, per share, equal to 110% of the volume weighted average closing price during the 20 trading days ending on the 90th day after the occurrence of such Listing Event; however, in no event shall the exercise price of the Warrants be less than $25 per share.
** These shares are held by the Darlene Lyndes TTEE & John Dawson TTEE - GST Trust under the Redd 1996 Trust. Mr. Dawson has control of the trust, but has no economic benefit in the trust.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ConflictsRelated Party Transactions
The descriptions of Interests
Weagreements in this “Certain Related Person Transactions” section do not purport to be complete and are subject to,
various conflictsand qualified in their entirety by, reference to the actual agreements, copies of
interest arising outcertain of
which are filed as exhibits to our
relationshipAnnual Report and other filings with the
Advisor and other affiliates, including (1) conflicts related toSEC.A “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) or a proposed transaction in which (i) we were, are or will be a participant, (ii) the compensation arrangements betweenamount involved exceeds the Advisor, certain affiliates and us, (2) conflicts with respect to the allocationlesser of $120,000 or 1.0% of the timeaverage of the AdvisorCompany’s total assets at year end for the last two completed fiscal years and its key personnel and (3) conflicts with respect to the allocation of investment opportunities. Our independent directors have an obligation to function on our behalf in all situations in which a conflict of interest may arise and(iii) any related person had, has or will have a fiduciary obligation to act on behalfdirect or indirect material interest.
A “related person” means any person who is, or at any time since January 1, 2021 was:
| • | a director, a nominee for director or an executive officer of the Company; |
| • | known to us to be the beneficial owner of more than 5.0% of the outstanding shares of common stock when a transaction in which such person had a direct or indirect material interest occurred or existed; |
| • | an immediate family member of any of the persons referenced in the preceding two bullets, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of any of the persons referenced in the preceding two bullets, and any person (other than a tenant or employee) sharing the household of any of the persons referenced in the preceding two bullets; or |
| • | a firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10.0% or greater beneficial ownership interest. |
We have adopted a written Code of Ethics that describe the consideration and approval of related person transactions. Under the Code of Ethics, we may not enter into a transaction from which any director or executive officer, any member of the stockholders.
Please referimmediate family of any director or executive officer or other related person, may derive an improper benefit, unless that transaction has been disclosed or made known to Note E – Related Party Transactionsour Board and Arrangementsa majority of the Board (including a majority of the Independent Directors) not otherwise interested in Part II, Item 8 Financial Statementsthe transaction reviews and approves or ratifies the transaction by affirmative vote as fair and reasonable to the Company and on terms not less favorable to the Company than those available from unaffiliated third parties. In determining whether to approve or ratify a transaction, our Board (including a majority of the Independent Directors) not otherwise interested in the transaction, as the case may be, shall also act in accordance with any applicable provisions of our Charter and Bylaws, consider all of the relevant facts and circumstances and approve only those transactions that they determine are fair and reasonable to us. All related person transactions described in this Annual Report were reviewed and approved or ratified in accordance with our policies, Code of Ethics, Charter and Bylaws, each as described above, and Maryland law. In the event of doubt, an officer or director of the company must disclose a suspected related person transaction to the Chair of the Audit Committee, or as otherwise directed in the Code of Ethics, to determine if the transaction requires the approvals set forth in the Code of Ethics. A copy of our Code of Ethics is available on Form 10-K, for information regarding our related party transactions, which are incorporated herein by reference. Please also see "Risk Factors – Risks Related to Conflict of Interests." in Part I, Item 1A Financial Statements of this Annual Report on Form 10-K
website, www.mobileIT.com.Certain Conflict Mitigation Measures
In order to reduce or mitigate certain potential conflicts of interests, we havethe Company has adopted the procedures set forth below.
Advisor Compensation
below, which includes procedures imposed by the NASAA REIT Guidelines. The independent directors evaluate at least annually whether the compensation that we contract to payCompany will no longer be subject to the Advisor and its affiliates is reasonable in relation to the nature and quality of services performed and whether such compensation is within the limits prescribed by our charter. The independent directors supervise the performancerequirements of the Advisor and its affiliates and the compensation we pay to them to determine whether the provisions of the advisory agreement are being carried out. This evaluation is based on the following factors as well as any other factors they deem relevant:
· | the amount of the fees and any other compensation, including stock-based compensation, paid to our advisor and its affiliates in relation to the size, composition and performance of the assets; |
· | the success of our advisor in generating appropriate investment opportunities; |
· | the rates charged to other companies, including other REITs, by advisors performing similar services; |
· | additional revenues realized by our advisor and its affiliates through their relationship with us, including whether we pay them or they are paid by others with whom we do business; |
· | the quality and extent of service and advice furnished by our advisor and its affiliates; |
· | the performance of our investment portfolio; and |
· | the quality of our portfolio relative to the investments generated by our advisor and its affiliates for their own account and for their other clients. |
Term of Advisory Agreement
Each contract for the services of the Advisor may not exceed one year, although there is no limit on the number of times that we may retain a particular advisor. Our charter provides that a majority of the independent directors may terminate the advisory agreement with MVP Realty Advisors, LLC without cause or penalty on 60 days' written notice. MVP Realty Advisors, LLC may terminate the advisory agreement with good reason on 60 days' written notice.
Independent Directors
The NASAA REIT Guidelines
require our charterif and when the Company lists its shares on a national securities exchange and amends the Charter.Independent Directors
Pursuant to definethe NASAA REIT Guidelines, the Charter defines an independent director as a director who is not and has not for the last two years been associated, directly or indirectly, with ourthe Sponsor or the Advisor.Advisor (as such terms are defined in the Charter). A director is deemed to be associated with ourthe Sponsor or the Advisor if he or she owns any interest in, is employed by, is an officer or director of, or has any material business or professional relationship with ourthe Sponsor, the Advisor or any of their affiliates, performs services (other than as a director) for us, or serves as a director or trustee for more than three (3) REITs sponsored by ourthe Sponsor or advised by the Advisor. A business or professional relationship will be deemed material per se if the gross revenue derived by the director from ourthe Sponsor, the Advisor or any of their affiliates exceeds five percent (5%) of (1) the director'sdirector’s annual gross revenue derived from all sources during either of the last two years or (2) the director'sdirector’s net worth on a fair market value basis. An indirect relationship is defined to include circumstances in which the director'sdirector’s spouse, parents, children, siblings, mothers- ormothers-or fathers-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is or has been associated with us, ourthe Company, the Sponsor, the Advisor or any of its affiliates.
See Item 10-“Independent Directors of the Company” concerning the Company’s current independent directors, each of whom meet the above-definition of independent director.A majority of our boardthe members of directors,the Board, including a majority of the independent directors, must determine the method used by the Advisor for the allocation of the acquisition of investments by two or more affiliated programs seeking to acquire similar types of assets is fair and reasonable to us. OurThe Company’s independent directors, acting as a group, will resolve potential conflicts of interest whenever they determine that the exercise of independent judgment by the full board of directorsBoard or the Advisor or its affiliates could reasonably be compromised. However, the independent directors may not take any action which, under Maryland law, must be taken by the entire board of directorsBoard or which is otherwise not within their authority. The independent directors, as a group, are authorized to retain their own legal and financial advisors. Among the matters we expect the independent directors to review and act upon are:
· | the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement and the property management agreement; |
·• | transactions with affiliates, including our directors and officers; |
· | • | awards under our equity incentive plan; and |
· | • | pursuit of a potential liquidity event. |
Those conflict of interest matters that cannot be delegated to the independent directors, as a group, under Maryland law must be acted upon by both the board of directorsBoard and the independent directors.
