Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20172022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF THE SECURITIES EXCHANGE ACT OF 1934

For the period from _____ to _____

000-53673001-34049

(Commission file No.)

 

PRESIDIO PROPERTY TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland

33-0841255

(State or other jurisdiction
of incorporation or organization

(I.R.S. employer
identification no.)

1282 Pacific Oaks Place, Escondido, California 920294995 Murphy Canyon Road, Suite 300, San Diego, CA 92123

(Address of principal executive offices)

(760) 471-8536

(Registrant’s telephone number, including area code)

Title of each class of registered securities Trading Symbol(s)Name of each exchange on which registered
Series A Common Stock,SQFT

The Nasdaq Stock Market LLC

$0.01 par value per share
9.375% Series D Cumulative Redeemable Perpetual Preferred Stock,SQFTPThe Nasdaq Stock Market LLC
$0.01 par value per share
Series A Common Stock Purchase Warrants to SQFTWThe Nasdaq Stock Market LLC
Purchase Shares of Common Stock

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)    Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Emerging Growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b-2 of the Exchange Act).    Yes    No

At November 8, 2017,August 11, 2022, registrant had issued and outstanding 17,614,16012,371,324 shares of its common stock,Series A Common Stock, $0.01 par value.value per share.


Index

 


 

Index

Page

Part I. FINANCIAL INFORMATION:

5

Item 1. FINANCIAL STATEMENTS:

5

Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20172022 (unaudited) and December 31, 20162021

5

Condensed Consolidated Statements of Operations for the Three Months and NineSix Months Ended SeptemberJune 30, 20172022 and 20162021 (unaudited)

6

Condensed Consolidated StatementStatements of Changes in Equity for the NineThree and Six Months Ended SeptemberJune 30, 20172022 and 2021 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20172022 and 20162021 (unaudited)

8

Notes to Condensed Consolidated Financial Statements (unaudited)

9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

1828

Item 3. Quantitative and Qualitative Disclosures about Market Risk

2737

Item 4. Controls and Procedures

27

38

Part II. OTHER INFORMATION

2738

Item 1. Legal Proceedings

2738

Item 1A. Risk Factors

2738

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

2738

Item 3. Defaults Upon Senior Securities

2739

Item 4. Mine Safety Disclosures

2739

Item 5. Other Information

2739

Item 6. Exhibits

2839

Signatures

41

29

 

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

 

2


CAUTIONARY STATEMENTS

This report contains “forward-looking statements” within the meaning of the federal securities laws that involve risks and uncertainties, many of which are beyond our control. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in this report and in our other filings with the Securities and Exchange Commission (the “SEC”). Forward-looking statements relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, financial condition, liquidity, capital resources, cash flows, results of operations and other financial and operating information.  Forward-looking statements included in this report include, but are not limited to, statements regarding purchases and sales of properties, plans for financing and refinancing our properties, the adequacy of our capital resources, changes to the markets in which we operate, our business plans and strategies, and our payment of dividends.When used in this report, the words “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “should,” “project,” “plan,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Important factors that may cause actual results to differ from projections include, but are not limited to:

 

the potential adverse effects of the novel coronavirus ("COVID-19") pandemic and ensuing economic turmoil on our financial condition, results of operations, cash flows and performance, particularly our ability to collect rent, on the financial condition, results of operations, cash flows and performance of our tenants, and on the global economy and financial markets; adverse economic conditions in the real estate market;market and overall financial market fluctuations (including, without limitation, as a result of the current COVID-19 pandemic);

 

inherent risks associated with real estate investments and with the real estate industry;

significant competition may decrease or prevent increases in our properties' occupancy and rental rates and may reduce the value of our properties;

a decrease in demand for commercial space and/or an increase in operating costs;

failure by any major tenant (or a substantial number of tenants) to make rental payments to us because of a deterioration of their financial condition, an early termination of their lease, a non-renewal of their lease or a renewal of their lease on terms less favorable to us;

challenging economic conditions facing us and our tenants may have a material adverse effect on our financial condition and results of operations;

our failure to generate sufficient cash to service and/or retire our debt obligations in a timely manner;

our inability to borrow or raise sufficient capital to maintain and/or expand our real estate investment portfolio;

adverse changes in the real estate financing markets;markets, including potential increases in interest rates and/or borrowing costs;

 

potential losses, including from adverse weather conditions, natural disasters and title claims, may not be covered by insurance;

our inability to raise sufficient additional capital to continue to expand our real estate investment portfolio and pay dividends to our stockholders;

 

unexpected costs, lower than expected rents and revenues from our properties, and/or increases in our operating costs;

inability to attractcomplete acquisitions or retain qualified personnel, including real estate management personnel;

adverse results of any legal proceedings;

changes in local, regionaldispositions and, national economic conditions;

our inability to compete effectively;

our inability to collect rent from tenants or renew tenants’ leases;

defaults on or non-renewal of leases by tenants;

increased interest rates and operating costs;

decreased rental rates or increased vacancy rates;

changes in the availability of additional acquisition opportunities;

our inability to successfully complete real estate acquisitions;

oureven if these transactions are completed, failure to successfully operate acquired properties and operations;and/or sell properties without incurring significant defeasance costs;

 

our reliance on third-party property managers to manage a substantial number of our properties, brokers and/or agents to lease our properties;

decrease in supply and/or demand for single family homes, inability to acquire additional model homes and increased competition to buy such properties;

terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions;

failure to continue to qualify as a REIT;

adverse results of any legal proceedings;

changes in laws, rules and regulations affecting our business strategy;business; and

the other risks and uncertainties discussed in Risk Factors in our Annual Report on Form 10-K filed with the SEC on March 30, 2022.

 

our failure to generate sufficient cash flows to service our outstanding indebtedness;

4


our failure or inability to implement the Recapitalization;

environmental uncertainties and risks related to adverse weather conditions and natural disasters;

our failure to qualify and maintain our status as a REIT;

government approvals, actions and initiatives, including the need for compliance with environmental requirements;

financial market fluctuations;

changes in real estate and zoning laws and increases in real property tax rates; and

additional factors discussed in our filings with the SEC.

 

3


The forward-looking statements contained in this report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to the factors, risks and uncertainties described above, changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors described in this report and the other documents that we have filed with the SEC, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this report speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

4


Presidio Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

September 30,

 

 

December 31,

 

 

June 30,

 

December 31,

 

 

2017

 

 

2016

 

 2022 2021 

 

(Unaudited)

 

 

 

 

 

 

(Unaudited)

   

ASSETS

 

 

 

 

 

 

 

 

      

Real estate assets and lease intangibles:

 

 

 

 

 

 

 

 

     

Land

 

$

46,105,130

 

 

$

47,190,225

 

 $17,836,329 $21,136,379 

Buildings and improvements

 

 

184,584,788

 

 

 

180,590,935

 

 115,053,575 119,224,375 

Tenant improvements

 

 

21,388,233

 

 

 

20,148,272

 

 12,184,676 12,752,518 

Lease intangibles

 

 

12,235,417

 

 

 

12,663,629

 

  4,110,139  4,110,139 

Real estate assets and lease intangibles held for investment, cost

 

 

264,313,568

 

 

 

260,593,061

 

 149,184,719  157,223,411 

Accumulated depreciation and amortization

 

 

(37,351,636

)

 

 

(32,665,688

)

  (30,368,624)  (30,589,969)

Real estate assets and lease intangibles held for investment, net

 

 

226,961,932

 

 

 

227,927,373

 

 118,816,095  126,633,442 

Real estate assets held for sale, net

 

 

12,342,411

 

 

 

12,594,836

 

  6,679,654  11,431,494 

Real estate assets, net

 

 

239,304,343

 

 

 

240,522,209

 

 125,495,749  138,064,936 

Cash and cash equivalents

 

 

3,436,531

 

 

 

3,116,147

 

Restricted cash

 

 

3,854,970

 

 

 

4,271,648

 

Cash, cash equivalents and restricted cash

 21,066,945 14,702,089 

Deferred leasing costs, net

 

 

1,922,468

 

 

 

1,920,091

 

 1,137,233 1,348,234 

Goodwill

 

 

2,423,000

 

 

 

2,423,000

 

 2,423,000 2,423,000 

Other assets, net

 

 

5,612,568

 

 

 

5,745,982

 

 3,876,429 4,658,504 

Investments held in Trust (see Notes 2 & 9)

  135,096,767  0 

TOTAL ASSETS

 

$

256,553,880

 

 

$

257,999,077

 

 $289,096,123  $161,196,763 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

      

Liabilities:

 

 

 

 

 

 

 

 

     

Mortgage notes payable held for investment, net

 

$

157,018,825

 

 

$

152,998,857

 

Mortgage notes payable related to real estate assets held for sale, net

 

 

5,900,258

 

 

 

5,887,254

 

Mortgage notes payable, net

 

 

162,919,083

 

 

 

158,886,111

 

 $89,432,732 $87,324,319 

Mortgage notes payable related to properties held for sale, net

  4,500,502  1,535,513 

Mortgage notes payable, total net

 93,933,234  88,859,832 

Accounts payable and accrued liabilities

 

 

6,743,991

 

 

 

6,066,068

 

 3,895,445 4,569,537 

Accounts payable and accrued liabilities of SPAC (see Notes 2 & 9)

 4,774,808 15,499 

Accrued real estate taxes

 

 

2,348,145

 

 

 

2,318,990

 

 953,277 1,940,913 

Dividends payable

 

 

-

 

 

 

1,171,924

 

Dividends payable preferred stock

 179,685 179,685 

Lease liability, net

 61,518 75,547 

Below-market leases, net

 

 

1,457,204

 

 

 

1,698,086

 

  45,685  73,130 

Mandatorily redeemable Series B Preferred Stock, net, $0.01 par value, $1,000

liquidating preference; shares authorized: 35,000; 30,700 and 32,700 shares issued and

outstanding at September 30, 2017 and December 31, 2016, respectively, net

 

 

30,565,687

 

 

 

32,108,268

 

Total liabilities

 

 

204,034,110

 

 

 

202,249,447

 

  103,843,652   95,714,143 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 2 & 9)

       

SPAC Class A common stock subject to possible redemption; 13,225,000 shares (at $10.20 per share), net of issuance cost of approximately $6,400,000

 128,636,719 0 

Equity:

 

 

 

 

 

 

 

 

     

Series A Common Stock, $0.01 par value, shares authorized: 100,000,000;

17,614,160 and 17,502,673 shares issued and outstanding

at September 30, 2017 and December 31, 2016, respectively

 

 

176,143

 

 

 

175,028

 

Series D Preferred Stock, $0.01 par value per share; 1,000,000 shares authorized; 920,000 shares issued and outstanding (liquidation preference $25.00 per share) as of June 30, 2022 and December 31, 2021, respectively

 9,200 9,200 

Series A Common Stock, $0.01 par value per share, shares authorized: 100,000,000; 11,793,757 shares and 11,599,720 shares were issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 117,938 115,997 

Additional paid-in capital

 

 

150,616,707

 

 

 

149,539,782

 

 183,126,885 186,492,012 

Dividends in excess of accumulated losses

 

 

(112,939,280

)

 

 

(106,623,957

)

Dividends and accumulated losses

  (135,754,642)  (130,947,434)

Total stockholders' equity before noncontrolling interest

 

 

37,853,570

 

 

 

43,090,853

 

 47,499,381  55,669,775 

Noncontrolling interest

 

 

14,666,200

 

 

 

12,658,777

 

  9,116,371  9,812,845 

Total equity

 

 

52,519,770

 

 

 

55,749,630

 

  56,615,752   65,482,620 

TOTAL LIABILITIES AND EQUITY

 

$

256,553,880

 

 

$

257,999,077

 

 $289,096,123  $161,196,763 

 

See Notes to Condensed Consolidated Financial Statements

 

5


Presidio Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2022

  

2021

  

2022

  

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Rental income

 

$

7,661,356

 

 

$

7,693,017

 

 

$

23,470,574

 

 

$

23,602,360

 

 $4,188,076  $4,553,798  $8,640,394  $10,031,021 

Fee and other income

 

 

302,118

 

 

 

160,616

 

 

 

1,257,500

 

 

 

489,565

 

Fees and other income

  132,784   292,785   253,607   484,316 

Total revenue

 

 

7,963,474

 

 

 

7,853,633

 

 

 

24,728,074

 

 

 

24,091,925

 

  4,320,860   4,846,583   8,894,001   10,515,337 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Rental operating costs

 

 

2,794,071

 

 

 

2,576,781

 

 

 

8,067,236

 

 

 

7,635,145

 

 1,348,083  1,485,815  2,931,556  3,324,738 

General and administrative

 

 

1,322,631

 

 

 

1,252,299

 

 

 

3,960,202

 

 

 

3,715,029

 

 1,214,005  1,344,770  2,797,696  2,882,036 

Depreciation and amortization

 

 

2,399,307

 

 

 

2,564,211

 

 

 

7,346,640

 

 

 

7,723,372

 

 1,316,193  1,368,209  2,655,418  2,797,143 

Impairment of real estate assets

  0   0   0   300,000 

Total costs and expenses

 

 

6,516,009

 

 

 

6,393,291

 

 

 

19,374,078

 

 

 

19,073,546

 

  3,878,281   4,198,794   8,384,670   9,303,917 

Other income (expense):

         

Interest expense-mortgage notes

 (1,085,860) (1,207,036) (2,103,573) (2,512,057)

Interest expense - note payable

 0  0  0  (279,373)

Interest and other (expense), net

 93,128  (20,657) 166,733  (53,443)

Gain on sales of real estate, net

 1,227,484  2,594,341  2,750,269  1,433,014 

Gain on extinguishment of government debt

 0  0  0  10,000 

Income tax expense

  (259,285)  (238,701)  (524,524)  (288,899)

Total other income (expense), net

  (24,533)  1,127,947   288,905   (1,690,758)

Net income (loss)

 418,046  1,775,736  798,236  (479,338)

Less: Income attributable to noncontrolling interests

  (709,202)  (925,697)  (1,917,878)  (1,332,305)

Net income (loss) attributable to Presidio Property Trust, Inc. stockholders

 $(291,156) $850,039  $(1,119,642) $(1,811,643)

Less: Preferred Stock Series D dividends

 (539,056) (95,836) (1,078,111) (95,836)

Less: Series A Warrant dividend

  0   0   (2,456,512)  0 

Net income (loss) attributable to Presidio Property Trust, Inc. common stockholders

 $(830,212) $754,203  $(4,654,265) $(1,907,479)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense-Series B preferred stock

 

 

(1,202,099

)

 

 

(1,443,960

)

 

 

(3,966,902

)

 

 

(4,546,687

)

Interest expense-mortgage notes

 

 

 

(1,989,053

)

 

 

(1,879,780

)

 

 

(5,851,865

)

 

 

(5,641,296

)

Interest and other income

 

 

10,515

 

 

 

9,892

 

 

 

25,612

 

 

 

78,224

 

Gain on sales of real estate, net

 

 

210,372

 

 

 

732,908

 

 

 

2,237,423

 

 

 

2,121,453

 

Impairment of real estate asset

 

 

-

 

 

 

(700,000

)

 

 

-

 

 

 

(700,000

)

Income tax expense

 

 

(53,566

)

 

 

(87,898

)

 

 

(154,189

)

 

 

(232,598

)

Total other expense, net

 

 

(3,023,831

)

 

 

(3,368,838

)

 

 

(7,709,921

)

 

 

(8,920,904

)

Net income (loss) per share attributable to Presidio Property Trust, Inc. common stockholders:

         

Basic & Diluted

 $(0.07) $0.08  $(0.39) $(0.20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,576,366

)

 

 

(1,908,496

)

 

 

(2,355,925

)

 

 

(3,902,525

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Income attributable to noncontrolling interests

 

 

(200,181

)

 

 

(81,534

)

 

 

(415,009

)

 

 

(102,890

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Presidio Property Trust, Inc.

common stockholders

 

$

(1,776,547

)

 

$

(1,990,030

)

 

$

(2,770,934

)

 

$

(4,005,415

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share

 

$

(0.10

)

 

$

(0.12

)

 

$

(0.16

)

 

$

(0.23

)

Weighted average number of common shares

outstanding - basic and diluted

 

 

17,617,500

 

 

 

17,073,986

 

 

 

17,564,805

 

 

 

17,286,439

 

Weighted average number of common shares outstanding - basic & diluted

  11,799,689   9,508,363   11,786,741   9,508,363 

 

See Notes to Condensed Consolidated Financial Statements

 

 

6


Presidio Property Trust, Inc. and Subsidiaries

Condensed Consolidated StatementStatements of Changes in Equity

For the NineThree and Six Months Ended SeptemberJune 30, 20172022 and 2021

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

In Excess of

 

 

Total

 

 

Non-

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

controlling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Losses

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance, December 31, 2016

 

 

17,502,673

 

 

$

175,028

 

 

$

149,539,782

 

 

$

(106,623,957

)

 

$

43,090,853

 

 

$

12,658,777

 

 

$

55,749,630

 

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,770,934

)

 

 

(2,770,934

)

 

 

415,009

 

 

 

(2,355,925

)

Dividends declared/reinvested

 

 

114,449

 

 

 

1,144

 

 

 

1,094,290

 

 

 

(3,544,389

)

 

 

(2,448,955

)

 

 

-

 

 

 

(2,448,955

)

Common stock repurchased

 

 

(2,962

)

 

 

(29

)

 

 

(17,365

)

 

 

-

 

 

 

(17,394

)

 

 

-

 

 

 

(17,394

)

Contributions from noncontrolling interests, net of distributions paid

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,592,414

 

 

 

1,592,414

 

Balance, September 30, 2017

 

 

17,614,160

 

 

$

176,143

 

 

$

150,616,707

 

 

$

(112,939,280

)

 

$

37,853,570

 

 

$

14,666,200

 

 

$

52,519,770

 

                  

Additional

  

Dividends and

  

Total

  

Non-

     
  

Preferred Stock Series D

  

Common Stock

  

Paid-in

  

Accumulated

  

Stockholders’

  

controlling

  

Total

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Losses

  

Equity

  

Interests

  

Equity

 

Balance, December 31, 2021

  920,000  $9,200   11,599,720  $115,997  $186,492,012  $(130,947,434) $55,669,775  $9,812,845  $65,482,620 

Net income

     0      0   0   (828,486)  (828,486)  1,208,676   380,190 

Vesting of restricted stock

  0   0   196,250   1,963   762,423   0   764,386   0   764,386 

Dividends paid to Series A Common Stockholders

     0      0   0   (1,298,252)  (1,298,252)  0   (1,298,252)

Dividends to Series D Preferred Stockholders

     0      0   0   (539,056)  (539,056)  0   (539,056)

Remeasurement of SPAC Class A common stock subject to possible redemption

     0      0   (4,023,113)  0   (4,023,113)  0   (4,023,113)

Distributions in excess of contributions received

     0      0   0   0   0   (258,410)  (258,410)

Balance, March 31, 2022

  920,000   9,200   11,795,970   117,960   183,231,322   (133,613,228)  49,745,254   10,763,111   60,508,365 

Net income

    $0     $0  $0   (291,156)  (291,156)  709,202   418,046 

Vesting of restricted stock

  0   0   8,198   82   27,955   0   28,037   0   28,037 

Dividends paid to Series A Common Stockholders

     0      0   0   (1,311,202)  (1,311,202)  0   (1,311,202)

Dividends to Series D Preferred Stockholders

     0      0   0   (539,056)  (539,056)  0   (539,056)

SPAC remeasurement of Class A shares

     0      0   (101,767)  0   (101,767)  0   (101,767)

Repurchase of Series A Common Stock, at cost

  0   0   (10,411)  (104)  (30,625)  0   (30,729)  0   (30,729)

Distributions in excess of contributions received

     0      0   0   0   0   (2,355,942)  (2,355,942)