OurThe Company’s Acquisitions
WeThe Company will not purchase or lease assets in which our Sponsor, the Advisor, any of ourthe Company’s directors or any of their affiliates has an interest without a determination by a majority of ourthe Company’s directors (including a majority of the independent directors) not otherwise interested in the transaction that such transaction is fair and reasonable to us and at a price to us no greater than the cost of the asset to ourthe Sponsor, the Advisor, the director or the affiliated seller or lessor, unless there is substantial justification for the excess amount and such excess is reasonable. In no event may wethe Company acquire any such asset at an amount in excess of its current appraised value.
The consideration we paythe Company pays for real property will ordinarily be based on the fair market value of the property as determined by a majority of the members of the board of directorsBoard or the members of a duly authorized committee of the board. In cases in which a majority of ourthe Company’s independent directors so determine, and in all cases in which real property is acquired from our Sponsor, the Advisor, any of ourthe Company’s directors or any of their affiliates, the fair market value shall be determined by an independent expert selected by ourthe Company’s independent directors not otherwise interested in the transaction.
Pursuant to the Stockholders’ Agreement described below, until such time as the Stockholders’ Agreement is terminated, the prior approval of one Incumbent Director and a majority of the Color Up Designated Directors shall be required for certain transactions, including without limitation, (i) any merger or sale of the Company or substantially all its assets, (ii) amendments to the Company’s Charter or bylaws, (iii) the authorization or issuance of any equity securities or any securities convertible into or exercisable for equity securities of the Company, (iv) any change in the authorized number of directors of the Board or establishment or abolition of any committee thereof; (v) any incurrence or repayment of indebtedness in an aggregate amount over a certain threshold, (vi) any declaration of dividends, (vii) any appointment or termination of any person as the chief executive officer, president or chief financial officer of the Company, (viii) any related party transactions, (ix) any amendment or waiver, or termination of certain provisions, of the Stockholders’ Agreement or (x) any amendment or waiver of the Tax Matters Agreement or the Warrant Agreement, each as described below.
Loans
WeThe Company will not make any loans to our Sponsor, our Advisor or ourthe Company’s directors or officers or any of their affiliates (other than mortgage loans complying with the limitations set forth in Section V.K.3 of the NASAA REIT Guidelines or loans to wholly owned subsidiaries). In addition, wethe Company will not borrow from these affiliates unless a majority of our boardthe members of directorsthe Board (including a majority of the independent directors) not otherwise interested in the transaction
approves the transaction as being fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties. These restrictions on loans will only apply to advances of cash that are commonly viewed as loans, as determined by our board of directors.
the Board.Other Transactions Involving Affiliates
A majority of ourthe Company’s directors, including a majority of the independent directors not otherwise interested in the transaction, must conclude that all other transactions between usthe Company and ourthe Sponsor, the Advisor, any of ourthe Company’s directors or any of their affiliates are fair and reasonable to usthe Company and on terms and conditions not less favorable to usthe Company than those available from unaffiliated third parties. To the extent that we contemplatethe Company contemplates any transactions with affiliates, members of our boardthe Board who serve on the board of the affiliated entity will be deemed "interested directors"“interested directors” and will not participate in approving or making other substantive decisions with respect to such related party transactions.
Limitation on Operating Expenses
After commencement of this offering, in compliance with the NASAA REIT Guidelines, our Advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. "Average invested assets" means the average of the aggregate monthly book value of our assets during a specified period invested, directly or indirectly in equity interests in and loans secured by real estate, before deducting depreciation, bad debts or other non-cash reserves. "Total operating expenses" means all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisory fees, but excluding (i) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (ii) interest payments; (iii) taxes; (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves; (v) incentive fees paid in compliance with the NASAA REIT Guidelines; (vi) acquisition fees and expenses; (vii) real estate commissions on the sale of real property; and (viii) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).
Notwithstanding the foregoing, to the extent that operating expenses payable or reimbursable by us exceed these limits and the independent directors determine that the excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient, our Advisor may be reimbursed in future periods for the full amount of the excess expenses or any portion thereof. Within 60 days after the end of any fiscal quarter for which our total operating expenses for the four consecutive fiscal quarters then ended exceed these limits, we will send our stockholders a written disclosure of such fact, together with an explanation of the factors our independent directors considered in determining that such excess expenses were justified. In addition, our independent directors will review the total fees and expense reimbursements for operating expenses paid to our Advisor to determine if they are reasonable in light of our performance, our net assets and income, and the fees and expenses of other comparable unaffiliated REITs.
Issuance of Options and Warrants to Certain Affiliates
Until ourthe Company’s shares of common stock are listed on a national securities exchange, wethe Company will not issue options or warrants to purchase our common stock to our Advisor, our Sponsor, any of ourthe Company’s directors or any of their affiliates, except on the same terms as such options or warrants, if any, are sold to the general public. We may issue options or warrants to persons other than our Advisor, our Sponsor, ourthe Company’s directors and their affiliates prior to listing ourthe Company’s common stock on a national securities exchange, but not at an exercise price less than the fair market value of the underlying securities on the date of grant and not for consideration (which may include services) that in the judgment of our board of directorsthe Board has a market value less than the value of such option or warrant on the date of grant. Any options or warrants we issue to ourthe Advisor, ourthe Sponsor or any of their affiliates shall not exceed an amount equal to 10% of the outstanding shares of ourthe Company’s common stock on the date of grant.
Relationship with Color Up, Bombe and Affiliates Thereof
Prior to August 25, 2021, a special committee (the “Special Committee”) of the Board consisting of John E. Dawson, Robert J. Aalberts and Shawn Nelson approved the Equity Purchase and Contribution Agreement (the “Purchase Agreement”) described below. In connection with the Closing of the transactions contemplated by the Purchase Agreement (collectively, the “Transaction”), Messrs. Dawson, Aalberts and Shustek resigned their directorships and Manuel Chavez, Stephanie Hogue, Jeffrey B. Osher, Lorrence T. Kellar, Danica Holley and Damon Jones were elected to the Company’s Board.
Color Up was formed for the purpose of consummating the transactions contemplated by the Purchase Agreement and investing in the shares of common stock. Mr. Chavez, a Manager and the Chief Executive Officer of Color Up, was elected Chairman of the Board and Chief Executive Officer of the Company, effective August 25, 2021. Ms. Hogue, a Manager and the President of Color Up, was elected President of the Company and a member of the Board, effective August 25, 2021 (and later as Chief Financial Officer). Both Mr. Chavez and Ms. Hogue are Managing Partners of Bombe. Mr. Osher, also a Manager of Color Up, was elected to the Board, effective August 25, 2021. Mr. Osher is a control person of HS3, and is portfolio manager of No Street GP LP, a registered investment adviser. On August 25, 2021, the Company also entered into the 2021 Employment Agreements with each of Mr. Chavez and Ms. Hogue as more fully described in this Annual Report.