Balance, June 30, 2022

  920,000  $9,200   11,793,757  $117,938  $183,126,885  $(135,754,642) $47,499,381  $9,116,371  $56,615,752 

 

                  

Additional

  

Dividends and

  

Total

  

Non-

     
  

Preferred Stock Series D

  

Common Stock

  

Paid-in

  

Accumulated

  

Stockholders’

  

controlling

  

Total

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

  

Losses

  

Equity

  

Interests

  

Equity

 

Balance, December 31, 2020

  0  $0   9,508,363  $95,038  $156,463,146  $(121,674,505) $34,883,679  $15,238,902  $50,122,581 

Net loss

     0      0   0   (2,661,682)  (2,661,682)  406,608   (2,255,074)

Dividends paid to Series A Common Stockholders

     0      0   0   (998,795)  (998,795)  0   (998,795)

Distributions in excess of contributions received

     0      0   0   0   0   (2,034,212)  (2,034,212)

Balance, March 31, 2021

  0   0   9,508,363   95,038   156,463,146   (125,334,982)  31,223,202   13,611,298   44,834,500 

Net income

     0      0   0   850,039   850,039   925,697   1,775,736 

Dividends paid to Series A Common Stockholders

     0      0   0   (1,009,389)  (1,009,389)  0   (1,009,389)

Dividends to Series D Preferred Stockholders

     0      0   0   (95,836)  (95,836)  0   (95,836)

Issuance of preferred stock Series D, net of issuance costs

  920,000   9,200   0   0   20,480,603   0   20,489,803   0   20,489,803 

Distributions in excess of contributions received

     0      0   0   0   0   (744,884)  (744,884)

Balance, June 30, 2021

  920,000  $9,200   9,508,363  $95,038  $176,943,749  $(125,590,168) $51,457,819  $13,792,111  $65,249,930 

See Notes to Condensed Consolidated Financial Statements

 

 

7


Presidio Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

For the

 

 

For the

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

For the Six Months Ended June 30,

 

 

September 30, 2017

 

 

September 30, 2016

 

 

2022

  

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,355,925

)

 

$

(3,902,525

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 $798,236 $(479,338)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

Depreciation and amortization

 

 

7,346,640

 

 

 

7,723,372

 

 2,655,418 2,797,143 

Stock compensation

 

 

410,760

 

 

 

388,602

 

 568,701 582,199 

Bad debt expense

 

 

37,205

 

 

 

(54,405

)

 13,416 0 

Gain on sale of real estate assets, net

 

 

(2,237,423

)

 

 

(2,121,453

)

 (2,750,269) (1,433,014)

Gain on extinguishment of government debt

 0 (10,000)

Net change in fair value marketable securities

 156,891 19,785 

Impairment of real estate assets

 

 

-

 

 

 

700,000

 

 0 300,000 

Amortization of financing costs

 

 

956,956

 

 

 

1,081,520

 

 125,850 371,201 

Amortization of above-market leases

 

 

79,013

 

 

 

139,417

 

 0 36,055 

Amortization of below-market leases

 

 

(240,882

)

 

 

(345,948

)

 (27,445) (34,450)

Straight-line rent adjustment

 

 

(452,427

)

 

 

(660,705

)

 (46,305) (170,554)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Other assets

 

 

487,961

 

 

 

1,000,323

 

 317,942 246,728 

Accounts payable and accrued liabilities

 

 

267,164

 

 

 

(1,008,736

)

 (1,284,696) (938,461)

Accrued real estate taxes

 

 

29,155

 

 

 

(473,886

)

  (987,636)  (1,607,985)

Net cash provided by operating activities

 

 

4,328,197

 

 

 

2,465,576

 

Net cash used in operating activities

  (459,897)  (320,691)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Real estate acquisitions

 

 

(16,810,985

)

 

 

(15,774,855

)

 (4,646,330) (2,851,800)

Additions to buildings and tenant improvements

 

 

(3,156,986

)

 

 

(3,713,626

)

 (832,990) (332,508)

Investment in marketable securities

 (661,247) (756,178)

Proceeds from sale of marketable securities

 1,111,608 63,456 

Investment of SPAC IPO proceeds into Trust Account

 (134,895,000) 0 

Additions to deferred leasing costs

 

 

(407,653

)

 

 

(710,721

)

 (35,864) (73,491)

Proceeds from sales of real estate

 

 

16,463,558

 

 

 

8,560,357

 

Restricted cash

 

 

416,678

 

 

 

2,992,873

 

Net cash used in investing activities

 

 

(3,495,388

)

 

 

(8,645,972

)

Proceeds from sales of real estate, net

  18,839,913  44,335,436 

Net cash provided by (used in) investing activities

  (121,119,910)  40,384,915 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from mortgage notes payable, net of issuance costs

 

 

13,342,994

 

 

 

18,979,585

 

 12,590,235 8,003,807 

Repayment of mortgage notes payable

 

 

(9,656,060

)

 

 

(9,217,047

)

 (7,361,659) (38,077,499)

Series B preferred stock costs

 

 

(153,500

)

 

 

-

 

Redemption of mandatorily redeemable Series B preferred stock

 

 

(2,000,000

)

 

 

(2,300,000

)

Contributions from noncontrolling interests net of distributions paid

 

 

1,592,414

 

 

 

197,148

 

Repurchase of common stock

 

 

(17,394

)

 

 

(55,023

)

Dividends paid to stockholders

 

 

(3,620,879

)

 

 

(3,347,690

)

Net cash (used in) provided by financing activities

 

 

(512,425

)

 

 

4,256,973

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

320,384

 

 

 

(1,923,423

)

Cash and cash equivalents - beginning of period

 

 

3,116,147

 

 

 

6,626,423

 

Cash and cash equivalents - end of period

 

$

3,436,531

 

 

$

4,703,000

 

Repayment of note payable

 0 (7,675,598)

Payment of deferred offering costs

 (3,201,266) (214,982)

Distributions to noncontrolling interests, net

 (2,614,352) (2,779,096)

Proceeds from initial public offering of SPAC

 132,250,000 0 

Issuance of Preferred Stock Series D, net of offering costs

 0 20,489,803 

Repurchase of common stock, at cost

 (30,729) 0 

Dividends paid to preferred stockholders

 (1,078,112) 0 

Dividends paid to common stockholders

  (2,609,454)  (2,008,184)

Net cash provided by (used in) financing activities

  127,944,663   (22,261,749)

Net increase (decrease) in cash equivalents and restricted cash

 6,364,856  17,802,475 

Cash, cash equivalents and restricted cash - beginning of period

  14,702,089  11,540,917 

Cash, cash equivalents and restricted cash - end of period

 $21,066,945  $29,343,392 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

    

Interest paid Series B preferred stock

 

$

3,355,983

 

 

$

5,080,417

 

Interest paid-mortgage notes payable

 

$

5,441,424

 

 

$

5,449,481

 

 $1,971,942 $2,400,367 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Reinvestment of cash dividends

 

$

1,095,434

 

 

$

1,795,040

 

Accrual of dividends payable

 

$

-

 

 

$

1,155,498

 

Interest paid-notes payable

 $0 $103,861 

Non-cash financing activities:

 

Unpaid deferred financing costs

 $0 $35,000 

Deferred offering cost SPAC, underwriting commission payable

 $4,628,750 $0 

Dividends payable - Preferred Stock Series D

 $179,685 $95,836 

 

See Notes to Condensed Consolidated Financial Statements


Presidio Property Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

SeptemberJune 30, 20172022

1. ORGANIZATION

 

1. ORGANIZATION

Organization. Presidio Property Trust, Inc. (formerly known as NetREIT, Inc.) (the(“we”, “our”, “us” or the “Company”) is incorporated in the State of Maryland and operates as a self-administeredan internally-managed real estate investment trust (“REIT”) under, with holdings in office, industrial, retail and model home properties. We were incorporated in the Internal Revenue CodeState of 1986,California on September 28,1999, and in August 2010, we reincorporated as amended (the “Code”). The Company’s portfolio includes the following properties:

Fifteen office buildingsa Maryland corporation. In October 2017, we changed our name from “NetREIT, Inc.” to “Presidio Property Trust, Inc.” Through Presidio Property Trust, Inc., its subsidiaries, and two industrialits partnerships, we own 12 commercial properties (“Office/Industrial Properties”)in fee interest, two of which total approximately 1,464,000 rentable square feet,

Four retail shopping centerswe own as a partial interest in various affiliates, in which we serve as general partner, member and/or manager, and one mixed use property (“Retail Properties”) which total approximately 228,000 rentable square feet, and

One hundred thirty-nine Model Homes owned by four affiliated limited partnerships and one limited liabilitya special purpose acquisition company (“Residential Properties”).as noted below.

The Company or one of its affiliates operates in the following partnerships during the periods covered by these condensed consolidated financial statements:

The Company is the sole General Partner in two limited partnerships (NetREIT Palm Self-Storage LP and NetREIT Casa Grande LP), all with ownership in real estate income producing properties. The Company refers to these entities collectively, as the “NetREIT Partnerships”. In June 2016, the Company purchased the 5.99% outside interest in NetREIT Garden Gateway LP.

The Company is the sole general partner and limited partner in two limited partnerships (NetREIT Palm Self-Storage LP and NetREIT Casa Grande LP), both of which, at June 30, 2022, had ownership interests in an entity that owns income producing real estate.  The Company refers to these entities collectively as the "NetREIT Partnerships".
The Company is the general and limited partner in five limited partnerships that purchase model homes and lease them back to homebuilders (Dubose Model Home Investors #202, LP, Dubose Model Home Investors #203, LP, Dubose Model Home Investors #204, LP, Dubose Model Home Investors #205, LP, and Dubose Model Home Investors #206, LP). The Company refers to these entities collectively as the “Model Home Partnerships”.

The Company is the general and limited partner in four partnerships that purchase and lease back Model Homes from developers (“Dubose Model Home Investors #201, LP”, “Dubose Model Homes Investors #202, LP”, “Dubose Model Homes Investors #203, LP” and “NetREIT Dubose Model Home REIT, LP”). The Company refers to these entities collectively, as the “Model Home Partnerships”. 

The Company has determined that the entities described above, wherelimited partnerships in which it owns less than 100%, should be included in the Company’s consolidated financial statements as the Company directs their activities and has control of thesesuch limited partnerships.

The Company has

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (the “Code”), for federal income tax purposes. To qualifymaintain our qualification as a REIT, the Company mustwe are required to distribute annually at least 90% of adjustedour REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as definedoperating results, asset holdings, distribution levels, and diversity of stock ownership. Provided we maintain our qualification for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to maintain our qualification as a REIT in any taxable year and are unable to avail ourselves of certain savings provisions set forth in the Code, all our taxable income would be subject to its stockholdersfederal income tax at regular corporate rates, including any applicable alternative minimum tax. We are subject to certain state and satisfy certain other organizational and operating requirements. Aslocal income taxes.

We, together with one of our entities, have elected to treat our subsidiaries as a taxable REIT no provision is madesubsidiary (a “TRS”) for federal income taxes on income resulting from those sales of real estate investments which have or willtax purposes. Certain activities that we undertake must be distributed to stockholders within the prescribed limits. However, taxes are providedconducted by a TRS, such as non-customary services for those gains which are not anticipated to be distributed to stockholders unless such gains are deferred pursuant to Section 1031. In addition, the Companyour tenants, and holding assets that we cannot hold directly. A TRS is subject to a federal excise tax which equals 4% of the excess, if any, of 85% of the Company’s ordinaryand state income plus 95% of the Company’s capital gain net income over cash distributions, as defined. The Company believes that it has met all of the REIT distribution and technical requirements for the three and nine months ended September 30, 2017 and 2016.

Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes due to differences in estimated useful lives and tax deprecation methods used to compute the carrying value (basis) on the investments in properties for tax purposes, among other things. During the nine months ended September 30, 2017 and 2016, all distributions paid were considered return of capital to the stockholders as we reported a taxable net loss during the period.

taxes. The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any major tax jurisdictions.

 

Reverse Stock Split. On July 29,2020, we amended our charter to effect a one-for-two reverse stock split of every outstanding share of our Series A Common Stock. The financial statements and accompanying footnotes have been retroactively restated to reflect the reverse stock split.

9

Additional Offerings & Warrants. Our Form S-3 Registration Statement was declared effective by the SEC on April 27, 2021.  Under this registration statement, we may offer and sell from time to time, in one or more series, subject to limitation that may apply (such as under Rule 415 of the Securities Act of 1933) various securities of the Company for total gross proceeds of up to $200,000,000. On July 12, 2021, we entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of 1,000,000 shares of our Series A Common Stock, warrants (“Common Stock Warrants”) to purchase up to 2,000,000 shares of Series A Common Stock and pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 1,000,000 shares of Series A Common Stock. The shares of Series A Common Stock, Pre-Funded Warrants and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants were issued pursuant to a prospectus supplement to the Form S-3 Registration Statement, with the Common Stock Warrants issued in a concurrent private placement.  Each share of Series A Common Stock and accompanying Series A Common Stock Warrants were sold together at a combined offering price of $5.00, and each share of Common Stock and accompanying Pre-Funded Warrants were sold together at a combined offering price of $4.99. The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $0.01 per share. The Common Stock Warrants have an exercise price of $5.50 per share, were exercisable upon issuance, and will expire five years from the date of issuance. 

In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares (the “Placement Agent Warrants”) of Series A Common Stock, representing 4.0% of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants.  The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $6.25 and will expire five years from the date of issuance.  The Company registered for resale Series A Common Stock issuable upon exercise of Common Stock Warrants and Placement Agent Warrants issued in the July 2021 offering pursuant to a registration statement on Form S-11 that was declared effective by the SEC on September 14, 2021. 

The Company evaluated the accounting guidance in ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivatives and Hedging regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and ultimately determined that it should be classified as permanent equity.  As of June 30, 2022, NaN of the Common Stock Warrants and Placement Agent Warrants have been exercised.

Warrant Dividend.  In January 2022, we distributed five-year listed warrants (the “Series A Warrants”) to our Series A Common Stockholders.  The Series A Warrants and the shares of Series A Common Stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022. The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to persons who held Series A Common Stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired Series A Common Stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022.  The Series A Warrants give the holder the right to purchase one share of common stock at $7.00 per share, for a period of five years. Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.  On the first day of trading SFQTW closed at $0.17 per warrant with 14,450,069 warrants in the public market.

Preferred Stock Series D.  On June 15, 2021, the Company completed its secondary offering of 800,000 shares of our 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock ("Series D Preferred Stock") for cash consideration of $25.00 per share to a syndicate of underwriters led by The Benchmark Company, LLC, as representative, resulting in approximately $18.1 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company. The Company granted the underwriters a 45-day option to purchase up to an additional 120,000 shares of Series D Preferred Stock to cover over-allotments, which they exercised on June 17, 2021, resulting in approximately $2.7 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.  In total, the Company issued 920,000 shares of Series D Preferred Stock with net proceeds of approximately $20.5 million, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company and deferred offering costs. The Company has used these proceeds for general corporate and working capital purposes, including acquiring additional properties.  

Liquidity. The Company's anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings, and the sale of equity or debt securities.  Future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. The Company is also seeking investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders and may seek a revolving line of credit to provide short-term liquidity. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

10

Short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of existing mortgages, completing tenant improvements, paying leasing commissions, and funding dividends to stockholders.  Future principal payments due on mortgage notes payables, during the last six months of 2022, total approximately $3.9 million, of which $3.2 million is related to model home properties.  Management expects certain model home properties can be sold, and that the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes can be refinanced, as the Company has historically been able to do in the past.  Additional principal payments will be made with cash flows from ongoing operations.  The mortgage note payable for 300 N.P. was an amortizing loan with a balloon payment of $2.2 million due at maturity, on June 11, 2022.  The Company paid this note in full on May 11, 2022 with available cash on hand.  Additionally, the Company has committed to provide additional funds, or obtain financing, if need to a special purpose acquisition company, or "SPAC", for which we serve as the financial sponsor (as described below in Note 2. Significant Account Policies).

As the Company continues its operations, it may re-finance or seek additional financing.  However, there can be no assurance that any such re-financing or additional financing will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. Management believes that the combination of working capital on hand and the ability to refinance commercial and model home mortgages will fund operations through at least the next twelve months from the date of the issuance of these unaudited interim financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K10-K for the year ended December 31, 2016.2021. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 20162021, included in the Company’s Annual Report on Form 10-K10-K filed with the Securities and Exchange Commission (“SEC”)SEC on March 17, 2017 and amended on April 20, 2017.30, 2022.

Basis of Presentation. The accompanying condensed consolidated financial statements have been prepared by the Company's management in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”) for interim

9


financial statementstatements and the instructions to Form 10-Q10-Q and Article 8 of Regulation S-X.S-X. Certain information and footnote disclosures required for annual consolidated financial statements have been condensed or excluded pursuant to rules and regulations of the SEC. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of our financial position, results of our operations, and cashflows as of, and for the ninethree and six months ended SeptemberJune 30, 2017 2022 and 2016,2021, respectively. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K10-K for the year ended December 31, 2016.2021. The condensed consolidated balance sheet at year ended as of December 31, 2016 2021has been derived from the audited consolidated financial statements included in the Form 10-K10-K filed with the SEC on March 17, 201730, 2022. The results for the three and amendedsix months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 due to real estate market flections, available mortgage lending rates and other factors, such as the effects of COVID-19 and its possible influence on April 20, 2017.our future results.

Principles of Consolidation.Consolidation. The accompanying condensed consolidated financial statements include the accounts of the CompanyPresidio Property Trust and its directsubsidiaries, NetREIT Advisors, LLC and indirect wholly-ownedDubose Advisors LLC (collectively, the “Advisors”), and NetREIT Dubose Model Home REIT, Inc. The consolidated financial statements also include the results of the NetREIT Partnerships and the Model Home Partnerships.  As used herein, references to the “Company” include references to Presidio Property Trust, its subsidiaries, and entities the Company controls or of which it is the primary beneficiary.partnerships. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements also include the accounts of (a) Murphy Canyon Acquisition Corp. ("Murphy Canyon"), which is a SPAC, for which we serve as the financial sponsor (as described below), and which is deemed to be controlled by us as a result of our 23.5% equity ownership stake, the overlap of three of our executive officers as executive officers of Murphy Canyon, and significant influence that we currently exercise over the funding and acquisition of new operations for an initial business combination ("IBC"). (see Note 2, Variable Interest Entity). All intercompany balances have been eliminated in consolidation.

The Company classifies the noncontrolling interests in the NetREIT Partnerships as part of consolidated net income (loss) in 2022 and 2021 and has included the accumulated amount of noncontrolling interests as part of equity since inception in February 2010. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interest will be remeasured, with the gain or loss reported in the statement of operations. Management has evaluated the noncontrolling interests and determined that they do not contain any redemption features.

11

Use of Estimates.Estimates. The preparation of financial statements in conformityaccordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the allocation of purchase price paid for property acquisitions between land, building and intangible assets acquired including their useful lives; valuation of long-lived assets, and the allowance for doubtful accounts, which is based on an evaluation of the tenants’ ability to pay. Actual results may differ from those estimates.

Real Estate Assets and Lease Intangibles. Land, buildings and improvements are recorded at cost, including tenant improvements and lease acquisition costs (including leasing commissions, space planning fees, and legal fees). The Company capitalizes any expenditure that replaces, improves, or otherwise extends the economic life of an asset, while ordinary repairs and maintenance are expensed as incurred. The Company allocates the purchase price of acquired properties between the acquired tangible assets and liabilities (consisting of land, buildings, tenant improvements, and long-term debt) and identified intangible assets and liabilities (including the value of above-market and below-market leases, the value of in-place leases, unamortized lease origination costs and tenant relationships), in each case based on their respective fair values.

The Company allocates the purchase price to tangible assets of an acquired property based on the estimated fair values of those tangible assets, assuming the property was vacant. Estimates of fair value for land, building and building improvements are based on many factors including but not limited to comparisons to other properties sold in the same geographic area and independent third-party valuations. In estimating the fair values of the tangible assets, intangible assets, and liabilities acquired, the Company also considers information obtained about each property as a result of its pre‑acquisition due diligence, marketing and leasing activities.

The value allocated to acquired lease intangibles is based on management’s evaluation of the specific characteristics of each tenant’s lease. Characteristics considered by management in allocating these values include but are not limited to the nature and extent of the existing business relationships with the tenant, growth prospects for developing new business with the tenant, the remaining term of the lease, the tenant’s credit quality, and other factors.

The value attributable to the above-market or below-market component of an acquired in-place lease is determined based upon the present value (using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of rents that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above or below-market leases are amortized on a straight-line basis as an increase or reduction of rental income over the remaining non-cancelable term of the respective leases. Amortization of above and below-market rents resulted in a net increase in rental income of approximately $14,000 and $27,000 for the three and six months ended June 30, 2022, respectively.  Amortization of above and below-market rents resulted in a net decrease in rental income of approximately$3,000 and $2,000 for the three and six months ended June 30, 2021, respectively.  

The value of in-place leases and unamortized lease origination costs are amortized to expenses over the remaining term of the respective leases, which range from less than a year to ten years. The amount allocated to acquired in-place leases is determined 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. The amount allocated to unamortized lease origination costs is determined by what the Company would have paid to a third-party to secure a new tenant reduced by the expired term of the respective lease. The amount allocated to tenant relationships is the benefit resulting from the likelihood of a tenant renewing its lease. Amortization expense related to these assets was approximately $50,000 and $0.1 million, for the three and six months ended June 30, 2022, respectively.  Amortization expenses related to these assets was approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2021, respectively.

Deferred Leasing Costs. Costs incurred in connection with successful property leases are capitalized as deferred leasing costs and amortized to leasing commission expense on a straight-line basis over the terms of the related leases which generally range from one to five years. Deferred leasing costs consist of third-party leasing commissions. Management re-evaluates the remaining useful lives of leasing costs as the creditworthiness of the tenants and economic and market conditions change. If management determines the estimated remaining life of the respective lease has changed, the amortization period is adjusted. At June 30, 2022 and December 31, 2021, the Company had net deferred leasing costs of approximately $1.1 million and $1.4 million, respectively. Total amortization expense for thethree and six months ended June 30, 2022 was approximately $0.1 million and $0.2 million, respectively.  Total amortization expense for the three and six months ended June 30, 2021 was approximately $0.1 million and $0.2 million, respectively.

12

Cash Equivalents and Restricted Cash. At June 30, 2022 and December 31, 2021, we had approximately $21.1 million and $14.7 million in cash, cash equivalents and restricted cash, respectively, of which approximately $4.3 million and $4.7 million represented restricted cash, respectively.  The Company considers all short-term, highly liquid investments that are both readily convertible to cash and have an original maturity of three months or less at the date of purchase to be cash equivalents. Items classified as cash equivalents include money market funds. Cash balances in individual banks may exceed the federally insured limit of $250,000 by the Federal Deposit Insurance Corporation (the "FDIC"). No losses have been experienced related to such accounts. At June 30, 2022 and December 31, 2021, the Company had approximately $13.5 million and $7.3 million, respectively, in deposits in financial institutions that exceeded the federally insurable limits. Restricted cash consists of funds held in escrow for Company lenders for properties held as collateral by the lenders. The funds in escrow are for payment of property taxes, insurance, leasing costs and capital expenditures.

Real Estate Held for Sale.Real estate held for sale during the current period is classified as “real estate held for sale” for all prior periods presented in the accompanying condensed consolidated financial statements. Mortgage notes payable related to the real estate held for sale during the current period isare classified as “notes“mortgage notes payable related to real estate held for sale”sale, net” for all prior periods presented in the accompanying condensed consolidated financial statements. As of June 30, 2022, one commercial property met the criteria to be classified as held for sale and five model homes were classified as held for sale.

Asset Impairments.

Deferred Offering Costs.Deferred offering costs represent legal, accounting and other direct costs related to our offerings. As of June 30, 2022 and December 31, 2021, we have incurred approximately $117,000 and $135,000, at the end of each period.  These costs are related to our offering of common and preferred stock in connection with the sponsorship, through our wholly-owned subsidiary Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering as of December 31, 2021.  As of June 30, 2022, these costs are related to the preparation of a registration statement.  These costs were deferred and recorded as a long-term asset at June 30, 2022 and December 31, 2021.  

Impairments of Real Estate Assets. We regularly review for impairment on a property-by-property basis. Impairment is recognized on a property held for use when the expected undiscounted cash flows for a property are less than the carrying amount at which time the property is written-down to fair value. The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows including but not limited to revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over long periods. Since our properties typically have a long life, the assumptions used to estimate the future recoverability of carrying value requires significant management judgment. Actual results could be significantly different from the estimates. These estimates have a direct impact on net income because recording an impairment charge results in a negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods.

Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. Although our strategy is to hold our properties over the long-term, if our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to fair value and such loss could be material.

Fair Value Measurements.  Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition. The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy:

Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, we utilize quoted market prices from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement.

13

Additionally, in an inactive market, a market price quoted from an independent third-party may rely more on models with inputs based on information available only to that independent third-party. When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources.  As of June 30, 2022 and December 31, 2021, our marketable securities presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $1.0 million and $1.5 million, respectively, with a cost basis of approximately $1.1 million and $1.6 million, respectively.  There were no financial liabilities measured at fair value as of June 30, 2022 and December 31, 2021.

Earnings per share (EPS). The EPS on Common stock has been computed pursuant to the guidance in FASB ASC Topic 260, Earnings Per Share.  The guidance requires the classification of the Company’s unvested restricted stock, which contain rights to receive non-forfeitable dividends, as participating securities requiring the two-class method of computing net income per share of common stock.  In accordance with the two-class method, earnings per share have been computed by dividing the net income less net income attributable to unvested restricted shares by the weighted average number of shares of common stock outstanding less unvested restricted shares. Diluted earnings per share is computed by dividing net income by the weighted average shares of common stock and potentially dilutive securities outstanding in accordance with the treasury stock method.

Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:

  

For the Three Months Ended June 30,

  

For the Six Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Common Stock Warrants

  2,000,000   0   2,000,000   0 

Placement Agent Warrants

  80,000   0   80,000   0 

Series A Warrants

  14,450,069   0   14,450,069   0 

Unvested Common Stock Grants

  577,567   385,274   577,567   385,274 
                 

Total potentially dilutive shares

  17,107,636   385,274   17,107,636   385,274 

14

Variable Interest Entity. We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. Our determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether we participated in the design of the entity and the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both: (i) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion continually.  We consolidate any VIE of which we are the primary beneficiary.

The Company is involved in the formation of an entity considered to be Variable Interest Entity (“VIE”). The Company evaluates the consolidation of this entity as required pursuant to ASC Topic 810 relating to the consolidation of such VIE. The Company’s determination of whether it is the primary beneficiary of the VIE is based in part on an assessment of whether or not the Company and its related parties have the power to direct activities of the VIE and are exposed to the majority of the risks and rewards of the entity.  

Following the completion of the Murphy Canyon IPO, we determined that Murphy Canyon is a Variable Interest Entity ("VIE") in which we have a variable interest because we participated in its formation and design, manage the significant activities, and Murphy Canyon does not have enough equity at risk to finance its activities without additional subordinated financial support. We have also determined that Murphy Canyon's public stockholders do not have substantive rights, and their equity interest constitutes temporary equity, outside of permanent equity, in accordance with ASC 480-10-S99-3A. As such, we have concluded that we are currently the primary beneficiary of Murphy Canyon as a VIE, as we have the right to receive benefits or the obligation to absorb losses of the entity, as well as the power to direct a majority of the activities that significantly impact Murphy Canyon's economic performance. Since we are the primary beneficiary, Murphy Canyon is consolidated into our condensed consolidated financial statements.  See Note 9 Commitments and Contingencies for additional details regarding Murphy Canyon.

Shares Subject to Possible Redemption.  The Company accounts for common stock issued by the SPAC, (which is consolidated in our condensed consolidated financial statements), that is subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Under ASC 480, shares of common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of common stock are classified as shareholders’ equity. 

All of the Public Shares of Murphy Canyon SPAC (Class A Common Shares) contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a stockholder vote or tender offer in connection with our initial business combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with SEC and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity.  Accordingly, as of June 30, 2022, the Public Shares are presented as temporary equity, outside the shareholder's equity section of the Company's June 30, 2022 balance sheet.

15

Given that the Public Shares were issued with other freestanding instruments (i.e., public warrants which were classified as permanent equity as described below), the proceeds and initial carrying value of each of our real estate properties quarterlyClass A common stock classified as temporary equity was allocated in accordance with ASC 470-20. The Murphy Canyon Class A common stock is subject to determine if circumstances indicate an impairmentASC 480-10-S99. In addition, because it is probable that the equity instrument will become redeemable, we have the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of these investments exists. Duringeach reporting period. We have elected to recognize the nineaccretion resulting from changes in redemption value immediately during the three months ended September 30, 2017, management did not believe any impairment reserve was required.March 31, 2022. See Note 9 Commitments and Contingencies for additional details regarding Murphy Canyon.

Reclassifications. Certain reclassifications have been made

Warrant Instruments SPAC. Murphy Canyon accounts for warrants in accordance with the guidance contained in ASC 480 and FASB ASC 815, “Derivatives and Hedging”. Under ASC 815-40 and ASC 840 warrants that meet the criteria for equity treatment are recorded in stockholder’s equity. The warrants are subject to re-evaluation of the previously presented consolidated financial statementsproper classification and condensed consolidated financial statementsaccounting treatment at each reporting period. If the warrants no longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statement of operations. The warrants meet the criteria for classification as equity because they are not exercisable until after the SPAC business combination is completed, at which point the common shares are no longer redeemable and because they are indexed to conform toMurphy Canyon's common stock and meet the current period presentation. These reclassifications had no effect on previously reported results of consolidated operations or equity.other criteria for equity classification.   See Note 9 Commitments and Contingencies for additional details regarding Murphy Canyon.

Subsequent Events. We evaluate subsequent events up until the date the condensed consolidated financial statements are issued.

 

Recently Issued and Adopted Accounting Pronouncements.  In February 2016, June 2017, the FASB issued ASU No. 2016-02, 2016-13,Financial Instruments – Credit Losses, amendedin February 2020 with ASU No.2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842) (“842)ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. While ASU 2016-13 was effective for periods beginning after December 15, 2019, the issuance of ASU 2020-02 has allowed for the delay in adoption for certain smaller public companies and is now effective for fiscal periods beginning after December 15, 2022. Retrospective adjustments shall be applied through a cumulative-effect adjustment to retained earnings. The Company is continuing to evaluate the impact of this guidance on its financial statements and does not believe it will have a material impact on the financial statements.

In August 2020, the FASB issued ASU No. 2016-02”2020-06,Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.  The amendments in ASU No. 2016 -02 changes the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is2020-06 are effective for annual periodspublic business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2018, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.  The Company has adopted this guidance with no impact on our financial statements.

In June 2022, the FASB issued ASU No.2022-03,Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.  This ASU No. 2016-02 asclarifies how the fair value of equity securities subject to contractual sale restrictions is determined. Prior to its issuance, is permitted. The new leases standardthere was diversity in practice as to whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring the security’s fair value.  ASU 2022-03 clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires a modified retrospective transition approachentities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities.  ASU 2022-03 takes effect for all leases existing at, or entered intopublic companies for fiscal years beginning after the date of initial application, with an option to use certain transition relief.December 15,2023.  The Company is currently evaluatingcontinuing to evaluate the impact of adopting the new leases standardthis guidance on its consolidated financial statements.

 

In November 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-18, “Statement

16

3. RECENT REAL ESTATE TRANSACTIONS

On February 27, 2017,

Acquisitions during the six months ended June 30, 2022

The Company acquired 8 model homes for approximately $4.6 million. The purchase price was paid through cash payments of approximately $1.4 million and mortgage notes of approximately $3.2 million.

Acquisitions during the six months ended June 30, 2021

The Company acquired six model homes for approximately $2.9 million.  These acquisitions were paid for with approximately $0.9 million in cash payments and approximately $2.0 million in mortgage loans.  There were no other commercial properties acquired during this period.

Dispositions during the six months ended June 30, 2022:

World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million.

The Company disposed of 18 model homes for approximately $10.0 million and recognized a gain of approximately $3.0 million.

Dispositions during the six months ended June 30, 2021:

Waterman Plaza, which was sold on January 28, 2021, for approximately $3.5 million and the Company recognized a loss of approximately $0.2 million.

Garden Gateway, which was sold on February 19, 2021, for approximately $11.2 million and the Company recognized a loss of approximately $1.4 million.

Highland Court, which was sold on May 20, 2021 for approximately $10.2 million and the Company recognized a loss of approximately $1.6 million.

Executive Office Park, which was sold on May 21, 2021 for approximately $8.1 million and the Company recognized a gain of approximately $2.5 million.

The Company disposed of 32 model homes for approximately $15.1 million and recognized a gain of approximately $2.3 million.

4. REAL ESTATE ASSETS

The Company owns a diverse portfolio of real estate assets. The primary types of properties the Company sold the Rangewood Medical Building for approximately $2.2 millioninvests in are office, industrial, retail, and recognized a losstriple-net leased model home properties.  We have 5 commercial properties located in Colorado, 4 in North Dakota, 1 in Southern California, 1 in Texas and 1 in Maryland. Our model home properties are located in 3 states. As of approximately $170,000.

10


On March 31, 2017,June 30, 2022, the Company sold the Regatta Square Retail Center for approximately $3.0 million and recognized a gain of approximately $756,000.

On April 7, 2017, the Company sold the Shoreline Medical Building for approximately $8.2 million and recognized a gain of approximately $1.3 million.

During the nine months ended September 30, 2017, the Company disposed of fourteen Model Homes for approximately $5.3 million and recognized a gain of approximately $350,000 related to the sale of these Model Homes.

During the nine months ended September 30, 2017, the Company acquired forty-five model homes for approximately $16.8 million. The purchase price was paid through cash payments of $5.7 million and mortgage notes of $11.1 million.owned or had an equity interest in:

 

Eight office buildings and 1 industrial property (“Office/Industrial Properties”) which total approximately 755,862 rentable square feet;

Three retail shopping centers (“Retail Properties”) which total approximately 65,242 rentable square feet; and

 82 model home residential properties (“Model Homes” or “Model Home Properties”), totaling approximately 252,235 square feet, leased back on a triple-net basis to homebuilders that are owned by 5 affiliated limited partnerships and 1 wholly-owned corporation, all of which we control.

4. REAL ESTATE ASSETS

17

A summary of the properties owned by the Company as of SeptemberJune 30, 20172022 and December 31, 2021 is as follows:

 

 

 

 

 

 

 

Real estate

 

 

 

Date

 

 

 

assets, net

 

Property Name

 

Acquired

 

Location

 

(in thousands)

 

Garden Gateway Plaza

 

March 2007

 

Colorado Springs, Colorado

 

$

11,450

 

World Plaza

 

September 2007

 

San Bernardino, California

 

 

5,738

 

Executive Office Park

 

July 2008

 

Colorado Springs, Colorado

 

 

8,120

 

Waterman Plaza

 

August 2008

 

San Bernardino, California

 

 

5,656

 

Pacific Oaks Plaza

 

September 2008

 

Escondido, California

 

 

4,019

 

Morena Office Center

 

January 2009

 

San Diego, California

 

 

4,922

 

Genesis Plaza

 

August 2010

 

San Diego, California

 

 

8,707

 

Dakota Bank Buildings

 

May 2011

 

Fargo, North Dakota

 

 

9,772

 

Yucca Valley Retail Center

 

September 2011

 

Yucca Valley, California

 

 

6,605

 

Port of San Diego Complex

 

December 2011

 

San Diego, California

 

 

13,957

 

The Presidio

 

November 2012

 

Aurora, Colorado

 

 

6,432

 

Bismarck

 

March 2014

 

Fargo, ND

 

 

5,788

 

Union Terrace Building

 

August 2014

 

Lakewood, Colorado

 

 

8,395

 

Centennial Tech Center

 

December 2014

 

Colorado Springs, Colorado

 

 

13,585

 

Arapahoe Service Center

 

December 2014

 

Centennial, Colorado

 

 

10,783

 

Union Town Center

 

December 2014

 

Colorado Springs, Colorado

 

 

10,293

 

West Fargo Industrial

 

August 2015

 

Fargo, North Dakota

 

 

7,500

 

300 N.P.

 

August 2015

 

Fargo, North Dakota

 

 

3,672

 

Research Parkway

 

August 2015

 

Colorado Springs, Colorado

 

 

2,710

 

One Park Center

 

August 2015

 

Westminster, Colorado

 

 

8,505

 

Highland Court

 

August 2015

 

Centennial, Colorado

 

 

12,449

 

Shea Center II

 

December 2015

 

Highlands Ranch, Colorado

 

 

23,742

 

Presidio Property Trust, Inc properties

 

 

 

 

 

 

192,800

 

Model Home properties

 

2010-2017

 

AZ, CA, FL, IL, NC, NJ, PA, SC, TX, UT, WI

 

 

46,504

 

 

 

Total real estate assets and lease intangibles, net

 

$

239,304

 

  

Date

   

Real estate assets, net (in thousands)

 

Property Name

 

Acquired

 

Location

 

June 30, 2022

  

December 31, 2021

 

World Plaza (1)

 

September 2007

 

San Bernardino, CA

 $0  $9,272,213 

Genesis Plaza (3)

 

August 2010

 

San Diego, CA

  8,062,568   8,310,803 

Dakota Center

 

May 2011

 

Fargo, ND

  8,475,529   8,607,360 

Grand Pacific Center (2)

 

March 2014

 

Bismarck, ND

  5,345,784   5,457,447 

Arapahoe Center

 

December 2014

 

Centennial, CO

  8,717,481   8,821,278 

Union Town Center

 

December 2014

 

Colorado Springs, CO

  9,053,038   9,169,387 

West Fargo Industrial

 

August 2015

 

Fargo, ND

  6,951,471   7,025,325 

300 N.P.

 

August 2015

 

Fargo, ND

  2,942,377   2,929,563 

Research Parkway

 

August 2015

 

Colorado Springs, CO

  2,344,622   2,375,943 

One Park Center

 

August 2015

 

Westminster, CO

  8,028,575   7,992,420 

Shea Center II

 

December 2015

 

Highlands Ranch, CO

  19,960,778   20,246,645 

Mandolin (4)

 August 2021 

Houston, TX

  4,829,841   4,875,696 

Baltimore

 

December 2021

 

Baltimore, MD

  8,774,229   8,891,810 

Presidio Property Trust, Inc. properties

       93,486,293   103,975,890 

Model Home properties (5)

 2016 - 2022 

IL, TX, WI

  32,009,456   34,089,046 

Total real estate assets and lease intangibles, net

      $125,495,749  $138,064,936 

Geographic Diversification Table 

The following tables show a list(1) This property was sold during the six months ended June 30, 2022.

(2) This property is held for sale as of propertiesJune 30, 2022.

(3) Genesis Plaza is owned by Presidio Property Trust, Inc. grouped2 tenants-in-common, each of which owns 57% and 43%, respectively, and we beneficially own an aggregate of 76.4%.

(4) Mandolin is owned by state locationNetREIT Palm Self-Storage LP, through its wholly owned subsidiary NetREIT Highland LLC, and the Company is the sole general partner and owns 61.3% of NetREIT Palm Self-Storage LP.

(5) Includes Model Homes listed as held for sale as of SeptemberJune 30, 2017:2022.