As of March 17, 2023, Mr. Chavez, Ms. Hogue and Mr. Osher beneficially owned through Color Up, 2,624,831 shares of Common Stock, or 33.81% of the outstanding Common Stock as of such date, warrants to purchase 1,702,128 shares of Common Stock and 7,495,090 OP Units, or approximately 44.2% of the outstanding OP Units as of such date, and Mr. Osher beneficially owned through HS3 an additional 1,702,128 OP Units or approximately 10.1% of the outstanding OP Units as of such date, and 425,532 Class A Units. Mr. Chavez, Ms. Hogue and Mr. Osher also beneficially own certain LTIP Units and Performance Units of the Company’s Operating Partnership, as further set forth in this Annual Report.
Reports
Equity Purchase and Contribution Agreement
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII”), and Michael V. Shustek (“Mr. Shustek” and together with VRMI and VRMII, the “Former Advisor”) and Color Up (the “Purchaser”). The transactions contemplated by the Purchase Agreement are referred to Stockholders
Weherein collectively as the “Transaction.”The Transaction contemplated in the Purchase Agreement closed on August 25, 2021 (the “Closing”). As a result of the Transaction, at Closing, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will prepareprovide Management real-time information on the performance of assets. Management has been implementing the contributed proprietary technology into its legacy garages. Pursuant to the Closing, the Operating Partnership issued 7,495,090 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $84.1 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.8 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an annual reportexercise price of $11.75 for an aggregate cash purchase price of up to $20 million.
Tender Offer
Pursuant to the Purchase Agreement, Color Up agreed that, as promptly as practicable after the Closing, it would commence the Tender Offer and the Company agreed (i) that prior to the Closing, the Board would recommend that stockholders accept the Tender Offer and (ii) to take all steps necessary to cause any offering memorandum relating to the Tender Offer to be distributed to the Company’s stockholders. In the event that the Company’s stockholders tender a number of shares less than the Tender Offer amount, the Company agreed to, at Color Up’s sole discretion, offer to issue and sell to Color Up the Company Backstop such that Color Up may acquire a total number of shares equal to the Tender Offer amount after giving effect to the Tender Offer and the Company Backstop.
On October 5, 2021, Color Up commenced the Tender Offer upon the terms and subject to the conditions set forth in that certain Offer to Purchase, dated October 5, 2021 and in the related Letter of Transmittal, copies of which are attached as exhibits to Schedule TO filed with the SEC on October 5, 2021, and the Board recommended that the stockholders of the Company accept the offer by Color Up to purchase up to 900,506 of the outstanding shares of common stock of the Company and tender their shares of common stock pursuant to the Tender Offer. On November 8, 2021, Color Up, following the expiration of the Tender Offer on November 5, 2021, accepted for purchase an aggregate of 878,082 shares of common stock that had been validly tendered and not validly withdrawn pursuant to the Tender Offer at $11.75 per share, or an aggregate consideration of $10,317,468. Also on November 8, 2021, the Company and Color Up entered into a subscription agreement pursuant to which Color Up purchased the remaining 22,424 shares of common stock not tendered in the Tender Offer pursuant to the Company Backstop at $11.75 per share, or an aggregate consideration of $263,482.
In connection with the Tender Offer, the Company’s Board of Directors agreed to reimburse Color Up for the fees and costs incurred in connection with the Tender Offer. The Company paid approximately $0.1 million as reimbursement of such tender offer fees and expenses.
Stockholders’ Agreement
The Company entered into the Stockholder’s Agreement, pursuant to which, until such time as the Stockholders’ Agreement is terminated, the prior approval of one Incumbent Director and a majority of the Color Up Designated Directors shall be required for certain transactions, including without limitation, (i) any merger or sale of the Company or substantially all its assets, (ii) amendments to the Company’s Charter or Bylaws, (iii) the authorization or issuance of any equity securities or any securities convertible into or exercisable for equity securities of the Company, (iv) any change in the authorized number of directors of the Board or establishment or abolition of any committee thereof; (v) any incurrence or repayment of indebtedness in an aggregate amount over a certain threshold, (vi) any declaration of dividends, (vii) any appointment or termination of any person as the chief executive officer, president or chief financial officer of the Company, (viii) any related party transactions, (ix) any amendment or waiver, or termination of certain provisions, of the Stockholders’ Agreement or (x) any amendment or waiver of the Tax Matters Agreement or the Warrant Agreement, each as described below.
The Stockholders’ Agreement also contains certain standstill provisions restricting, subject to certain customary exclusions, Color Up from, among other things, acquiring (or seeking or making any proposal or offer with respect to acquiring) additional shares of common stock or any security convertible into common stock or any assets of the Company. In addition, the Company has agreed that, in the event the Company proposes to issue additional securities, Color Up will have the right to purchase an amount of securities so that its ownership percentage will not be diluted by the issuance of additional securities. Under the terms of the Stockholders’ Agreement, except for limited circumstances, Color Up is prohibited from selling or transferring its shares of common stock until six months following a Liquidity Event (defined as an initial public offering or a listing of the shares of common stock on a national securities exchange). A transfer of any of Color Up’s shares of common stock to a Permitted Transferee (defined to include any member of Color Up) is permissible under the Stockholders’ Agreement. Except for the transfer restrictions set forth above, the Stockholders’ Agreement terminates upon a Liquidity Event or written agreement of the parties. Until a Liquidity Event and subject to certain limited exceptions, Color Up (and its Permitted Transferees) are prohibited from, directly or indirectly, (i) having an ownership interest in, or permitting such party’s name to be used in connection with, any business in any central business district in North America which is primarily engaged in the business of acquiring, investing in, owning, operating or leasing parking lots or parking garages and (ii) soliciting or attempting to solicit any clients or customers of the Company or any of its subsidiaries for the purpose of diverting their business or service from the Company or any of its subsidiaries.
Tax Matters Agreement
On August 25, 2021, the Company, the Operating Partnership and Color Up entered into the Tax Matters Agreement (the “Tax Matters Agreement”), pursuant to which the Operating Partnership agreed to indemnify Color Up and certain affiliates and transferees of Color Up (together, the “Protected Partners”) against certain adverse tax consequences in connection with (1) (i) a taxable disposition of certain specified properties and (ii) certain dispositions of the Protected Partners’ interest in the Operating Partnership, in each case, prior to the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied); and (2) the Operating Partnership’s failure to provide the Protected Partners the opportunity to guarantee a specified amount of debt of the Operating Partnership during the period ending on the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied). In addition, and for so long as the Protected Partners own at least 20% of the units in the Operating Partnership received in the Transaction, the Company agreed to use commercially reasonable efforts to provide the Protected Partners with similar guarantee opportunities.