State

 

No. of

Properties

 

 

Aggregate

Square Feet

 

 

Approximate %

of Square Feet

 

 

Current

Base Annual

Rent

 

 

Approximate %

of Aggregate

Annual Rent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California

 

 

7

 

 

 

420,927

 

 

 

24.9

%

 

$

5,947,230

 

 

 

27.5

%

Colorado

 

 

11

 

 

 

873,684

 

 

 

51.6

%

 

 

12,229,995

 

 

 

56.5

%

North Dakota

 

 

4

 

 

 

397,039

 

 

 

23.5

%

 

 

3,457,516

 

 

 

16.0

%

Total

 

 

22

 

 

 

1,691,650

 

 

 

100.0

%

 

$

21,634,741

 

 

 

100.0

%

 

11


Model Home properties:

State

 

No. of

Properties

 

 

Aggregate

Square Feet

 

 

Approximate %

of Square Feet

 

 

Current

Base Annual

Rent

 

 

Approximate

of Aggregate

% Annual Rent

 

Arizona

 

 

2

 

 

 

4,618

 

 

 

1.2

%

 

$

50,220

 

 

 

1.3

%

California

 

 

2

 

 

 

4,563

 

 

 

1.1

%

 

 

42,456

 

 

 

1.1

%

Florida

 

 

34

 

 

 

82,995

 

 

 

20.8

%

 

 

897,660

 

 

 

22.9

%

Illinois

 

 

2

 

 

 

5,851

 

 

 

1.5

%

 

 

64,860

 

 

 

1.7

%

New Jersey

 

 

2

 

 

 

5,643

 

 

 

1.4

%

 

 

51,756

 

 

 

1.3

%

North Carolina

 

 

4

 

 

 

13,623

 

 

 

3.4

%

 

 

144,540

 

 

 

3.7

%

Pennsylvania

 

 

10

 

 

 

28,609

 

 

 

7.2

%

 

 

351,960

 

 

 

9.0

%

South Carolina

 

 

3

 

 

 

8,703

 

 

 

2.2

%

 

 

93,864

 

 

 

2.4

%

Texas

 

 

76

 

 

 

232,456

 

 

 

58.2

%

 

 

2,088,588

 

 

 

53.4

%

Utah

 

 

3

 

 

 

9,918

 

 

 

2.5

%

 

 

99,816

 

 

 

2.6

%

Wisconsin

 

 

1

 

 

 

2,508

 

 

 

0.6

%

 

 

26,448

 

 

 

0.7

%

Total

 

 

139

 

 

 

399,487

 

 

 

100.0

%

 

$

3,912,168

 

 

 

100.0

%

5. LEASE INTANGIBLES

The following table summarizes the net value of other intangible assets acquired and the accumulated amortization for each class of intangible asset:

  

June 30, 2022

  

December 31, 2021

 
  

Lease Intangibles

  

Accumulated Amortization

  

Lease Intangibles, net

  

Lease Intangibles

  

Accumulated Amortization

  

Lease Intangibles, net

 

In-place leases

 $2,515,264  $(2,420,078) $95,186  $2,515,264  $(2,353,782) $161,482 

Leasing costs

  1,261,390   (1,201,566)  59,824   1,261,390   (1,165,701)  95,689 

Above-market leases

  333,485   (333,485)  0   333,485   (333,485)  0 
  $4,110,139  $(3,955,129) $155,010  $4,110,139  $(3,852,968) $257,171 

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

Lease Intangibles

 

 

Accumulated Amortization

 

 

Lease Intangibles, net

 

 

Lease Intangibles

 

 

Accumulated Amortization

 

 

Lease Intangibles, net

 

In-place leases

 

$

6,635,928

 

 

$

(4,369,040

)

 

$

2,266,888

 

 

$

6,872,980

 

 

$

(3,840,670

)

 

$

3,032,310

 

Leasing costs

 

 

4,622,792

 

 

$

(2,849,914

)

 

 

1,772,878

 

 

 

4,813,951

 

 

 

(2,517,759

)

 

 

2,296,192

 

Above-market leases

 

 

2,124,360

 

 

$

(1,665,341

)

 

 

459,019

 

 

 

2,124,360

 

 

 

(1,586,328

)

 

 

538,032

 

 

 

$

13,383,080

 

 

$

(8,884,295

)

 

$

4,498,785

 

 

$

13,811,291

 

 

$

(7,944,757

)

 

$

5,866,534

 

18

At June 30, 2022 and December 31, 2021, gross lease intangible assets of $0.0 and $1.1 million, respectively, were included in real estate assets held for sale.  At June 30, 2022 and December 31, 2021, accumulated amortization related to the lease intangible assets of $0.0 and $1.1 million, respectively, were included in real estate assets held for sale.

The net value of acquired intangible liabilities was $1,457,204approximately $45,685 and $1,698,086$73,130 relating to below-market leases as of Septemberat June 30, 20172022 and December 31, 2016,2021, respectively.

Aggregate

Future aggregate approximate amortization expense for the Company's lease intangible assets is as follows:

2022

 $100,181 

2023

  17,526 

2024

  17,526 

2025

  15,670 

2026

  4,107 

Thereafter

  0 

Total

 $155,010 

Three months remaining in 2017

 

$

365,385

 

Years ending December 31:

 

 

 

 

2018

 

 

1,320,270

 

2019

 

 

1,066,827

 

2020

 

 

850,757

 

2021

 

 

554,344

 

Thereafter

 

 

341,202

 

Total

 

$

4,498,785

 

The weighted average remaining amortization period of the intangible assets as of September 30, 2017 is 3.5 years.

12


6. OTHER ASSETS

Other assets consist of the following:

  

June 30,

  

December 31,

 
  

2022

  

2021

 

Deferred rent receivable

 $1,435,377  $1,660,197 

Prepaid expenses, deposits and other

  775,972   473,554 

Investment in marketable securities

  984,201   1,514,483 

Accounts receivable, net

  134,756   401,927 

Right-of-use assets, net

  60,411   74,643 

Other intangibles, net

  52,483   82,483 

Notes receivable

  316,374   316,374 

Deferred offering costs

  116,855   134,843 

Total other assets

 $3,876,429  $4,658,504 

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Deferred rent receivable

 

$

3,055,566

 

 

$

2,950,034

 

Raw land

 

 

900,000

 

 

 

900,000

 

Prepaid expenses, deposits and other

 

 

639,932

 

 

 

564,983

 

Other intangibles, net

 

 

394,958

 

 

 

455,632

 

Notes receivable

 

 

316,374

 

 

 

316,374

 

Accounts receivable, net

 

 

305,738

 

 

 

558,959

 

Total other assets

 

$

5,612,568

 

 

$

5,745,982

 

Periodically, the Company may sell an option in the marketable securities it holds to unrelated third parties for the right to purchase certain securities held within its investment portfolios (“covered call options”). These option transactions are designed primarily to increase the total return associated with holding the related securities as earning assets by using fee income generated from these options. These transactions are not designated as hedging relationships pursuant to accounting guidance ASC 815 and, accordingly, changes in fair values of these contracts, are reported in other income (expense).  There are several risks associated with transactions in options on securities. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A transaction in options or securities may be unsuccessful to some degree because of market behavior or unexpected events. When we write a covered call option, we forgo, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retain the risk of loss should the price of the underlying security decline. The writer of an option has no control over the time when it may be required to fulfill its obligation before the sold option expires, and once an option writer has received an exercise notice, it must deliver the underlying security in exchange for the strike price.

As of June 30, 2022, we owned common shares of 13 different publicly traded REITs and an immaterial amount of written covered call options in six of those same REITs.  The gross fair market value on our publicly traded REIT securities was $989,654, with written covered call options totaling $5,453.  As of June 30, 2022, the net fair value of our publicly traded REIT securities was $984,201 based on the June 30, 2022 closing prices.  As of December 31, 2021, we owned common shares of 19 different publicly traded REITs and an immaterial amount of covered call options in ten of those same REITs.  The gross fair market value on our publicly traded REIT securities was $1,529,185, with covered call options totaling $14,702.  As of December 31, 2021, the net fair value of our publicly traded REIT securities was $1,514,483 based on the December 31, 2021 closing prices. 

 

19

7. MORTGAGE NOTES PAYABLE

Mortgage notes payable consistedconsist of the following:

 

 

 

 

Principal as of

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

Loan

 

Interest

 

 

 

Mortgage note property

 

Notes

 

2017

 

 

2016

 

 

Type

 

Rate (1)

 

 

Maturity

Rangewood Medical Office Building

 

 

 

$

-

 

 

$

958,106

 

 

Fixed

 

 

4.95

%

 

1/1/2019

Regatta Square

 

 

 

 

-

 

 

 

1,150,566

 

 

Fixed

 

 

4.95

%

 

1/1/2019

Garden Gateway Plaza

 

 

 

 

6,491,497

 

 

 

6,626,739

 

 

Fixed

 

 

5.00

%

 

2/5/2020

Port of San Diego Complex

 

 

 

 

9,645,958

 

 

 

9,852,456

 

 

Fixed

 

 

4.75

%

 

3/5/2020

West Fargo Industrial

 

 

 

 

4,383,209

 

 

 

4,434,655

 

 

Fixed

 

 

4.79

%

 

8/4/2020

Morena Office Center

 

(2)

 

 

2,173,577

 

 

 

2,224,839

 

 

Fixed

 

 

4.50

%

 

1/1/2021

Waterman Plaza

 

 

 

 

3,872,112

 

 

 

3,939,037

 

 

Fixed

 

 

4.25

%

 

4/29/2021

Pacific Oaks Plaza

 

 

 

 

1,477,981

 

 

 

1,512,640

 

 

Fixed

 

 

4.50

%

 

6/1/2021

The Presidio

 

 

 

 

6,000,000

 

 

 

6,000,000

 

 

Fixed

 

 

4.54

%

 

12/1/2021

Shoreline Medical Building

 

 

 

 

-

 

 

 

3,602,238

 

 

Fixed

 

 

5.10

%

 

6/1/2022

Highland Court

 

 

 

 

6,729,472

 

 

 

6,829,348

 

 

Fixed

 

 

3.82

%

 

9/1/2022

Dakota Bank Buildings

 

 

 

 

10,538,950

 

 

 

10,677,761

 

 

Fixed

 

 

4.74

%

 

7/6/2024

Union Terrace Building

 

 

 

 

6,480,347

 

 

 

6,558,704

 

 

Fixed

 

 

4.50

%

 

9/5/2024

Centennial Tech Center

 

 

 

 

9,950,275

 

 

 

10,077,242

 

 

Fixed

 

 

4.34

%

 

11/5/2024

Research Parkway

 

 

 

 

1,920,972

 

 

 

1,956,154

 

 

Fixed

 

 

3.94

%

 

1/5/2025

Arapahoe Service Center

 

 

 

 

8,397,863

 

 

 

8,500,000

 

 

Fixed

 

 

4.34

%

 

1/5/2025

Union Town Center

 

 

 

 

8,440,000

 

 

 

8,440,000

 

 

Fixed

 

 

4.28

%

 

1/5/2025

Yucca Valley Retail Center

 

 

 

 

6,000,000

 

 

 

6,000,000

 

 

Fixed

 

 

4.30

%

 

4/11/2025

Executive Office Park

 

(3)

 

 

4,171,269

 

 

 

4,231,842

 

 

Fixed

 

 

5.80

%

 

7/1/2025

Genesis Plaza

 

 

 

 

6,500,000

 

 

 

6,610,000

 

 

Fixed

 

 

4.65

%

 

8/25/2025

One Park Centre

 

 

 

 

6,610,000

 

 

 

6,500,000

 

 

Fixed

 

 

4.77

%

 

9/5/2025

Shea Center II

 

 

 

 

17,727,500

 

 

 

17,727,500

 

 

Fixed

 

 

4.92

%

 

1/5/2026

Bismarck Office Building

 

(5)

 

 

4,083,446

 

 

 

4,158,998

 

 

Fixed

 

 

4.02

%

 

8/1/2037

300 N.P.

 

 

 

 

2,388,948

 

 

 

-

 

 

Fixed

 

 

4.02

%

 

8/1/2037

Subtotal, Presidio Property Trust, Inc. properties

 

 

 

 

133,983,376

 

 

 

138,568,825

 

 

 

 

 

4.71

%

 

 

Model Home mortgage notes

 

 

 

 

30,717,681

 

 

 

22,259,779

 

 

Fixed

 

(4)

 

 

2017-2020

Mortgage Notes Payable

 

 

 

$

164,701,057

 

 

$

160,828,604

 

 

 

 

 

 

 

 

 

Unamortized loan costs

 

 

 

 

(1,781,974

)

 

 

(1,942,493

)

 

 

 

 

 

 

 

 

Mortgage Notes Payable, net

 

 

 

$

162,919,083

 

 

$

158,886,111

 

 

 

 

 

 

 

 

 

  

Principal as of

          
  

June 30,

  

December 31,

 

Loan

 

Interest

     

Mortgage note property

 

2022

  

2021

 

Type

 

Rate (1)

  

Maturity

 

300 N.P. (2)

  0   2,232,923 

Fixed

  4.95% 

6/11/2022

 

Dakota Center

  9,560,814   9,677,108 

Fixed

  4.74% 

7/6/2024

 

Research Parkway

  1,677,119   1,705,438 

Fixed

  3.94% 

1/5/2025

 

Arapahoe Service Center

  7,687,042   7,770,887 

Fixed

  4.34% 

1/5/2025

 

Union Town Center

  8,099,754   8,173,568 

Fixed

  4.28% 

1/5/2025

 

One Park Centre

  6,220,286   6,276,849 

Fixed

  4.77% 

9/5/2025

 

Genesis Plaza

  6,112,415   6,168,604 

Fixed

  4.71% 

9/6/2025

 

Shea Center II

  17,362,510   17,494,527 

Fixed

  4.92% 

1/5/2026

 

West Fargo Industrial (6)

  4,089,833   4,148,405 

Fixed

  3.27% 

8/5/2029

 

Grand Pacific Center (3) (4)

  3,558,614   3,619,695 

Fixed

  4.02% 

8/1/2037

 

Baltimore

  5,670,000   0 

Fixed

  4.67% 

4/6/2032

 

Mandolin

  3,665,201   0 

Fixed

  4.35% 4/20/2029 

Subtotal, Presidio Property Trust, Inc. Properties

 $73,703,588  $67,268,004          

Model Home mortgage notes (4) (5)

  20,947,121   22,154,128 

Fixed

      2022 - 2024 

Mortgage Notes Payable

 $94,650,709  $89,422,132          

Unamortized loan costs

  (717,475)  (562,300)         

Mortgage Notes Payable, net

 $93,933,234  $88,859,832          

(1)

Interest rates as of June 30, 2022.

(2)The mortgage note payable for 300 N.P. is an amortizing loan with a balloon payment of $2.2 million due at maturity, on June 11, 2022.  The Company paid this note in full on May 11, 2022 with available cash on hand.  
(3)Interest rate is subject to possible reset on September 1, 2023.
(4)Property held for sale as of June 30, 2022. There were five model homes included as real estate assets held for sale.
(5)Our model homes have stand-alone mortgage note at interest rates ranging from 2.50% to 5.18% per annum as of June 30, 2022.
(6)Interest rate is subject to possible reset on August 5, 2023.

(1)  Interest rates as of September 30, 2017.

(2)  Interest rate is subject to reset on May 4, 2018.

(3)  Interest rate is subject to reset on July 1, 2018.

(4)  Each Model Home has a stand-alone mortgage note at interest rates ranging from 3.8% to 5.5% per annum (at September 30, 2017).

(5)  Interest rate is subject to reset on September 1, 2023 and on September 1, 2030.

The Company is in compliance with all material conditions and covenants of its mortgage notes payable.

13


Scheduled principal payments of mortgage notes payable were as follows as of June 30, 2022:

  

Presidio Property

  

Model

     
  

Trust, Inc.

  

Homes

  

Total Principal

 

Years ending December 31:

 Notes Payable  Notes Payable  Payments 

2022

 $704,494  $3,244,546  $3,949,040 

2023

  1,470,877   7,768,366   9,239,243 

2024

  10,449,488   9,934,209   20,383,697 

2025

  28,852,888   0   28,852,888 

2026

  16,719,849   0   16,719,849 

Thereafter

  15,505,992   0   15,505,992 

Total

 $73,703,588  $20,947,121  $94,650,709 

20

8. NOTES PAYABLE

On April 22, 2020, the Company received an Economic Injury Disaster Loan of $10,000 from the Small Business Administration ("SBA") to provide economic relief during the COVID-19 pandemic. This loan advance is not required to be repaid, has no stipulations on use, and has been recorded as fees and other income in the condensed consolidated statements of operations during fiscal 2020. On August 17, 2020, we received an additional Economic Injury Disaster Loan ("EIDL") of $150,000, for which principal and interest payments are deferred for twelve months from the date of issuance, and interest accrues at 3.75% per year. The loan matures on August 17, 2050. We have used the funds for general corporate purposes to alleviate economic injury caused by the COVID-19 pandemic, which economic injury included abating or deferring rent to certain tenants (primarily retail tenants).

Since September 30, 2017:2021, we have issued five promissory notes to our majority owned subsidiary Dubose Model Home Investors 202 LP and Dubose Model Home Investors 204 LP for the refinancing of five model home properties in Texas and Wisconsin, for approximately $1.1 million with an interest rate of 3.0% per annum and maturity dates in November 2022 and December 2022.   These notes payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

On August 17, 2021, we issued a promissory note to our majority owned subsidiary NetREIT Highland for the acquisition of the Mandolin property in Houston, Texas, for $1.56 million with an interest rate of 4.0% per annum and a maturity date of August 17, 2022.   This note payable and note receivable, including interest expense and interest income related to this promissory note, were eliminated through consolidation on our financial statements.  During April 2022, this loan was refinanced with a loan from a third-party bank totaling $3.7 million, with the proceeds being used to pay back our $1.56 million promissory note.

On December 20, 2021, we issued a promissory note to our majority owned subsidiary PPT Baltimore for the acquisition of the Baltimore property in Baltimore, Maryland, for $5.65 million with an interest rate of 4.5% per annum and a maturity date of December 20, 2022.   This note payable and note receivable, including interest expense and interest income related to this promissory note, were eliminated through consolidation on our financial statements.  During March 2022, this loan was refinanced with a loan from a third-party lender totaling $5.67 million, with the proceeds being used to pay back our $5.65 million promissory note.

9.COMMITMENTS AND CONTINGENCIES

The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties.

Litigation. From time to time, we may become involved in various lawsuits or legal proceedings which arise in the ordinary course of business. Neither the Company nor any of the Company’s properties are presently subject to any material litigation nor, to the Company’s knowledge, is there any material threatened litigation.

Environmental Matters. The Company monitors its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, the Company is not currently aware of any environmental liability with respect to the properties that would have a material effect on the Company’s financial condition, results of operations and cash flow. Further, the Company is not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that the Company believes would require additional disclosure or recording of a loss contingency.

Financial Markets.  The Company monitors concerns over economic recession, the COVID-19 pandemic, interest rate increases, policy priorities of the U.S. presidential administration, trade wars, labor shortages, or inflation may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. For example, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown. We have not currently experienced a direct material impact to our Company or operations; however, we will continue to monitor the financial markets for events that could impact our commercial real estate properties.

 

 

 

Presidio Property Trust, Inc.

 

 

Model Homes

 

 

Principal

 

 

 

Notes Payable

 

 

Notes Payable

 

 

Payments

 

Three months remaining in 2017

 

$

474,791

 

 

$

299,579

 

 

$

774,370

 

Years ending December 31:

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

1,931,368

 

 

 

1,720,327

 

 

$

3,651,695

 

2019

 

 

2,286,504

 

 

 

16,696,091

 

 

$

18,982,595

 

2020

 

 

21,156,934

 

 

 

12,001,684

 

 

$

33,158,618

 

2021

 

 

14,496,465

 

 

 

-

 

 

$

14,496,465

 

Thereafter

 

 

93,637,314

 

 

 

-

 

 

$

93,637,314

 

Total

 

$

133,983,376

 

 

$

30,717,681

 

 

$

164,701,057

 

21

Sponsorship of Special Purpose Acquisition Company.  On January 7, 2022, we announced our sponsorship, through our wholly-owned subsidiary, Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering. The SPAC raised $132,250,000 in capital investment to acquire businesses in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space, which we may refer to as “Proptech” businesses. We, through our wholly-owned subsidiary, owned approximately 23.5% of the issued and outstanding stock in the entity upon the initial public offering being declared effective and consummated (excluding the private placement units described below), and that following the completion of its initial business combination that the SPAC will operate as a separately managed, publicly traded entity. The SPAC offered 132,250,000 units, with each unit consisting of 1 share of common stock and three-quarters of one redeemable warrant.  The warrants were evaluated using the guidance in ASC 480 "Distinguishing Liabilities from Equity" and we concluded that the warrants are indexed to Murphy Canyon's common stock and meets the criteria to be classified in stockholders' equity.

 

8.  SERIES B MANDATORILY REDEEMABLE PREFERRED STOCK

In August 2014,The SPAC's ability to complete a business combination may be extended in additional increments of three months up to a total of six (6) additional months from the Company closed on a private placementclosing date of the offering, subject to the payment into the Trust Account by the Sponsor (or its designees or affiliates) of its mandatorily redeemable Series B Preferred Stock. The financing, was funded in installmentsthe sum of $1,322,500, representing the sum of $0.10 per share of Common Stock sold to Public Stockholders, and completed on December 24, 2015. As of December 31, 2015,which extension payments, if any, shall be added to the Company had issued 35,000 shares of its Series B Preferred Stock.Trust Account.  The Company has classifiedcommitted to provide additional funds if needed to make such a deposit for the Series B Preferred Stock asextension.

The Murphy Canyon IPO, of 13,225,000 units (“Units”) and, with respect to the common stock included in the Units being offered, the (“Public Shares”), closed on February 7, 2022, raising gross proceeds for Murphy Canyon of $132,250,000, including the exercise in full by the underwriters of their over-allotment option. In connection with the IPO, we purchased, through the Sponsor, 754,000 placement units (the “placement units”) at a liabilityprice of $10.00 per unit, for an aggregate purchase price of $7,540,000.  The Sponsor has agreed to transfer an aggregate of 45,000 placement units (15,000 each) to each of Murphy Canyon’s independent directors.  These proceeds were deposited in accordance with ASC Topic No. 480, “Distinguishing Liabilities from Equity,” which states that mandatorily redeemable financial instruments should be classified as liabilitiesa trust account established for the benefit of the Murphy Canyon public shareholders and therefore the related dividend payments are treated as a component of interest expenseincluded in Investments held in Trust in the accompanying condensed consolidated statementsbalance sheet at June 30, 2022In connection with the initial public offering, Murphy Canyon incurred $7,738,161 in issuance costs, including $2,645,000 of operations.underwriting discounts and commission, $4,628,750 of deferred underwriting fees and $464,411 of other offering costs.  These costs were allocated to temporary and permanent equity and offset against the proceeds.

The Series B preferred stock has

Immediately following the IPO, Murphy Canyon began to evaluate acquisition candidates in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space with an aggregate combined enterprise value of approximately $300 million to $1.2 billion. Murphy Canyon’s goal is to complete its initial business combination (“IBC”) within one year of its IPO.  We expect Murphy Canyon to operate as a $0.01 par value and a $1,000 liquidation preference. The Series B preferred stock shall be redeemed through a cash paymentseparately managed, publicly traded entity following the completion of the face value of the shares outstanding at redemption. The preferred return on the funds invested is 14% and shall be paid on a monthly basis. The Series B Preferred Stock was scheduled to be redeemed on August 1, 2017; however, the Company had two one year options to extend the redemption date. On June 30, 2017, the Company exercised its option to extend the redemption date to August 1, 2019 and paid an extension fee of $153,500. The Company incurred approximately $3.1 million in legal and underwriting costs related to this transaction. These costs have been recorded as deferred financing costs on the accompanying consolidated balance sheets as a direct deduction from the carrying amount of that debt liability and are being amortized over the term of the agreement. Amortization expense totaling approximately $507,000 and $508,000 was included in interest expense for the nine months ended September 30, 2017 and 2016 in the accompanying consolidated statements of operations. The unamortized deferred stock costs totaled $134,000 and $592,000 as of September 30, 2017 and December 31, 2016, respectively.

During 2016, the Company redeemed 300 shares in June, 1,000 shares in July and 1,000 shares in August for a total of $2.3 million. During 2017, the Company redeemed 1,000 shares in March and 1,000 shares in May for a total of $2.0 million. As of September 30, 2017, the remaining outstanding number of shares was 30,700.  IBC, or “De-SPAC”. 

 

9.10. STOCKHOLDERS' EQUITY

Preferred Stock. The Company is authorized to issue up to 8,990,0001,000,000 shares of preferred stockPreferred Stock (the “Preferred Stock”). The Preferred Stock may be issued from time to time in one or more series.  The Board of Directors is authorized to fix the number of shares of any series of the Preferred Stock, to determine the designation of any such series, and to determineset the preferences, conversion or alter other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each series of Preferred Stock.

On June 15, 2021, the Company completed its secondary offering of 800,000 shares of our Series D Preferred Stock for cash consideration of $25.00 per share to a syndicate of underwriters led by Benchmark, as representative, resulting in approximately $18.1 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company. The Company granted the underwriters a 45-day option to purchase up to an additional 120,000 shares of Series D Preferred Stock to cover over-allotments, which they exercised on June 17, 2021, resulting in approximately $2.7 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.  In total, the Company issued 920,000 shares of Series D Preferred Stock with net proceeds of approximately $20.5 million, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company and deferred offering costs.  The Series D Preferred Stock is listed and trading on The Nasdaq Capital market under the symbol SQFTP.   The Company has used these proceeds for general corporate and working capital purposes, including acquiring additional properties.  Below are some of the key terms of the Series D Preferred Stock:

22

Dividends:

Holders of shares of the Series D Preferred Stock are entitled to receive cumulative cash dividends at a rate of 9.375% per annum of the $25.00 per share liquidation preference (equivalent to $2.34375 per annum per share). Dividends will be payable monthly on the 15th day of each month (each, a “Dividend Payment Date”), provided that if any Dividend Payment Date is not a business day, then the dividend that would otherwise have been payable on that Dividend Payment Date may be paid on the next succeeding business day without adjustment in the amount of the dividend.

Voting Rights:

Holders of shares of the Series D Preferred Stock will generally have no voting rights. However, if the Company does not pay dividends on the Series D Preferred Stock for eighteen or more monthly dividend periods (whether or not consecutive), the holders of the Series D Preferred Stock (voting separately as a class with the holders of all other classes or series of the Company’s preferred stock it may issue upon which like voting rights grantedhave been conferred and are exercisable and which are entitled to vote as a class with the Series D Preferred Stock in the election referred to below) will be entitled to vote for the election of two additional directors to serve on the Company’s  Board of Directors until the Company pays, or imposeddeclares and sets apart funds for the payment of, all dividends that it owes on the Series D Preferred Stock, subject to certain limitations.

In addition, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock (voting together as a class with all other series of parity preferred stock the Company may issue upon which like voting rights have been conferred and are exercisable) is required at any time for the Company to (i) authorize or issue any class or series of its stock ranking senior to the Series D Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up or (ii) to amend any provision of the Company charter so as to materially and adversely affect any rights of the Series D Preferred Stock or to take certain other actions. 

Liquidation Preference:

In the event of the Company’s voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Series D Preferred Stock will be entitled to be paid out of the assets the Company has legally available for distribution to its stockholders, subject to the preferential rights of the holders of any class or series of its stock the Company may issue ranking senior to the Series D Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up, a liquidation preference of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any distribution of assets is made to holders of the Company’s common stock or any other class or series of the Company’s stock it may issue that ranks junior to the Series D Preferred Stock as to liquidation rights.

In the event that, upon any wholly unissuedsuch voluntary or involuntary liquidation, dissolution or winding up, the Company’s available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series D Preferred Stock and the corresponding amounts payable on all shares of other classes or series of preferredthe Company’s stock that it issues ranking on parity with the Series D Preferred Stock in the distribution of assets, then the holders of the Series D Preferred Stock and all other such classes or series of stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. 

Redemption:

Commencing on or after June 15, 2026, the Company may redeem, at its option, the Series D Preferred Stock, in whole or in part, at a cash redemption price equal to $25.00 per share, plus any accumulated and unpaid dividends to, but not including the dividend rights, dividend rate, conversion rights, voting rights, redemption rights (includingdate. Prior to June 15, 2026, upon a Change of Control (as defined in the Articles Supplementary), the Company may redeem, at its option, the Series D Preferred Stock, in whole or part, at a cash redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including the redemption date. The Series D Preferred Stock has no stated maturity, will not be subject to any sinking fund provisions),or other mandatory redemption, price, and liquidation preference.will not be convertible into or exchangeable for any of our other securities.

In accordance with the terms of the Series D Preferred Stock, the Series D monthly dividend has been approved by the Board of Directors through June 2022 in the amount of $0.19531 per share payable on the 15th of every month to stockholders of record of Series D Preferred Stock as of the last day of the prior month.  Total dividends paid to Series D Preferred stockholders during the three and six months ended June 30, 2022 was approximately $0.5 million and $1.1 million, respectively. 

Common Stock. The Company is authorized to issue up to 100,000,000 shares of Series A Common Stock, (“Common Stock”) $0.01 par value and 1,000 shares of Series B Common Stock, and 9,000,000 shares of Series C Common Stock (collectively, the "Common Stock") each with $0.01 par value. Thevalue per share. Each class of Common Stock and the Series B Common Stock havehas identical rights, preferences, terms, and conditions except that the holders of Series B Common StockholdersStock are not entitled to receive any portion of Company assets in the event of Companythe Company's liquidation. There have been noNaN shares of Series B or Series C Common Stock shareshave been issued. Each share of Common Stock entitles the holder to one vote. TheShares of our Common Stock is are not subject to redemption and it does do not have any preference, conversion, exchange, or pre-emptivepreemptive rights. The articles of incorporation contain a restrictionCompany’s charter contains restrictions on the ownership and transfer of the Common Stock that prevents one person from owning more than 9.8% of the outstanding shares of common stock.

23

In October 2006, On July 12, 2021, the Company commencedentered into a private placement offering of its common stock. Through December 31, 2011 whensecurities purchase agreement with a single U.S. institutional investor for the offering was closed, the Company conducted a self-underwritten private placement offeringpurchase and sale of 20,000,0001,000,000 shares of its common stockSeries A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock. Each share of Common Stock and accompanying Common Stock Warrants were sold together at a combined offering price of $10$5.00, and each share of Common Stock and accompanying Pre-Funded Warrants were sold together at a combined offering price of $4.99. The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $0.01 per share. ThisThe Common Stock Warrants have an exercise price of $5.50 per share, were exercisable upon issuance and will expire five years from the date of issuance. 

In connection with this additional offering, was made onlywe agreed to accredited investors (andissue the Placement Agent Warrants to purchase up to thirty-five non-accredited80,000 shares of Series A Common Stock, representing 4.0% of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrant.  The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $6.25 and will expire five years from the date of issuance.

14


investors) pursuantThe Company evaluated the accounting guidance in ASC 480 and ASC 815 regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and ultimately determined that it should be classified as permanent equity.  As of June 30, 2022, none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

Stock Repurchase Program.  On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock.  During September 2021, the Company was able to purchase 18,133 shares at an exemption from registration providedaverage price of $3.73692 per share, plus commission of $0.035 per share, for a total cost of $68,396.  During December 2021, the Company was able to purchase 11,588 shares at an average price of $3.6097 per share, plus commission of $0.035 per share, for a total cost of $42,235.  NaN repurchases were made during the first quarter of 2022, and during the three months ended June 30, 2022, the Company was able to purchase 10,411 shares at an average price of $2.9698 per share, including transaction costs, for a total cost of $30,919.  These shares will be treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders' equity at cost.  While we will continue to pursue value creating investments, the Board believes there is significant embedded value in our assets that is yet to be realized by Section 4(2)the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently.

Cash Dividends on Common Stock.  For the three and Rule 506six months ended June 30, 2022, the Company declared and paid cash dividends of Regulationapproximately $1.3 million, and $2.6 million, respectively. For the three and six months ended June 30, 2021 the Company declared and paid approximately $1.0 million, and $2.0 million, respectively.  The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis to holders of our Series D underPreferred Stock going forward, but there can be no guarantee the Securities ActBoard of 1933, as amended. No public or private market currently existsDirectors will approve any future dividends.  The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the securities sold under this offering.six months ended June 30, 2022 and 2021.

Cash Dividends.

Series A Common Stock

Quarter Ended

 

2022

  

2021

 
  

Distributions Declared

  

Distributions Declared

 

March 31

 $0.105  $0.101 

June 30

  0.106   0.102 

Total

 $0.211  $0.203 

Series D Preferred Stock

Month

 

2022

  

2021

 
  

Distributions Declared

  

Distributions Declared

 

January

 $0.19531  $0 

February

  0.19531   0 

March

  0.19531   0 

April

  0.19531   0 

May

  0.19531   0 

June

  0.19531   0.10417 

Total

 $1.17186  $0.10417 

24

Warrant Dividend. In September 2017, January 2022, we fileddistributed the Series A Warrants to our Series A Common Stockholders.  The Series A Warrants and the shares of Series A Common Stock issuable upon the exercise of the Series A Warrants were registered on a registration statement relatingthat was filed with the SEC and was declared effective January 21, 2022. The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to our proposed initial public offering. In lightpersons who held shares of common stock and existing outstanding warrants as of the proposed offering, we suspendedJanuary 14, 2022 record date, or who acquired shares of Series A Common Stock in the paymentmarket following the record date, and who continued to hold such shares at the close of dividends correspondingtrading on January 21, 2022.  The Series A Warrants give the holder the right to purchase one share of Series A Common Stock at $7.00 per share, for a period of five years. Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a share of Series A Common Stock at expiration, rounded down to the three months ended September 30, 2017.  During the nine months ended September 30, 2017 and 2016nearest number of whole shares.

Partnership Interests. Through the Company, paid cash dividends, netits subsidiaries, and its partnerships, we own 12 commercial properties in fee interest, two of reinvested stock dividends,which we own partial interests in through our holdings in various affiliates in which we serve as general partner, member and/or manager. Each of approximately $3,621,000the limited partnerships is referred to as a “DownREIT.” In each DownREIT, we have the right, through put and $3,348,000, respectively, orcall options, to require our co-investors to exchange their interests for shares of our Common Stock at a ratestated price after a defined period (generally five years from the date they first invested in the entity’s real property), the occurrence of $0.10 per share on a quarterly basis. As thespecified event or a combination thereof. The Company expects to report net taxable losses for the year ended December 31, 2017,is a limited partner in five partnerships and on a cumulative basis, the cash dividends paid are expected to be a return of capital to the stockholders rather than a distribution of earnings.sole stockholder in one corporation, which entities purchase and leaseback model homes from homebuilders.

Dividend Reinvestment Plan.The Company has adopted a distribution reinvestment plan (the “DRIP”) that allowsallowed stockholders to have dividends and other distributions otherwise distributable to them invested in additional shares of Company common stock.the Company’s Common Stock. The Company has registered 3,000,000 shares of common stockCommon Stock pursuant to the dividend reinvestment plan. The dividend reinvestment plan became effective on January 23, 2012.DRIP. The purchase price per share isused in the past was 95% of the price the Company was formerly sellingsold its shares, or $9.50$19.00 per share. NoNaN sales commission or dealer manager fee will befees were paid on shares sold through the dividend reinvestment plan.DRIP. The Company may amend, suspend or terminate the PlanDRIP at any time. Any such amendment, suspension or termination will beis effective upon a designated dividend record date and notice of such amendment, suspension or termination will beis sent to all Participantsparticipants at least thirty (30) days prior to such record date. The DRIP became effective on January 23, 2012, was suspended on December 7, 2018 and adopted on October 6, 2020 in connection with our IPO, and updated to reflect a change in transfer agent and registrar. As of SeptemberJune 30, 20172022, approximately $17.4 million or approximately 1,834,147917,074 shares of common stockCommon Stock have been issued under the dividend reinvestmentDRIP. No shares were issued under the DRIP since it was suspended in 2018.

11. SHARE-BASED INCENTIVE PLAN

The Company maintains a restricted stock incentive plan for the purpose of attracting and retaining officers, employees, and non-employee board members. Share awards generally vest in equal annual installments over a three-to-ten-year period from date of issuance. Non-vested shares have voting rights and are eligible for any dividends paid to date.common shares. The Company recognized compensation cost for these fixed awards over the service vesting period, which represents the requisite service period, using the straight-line method. Prior to our IPO, the value of non-vested shares was calculated based on the offering price of the shares in the most recent private placement offering of $20.00, adjusted for stock dividends since granted and assumed selling costs, which management believed approximated fair market value as of the date of grant. Upon our IPO, the value of non-vested shares granted is generally calculated based on the closing price of our common stock on the date of the grant.

 

During our Annual Stockholders meeting, held on May 26, 2022, the Company's 2017 Incentive Award Plan was amended to increase the available shares for issuance from 1.1 million to 2.5 million.

10.  RELATED PARTY TRANSACTIONS

The Company leases a portionA summary of its corporate headquarters at Pacific Oaks Plaza in Escondido, California to entities 100% owned bythe activity for the Company’s Chairman and Chief Executive Officer. Rental income recordedrestricted stock was as follows:

Outstanding shares:

Common Shares

Balance at December 31, 2021

295,471

Granted

389,823

Forfeited

(11,780)

Vested

(95,947)

Balance at June 30, 2022

577,567

25

The non-vested restricted shares outstanding as of June 30, 2022 will vest over the next one to six years.

Share-based compensation expense was approximately $0.6 million for both the three and ninesix months ended SeptemberJune 30, 2017 2022 and 20162021.  As of June 30, 2022, future unrecognized stock compensation related to unvested shares totaled $7,000 and $7,000, respectively, and $21,000 and $21,000, respectively.  approximately $2.6 million.

11.

12. SEGMENTS

The Company’s reportable segments consist of three types of commercial real estate properties for which the Company’s decision-makers internally evaluate operating performance and financial results: Office/Industrial Properties, ResidentialModel Home Properties and Retail Properties. The Company also has certain corporate levelcorporate-level activities including accounting, finance, legal administration, and management information systems which are not considered separate operating segments.  The accounting policies of the reportable segments are the same as those described in Note 2.  There is no inter segment material inter-segment activity.

The Company evaluates the performance of its segments based upon net operating income (“NOI”), which is a non-GAAP supplemental financial measure. The Company defines NOI for its segments as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees, impairments and provision for bad debt). NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, real estate acquisition fees and expenses and corporate general and administrative expenses. The Company uses NOI to evaluate the operating performance of the Company’s real estate investments and to make decisions about resource allocations.regarding allocation of resources.