Warrant Agreement
On August 25, 2021, the Company entered into a Warrant Agreement (the “Warrant Agreement”), pursuant to which the Company issued the Common Stock Warrants to Color Up to purchase up to 1,702,128 of the Company’s shares of Common Stock, at an exercise price of $11.75 per share for an aggregate cash purchase price of up to $20,000,000. Each whole Warrant entitles the registered holder thereof to purchase one whole share of Common Stock at a price of $11.75 per Share (the “Warrant Price”), subject to adjustment as discussed below, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or listing of the Common Stock on the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (each, a “Trading Market”). The Common Stock Warrants expire five years after the date of the Warrant Agreement, at 5:00 p.m., New York City time. The Warrant Agreement provides that if the exercise of the Common Stock Warrants would require the Company to obtain stockholder approval pursuant to any applicable listing standards of the Trading Market on which the Common Stock is listed, the Company will, at its discretion, either obtain such stockholder approval or deliver itcash in lieu of shares of Common Stock otherwise deliverable upon the exercise of such Warrant. If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split of outstanding shares of Common Stock or other similar event, or decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then the number of shares of Common Stock issuable upon exercise of each Warrant shall be increased or decreased, as applicable, in proportion to oursuch increase or decrease, as applicable, in outstanding shares of Common Stock. Whenever the number of shares of Common Stock purchasable upon the exercise of the Common Stock Warrants is adjusted, as described above, the Warrant Price will be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Common Stock Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. The Warrant Agreement further provides that, in lieu of issuing fractional shares, the Company will make a cash payment equal to the Fair Market Value (as defined in the Warrant Agreement) of one share of Common Stock multiplied by such fraction.
Securities Purchase Agreement
On November 2, 2021, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) by and among the Company, the Operating Partnership, and HS3, pursuant to which, on November 2, 2021 (the “Securities Purchase Closing Date”), the Operating Partnership issued and sold to HS3 (a) 1,702,128 newly-issued OP Units; and (b) 425,532 newly-issued Class A units of limited partnership of the Operating Partnership (“Class A Units”) which entitle HS3 to purchase up to 425,532 additional OP Units (the “Additional OP Units”) at an exercise price equal to $11.75 per Additional OP Unit, subject to adjustment as provided in the Class A Unit Agreement (as defined below), and HS3 paid to the Operating Partnership cash consideration of $20,000,000 (the “Securities Purchase Transaction”). The Securities Purchase Agreement Transaction and the Securities Purchase Agreement and related agreements were evaluated, negotiated and unanimously approved by the members of the Board who were determined by the Board to be disinterested with respect to the Securities Purchase Transaction and the Board.
Under the Securities Purchase Agreement, the parties made customary representations and warranties for transactions of this type. Pursuant to the terms of the Securities Purchase Agreement, the representations and warranties made under the Securities Purchase Agreement will survive for six months after the Securities Purchase Closing Date and the Company and the Operating Partnership, on one hand, and HS3, on the other hand, will indemnify each other party and certain of their respective representatives against losses arising out of certain material breaches of, and certain third party claims related to, the Securities Purchase Agreement and the Securities Purchase Transactions.
In connection with the issuance of the OP Units and the Class A Units under the Securities Purchase Agreement, the Board amended and restated the limited exception to the restrictions on ownership and transfer of common stockholders within 120stock set forth in the Charter previously granted to Color Up, HS3 and certain of its affiliates to allow these parties to own, directly or indirectly, in the aggregate, up to 15,200,000 shares of common stock (the “Excepted Holder Limit”) and up to five percent (5%) of any outstanding class of preferred stock of the Company. The grant of this exception is conditioned upon the receipt of various representations and covenants set forth in the Request for Waiver of Ownership Limit, made by Color Up and HS3 to the Company, confirming, among other things, that none of HS3, Color Up, nor certain of their affiliates may own, directly or indirectly, more than 4.9% of the interests in a tenant of the Company (or subsidiary of the Company) that comprises more than three percent (3%) of the gross income of the Company as determined for purposes of Section 856(c)(2) of the Internal Revenue Code of 1986, as amended. The request also includes representations intended to confirm that the Purchaser, Color Up, and certain of their affiliates’ ownership of common stock will not cause the Company to otherwise fail to qualify as a real estate investment trust for federal income tax purposes.
Registration Rights Agreement
The Company terminated its existing registration rights agreement dated as of March 29, 2019, and on August 25, 2021, entered into a separate Registration Rights Agreement with Color Up (the “Registration Rights Agreement”), pursuant to which the Company granted the Holders (as defined in the Registration Rights Agreement) certain registration rights with respect to the Registrable Securities (as defined below) of the Company. Among other things, the Registration Rights Agreement requires the Company to register (i) the shares of Common Stock purchased pursuant to the Purchase Agreement, (ii) shares of Common Stock, if any, issued upon the redemption of OP Units purchased pursuant to the Purchase Agreement, (iii) shares of Common Stock acquired pursuant to the Tender Offer, (iv) shares of Common Stock issuable upon redemption of the Common Stock Warrants, (v) the Common Stock Warrants and (vi) any additional securities issued or issuable as a dividend or distribution on, in exchange for, or otherwise in respect of, such shares of Common Stock and OP Units (including as a result of combinations, recapitalizations, mergers, consolidations, reorganizations, stock splits or otherwise) (collectively, the “Registrable Securities”). The Holders are entitled to make a written demand for registration under the Securities Act of all or part of their Registrable Securities; provided, however, that the Company is not required to file a registration statement prior to (x) 180 days after the endinitial listing of the Registrable Securities on a national securities exchange or (y) the expiration of any other lock-up period imposed with respect to the Registrable Securities pursuant to the Stockholders’ Agreement. In addition, the Holders are entitled to “piggy-back” registration rights to registration statements filed by the Company. The Company will bear all of the expenses incurred in connection with the filing of any such registration statement.
On November 2, 2021, the Company entered into an amended and restated registration rights agreement with Color Up and HS3 (the “A&R Registration Rights Agreement”), pursuant to which the Company granted the Holders (as defined in the A&R Registration Rights Agreement) certain registration rights with respect to the shares of common stock issuable upon redemption of Additional OP Units issued upon exercise of the Class A Units in addition to the other Registrable Securities (as defined in the Registration Rights Agreement described above).
Operating Partnership Agreement
On August 25, 2021, the Company entered into an Amended and Restated Agreement of Limited Partnership of the Operating Partnership to facilitate the transactions contemplated by the Purchase Agreement and to admit Color Up as a limited partner.
On November 2, 2021, the Company, the Operating Partnership, Color Up and HS3 entered into a Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership to facilitate the Securities Purchase Transaction which, among other things, provided for the issuance by the Operating Partnership of Class A Units having the rights and preferences as may be set forth in a Class A Unit agreement.
On March 18, 2022, the Company, the Operating Partnership and the other limited partners entered into a Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership to change the name of the Operating Partnership to Mobile Infra Operating Partnership, L.P. and to reflect the merger of MVP REIT II Holdings, LLC, a wholly owned subsidiary of the Company, with and into the Company with the Company surviving, such that the Company was the sole, direct general partner of the Operating Partnership.
Class A Unit Agreement
The Operating Partnership issued the Class A Units pursuant to a Class A Unit agreement (the “Class A Unit Agreement”) also dated as of the Securities Purchase Closing Date, which provides that each whole Class A Unit entitles the registered holder thereof to purchase one whole OP Unit at a price of $11.75 per share (the “Class A Unit Price”), subject to adjustment as discussed below, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or listing of the common stock of the Company on a Trading Market. The Class A Units expire five years after the date of the Class A Unit Agreement, at 5:00 PM, New York City time. The Class A Units may also be exercised on a cashless basis by surrendering Additional OP Units in lieu of payment of the aggregate Class A Unit Price at the Purchaser’s election. If the number of outstanding OP Units is increased by a dividend payable in OP Units, or by a split-up of OP Units or other similar event, or decreased by a consolidation, combination, reverse split or reclassification of OP Units or other similar event, then the number of Additional OP Units issuable on exercise of each fiscal year. Our directors are requiredClass A Unit shall be increased or decreased, as applicable, in proportion to take reasonable stepssuch increase or decrease, as applicable, in outstanding OP Units. Whenever the number of Additional OP Units purchasable upon the exercise of the Class A Units is adjusted, as described above, the Class A Unit Price will be adjusted (to the nearest cent) by multiplying such Class A Unit Price immediately prior to ensuresuch adjustment by a fraction (x) the numerator of which shall be the number of OP Units redeemable upon the exercise of the Class A Units immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so redeemable immediately thereafter. The Class A Unit Agreement further provides that, in lieu of issuing fractional units, the Operating Partnership will make a cash payment equal to the Fair Market Value (as defined in the Class A Unit Agreement) of one OP Unit multiplied by such fraction.
License Agreement
On August 25, 2021, the Company entered into a Software License and Development Agreement (the “License Agreement”) with an affiliate of Bombe (the “Supplier”), pursuant to which the Company granted to the Supplier a limited, non-exclusive, non-transferable, worldwide right and license to access certain software and services for a fee of $5,000 per month.
Assignment of Litigation Agreement
On August 25, 2021, the Company also entered into an Assignment of Claims, Causes of Action, and Proceeds Agreement (the “Assignment of Litigation Agreement”) pursuant to which (i) the Company assigned to the Former Advisor all of the Company’s right, title, interest, and benefits, whether legal, equitable, or otherwise, in and to any and all of the claims and causes of action that the Company may have against certain parties and any amounts that may be recovered or awarded to the Former Advisor on such claims and (ii) the Former Advisor agreed to indemnify the Company against all liabilities in connection with the assignment.
Services Agreement
On August 25, 2021, the Company entered into an amendment to the Services Agreement, dated as of March 29, 2019, between, among others, the Company and the Advisor, to provide that upon Closing, the Advisor will be entitled to receive a one-time consulting fee in an amount equal to $800,000 in lieu of four annual report compliespayments of $200,000 for the services set forth therein.
Contribution Agreement
On August 25, 2021, the Company entered into an amendment to the Contribution Agreement, dated as of April 1, 2019, which was entered into in connection with our charter provisions. Among the mattersinternalization of the Company’s management function. Pursuant to such amendment, and in connection with the Closing of the Transaction and the entry by the Company into the settlement of putative class action litigation in which the Company is a defendant, the Advisor agreed to surrender its claim to 400,000 shares of Common Stock that mustwould otherwise be includeddue to the Advisor from the Company on December 31, 2021.
Merger Agreement with Mobile Infrastructure Trust
On May 27, 2022, the Company entered into an Agreement and Plan of Merger by and between the Company and Mobile Infrastructure Trust, a Maryland real estate investment trust (“MIT”), which is 100% owned by Bombe Asset Management LLC (“Bombe”), an Ohio limited liability company owned by Mr. Chavez and Ms. Hogue. On September 26, 2022, the Company and MIT entered into an amended and restated Agreement and Plan of Merger (as so amended and restated, the “MIT Merger Agreement”). Pursuant to the terms of the Merger Agreement, the Company proposed to merge with and into MIT, with MIT continuing as the surviving entity resulting from the merger. On December 13, 2022, the MIT Merger Agreement was terminated pursuant to the proposed Merger.
Color Up Lock-Up Agreement
On December 13, 2022, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among Fifth Wall Acquisition Corp. III, a Cayman Islands exempted company (“FWAC”), Queen Merger Corp. I, a Maryland corporation and a wholly-owned subsidiary of FWAC (“Merger Sub”), and the Company. Pursuant to the Merger Agreement, Color Up entered into a lock-up agreement (“Color Up Lock-up Agreement”) with the Company and FWAC. Pursuant to the Color Up Lock-up Agreement, Color Up agreed, among other things, that their shares received as MIC Common Stock Merger Consideration (as defined in the annual reportMerger Agreement) may not be transferred until, subject to certain customary exceptions, the earlier to occur of (a) six (6) months following closing and (b) the date after the closing on which FWAC completes a liquidation, merger, capital stock exchange, reorganization or includedother similar transaction that results in all of FWAC’s shareholders having the right to exchange their equity holdings in FWAC for cash, securities or other property.
Family Relationships
There were no family relationships to disclose for the fiscal year ended December 31, 2022.
Other Matters
Two of the Company’s Cincinnati assets, 1W7 Carpark and 222W7, are currently operated by PCA, Inc., d/b/a Park Place Parking. Park Place Parking is a private parking operator that is wholly owned by relatives of the Company’s Chief Executive Officer, Manuel Chavez. Mr. Chavez is neither an owner nor a beneficiary of Park Place Parking. Park Place Parking has been operating these assets for four and three years, respectively. Both assets were acquired with their management agreements in place and at the same terms under which they were operating prior to the Transaction. As of January 1, 2023, both assets are operating under the New Lease Structure and are no longer separately managed.
The Company has an investment in MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”). Pursuant to the Closing, the Former Advisor and Mr. Shustek, were replaced as manager of MVP Parking, DST, LLC, the entity that manages MVP St. Louis, by the Company's CEO.
In March 2022, the Company entered into an agreement with MIT, an affiliate of Bombe, requiring the Company to be allocated, bear and (where practicable) pay directly certain costs and expenses related to the Merger and MIT IPO. As of December 31, 2022, the Company incurred costs of approximately $4.6 million, respectively, pursuant to this agreement.