15


The following tables reconcilecompare the Company’s segment activity to its results of operations and financial position as of and for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.June 30, 2021:

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 

Office/Industrial Properties:

                

Rental, fees and other income

 $3,150,251  $3,317,847  $6,273,139  $7,260,652 

Property and related expenses

  (1,174,391)  (1,262,483)  (2,530,925)  (3,116,754)

Net operating income, as defined

  1,975,860   2,055,364   3,742,214   4,143,898 

Model Home Properties:

                

Rental, fees and other income

  696,964   845,412   1,407,292   1,789,190 

Property and related expenses

  (25,440)  (30,215)  (53,208)  (80,501)

Net operating income, as defined

  671,524   815,197   1,354,084   1,708,689 

Retail Properties:

                

Rental, fees and other income

  471,344   683,324   1,224,685   1,465,495 

Property and related expenses

  (145,951)  (193,117)  (358,538)  (427,483)

Net operating income, as defined

  325,393   490,207   866,147   1,038,012 

Reconciliation to net loss:

                

Total net operating income, as defined, for reportable segments

  2,972,777   3,360,768   5,962,445   6,890,599 

General and administrative expenses

  (1,214,005)  (1,344,770)  (2,797,696)  (2,882,036)

Depreciation and amortization

  (1,316,193)  (1,368,209)  (2,655,418)  (2,797,143)

Interest expense

  (1,085,860)  (1,207,036)  (2,103,573)  (2,791,430)

Gain on extinguishment of government debt

  0      0   10,000 

Other income (expense), net

  93,128   (20,657)  166,733   (53,443)

Income tax expense

  (259,285)  (238,701)  (524,524)  (288,899)

Gain (loss) on sale of real estate

  1,227,484   2,594,341   2,750,269   1,433,014 

Net income (loss)

 $418,046  $1,775,736  $798,236  $(479,338)

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Office/Industrial Properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

5,924,773

 

 

$

6,204,750

 

 

$

18,703,971

 

 

$

19,258,901

 

Property and related expenses

 

 

(2,413,777

)

 

 

(2,220,366

)

 

 

(6,928,015

)

 

 

(6,603,192

)

Net operating income, as defined

 

 

3,510,996

 

 

 

3,984,384

 

 

 

11,775,956

 

 

 

12,655,709

 

Residential Properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

 

983,426

 

 

 

548,260

 

 

 

2,790,032

 

 

 

1,555,405

 

Property and related expenses

 

 

(35,239

)

 

 

(25,061

)

 

 

(109,233

)

 

 

(94,142

)

Net operating income, as defined

 

 

948,187

 

 

 

523,199

 

 

 

2,680,799

 

 

 

1,461,263

 

Retail Properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

 

1,055,177

 

 

 

1,100,623

 

 

 

3,234,071

 

 

 

3,277,619

 

Property and related expenses

 

 

(344,957

)

 

 

(331,354

)

 

 

(1,029,987

)

 

 

(937,811

)

Net operating income, as defined

 

 

710,220

 

 

 

769,269

 

 

 

2,204,083

 

 

 

2,339,808

 

Reconciliation to net loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net operating income, as defined, for reportable segments

 

 

5,169,403

 

 

 

5,276,852

 

 

 

16,660,838

 

 

 

16,456,780

 

General and administrative expenses

 

 

(1,322,631

)

 

 

(1,252,299

)

 

 

(3,960,202

)

 

 

(3,715,029

)

Depreciation and amortization

 

 

(2,399,307

)

 

 

(2,564,211

)

 

 

(7,346,640

)

 

 

(7,723,372

)

Interest expense

 

 

(3,191,152

)

 

 

(3,323,740

)

 

 

(9,818,767

)

 

 

(10,187,983

)

Interest income

 

 

10,515

 

 

 

9,892

 

 

 

25,612

 

 

 

78,224

 

Income tax expense

 

 

(53,566

)

 

 

(87,898

)

 

 

(154,189

)

 

 

(232,598

)

Impairment of real estate

 

 

-

 

 

 

(700,000

)

 

 

-

 

 

 

(700,000

)

Gain on sale of real estate

 

 

210,372

 

 

 

732,908

 

 

 

2,237,423

 

 

 

2,121,453

 

Net loss

 

$

(1,576,366

)

 

$

(1,908,496

)

 

$

(2,355,925

)

 

$

(3,902,525

)

26

 
  

June 30,

  

December 31,

 

Assets by Reportable Segment:

 

2022

  

2021

 

Office/Industrial Properties:

        

Land, buildings and improvements, net (1)

 $77,224,583  $78,240,086 

Total assets (2)

 $78,900,054  $76,453,436 

Model Home Properties:

        

Land, buildings and improvements, net (1)

 $32,009,456  $34,089,046 

Total assets (2)

 $30,652,005  $31,047,202 

Retail Properties:

        

Land, buildings and improvements, net (1)

 $16,227,501  $25,693,239 

Total assets (2)

 $16,909,932  $27,579,469 

Reconciliation to Total Assets:

        

Total assets for reportable segments

 $126,461,991  $135,080,107 

Other unallocated assets:

        

Cash, cash equivalents and restricted cash

  12,154,873   6,738,345 

Other assets, net

  150,479,259   19,378,311 

Total Assets

 $289,096,123  $161,196,763 

(1)

Includes lease intangibles and the land purchase option related to property acquisitions.

 

 

September 30,

 

 

December 31,

 

Assets by Reportable Segment:

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

Office/Industrial Properties:

 

 

 

 

 

 

 

 

Land, buildings and improvements, net (1)

 

$

161,798,825

 

 

$

172,309,537

 

Total assets (2)

 

$

166,582,487

 

 

$

175,689,722

 

Residential Properties:

 

 

 

 

 

 

 

 

Land, buildings and improvements, net (1)

 

$

46,504,124

 

 

$

34,813,680

 

Total assets (2)

 

$

43,862,941

 

 

$

35,960,179

 

Retail Properties:

 

 

 

 

 

 

 

 

Land, buildings and improvements, net (1)

 

$

31,001,394

 

 

$

33,398,992

 

Total assets (2)

 

$

32,622,709

 

 

$

35,320,092

 

Reconciliation to Total Assets:

 

 

 

 

 

 

 

 

Total assets for reportable segments

 

$

243,068,137

 

 

$

246,969,993

 

Other unallocated assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

3,436,531

 

 

 

3,116,147

 

Other assets, net

 

 

10,049,212

 

 

 

7,912,937

 

Total Assets

 

$

256,553,880

 

 

$

257,999,077

 

(1)  Includes lease intangibles and the land purchase option related to property acquisitions.

(2)  

(2)

Includes land, buildings and improvements, cash, cash equivalents, and restricted cash, current receivables, deferred rent receivables and deferred leasing costs and other related intangible assets, all shown on a net basis.

  

For the Six Months Ended June 30,

 

Capital Expenditures by Reportable Segment

 

2022

  

2021

 

Office/Industrial Properties:

        

Capital expenditures and tenant improvements

 $832,990  $289,685 

Model Home Properties:

        

Acquisition of operating properties

  4,646,330   2,851,800 

Retail Properties:

        

Acquisition of operating properties

  0   0 

Capital expenditures and tenant improvements

  0   42,823 

Totals:

        

Acquisition of operating properties, net

  4,646,330   2,851,800 

Capital expenditures and tenant improvements

  832,990   332,508 

Total real estate investments

 $5,479,320  $3,184,308 

13. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements

 

27

16


Capital Expenditures by Reportable Segment

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Office/Industrial Properties:

 

 

 

 

 

 

 

 

Capital expenditures and tenant improvements

 

$

3,115,489

 

 

$

3,629,586

 

 

 

 

 

 

 

 

 

 

Residential Properties:

 

 

 

 

 

 

 

 

Acquisition of operating properties

 

 

16,810,985

 

 

 

15,774,855

 

 

 

 

 

 

 

 

 

 

Retail Properties:

 

 

 

 

 

 

 

 

Capital expenditures and tenant improvements

 

 

41,497

 

 

 

84,040

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

Acquisition of operating properties, net

 

 

16,810,985

 

 

 

15,774,855

 

Capital expenditures and tenant improvements

 

 

3,156,986

 

 

 

3,713,626

 

Total real estate investments

 

$

19,967,971

 

 

$

19,488,481

 

17


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion relates to our financial statements and should be read in conjunction with our condensed consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2022.

We may refer to the three months ended June 30, 2022 and June 30, 2021 as the “2022 Quarter” and the “2021 Quarter,” respectively.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” and/or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and also of which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Currently, one of the most significant factors is the potential adverse effect of COVID-19 and ensuing economic turmoil on the financial condition, results of operations, cash flows and performance of the Company, particularly our ability to collect rent, on the financial condition, results of operations, cash flows and performance of our tenants, and on the global economy and financial markets. The extent to which COVID-19 impacts the Company and its tenants will depend on current and future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 30, 2022, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements footnotesinclude, but are not limited to the risks associated with the ownership of real estate in general and our real estate assets in particular; the economic health of the metro regions where we conduct business; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to e-commerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; weather conditions, natural disasters and pandemics; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2021 Annual Report on Form 10-K filed on March 30, 2022. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

Outlook

On March 11, 2020, the World Health Organization declared COVID-19, a respiratory illness caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic caused state and local governments within our areas of business operations to institute quarantines, “shelter-in-place” mandates, including rules and restrictions on travel and the types of businesses that may continue to operate. While certain areas have re-opened, others have seen an increase in the number of cases reported, prompting local governments to consider enforce further restrictions. We continue to monitor our operations and government recommendations. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law to provide widespread emergency relief for the economy and to Cautionary Statements appearing elsewhereprovide aid to corporations.

The CARES Act includes several significant provisions related to taxes, refundable payroll tax credits and deferment of social security payments. We utilized certain relief options offered under the CARES Act and continue to evaluate the relief options for us and our tenants available under the CARES Act, as well as other emergency relief initiatives and stimulus packages instituted by the federal government. Several of the relief options contain restrictions on future business activities, which require careful evaluation and consideration, such as restrictions on the ability to repurchase shares and pay dividends. We will continue to assess these options, and any subsequent legislation or other relief packages, including the accompanying restrictions on our business, as the effects of the pandemic continue to evolve.

The effects of the COVID-19 pandemic did not significantly impact our operating results during 2021 or the six months ended June 30, 2022. We continue to monitor and communicate with our tenants to assess their needs and ability to pay rent. We have negotiated lease amendments with certain tenants who have demonstrated financial distress caused by the COVID-19 pandemic, which have included or may include rent deferral, temporary rent abatement, or reduced rental rates and/or lease extension periods, however no new negotiations were initiated during the first two quarters of 2022. While these amendments have affected our short-term cash flows, we do not believe they represent a change in the valuation of our assets for the properties affected and have not significantly affected our results of operations. Given the longevity of this report.pandemic and the potential for other variants of the coronavirus, such as the delta variant, the COVID-19 outbreak may materially affect our financial condition and results of operations going forward, including but not limited to real estate rental revenues, credit losses, leasing activity, and potentially the valuation of our real estate assets. We do expect additional rent deferrals, abatements, and/or credit losses from our commercial tenants during the remainder of 2022 and we do not expect our existing rent deferrals, abatements, and/or credit losses to have a material impact on our real estate rental revenue and cash collections. While we do expect that the effects of the COVID-19 pandemic will impact our ability to lease up available commercial space, our business operations and activities in many regions may be subject to future quarantines, "shelter-in-place" rules, and various other restrictions for the foreseeable future. Due to the uncertainty of the future impacts of the COVID-19 pandemic, the extent of the financial impact cannot be reasonably estimated at this time.  We are continuing to focus on growing our portfolio with the capital raised from the sale of our 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock in June 2021 and our Series A Common Stock in July 2021, as well are the sale of our commercial property World Plaza in March 2022.  For more information, see Part II - Item 1A. Risk Factors and Part II - Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 30, 2022. 

OVERVIEW

OVERVIEW

The Company operates as a self-managedan internally managed, diversified REIT, with primary holdings in office, industrial, retail, and self-administered real estate investment trust, or REIT.triple-net leased model home properties. In October 2017, we changed our name from “NetREIT, Inc.” to “Presidio Property Trust, Inc.” The Company acquires, owns, and manages a geographically diversified portfolio of real estate assets including office, industrial, office, retail and model home leased residential properties leased to homebuilders located throughoutin the United States. As of SeptemberJune 30, 2017,2022, the Company owned or had an equity interest in:

Fifteen multi-tenant office buildings and two industrial properties which total approximately 1,464,000 rentable square feet,

Eight office buildings and one industrial property (“Office/Industrial Properties”), which totals approximately 755,862 rentable square feet;

Four

Three retail shopping centers (“Retail Properties”), which total approximately 65,242 rentable square feet; and

82 model home residential properties (“Model Homes” or “Model Home Properties”), totaling approximately 252,235 square feet, leased back on a triple-net basis to homebuilders that are owned by five affiliated limited partnerships and one wholly-owned corporation, all of which we control.

We own five commercial properties located in Colorado, four in North Dakota, one in Southern California, one in Texas and one mixed use property which total approximately 228,000 rentable square feet, and

One hundred thirty-nine Model Homes owned by four affiliated limited partnerships and one limited liability company (“Residential Properties”).

The Company’s office, industrial, retail and mixed usein Maryland. Our model home properties are located primarily in Southern California and Colorado, with four properties located in North Dakota. Ourthree states.  While geographical clustering of assetsreal estate enables us to reduce our operating costs through economies of scale by servicing a number ofseveral properties with less staff, but it also makes us more susceptible to changing market conditions in these discrete geographic areas.areas, including those that have developed as a result of COVID-19. We do not develop properties but acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition. We consider a property to be stabilized once it has achieved an 80% occupancy rate for a full year as of January 1 of such year or has been operating for three years.

Most of our office industrial,and retail and mixed use properties are leased to a variety of tenants ranging from small businesses to large public companies, many of which doare not have publicly rated debt.investment grade. We have in the past entered into, and intend in the future to enter into, purchase agreements for real estate having net leases that require the tenant to pay all of the operating expense (NNN Leases) or pay increases in operating expenses over specific base years. Decreased demand and other negative trends or unforeseeable events that impairMost of our abilityoffice leases are for terms of three to timely renew or re-lease space could have a negative effect on our future financial condition, results of operations and cash flow.

five years with annual rental increases. Our Model Homesmodel homes are typically leased back for 2two to 3three years to the home developerbuilder on a triple nettriple-net lease. Under a triple nettriple-net lease, the tenant is required to pay all operating, maintenance and insurance costs and real estate taxes with respect to the leased property.

We seek to diversify our portfolio by commercial real estate segments, including office, industrial, retail and model home properties to reduce the adverse effect of a single under-performing segment geographic market and/or tenant. We further supplement thismitigate risk at the tenant level through our credit review process, which varies by tenant class. For example, our commercial and industrial tenants tend to be corporations or individual owned businesses. In these cases, we typically obtain financial records, including financial statements and tax returns (depending on the circumstance), and run credit reports for any prospective tenant to support our decision to enter into a rental arrangement. We also typically obtain security deposits from these commercial entities.tenants. Our Model Home businesscommercial tenants are typically substantial home developerswell-known homebuilders with established credit histories. These tenants are subjectsubjected to financial review and analysis prior to us entering into a sale-leasebacksales-leaseback transaction. Our ownership of the underlying property provides a further means to avoiding significant credit losses.

For additional information regarding our Common Stock activity, see Footnote 10. Stockholders’ Equity in Item 1. Financial Statements.

SIGNIFICANT TRANSACTIONS IN 20172022 AND 20162021

Acquisitions

The Company acquired forty-five Model Home properties and leased them back to the homebuildersAcquisitions during the ninesix months ended SeptemberJune 30, 2017. The purchase price for the properties was $16.8 million. The purchase price paid was through cash payments of $5.8 million and mortgage notes of $11.1 million.

2022:

The Company acquired 8 model homes for approximately $4.6 million. The purchase price was paid through cash payments of approximately $1.4 million and mortgage notes of approximately $3.2 million.

 

The Company acquired sixty-five Model Home properties and leased them back to the homebuildersAcquisitions during the twelvesix months ended December 31, 2016. The purchase priceJune 30, 2021

The Company acquired six model homes forapproximately$2.9 million.  These acquisitions were paid for with approximately $0.9 million in cash payments and approximately $2.0 million in mortgage loans.  There were no other commercial properties acquired during this period.

Dispositions during the six months ended June 30, 2022:

World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million.

The Company disposed of 18 model homes for approximately $10.0 million and recognized a gain of approximately $3.0 million.

Dispositions during the six months ended June 30, 2021

Waterman Plaza, which was sold on January 28, 2021, for approximately $3.5 million and the Company recognized a loss of approximately $0.2 million.

Garden Gateway, which was sold on February 19, 2021, for approximately $11.2 million and the Company recognized a loss of approximately $1.4 million.

Highland Court, which was sold on May 20, 2021 for approximately $10.2 million and the Company recognized a loss of approximately $1.6 million.

Executive Office Park, which was sold on May 21, 2021 for approximately $8.1 million and the Company recognized a gain of approximately $2.5 million.

The Company disposed of 32 model homes for approximately $15.1 million and recognized a gain of approximately $2.3 million.

Management does not expect that the level of commercial property sales experienced over the last 24 months to continue in the near future.  Additionally, with the recent equity raised in June and July 2021 and the refinancing of our commercial properties was $23.7 million. The purchase price paid was through cash paymentsduring 2022, management is working to increase the number of $7.5 millioncommercial properties in the portfolio with new acquisitions.  However, elevated real estate prices in both commercial and mortgage notes of $16.2 million.

Dispositions - We reviewresidential real estate and compressing capitalization rates have made it challenging to acquire properties that fit our portfolio needs.  Management will continue to evaluate potential acquisitions in an effort to increase our portfolio of investment properties for value appreciation potential on an ongoing basis,commercial real estate.

For details regarding our sponsorship of a special purpose acquisition company, Murphy Canyon Acquisition Corp. ("Murphy Canyon"), see Note 9, Commitments and dispose of any properties that no longer satisfy our requirements in this regard. The proceeds from any such property sale, after repayment of any associated mortgage, are available for investing in properties that we believe will have a much greater likelihood of future price

18


appreciation. We disposed of the following properties during the nine months ended September 30, 2017 and the year ended December 31, 2016:

On February 27, 2017, the Company sold the Rangewood Medical Building for approximately $2.2 million and recognized a loss of approximately $170,000.

On March 31, 2017, the Company sold the Regatta Square Retail Center for approximately $3.0 million and recognized a gain of approximately $756,000.

On April 7, 2017, the Company sold the Shoreline Medical Building for approximately $8.2 million and recognized a gain of approximately $1.3 million.

During the nine months ended September 30, 2017, the Company disposed of fourteen Model Homes for approximately $5.3 million and recognized a gain of approximately $350,000 relatedContingencies, to the saleNotes to the Condensed Consolidated Financial Statements in “Part I, Item 1. Condensed Consolidated Financial Statements (Unaudited)” of these Model Homes.this Quarterly Report.

30

In July 2016, the Company sold the Havana Parker Complex for approximately $3.3 million and recognized a gain

In June 2016, the Company sold a parcel of land and its building at the Yucca Valley Retail Center for approximately $1.3 million and recognized a gain of approximately $831,000.

During 2016, the Company sold twenty-one Model Homes for approximately $6.4 million, resulting in gain on sales of approximately $687,000.

 

ECONOMIC ENVIRONMENT

In one of the longest expansions on record, the United States continues to expand its economy. GDP growth in the second quarter of 2017 was 3.0%, which was its quickest pace in two years. The Federal Reserve has remained optimistic about the United States’ economic outlook, and currently anticipates two more rate hikes in 2017.

The U.S. labor market is showing continued improvement since the Great Recession, with an unemployment rate of only 4.4% as of June 30, 2017. Unemployment in the office-using sector of professional & business services was even lower, at 4.1%, and that could lead to a more favorable market for the commercial real estate segment. Vacancy rates for the office sector of commercial real estate rose slightly to 14.8% as of June 30, 2017. During the second quarter of 2017, net absorption in the U.S. office market was 8.8 million square feet.

The economy’s moderate growth has continued so far in 2017, with some second quarter growth in household spending and positive consumer sentiment, having improved 62.0% since mid-2011. Fixed investment has also increased this year after a slow 2016, and growth in export markets helped to keep U.S. manufacturing buoyant. The housing market remained strong, with continued, historically low mortgage rates.

It is impossible to project U.S. economic growth, but economic conditions could have a material effect on our business, financial condition and results of operations.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 20162021 filed with the SEC on March 17, 2017 and amended on April 20, 2017.30, 2022.