In May 2022, the Company entered into a lease agreement with ProKids, an Ohio not-for-profit. An immediate family member of the Company’s CEO is a member of the Board of Trustees and President-Elect of that organization. ProKids leased 21,000 square feet of vacant unfinished commercial space in a proxy statement delivered with531,000 square foot building in Cincinnati, Ohio for 120 months. ProKids will invest in the annual report are:
| • | | financial statements prepared in accordance with GAAP that are audited and reported on by independent certified public accountants; |
| • | | the ratio of the costs of raising capital during the year to the capital raised; |
| • | | the aggregate amount of advisory fees and the aggregate amount of other fees paid to our Advisor and any affiliates of our Advisor by us or third parties doing business with us during the year; |
| • | | our total operatingtenant improvements in this space and ultimately use it as their headquarters location. ProKids will have no rent due to the Company throughout the lease term, other than a rental fee on parking spaces used by the ProKids staff and visitors. As of December 31, 2022, ProKids does not owe the Company rental income related to the lease agreement.The Company has agreed to pay for certain tax return preparation services of Color Up and certain member entities of Color Up. The Company has incurred $129,490 related to these services which is reflected in general and administrative expenses in the consolidated statements of income for the year stated as a percentage of our average invested assets and as a percentage of our net income; |
| • | | a report from the independent directors that our policies are in the best interests of our stockholders and the basis for such determination; and |
| • | | a separately stated, full disclosure of all material terms, factors and circumstances surrounding any and all transactions involving us and our Advisor, a director or any affiliate thereof during the year, which disclosure has been examined and commented upon in the report by the independent directors with regard to the fairness of such transactions. |
ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES; AUDIT COMMITTEE REPORT
Principal Accounting Fees and Services
For the year ended December 31,
2016 and during2022. In connection with the period from May 4, 2015 (date of inception) through December 31, 2015 RBSM LLP ("RBSM"), our independent public accounting firm, billedTransaction, the Company owes approximately $469,231 to certain member entities of Color Up relating to prorated revenues for their professional services renderedthe month of August 2021 of the three properties contributed by Color Up. The accrual was established in the fourth quarter of 2021 and is reflected within due to related parties on the Consolidated Balance Sheets. Additionally, in connection with the Transaction, the Company is due approximately $156,000 from Color Up as follows:
| | | December 31, 2016 | | | For the period May 4, 2015 (date of inception) December 31, 2015 | |
| Audit Fees | | $ | 61,000 | | | $ | -- | |
| Audit Related Fees | | $ | 7,500 | | | $ | 34,000 | |
| Tax Fees | | $ | -- | | | $ | -- | |
| All Other Fees | | $ | -- | | | $ | -- | |
RBSM did not perform any non-audit servicesconsideration for
us duringOP Units then issued which is reflected within due from related parties on the
year ended December 31, 2016Consolidated Balance Sheets.ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
Principal Accounting Fees and during the period May 4, 2015 (date of inception) December 31, 2015.
Services| | | Deloitte 12/31/2022 | | | Deloitte 12/31/2021 | |
Audit Fees | | $ | 514,100 | | | $ | 458,000 | |
Audit Related Fees | | | 376,586 | | | | — | |
Tax Fees | | | — | | | | — | |
All Other Fees | | | — | | | | — | |
Total | | $ | 890,686 | | | $ | 458,000 | |
Audit fees.
Consists of fees billed for the audit of
ourthe Company’s annual financial statements, review of
ourthe Company’s Form 10-K, review of
ourthe Company’s interim financial statements included in
ourthe Company’s Form 10-Q and services that are normally provided by the accountant in connection with year-end statutory and regulatory filings or engagements.
Audit-related fees.
Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of
ourthe Company’s financial statements and are not reported under
"Audit Fees",“Audit Fees,” such as acquisition audit,
and audit of
ourthe Company’s financial statements and review of our
Current Reports on Form
S-11 filings.8-K and other filings with the SEC.Tax fees.
Consists of professional services rendered by a company aligned with
ourthe Company’s principal accountant for tax compliance, tax advice and tax planning.
Other fees.
The services provided by
ourthe Company’s accountants within this category consisted of advice and other services.
The Audit Committee has direct responsibility to review and approve the engagement of the independent auditors to perform audit services or any permissible non-audit services. All audit and non-audit services to be provided by the independent auditors must be approved in advance by the Audit Committee. The Audit Committee may not engage the independent auditors to perform specific non-audit services proscribed by law or regulation. All services performed by our independent auditors under engagements entered into were approved by ourthe Company’s Audit Committee, pursuant to ourthe Company’s pre-approval policy, and none was approved pursuant to the de minimis exception to the rules and regulations of the Securities Exchange Act, of 1934, Section 10A(i)(1)(B), on pre-approval.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following are filed as part of this Report:
(a) 1. Financial Statements
The list of the financial statements contained herein are contained in Part II, Item 8. Financial Statements on this Annual Report, on Form 10-K, which is hereby incorporated by reference.
(a) 2. Financial Statement Schedules
Schedule III – Combined Real Estate and Accumulated Depreciation
3. Exhibits
Reference is made to the Exhibit Index appearing immediately afterbefore the signature page to this report for a list of exhibits filed as part of this report.
ITEM 16. Form 10-K Summary
None.
EXHIBIT INDEX
| 2.1 | Amended & Restated Agreement and Plan of Merger, dated as of September 26, 2022, between Mobile Infrastructure Trust and Mobile Infrastructure Corporation. (Incorporated by reference as Exhibit 2.1 to Form 8-K filed September 27, 2022). |
| 2.2 | Merger Termination Agreement, dated as of December 13, 2022, by and between Mobile Infrastructure Corporation and Mobile Infrastructure Trust. (Incorporated by reference as Exhibit 2.2 to Form 8-K filed December 14, 2022). |
| 2.3† | Agreement and Plan of Merger, dated as of December 13, 2022, by and among Fifth Wall Acquisition Corp. III, Queen Merger Corp. I and Mobile Infrastructure Corporation. (Incorporated by reference as Exhibit 2.1 to Form 8-K filed December 14, 2022). |
3.1 | Articles of Amendment and Restatement of THE PARKING REIT, Inc. (Incorporated by reference as Exhibit 3.1 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 filed September 24, 2015). |
3.2 | Articles of Amendment of THE PARKING REIT, Inc. (Incorporated by reference as Exhibit 3.1 to Form 8-K filed December 18, 2017). |
3.3 | Articles of Amendment of MOBILE INFRASTRUCTURE CORPORATION (Incorporated by reference as Exhibit 3.1 to Form 8-K filed November 12, 2021). |
3.4 | Certificate of Correction to the Articles of Amendment and Restatement of Mobile Infrastructure Corporation (Incorporated by reference as Exhibit 3.1 to Form 8-K filed March 21, 2022). |
3.5 | Articles Supplementary for Series A Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. (Incorporated by reference as Exhibit 3.1 to Form 8-K filed October 28, 2016). |
3.6 | Articles Supplementary for Series 1 Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. (Incorporated by reference as Exhibit 3.1 to Form 8-K filed March 30, 2017). |
3.7 | Amended & Restated Bylaws of MOBILE INFRASTRUCTURE CORPORATION (Incorporated by reference as Exhibit 3.2 to Form 8-K filed November 12, 2021). |
10.1 | Third Amended & Restated Agreement of Limited Partnership of Mobile Infra Operating Partnership, L.P., dated March 18, 2022 (Incorporated by reference as Exhibit 10.1 to Form 10-K filed March 30, 2022). |
10.2 | THE PARKING REIT, Inc. Long-Term Incentive Plan (Incorporated by reference as Exhibit 10.3 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 filed September 24, 2015). |
10.3 | Form of Indemnification Agreement (Incorporated by reference as Exhibit 10.5 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 filed September 24, 2015). |
10.4 | Loan Agreement, dated as of January 10, 2017, by and between MVP Detroit Center Garage, LLC and Bank of America, N.A. (Incorporated by reference as Exhibit 10.1 to Form 8-K filed January 12, 2017). |
10.5 | Credit Agreement, dated March 29, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P., the other subsidiary borrowers party thereto, KeyBanc Capital Markets, and KeyBank National Association, as administrative agent and lender (Incorporated by reference as Exhibit 10.1 to Form 8-K filed April 1, 2022). |
10.6 | First Amendment to Credit Agreement, dated November 17, 2022, by and among Mobile Infra Operating Partnership, L.P. and KeyBank National Association. (Incorporated by reference as Exhibit 10.1 to Form 8-K filed November 22, 2022). |
| 10.7** | Form of Performance Unit Award Agreement (Incorporated by reference as Exhibit 10.1 to Form 10-Q filed on August 15, 2022) |
10.8 | Form of LTIP Unit Award Agreement (Incorporated by reference as Exhibit 10.2 to Form 10-Q filed on August 15, 2022). |
10.9** | Form of LTIP Unit Agreement (Liquidity Event) among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and participant. (Incorporated by reference as Exhibit 10.3 to Form 8-K filed August 26, 2022). |
10.10 | First Amendment to Form of LTIP Unit Agreement, dated December 13, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and Manuel Chavez. (Incorporated by reference as Exhibit 10.6 to Form 8-K filed December 14, 2022). |
10.11** | First Amendment to Form of LTIP Unit Agreement, dated December 13, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and Stephanie Hogue. (Incorporated by reference as Exhibit 10.7 to Form 8-K filed December 14, 2022). |
10.12 | Amended & Restated Registration Rights Agreement dated November 2, 2021, by and among The Parking REIT, Inc. and the Holders (Incorporated by reference as Exhibit 10.3 to Form 8-K filed November 4, 2021). |
10.13 | Equity Purchase and Contribution Agreement, dated January 8, 2021, by and among The Parking REIT, Inc., MVP REIT II Operating Partnership, L.P., Michael V. Shustek, Vestin Realty Mortgage II, Inc., Vestin Realty Mortgage I, Inc. and Color Up, LLC (Incorporated by reference as Exhibit 10.1 to Form 8-K filed January 14, 2021). |
10.14 | Tax Matters Agreement, dated August 25, 2021, by and between The Parking REIT, Inc., MPV REIT II Operating Partnership, L.P., and each Protected Partner (Incorporated by reference as Exhibit 10.1 to Form 8-K filed August 31, 2021). |
10.15 | Stockholders Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and the Investors identified on the signature pages thereto (Incorporated by reference as Exhibit 10.2 to Form 8-K filed August 31, 2021). |
10.16 | Assignment of Claims, Causes of Action, and Proceeds, dated August 25, 2021, by The Parking REIT, Inc. in favor of Michael V. Shustek, MVP Realty Advisors, LLC, Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc. and their designees, successors, representatives, heirs and assigns (Incorporated by reference as Exhibit 10.3 to Form 8-K filed August 31, 2021). |
10.17 | Warrant Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and Color Up, LLC (Incorporated by reference as Exhibit 10.4 to Form 8-K filed August 31, 2021). |
10.18 | Software License and Development Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and DIA Land Co., LLC (Incorporated by reference as Exhibit 10.7 to Form 8-K filed August 31, 2021). |
10.19** | Employment Agreement, dated August 25, 2021, by and between The Parking REIT, Inc., and Manuel Chavez (Incorporated by reference as Exhibit 10.10 to Form 8-K filed August 31, 2021). |
10.20** | Employment Agreement, dated August 25, 2021, by and between The Parking REIT, Inc., and Stephanie Hogue (Incorporated by reference as Exhibit 10.11 to Form 8-K filed August 31, 2021). |
10.21 | Securities Purchase Agreement, dated as of November 2, 201, by and among The Parking REIT, Inc., MVP REIT II Operating Partnership, L.P. and HSCP Strategic III, L.P. (Incorporated by reference as Exhibit 10.1 to Form 8-K filed November 4, 2021). |
10.22 | Class A Unit Agreement, dated November 2, 2021, by and between MVP REIT II Operating Partnership, L.P. and HSCP Strategic III, L.P. (Incorporated by reference as Exhibit 10.2 to Form 8-K filed November 4, 2021). |
10.23** | First Amendment to Employment Agreement, dated August 23, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and Manuel Chavez. (Incorporated by reference as Exhibit 10.1 to Form 8-K filed August 26, 2022). |
10.24** | First Amendment to Employment Agreement, dated August 23, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and Stephanie Hogue. (Incorporated by reference as Exhibit 10.2 to Form 8-K filed August 26, 2022). |
10.25** | Second Amendment to Employment Agreement, dated December 13, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and Manuel Chavez. (Incorporated by reference as Exhibit 10.4 to Form 8-K filed December 14, 2022). |
10.26** | Second Amendment to Employment Agreement, dated December 13, 2022, among Mobile Infrastructure Corporation, Mobile Infra Operating Partnership, L.P. and Stephanie Hogue. (Incorporated by reference as Exhibit 10.5 to Form 8-K filed December 14, 2022). |
| 10.27 | Form of Sponsor Lock-up Agreement, by and among Fifth Wall Acquisition Sponsor III LLC, Fifth Wall Acquisition Corp. III and Mobile Infrastructure Corporation. (Incorporated by reference as Exhibit 10.1 to Form 8-K filed December 14, 2022). |
| 10.28 | Form of Seller Lock-up Agreement, by and among Fifth Wall Acquisition Corp. III, Mobile Infrastructure Corporation and certain holders of Mobile Infrastructure Corporation. (Incorporated by reference as Exhibit 10.2 to Form 8-K filed December 14, 2022). |
10.29 | Sponsor Agreement, dated December 13, 2022, by and among Fifth Wall Acquisition Corp. III, Fifth Wall Acquisition Sponsor III LLC and certain holders of Fifth Wall Acquisition Corp. III’s Class B ordinary shares. (Incorporated by reference as Exhibit 10.3 to Form 8-K filed December 14, 2022). |
21.1 | Subsidiaries of the Registrant. |
31.1(*) | Certification of Chief Executive Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2(*) | Certification of Chief Financial Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. |
32(*) | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed concurrently herewith. |
** | Management compensatory agreement |
| † | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon request. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | MVP REIT II, Inc.Mobile Infrastructure Corporation |
| | | |
| | By: | /s/ Michael V. ShustekManuel Chavez |
| | | Michael V. ShustekManuel Chavez |
| | | Chief Executive Officer |
| | Date: | March 24, 201722, 2023 |
| | | |