MANAGEMENT EVALUATION OF RESULTS OF OPERATIONS

Management’s evaluation of operating results includes an assessment of our ability to generate cash flow necessary to pay operating expenses, general and administrative expenses, debt service and to fund distributions to our stockholders. As a result, Management’smanagement’s assessment of operating results gives less emphasis to the effects of unrealized gains and losses and other non-cash charges, such as depreciation and amortization and impairment charges, which may cause fluctuations in net income for comparable periods but have no impact on cash flows. Management’s evaluation of our potential for generating cash flow includes assessments of our recently acquired properties, our non-stabilized properties, long-term sustainability of our real estate portfolio, our future operating cash flow from anticipated acquisitions, and the proceeds from the sales of our real estate assets.

In addition, Managementmanagement evaluates the results of the operations of our portfolio and individual properties results of operations with a primary focus on increasing and enhancing the value, quality and quantity of properties in our real estate holdings. Management focuses its efforts on improving underperforming assets through re-leasing efforts, including negotiation of lease renewals and rental rates. Properties that have reached goals in occupancy and rental rates are regularly evaluated for potential added value appreciation and cashflow and, if lacking such potential, are sold

19


with the equity reinvested in properties that have better potential without foregoing cash flow.new acquisitions or otherwise allocated in a manner we believe is accretive to our stockholders. Our ability to increase assets under management is affected by our ability to raise borrowings and/or capital, coupled with our ability to identify appropriate investments.

In September 2017, we filed a registration statement relating to our proposed initial public offering. In light of the proposed offering, we suspended the payment of dividends corresponding to the three months ended September 30, 2017.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBERJune 30, 2017 AND 2016.2022 and 2021

Our results of operations for the three months ended September 30, 2017 and 2016 are not indicative of those expected in future periods as we expect that rental income, interest expense, rental operating expense and depreciation and amortization will increase in future periods as a result of anticipated growth through future acquisitions of real estate related investments.

Revenues.Total revenue was $8.0revenues were approximately $4.3 million for the three months ended SeptemberJune 30, 20172022 compared to $7.9approximately $4.8 million for the same period in 2016, an increase2021, a decrease of approximately $100,000$0.5 million or 1.3%. While total revenue remained consistent, rental revenue from retail and medical properties decreased $320,000 during the period due10%, which is primarily related to the sales that occurred during the firstsale of four commercial properties and second quarter of 2017. This decrease was offset by a $360,000 increase in rental revenues from model homes. The Company owned 13944 model homes asduring 2021.  As of SeptemberJune 30, 2017 compared to 93 model homes as of September 30, 2016.

Rental Operating Costs.  Rental operating costs remained relatively consistent at2022, we had approximately $2.8$125.5 million for the three months ended September 30, 2017 when compared to $2.6 million for the three months ended September 30, 2016.  Rental operating costs as a percentage of total revenue was 35.0% and 32.9% for the three months ended September 30, 2017 and 2016, respectively.

General and Administrative Expenses. General and administrative (“G&A”) expenses remained consistent at $1.3 million for the three months ended September 30, 2017 and 2016. G&A expenses as a percentage of total revenue was 16.3% and 16.5% for three months ended September 30, 2017 and 2016, respectively.

Depreciation and Amortization. Depreciation and amortization expense totaled approximately $2.4 million for the three months ended September 30, 2017,in net real estate assets, compared to approximately $2.6$145.3 million in real estate assets at June 30, 2021.

Rental Operating Costs. Rental operating costsdecreasedby approximately $0.2 millionto $1.3 millionfor thethree months endedJune 30, 2022,compared to approximately $1.5 million for the same period in 2016,2021. The overalldecrease in rental operating costsfor the three months endedJune 30, 2022 as compared to 2021 is primarily related to the decrease in real estate assets note above, as well as the mix of properties that were triple net lease, like Mandolin and Baltimore as well as model homes, which have significantly lower operating costs than non-triple net leased properties. 

General and Administrative Expenses. General & Administrative (“G&A”) expenses for thethree months ended June 30, 2022 and 2021 totaled approximately $1.2 million and $1.3 million, respectively.  These expenses decreased only slightly by approximately $0.1 million for the three months ended June 30, 2022 compared to the same period in 2021 primarily due to employee tax refunds from employee retention credits totaling approximately $0.3 million.  This decrease was offset by the increase in Directors and Officers insurance expense for Murphy Canyon, not in place during 2021.  G&A expenses as a percentage of total revenue was 28.1% and 27.7% for three months ended June 30, 2022 and 2021, respectively.  

Depreciation and Amortization. Depreciation and amortization expense was approximately$1.3 million for the three months ended June 30, 2022, compared to approximately$1.4 million for the same period in 2021, representing a decrease of approximately$0.1 million or 7%. The decrease in depreciation and amortization expense in 2022 compared to the same period in 2021 is primarily related to the sale of four commercial properties during 2021. 

Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges was approximately$1.1 million for the three months ended June 30, 2022 compared to approximately$1.2 million for the same period in 2021, a decrease of $0.1 million or 8%. The decrease in mortgage interest expense relates to the decreased number of commercial properties owned in 2022 compared to 2021 and the related mortgage debt. The weighted average interest rate on our outstanding debt was 4.4% and 4.2% as of June 30, 2022 and 2021, respectively.

Gain on Sale of Real Estate Assets, net. The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. See "Significant Transactions in 2022 and 2021" above for further detail.

Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended June 30, 2022 and 2021 totaled approximately $200,000$0.7 million and $0.9 million.

RESULTS OF OPERATIONS FOR THE Six MONTHS ENDED June 30, 2022 and 2021

Revenues. Total revenues were approximately $8.9 million for the six months ended June 30, 2022 compared to approximately $10.5 million for the same period in 2021, a decrease of approximately $1.6 million or 7.6%15%, which is primarily related to the sale of four commercial properties and 44 model homes during 2021, and the sale of World Plaza in March 2022.  As of June 30, 2022, we had approximately $125.5 million in net real estate assets, compared to approximately $145.3 million in real estate assets at June 30, 2021.

Rental Operating Costs. Rental operating costsdecreasedby approximately $0.4 million to $2.9 million for the six months endedJune 30, 2022,compared to approximately $3.3 million for the same period in 2021. The overalldecrease in rental operating costsfor the six months endedJune 30, 2022 as compared to 2021 is primarily related to the decrease in real estate assets note above, as well as the mix of properties that were triple net lease, like Mandolin and Baltimore as well as model homes, which have significantly lower operating costs than non-triple net leased properties. 

General and Administrative Expenses. G&A expenses for thesix months ended June 30, 2022 and 2021 totaled approximately $2.8 million and $2.9 million, respectively. These expenses decreased only slightly by approximately $0.1 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily due to employee tax refunds from employee retention credits totaling approximately $0.3 million.  This reduction was offset by new formation, insurance and operating costs related to Murphy Canyon and increased costs for audit, tax and legal services. G&A expenses as a percentage of total revenue was 31.5%and 27.4%for six months ended June 30, 2022 and 2021, respectively.  The increase in percentage is primarily due to a net decrease in rental income related tothe sale of properties noted above, while G&A remained relatively flat, including the Murphy Canyon G&A expenses of approximately $0.6 million.

Depreciation and Amortization. Depreciation and amortization expense associated withwas approximately $2.7 millionfor the six months ended June 30, 2022, compared to approximately $2.8 millionfor the same period in 2021, representing a decrease of approximately $0.1 millionor 4%. The decrease in depreciation and amortization expense in 2022 compared to the same period in 2021 is primarily related to the sale of four commercial properties sold during 2021, offset by the firstacquisitions of our Baltimore and second quarter account for all of the decrease during the quarter.Mandolin properties. 

Asset Impairments.We review the carrying value of each of our real estate properties quarterly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During threeThe Company did not recognize an impairment during the six months ended SeptemberJune 30, 2017, management did not believe any impairment reserve was required.  During the three months ended September 30, 2016, management estimated that the fair market value of World Plaza property was below the carrying value and2022, compared to an impairment of approximately $700,000 was recorded.

Interest Expense-Series B preferred stock. The Series B Preferred Stock issued in August 2014 includes a mandatory redemption provision and therefore is treated as a liability for financial reporting purposes. The interest paid and accrued and$0.3 millionduring the amortization of the deferred offering costs are considered interest expense. Interest expense, including amortization of the deferred offering costs, totaled $1.2 million for the threesix months ended SeptemberJune 30, 2017 compared to $1.4 million for the same period in 2016. Interest paid and accrued totaled $1.1 million and $1.2 million, respectively, and the amortization2021.

Interest Expense-mortgageInterest Expense - mortgage notes.Interest expense, including amortization of deferred finance charges remained consistent was approximately $2.1 millionfor the threesix months ended SeptemberJune 30, 2017 when2022 compared toapproximately $2.5 millionfor the same period in 2016 totaling $2.02021, a decrease of $0.4 millionor 16%. The decrease in mortgage interest expense relates to the decreased number of commercial properties owned in 2022 compared to 2021 and $1.9 million, respectively.the related mortgage debt, slightly off set by the addition of mortgage loans for Baltimore and Mandolin in 2022. The weighted average interest rate on our outstanding debt was 4.7 %4.4% and 4.2% as of June 30, 2022 and 2021, respectively.

Interest expense - note payable. On September 30, 2017 compared to 4.6% as of September 30, 2016.

Gain on Sale of Real Estate Assets, net. For the three months ended September 30, 2017,17, 2019, the Company recognizedexecuted a net gainPromissory Note pursuant to which Polar Multi-Strategy Master Fund (“Polar”), extended a loan in the principal amount of $210,000 from the sale of five Model Homes. The Company recognized a gain from the sale of two Model Homes of approximately $65,000 and an approximately $668,000 gain from the sale of the Havana Parker Complex during the three months ended September 30, 2016.

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Income allocated to non-controlling interests.  Income allocated to non-controlling interests for the three months ended September 30, 2017 totaled approximately $200,000 when compared$14.0 million to the income allocated during the three months ended September 30, 2016 of $82,000.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016.

Revenues.  Total revenue was $24.7 million for the nine months ended September 30, 2017 compared to $24.1 million for the same period in 2016, an increase of $600,000 or 2.5%Company (the "Polar Note"). The increase in revenue as reported for the nine months month period in 2017 as compared to 2016 is due toPolar Note bore interest at a favorable insurance claimfixed rate of approximately $525,000 in excess of the cost to repair roof damage at one of the properties. As same store occupancy remained largely consistent at 89.1%8% per annum and 91.2 % as of September 30, 2017 and 2016, respectively, the remaining $75,000 increase was due to an increase in rental rates.

Rental Operating Costs.  Rental operating costs were $8.1 million for the nine months ended September 30, 2017 compared to $7.6 million for the same period in 2016, an increase of approximately $500,000 or 6.6%.  Rental operating costs as a percentage of total revenue was 32.8% and 31.5% for the nine months ended September 30, 2017 and 2016, respectively.

General and Administrative Expenses. G&A expenses was $4.0 million for the nine months ended September 30, 2017 compared to $3.7 million for the same period in 2016, an increase of  approximately $300,000 or 8.1%. The increase in G&A expense is due to annual salary increases and an increase in group insurance rates.  G&A expenses as a percentage of total revenue was 16.2% and 15.4% for nine months ended September 30, 2017 and 2016, respectively.

Depreciation and Amortization. Depreciation and amortization expense totaled approximately $7.3 million for the nine months ended September 30, 2017, compared to approximately $7.7 million for the same period in 2016, representing a decrease of approximately $400,000 or 5.2 %. Depreciation and amortization expense associated with properties sold during the first and second quarters of 2017 account for all of the decrease during the nine months ended September 30, 2017 when compared to the same period in 2016.

Asset Impairments. We review the carrying value of each of our real estate properties quarterly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During nine months ended September 30, 2017, management did not believe any impairment reserve was required. During the nine months ended September 30, 2016, management estimated that the fair market value of World Plaza property was below the carrying value and an impairment of approximately $700,000 was recorded.

Interest Expense-Series B preferred stock. The Series B Preferred Stock issued in August 2014 includes a mandatory redemption provision and therefore is treated as a liability for financial reporting purposes. The interest paid and accrued and the amortization of the deferred offering costs are considered interest expense.required monthly interest-only payments. Interest expense, including amortization of the deferred offering costs and Original Issue Discount of approximately $1.4 million, totaled $4.0$0 and $0.9 million for the ninesix months ended SeptemberJune 30, 2017 compared to $4.5 million for the same period2022 and 2021, respectively.  The Polar Note was paid in 2016, a decrease of $500,000 or 11.1%. The decrease is due to the 2,000 shares redeemedfull during the second and third quarters of 2016.  Interest paid and accrued totaled $3.3 million and $3.8 million, respectively, and the amortization of the deferred offering costs associated with that transaction totaled $611,000 and $761,000, respectively for the nine months ended September 30, 2017 and 2016 and were included in interest expense-Series B preferred stock in the accompanying financial statements. There were 30,700 and 32,700 shares outstanding as of September 30, 2017 and 2016, respectively, resulting in the decrease in interest expense.  We plan to redeem the entire outstanding amount of the Series B Preferred Stock using a portion of the proceeds from the completion of our proposed initial public offering.March 2021.

Interest Expense-mortgage notes. Interest expense, including amortization of deferred finance charges was $5.9 million for the nine months ended September 30, 2017 when compared to $5.6 million for the same period in 2016, an increase of $300,000 or 5.4%. The increase in interest relates to the new debt on the Waterman property drawn in the second quarter of 2016 and the increased number of model homes and the related debt. The weighted average interest rate on our outstanding debt was 4.7 % as of September 30, 2017 compared to 4.6% as of September 30, 2016.

Gain on Sale of Real Estate Assets, net.For the nine months ended September 30, 2017, the Company recognized a net The change in gain of approximately $2.3 million due to the sales of Rangewood Medical Office Building, Regatta Square Retail Center, Shoreline Medical Building and fourteen Model Homes. The sale of Rangewood Medical Office Building resulted in aor loss of approximately $170,000. The sale of Regatta Square resulted in a gain of approximately $756,000. The sale of the Shoreline Medical Office Building resulted in a gain of approximately $1.3 million.  The sale of the fourteen Model Homes resulted in a gain of approximately $350,000. For the nine months ended September 30, 2016, the Company recognized a gain fromon the sale of seventeen Model Homesreal estate assets is dependent on the mix of approximately $622,000, a gain of approximately $831,000 fromproperties sold and the sale of a parcel of land and its buildingmarket conditions at the Yucca Valley Retail and a $668,000 gain from the saletime of the Havana Parker Complex.sale. See "Significant Transactions in 2022 and 2021" above for further detail.

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Income allocated to non-controlling interests.Income allocated to non-controlling interests for the ninesix months ended SeptemberJune 30, 20172022 and 2021 totaled approximately $415,000 when compared to$1.9 millionand $1.3 million.

Geographic Diversification Tables

The following tables show a list of commercial properties owned by the income allocated during the nine months ended SeptemberCompany grouped by state and geographic region as of June 30, 20162022:

     

Aggregate

      

Current

  

Approximate %

 
  

No. of

  

Square

  

Approximate %

  

Base Annual

  

of Aggregate

 

State

 

Properties

  

Feet

  

of Square Feet

  

Rent

  

Annual Rent

 

California

 1   57,807   7.0% $1,195,246   10.8%

Colorado

 5   324,245   39.5%  5,605,386   50.5%

Maryland

 1   31,752   3.9%  696,321   6.3%

North Dakota

 4   396,800   48.3%  3,262,476   29.4%

Texas

 1   10,500   1.3%  329,385   3.0%

Total

 12   821,104   100.0% $11,088,814   100.0%

The following tables show a list of $103,000.our Model Home properties by geographic region as of June 30, 2022:

             

Current

  

Approximate

 
  

No. of

  

Aggregate

  

Approximate %

  

Base Annual

  

of Aggregate

 

Geographic Region

 

Properties

  

Square Feet

  

of Square Feet

  

Rent

  

% Annual Rent

 

Midwest

 1   3,663   1.5% $57,420   2.3%

Northeast

 2   6,153   2.4%  80,844   3.3%

Southwest

 79   242,419   96.1%  2,329,920   94.4%

Total

 82   252,235   100% $2,468,184   100%

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, new mortgages on our unencumbered properties, refinancing of existing mortgages, future real estate sales, new borrowings, financial aid from government programs instituted as a result of COVID-19, and the possible sale of additional equity/equity or debt securities. Management believes that the number of recent real estate sales and resulting cash generated may not be indicative of our future strategic plans.  We intend to grow our portfolio with the capital raised from the sale of our Series D Preferred Stock in June 2021 and our Series A Common Stock in July 2021 as well are the sale of our commercial property World Plaza in March 2022.  Our available liquidity at September 30, 2017 included cash and restricted cash equivalents of $3.4 million, as well as, funds from mortgages and refinancing of mortgages with low debt to value. We currently do not have a revolving line of credit but have been exploring the possibilities of obtaining such a line of credit. Onat June 30, 2017, the Company exercised its option to extend the redemption date on its Series B preferred stock to August 1, 2019 and paid an extension fee of $153,500.

2022 was approximately $21.1 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (not(to the extent they are not covered by lender heldlender-held reserve deposits), monthly payments on the Series B preferred stock and the payment of a competitive distributiondividends to our stockholders. We also are actively seeking investments that are likely to produce income and achieve long termlong-term gains in order to pay distributionsdividends to our stockholders.stockholders, and may seek a revolving line of credit to provide short-term liquidity. To ensure that we are able tocan effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

Our short termshort-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of our existing mortgages, completing tenant improvements, paying leasing commissions, and funding for our distributionsdividends to stockholders.  Future principal payments due on our mortgage notes payables during 2022, total approximately $ 3,949,040, of which $ 3,244,546 is related to model home properties.  Management expects certain model home and commercial properties will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past. Additional principal payments will be made with cash flows from ongoing operations.  On March 11, 2022, the Company completed the sale our property World Plaza, located in San Bernardino, CA, for $10 million to an unrelated third party.  This property was not encumbered by any debt and net cash proceeds will be used for future cash needs.

On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10.0 million outstanding shares of our Series A Common Stock.  During 2021, the nineCompany was able to purchase 29,721 shares at an average price of $3.72232 per share, including commission of $0.035 per share, for a total cost of $110,631.  No repurchases were made during the first quarter of 2022, and during the three months ended SeptemberJune 30, 2017,2022, the Company was able to purchase 10,411 shares at an average price of $2.9698 per share, including transaction costs, for a total cost of $30,919.  These shares will be treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders' equity at cost.  While we will continue to pursue value creating investments, the Board believes there is significant embedded value in our principal debt service was approximately $2.1 million (debt paid off in connection with salesassets that is yet to be realized by the market and that our stock may be undervalued. Therefore, returning capital to stockholders through a repurchase program is an attractive use of real estate was $7.6 million) andcapital currently.

There can be no assurance that the cash portion ofCompany will refinance loans, take out additional financing or capital will be available to the distributionsCompany on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to our common stockholders was approximately $2.4 million andreduce its plans or certain discretionary spending, which could have a material adverse effect on the net cash provided by our operating activities totaled approximately $4.3 million.Company’s ability to achieve its intended business objectives. We believe that thecash on hand, cash flow from our existing portfolio, and our acquisitions and distributions from joint ventures in Model Home partnershipsPartnerships and property sales during 2021 will be sufficient to fund our near term operating costs, planned capital expenditures debt service costs and required dividends for at least the cash portion of distributions to stockholders at the current rate. However, ifnext twelve months. If our cash flow from operating activities is not sufficient to fund our short termshort-term liquidity needs, we willplan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we willmay reduce the rate of distributiondividends to our stockholders.

The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the stockholders.six months ended June 30, 2022 and 2021.  The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis for the Series D Preferred stockholders going forward, but there can be no guarantee the Board of Directors will approve any future dividends.