| | By: | /s/ Ed BentzenStephanie Hogue |
| | | Ed BentzenStephanie Hogue |
| | | President and Chief Financial Officer |
| | Date: | March 24, 201722, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | | Capacity | | Date |
| | | | | |
/s/ Michael V. ShustekManuel Chavez | | Chief Executive Officer and Director | | March 24, 201722, 2023 |
Michael V. ShustekManuel Chavez | | (Principal Executive Officer) | | |
| | | | | |
/s/ Ed BentzenStephanie Hogue | | President and Chief Financial Officer | | March 22, 2023 |
Stephanie Hogue | | (Principal Financial Officer) | | |
| | | | |
| /s/ Kyle Brown | | Chief FinancialAccounting Officer | | March 24, 201722, 2023 |
Ed BentzenKyle Brown | | (Principal Financial and Accounting Officer) | | |
| | | | | |
/s/ John E. DawsonLorrence T. Kellar | | Director | | March 24, 201722, 2023 |
John E. DawsonLorrence T. Kellar | | | | |
| | | | | |
/s/ Allen WolffJeffrey B. Osher | | Director | | March 24, 201722, 2023 |
Allen WolffJeffrey B. Osher | | | | |
| | | | | |
/s/ David ChavezDanica Holley | | Director | | March 24, 201722, 2023 |
David ChavezDanica Holley | | | | |
| | | | | |
/s/ Erik HartDamon Jones | | Director | | March 24, 201722, 2023 |
Erik HartDamon Jones | | | | |
| | | | | |
-101-
3.1(1)/s/ David Garfinkle | | Articles of Amendment and Restatement of MVP REIT II, Inc. |
3.2(9)Director | | Articles Supplementary of MVP REIT II, Inc.March 22, 2023 |
3.3(2)David Garfinkle | | Bylaws of MVP REIT II, Inc. |
4.1(3) | | Form of Subscription Agreement |
4.2(4) | | Distribution Reinvestment Plan |
4.3(5) | | Amended and Restated Escrow Agreement, dated October 5, 2015, between MVP REIT II, Inc. and UMB Bank, N.A. |
4.4(6) | | Second Amended and Restated Escrow Agreement, dated November 30, 2015, by and among MVP REIT II, Inc., MVP American Securities, LLC, and UMB Bank, N.A. |
10.1(5) | | Amended and Restated Advisory Agreement, dated October 5, 2015, between MVP REIT II, Inc. and MVP Realty Advisors, LLC |
10.2(6) | | Amendment No. 1 to the Amended and Restated Advisory Agreement, dated November 30, 2015, between MVP REIT II, Inc., MVP REIT II Operating Partnership, LP, and MVP Realty Advisors, LLC |
10.3(5) | | Amended and Restated Selling Agreement, dated October 5, 2015, between MVP REIT II, Inc. and MVP American Securities, LLC |
10.4(1) | | Agreement of Limited Partnership of MVP REIT II Operating Partnership, LP |
10.5(1) | | MVP REIT II, Inc. Long-Term Incentive Plan |
10.6(1) | | MVP REIT II, Inc. Independent Directors Compensation Plan |
10.7(1) | | Form of Indemnification Agreement |
10.8(7) | | Operating Agreement of MVP Minneapolis Orpheum Lots, LLC |
10.9(7) | | Membership Interest Purchase Agreement, dated as of December 4, 2015, by and between MVP Minneapolis Orpheum Lots, LLC and Minneapolis Parking Venture LLC |
10.10(7) | | First Amendment to Membership Interest Purchase Agreement, dated as of December 29, 2015, by and between MVP Minneapolis Orpheum Lots, LLC and Minneapolis Parking Venture LLC |
10.11(7) | | Operating Agreement of MVP Denver 1935 Sherman, LLC |
10.12(7) | | Agreement of Purchase and Sale, dated as of November 19, 2015, by and among MVP Denver 1935 Sherman, LLC, Robert A. Bruhn, Jr., Kristina Cleary, Lisa L. Westwood, and Annah E. Palm |
10.13(7) | | First Amendment of Agreement of Purchase and Sale, dated as of January 20, 2016, by and among MVP Denver 1935 Sherman, LLC, Robert A. Bruhn, Jr., Kristina Cleary, Lisa L. Westwood, and Annah E. Palm |
10.14(7) | | Second Amendment of Agreement of Purchase and Sale, dated as of February 1, 2016, by and among MVP Denver 1935 Sherman, LLC, Robert A. Bruhn, Jr., Kristina Cleary, Lisa L. Westwood, and Annah E. Palm |
10.15(7) | | Operating Agreement of MVP Bridgeport Fairfield Garage, LLC |
10.16(7) | | Purchase and Sale Agreement, dated as of February 19, 2016, by and between Fairfield Avenue Parking Corporation and MVP Bridgeport Fairfield Garage, LLC |
10.17(7) | | First Amendment to Purchase and Sale Agreement, dated as of March 18, 2016, by and between Fairfield Avenue Parking Corporation and MVP Bridgeport Fairfield Garage, LLC |
10.18(8) | | Credit Agreement dated as of October 5, 2016 among MVP Real Estate Holding, LLC, MVP REIT II Operating Partnership, L.P., certain of their subsidiaries and KeyBank National Association |
10.19(8) | | MVP Guaranty dated as of October 5, 2016, by and among MVP REIT, Inc. and MVP REIT II, Inc. |
10.20(8) | | Pledge and Security Agreement dated as of October 5, 2016 among MVP Real Estate Holdings, LLC, MVP REIT II Operating Partnership, LP, certain of their Subsidiaries and KeyBank National Association |
10.21(8) | | Promissory Note dated October 5, 2016 2016 among MVP Real Estate Holdings, LLC, MVP REIT II Operating Partnership, LP, certain of their Subsidiaries and KeyBank National Association |
10. 22(9) | | Form of Warrant to Purchase Common Stock |
10.23(10) | | Form of Subscription Agreement For Shares of Series A Convertible Redeemable Preferred Stock |
10.24(10) | | Lead Placement Agent Agreement, dated as of November 1, 2016, by and between MVP American Securities, LLC and MVP REIT II, Inc. |
10.25(10) | | Form of MVP American Securities, LLC Selling Agent Agreement for the Private Place of Series A Convertible Redeemable Preferred Stock of MVP REIT II, Inc. |
10.26(11) | | Purchase and Sale Agreement, dated as of October 31, 2016, by and between Center Parking Associates Limited Partnership and MVP Detroit Center Garage, LLC |
10.27(12) | | Loan Agreement, dated as of January 10, 2017, by and between MVP Detroit Center Garage, LLC and Bank of America, N.A. |
21.1(2) | | Subsidiaries of the Registrant. |
23.1 | | Consent of Independent Registered Public Accounting Firm |
31.1(*) | | Certification of Chief Executive Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2(*) | | Certification of Chief Financial Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. |
32(*) | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101(*) | | The following materials from the Company's Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (extensible Business Reporting Language (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statement of Stockholder's Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
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* | Filed concurrently herewith. |
(1) | Filed previously with Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 on September 24, 2015 and incorporated herein by reference. |
(2) | Filed previously with the Registration Statement on Form S-11 on July 28, 2015 and incorporated herein by reference. |
(3) | Filed previously as Exhibit A to Supplement No. 1 to the Registrant's prospectus filed December 3, 2015 and incorporated herein by reference. |
(4) | Filed previously as Appendix D to the Registrant's prospectus filed October 23, 2015 and incorporated herein by reference. |
(5) | Filed previously with Pre-Effective Amendment No. 3 to the Registration Statement on Form S-11 on October 6, 2015 and incorporated herein by reference. |
(6) | Filed previously on Form 8-K on December 3, 2015 and incorporated herein by reference. |
(7) | Filed previously with Post-Effective Amendment No. 1 to the Registration Statement on Form S-11 on April 6, 2016 and incorporated herein by reference. |
(8) | Filed previously on Form 8-K on October 6, 2016 and incorporated herein by reference. |
(9) | Filed previously on Form 8-K on October 28, 2016 and incorporated herein by reference. |
(10) | Filed previously on Form 8-K on November 2, 2016 and incorporated herein by reference. |
(11) | Filed previously on Form 8-K on December 8, 2016 and incorporated herein by reference. |
(12) | Filed previously on Form 8-K on January 1, 2017 and incorporated herein by reference. |