Series A Common Stock

Quarter Ended

 

2022

  

2021

 
  

Distributions Declared

  

Distributions Declared

 

March 31

 $0.105  $0.101 

June 30

  0.106   0.102 

Total

 $0.211  $0.203 

Series D Preferred Stock

Month

 

2022

  

2021

 
  

Distributions Declared

  

Distributions Declared

 

January

 $0.19531  $ 

February

  0.19531    

March

  0.19531    

April

  0.19531    

May

  0.19531    

June

  0.19531   0.10417 

Total

 $1.17186  $0.10417 

 

Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our shortshort- and long termlong-term goals and reinvesting the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on unencumbered properties, issue debt instruments, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives. 

Cash

In addition, the ongoing COVID-19 pandemic may adversely impact our future operating cash flows due to the inability of some of our tenants to pay their rent on time or at all and the overall weakening of economic conditions that the pandemic may cause. The COVID-19 pandemic may also make financing more difficult to obtain for us and for prospective buyers of our properties, resulting in difficulty in selling assets within our expected timeframe, or a decline in our expected sales price. 

Cash Equivalents and Restricted Cash

At SeptemberJune 30, 2017,2022 and December 31, 2021, we had approximately $3.4$21.1 million and $14.7 million in cash equivalents, respectively, including $4.3 million and $4.7 million of restricted cash, equivalents.respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts and cash equivalents are held in bank accounts at third party institutionsthird-party institutions. During 2022 and consist of invested cash and cash in our operating accounts.  During 2017 and 2016,2021, we did not experience any loss or lack of access to our cash or cash equivalents. equivalents. Approximately $2.0$1.0 million of our cash balance is intended for capital expenditures on existing properties (net(some of depositswhich is held in deposits reserve accounts by our lenders). during the rest of year. We intend to use the remainder of our existing cash and cash equivalents for acquisitions,asset/property acquisitions, reduction of principal debt, general corporate purposes, and distributionscommon stock repurchases (if market conditions are met), or dividends to our stockholders.

Secured Debt

As of SeptemberJune 30, 2017, the Company2022, all our commercial properties had fixed-rate mortgage notes payable in the aggregate principal amount of $134.0$73.7 million, collateralized by a total of 2111 commercial properties with loan terms at issuance ranging from 5 to 2022 years. The weighted-average interest rate on thethese mortgage notes payable as of SeptemberJune 30, 20172022 was approximately 4.7 %,4.53%, and our debt to estimated market value on thesefor our commercial properties was approximately 57.3%60.1%.

As of SeptemberJune 30, 2017,2022, the Company had 13677 fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $27.4$20.9 million, excluding loans eliminated through consolidation, collateralized by a total of 13977 Model Home properties.Homes. These loans generally have a term at issuance of three to five years. TheAs of June 30, 2022, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $226,000$272,000 and 4.5%3.77%respectively as of September 30, 2017.respectively. Our debt to estimated market value on theseall our model home properties is approximately 66.5%. The Company has guaranteed these promissory notes. 

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56.7%, excluding any loans eliminated through consolidation.  We have been able to refinance maturing debts before scheduledmortgages to extend maturity dates and we have also not experienced any unusualnotable difficulties financing our acquisitions.

Cash Flows for the ninesix months ended SeptemberJune 30, 20172022 and SeptemberJune 30, 2016.2021

Operating Activities: Net cash provided byused in operating activities for the ninesix months ended SeptemberJune 30, 2017 increased by2022 totaled approximately $1.8$0.5 million, as compared to approximately $4.3cash used in operating activities of $0.3 million from for the six months ended June 30, 2021. The change in net cash provided of $2.5 million for the nine months ended September 30, 2016. The primary reason cash provided fromused in operating was low during the nine months ended September 30, 2016 wasactivities is mainly due to paying off approximately $1.3 millionchanges in Series B accrued preferred dividendsnet income, which were includedfluctuates based on timing of receipt and payment, as well as an increase in account payable and accrued liabilitiesnon-cash addbacks such as of December 31, 2015.straight-line rent.  

Investing Activities: Net cash used in investing activities duringfor the ninesix months ended SeptemberJune 30, 20172022 was approximately $3.5$121.1 million compared to approximately $8.6$40.4 million of cash used in provided by investing activities during the same period in 2016. During2021. The change from each period was primarily related to the nine months ended September 30, 2017gross cash invested into the Company purchased forty-five model homestrust account for approximately $16.8 million. During the nine months ended September 30, 2016, the Company purchased forty-six Model Homes for approximately $15.8 million. During the nine months ended September 30, 2017, the Company received proceeds from the sales of two medical buildings and one retail building totaling approximately $13.3 million and the sale of fourteen Model homes for approximately $3.2 million. During the nine months ended September 30, 2016, the Company received proceeds from the sales of seventeen Model Homes totaling $5.1 million, sold a parcel of land and its building for approximately $1.3 million and the Havana Parker Complex for approximately $3.3 million.  Murphy Canyon. 

We currently project that we could spend up to $2.0$2.9 million (net(some of depositswhich is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio on an annual basis.during the rest of year. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties. We may spend more on capital expenditures in the future due to rising construction costs and the anticipated increase in property acquisitions.costs. Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Financing Activities: Net cash provided by financing activities during the six months ended June 30, 2022 was $127.9 million compared to $22.3 million used in financing activities during the nine months ended September 30, 2017 was approximately $500,000 compared to cash provided of approximately $4.3 million for the same period in 20162021 and was primarily due to refinancing two properties in the prior year for approximately $8.2 million. During the nine month ended September 30, 2017, we redeemed 2,000 shares of Series B preferred stock for $2,000,000. There were 2,300 shares redeemed in the same period in 2016 totaling $2.3 million.

Off-Balance Sheet Arrangements

As of September 30, 2017, we do not have any off-balance sheet arrangements or obligations, including contingent obligations.

Non-GAAP Supplemental Financial Measures:

Funds From Operations (“FFO”)

Management believes that FFO is a useful supplemental measure of our operating performance. We compute FFO using the definition outlined by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income (loss) in accordance with GAAP, plus depreciation and amortization of real estate assets (excluding amortization of deferred financing costs and depreciation of non-real estate assets) reduced by gains and losses from sales of depreciable operating property and extraordinary items, as defined by GAAP. Other REITs may use different methodologies for calculating FFO and, accordingly, our FFO may not be comparable to other REITs. Because FFO excludes depreciation and amortization, gains and losses from property dispositions that are available for distribution to stockholders and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, developmentfollowing activities general and administrative expenses and interest costs, providing a perspective not immediately apparent from net income. In addition, Management believes that FFO provides useful information to the investment community about our financial performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs. However, FFO should not be viewed as an alternative measure of our operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties which are significant economic costs and could materially impact our results from operations.

Modified Funds From Operations (“MFFO”)

We define MFFO, a non-GAAP measure, consistent with the Investment Program Association’s (“IPA”) Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REIT Modified Funds From Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relatingsix months ended June 30, 2022:

Proceeds of approximately $132.3 million from public issuance for Murphy Canyon common stock during the six months ended June 30, 2022.

Net decrease in repayment of mortgage notes payable totaling approximately $30.7 million.
Net increase in proceeds from mortgage notes payable totaling approximately $4.6 million.

These increases to deferred

23


rent receivables and amortization of above-market and below-market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; nonrecurring impairments of real estate-related investments (i.e., infrequent or unusual, not reasonably likely to recur in the ordinary course of business); mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operatingfinancing activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, amortization of above-market and below-market leases, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of impairment charges and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of MFFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges.

The following table presents our FFO and MFFO for the three and nine months ended September 30, 2017 and 2016:

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net loss

 

$

(1,776,547

)

 

$

(1,990,030

)

 

$

(2,770,934

)

 

$

(4,005,415

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to noncontrolling interests

 

 

200,181

 

 

 

81,534

 

 

 

415,009

 

 

 

102,890

 

Depreciation and amortization

 

 

2,399,307

 

 

 

2,564,211

 

 

 

7,346,640

 

 

 

7,723,372

 

Impairment of real estate

 

 

-

 

 

 

700,000

 

 

 

-

 

 

 

700,000

 

Gain on sale of real estate assets

 

 

(210,372

)

 

 

(732,908

)

 

 

(2,237,423

)

 

 

(2,121,453

)

FFO

 

$

612,569

 

 

$

622,807

 

 

$

2,753,292

 

 

$

2,399,394

 

Straight-line rent adjustment

 

 

(135,037

)

 

 

(258,254

)

 

 

(452,427

)

 

 

(660,705

)

Amortization of above and below market leases, net

 

 

(49,769

)

 

 

(65,525

)

 

 

(161,869

)

 

 

(206,531

)

Restricted stock compensation

 

 

136,920

 

 

 

129,534

 

 

 

410,760

 

 

 

388,602

 

Amortization of financing costs

 

 

213,667

 

 

 

346,213

 

 

 

956,957

 

 

 

1,081,520

 

Real estate acquisition costs

 

 

28,028

 

 

 

28,935

 

 

 

66,355

 

 

 

56,016

 

MFFO

 

$

806,378

 

 

$

803,710

 

 

$

3,573,068

 

 

$

3,058,296

 

No conclusion or comparisons should be made from the presentation of these figures.

24


Same-Store Property Operating Results for the nine months ended September 30, 2017 and 2016.

The table below presents the operating results for the Company’s commercial rental properties owned as of January 1, 2016 for each of the three and nine months ended September 30, 2017 and 2016, thereby excluding the impact on our results of operations from the real estate properties acquired subsequently.  The table below excludes model home operations as the rental rates do not fluctuate during the term of the lease and there are no operating expenses.  Income from discontinued operations from the self-storage portfolio are not included. The Company believes that this type of non-GAAP financial measure, when considered with our financial statements prepared in accordance with GAAP, allows investors to better understand the Company’s operating results. Properties are included in this analysis if they were owned and operated for the entirety of both periods being compared. Further, same-property operating results is a measure for which there is no standard definition and, as such, it is not consistently defined or reported on among the Company’s peers, and thus may not provide an adequate basis for comparison between REITs.

The Company evaluates the performance of its same-store property operating results based upon net operating income from continuing operations (“NOI”), which is a non-GAAP supplemental financial measure. The Company defines NOI as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance and provision for bad debt) less interest expense. NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, asset management fees and corporate general and administrative expenses. The Company believes that net income is the GAAP measure that is most directly comparable to NOI; however, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as defined above may not be comparable to other REITs or companies as their definitions of NOI may differ from the Company’s definition.

 

 

For the Three Months Ended September 30,

 

 

Variance

 

 

For the Nine Months Ended September 30,

 

 

Variance

 

 

 

2017

 

 

2016

 

 

$

 

 

%

 

 

2017

 

 

2016

 

 

$

 

 

%

 

Rental revenues

 

$

7,053,463

 

 

$

7,016,649

 

 

$

36,814

 

 

 

0.5%

 

 

$

21,351,285

 

 

$

20,416,346

 

 

$

934,939

 

 

 

4.6%

 

Rental operating costs

 

 

2,570,987

 

 

 

2,177,697

 

 

 

393,290

 

 

 

18.1%

 

 

 

7,219,169

 

 

 

6,355,950

 

 

 

863,219

 

 

 

13.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

$

4,482,476

 

 

$

4,838,952

 

 

$

(356,476

)

 

 

-7.4%

 

 

$

14,132,116

 

 

$

14,060,396

 

 

$

71,720

 

 

 

0.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of same properties

 

 

22

 

 

 

22

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

22

 

 

 

 

 

 

 

 

 

Same-property occupancy, end of period

 

 

89.1

%

 

 

91.2

%

 

 

 

 

 

 

-0.2%

 

 

 

89.1

%

 

 

91.2

%

 

 

 

 

 

 

-0.2%

 

Same-properties operating costs as

a percentage of total revenues

 

 

36.4

%

 

 

31.0

%

 

 

 

 

 

 

5.4%

 

 

 

33.8

%

 

 

31.1

%

 

 

 

 

 

 

2.7%

 

Overview

Same-store property NOI decreased 7.4% for the three months ended September 30, 2017, as compared to the corresponding period in 2016.  The decrease in NOI was due to an 18.1% increase in rental operating costs related increases in real estate taxes in Colorado due to property value reassessments of approximately $317,000.  Without these increases, same store NOI would have decreased .08%.  While rental revenues remained consistent for the three months ended September 30, 2017 when compared to the same quarter in 2016, rental rates increased as evidenced by the leasing spreads discussed below. The net impact on rental revenue was an increase of 0.5% as the increases in rental rates were offset by the lossfollowing:

Net increase of payment of deferred offering costs totaling approximately $3.1 million, mainly related to offering costs for Murphy Canyon.
Net increase in cash dividend payments to Series A Common Stockholder and Series D Preferred Stockholders of approximately $1.7 million (there were no Series D Preferred Stock dividends during the six months ended June 30, 2021).

Off-Balance Sheet Arrangements

On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock. Each share of Common Stock and accompanying Common Stock Warrants were sold together at a combined offering price of $5.00, and each share of Common Stock and accompanying Pre-Funded Warrant were sold together at a combined offering price of $4.99. The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $0.01 per share. The Common Stock Warrants have an exercise price of $5.50 per share, were exercisable upon issuance and will expire five years from the date of issuance. 

In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares of Series A Common Stock, representing 4.0% of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants.  The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $6.25 and will expire five years from the date of issuance.

Common Stock Warrants:

If all the potential Common Stock Warrants outstanding at June 30, 2022, were exercised at the Shea property.price of $5.00 per share, gross proceeds to us would be approximately $10 million and we would as a result issue an additional 2,000,000 shares of common stock.

Same-store property NOI increased 0.5% for

Placement Agent Warrants:

If all the nine months ended Septemberpotential Placement Agent Warrants outstanding at June 30, 20172022, were exercised at the price of $6.25 per share, gross proceeds to us would be approximately $0.5 million and we would as compareda result issue an additional 80,000 shares of common stock.

January 14, 2022 was the record date with respect to the correspondingdistribution of five-year listed warrants (the “Series A Warrants”).  The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022. The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022.  The Series A Warrants give the holder the right to purchase one share of common stock at $7.00 per share, for a period in 2016of five years. Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.

Series A Warrants:

If all the potential Series A Warrants outstanding at June 30, 2022, were exercised at the price of $7.00 per share, gross proceeds to us would be approximately $101.2 million and we would as evidenced by the increase in rental revenuesa result issue an additional 14,450,069 shares of 4.6 % offset bycommon stock.

Inflation

Leases generally provide for limited increases in rental operating costs of 13.6%. The increases in rental revenues was due to an increase in rental rates. The increase in rental operating costs during the nine months ended September 30, 2017 when compared to 2016 due to an increase in real estate taxes in Colorado of approximately $514,000 due to property value reassessments, an increase in bad debt expense during the period of approximately $78,000, an increase in utilities of $72,000 and $182,000 in maintenance costs.

Leasing

Our same-store results is primarily driven by increases in rental rates on new leases and lease renewals and changes in portfolio occupancy. Over the long-term, we believe that the infill nature and strong demographics of our properties provide us with a strategic advantage, allowing us to maintain relatively high occupancy and increase rental rates. We have continued to see signs of

25


improvement for many of our tenants as well as increased interest from prospective tenants for our spaces. While there can be no assurance that these positive signs will continue, we remain cautiously optimistic regarding the improved trends we have seen over the past few years. We believe the locations of our properties and diverse tenant base mitigate the potentially negative impact of a poor economic environment. However, any reduction in our tenants' abilities to pay base rent percentage rent or other charges, may adversely affect our financial condition and results of operations.

During the quarter ended September 30, 2017, we signed 9 comparable leases (1 new leases and 8 renewals) for a total of 32,366 square feet of comparable space leases, at an average rental rate increase of 1.7 % on a cash basis and an average rental increase of 10.0 % on a straight-line basis. Renewals for comparable office spaces were signed for 31,244 square feet at an average rental rate increase of 2.6% on a cash basis and increase of 11.2% on a straight-line basis.

Impact of Downtime and Rental Rate Changes

The downtime between a lease expiration and a new lease commencement, typically ranging from 6-24 months, can negatively impact total NOI and same property NOI.   In addition, office leases, both new and lease renewals typically contain upfront rental and /or operating expense abatement periods which delay the cash flow benefits of the lease even after the new lease or renewal has commenced. If we are unable to replace expiring leases with new or renewal leases at rental rates equal to or greater than the expiring rates, rental rate roll downs can also negatively impact total NOI and same property NOI comparisons.  This was the case for all leases entered into prior to 2008 the start of the recession.  Most of our leases were less than seven years and therefore the rental rate roll downs should not have a significant effect on future years. Our geographically diverse portfolio model results in rent roll ups that can fluctuate widely on a market by market basis; however, given the large volume of leasing activity over the last several years, we estimate that our portfolio, taken as a whole, is currently at market.  Total NOI and same property NOI comparisons for any given period may still fluctuate as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the clients’ sales volumes. We expect that inflation will cause these lease provisions to result in rent roll ups and roll downs, however, depending onincreases over time. During times when inflation is greater than increases in rent, as provided for in the leasing activity in individual geographic markets duringleases, rent increases may not keep up with the respective period.rate of inflation.

 

However, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Inflation and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue.

26


ITEM 3. QUANTITATIVE AND QUALITATIVEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required

 

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.  

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reportsreport is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer, Chief Financial Officer and PrincipalChief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure“disclosure controls and procedures"procedures” in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and our PrincipalChief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer, Chief Financial Officer, and PrincipalChief Accounting Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended SeptemberJune 30, 20172022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. Furthermore, we do not believe that these controls have been impacted by COVID-19 related circumstances, including remote work arrangements with our employees.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors

Not Required

There have been no material changes to the risk factors under Part I, Item 1A of our Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities.None.

Stock Repurchases. On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million outstanding shares of our Series A Common Stock.  Purchases under the repurchase program may be made in the open market, through block trades, and other negotiated transactions. We expect to execute the share repurchase program primarily in open market transactions, subject to market conditions. There is no fixed termination date for the repurchase program, and the program may be suspended, discontinued, or accelerated at any time.

The following table contains information for shares of common stock repurchased during the three months ended June 30, 2022.

Month

 

Total Number of Shares Purchased

  

Average Price Paid Per Share

  

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

  

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

 

April 2022

    $     $ 

May 2022

            

June 2022

  10,411   2.97   10,411   9,858,450 

Total

  10,411  $2.97   10,411  $9,858,450 

1.

The Company does not have a formal policy with respect to a stock repurchase program and typically restricts repurchases to hardship cases only.

38

2.

See note 10 to the condensed consolidated financial statements for a description of the related party transaction.

Item 3. Defaults Upon Senior Securities.

None.

None.

ItemItem 4. Mine Safety Disclosures

None.

None.

Item 5. Other Information.

None.

27None.


Item 6. EXHIBITS.Exhibits.

Exhibit
Number

Description

31.1

Certificate of the Company's Chief Executive Officer (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant's Quarterly Report on Form 10-Q for the quarterthree and six months ended SeptemberJune 30, 2017.2022.

31.2

Certification of the Company's Principal AccountingChief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant's Quarterly Report on Form 10-Q for the quarterthree and six months ended SeptemberJune 30, 2017.2022

32.1

Certification of PrincipalChief Executive Officer and Principal AccountingChief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to 18 U.S.C. 1350,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

104Cover Page Interactive Data File (formatted as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL and contained in Exhibit 101)

Instance DocumentSIGNATURES

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

28


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.

Date: November 8, 2017August 11, 2022

Presidio Property Trust, Inc.

By:

By:

/s/ Jack K. Heilbron

Name:

Name:

Jack K. Heilbron

Title:

Title:

Chief Executive Officer

By:

By:

/s/ Heather L. PittardAdam Sragovicz

Name:

Name:

Heather L. PittardAdam Sragovicz

Title:

Chief Financial Officer

By:

Title:/s/ Ed Bentzen

Name:

Ed Bentzen

Title:

PrincipalChief Accounting Officer

41

29