Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021March 31, 2022
Or
[ ] ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-55760
MOBILE INFRASTRUCTURE CORPORATION |
(Exact name of registrant as specified in its charter) |
marylandMaryland
| | 47-3945882 |
(State or Other Jurisdiction of | | (I.R.S. Employer |
Incorporation or Organization) | | Identification No.) |
250 E. 5th STREET, SUITE 2110, CINCINNATI, OH 45202
(Address(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (702) 534-5577
The Parking REIT, Inc.
9130 W. Post Rd., Suite 200
Las Vegas, Nevada 89148
(Former Name or Former Address, if Changed Since Last Report)(513) 834-5110
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbols(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
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 [X]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files).
Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 [X]☒ | Smaller reporting company [X]☒ |
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-2 of the Act).
Yes [ ]☐ No [ X ]☒
As of NovemberMay 12, 2021,2022, the registrant had 7,762,375 sharesshares of common stock outstanding.
PART I
ITEM 1.FINANCIAL STATEMENTS
MOBILE INFRASTUCTUREINFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | As of March 31, 2022 (unaudited) | | | As of December 31, 2021 | |
ASSETS | |
Investments in real estate | | | | | | | | |
Land and improvements | | $ | 166,224,000 | | | $ | 166,224,000 | |
Buildings and improvements | | | 254,482,000 | | | | 254,379,000 | |
Construction in progress | | | 222,000 | | | | 89,000 | |
Intangible assets | | | 9,808,000 | | | | 9,756,000 | |
| | | | 430,736,000 | | | | 430,448,000 | |
Accumulated depreciation and amortization | | | (24,835,000 | ) | | | (22,873,000 | ) |
Total investments in real estate, net | | | 405,901,000 | | | | 407,575,000 | |
| | | | | | | | | |
Fixed Assets, net of accumulated depreciation of $99,000 and $94,000 as of March 31, 2022 and December 31, 2021, respectively | | | 56,000 | | | | 61,000 | |
Cash | | | 9,418,000 | | | | 11,805,000 | |
Cash – restricted | | | 5,043,000 | | | | 4,891,000 | |
Prepaid expenses | | | 462,000 | | | | 676,000 | |
Accounts receivable, net allowance of doubtful accounts of $0.1 million as of March 31, 2022 and December 31, 2021, respectively | | | 3,312,000 | | | | 4,031,000 | |
Deposits | | | 340,000 | | | | 0 | |
Other assets | | | 103,000 | | | | 108,000 | |
Total assets | | $ | 424,635,000 | | | $ | 429,147,000 | |
LIABILITIES AND EQUITY | |
Liabilities | | | | | | | | |
Notes payable and paycheck protection program loan, net | | $ | 205,965,000 | | | $ | 207,153,000 | |
Accounts payable and accrued expenses | | | 15,589,000 | | | | 13,849,000 | |
Indemnification liability | | | 2,000,000 | | | | 2,000,000 | |
Security deposits | | | 166,000 | | | | 166,000 | |
Due to related parties | | | 20,000 | | | | 0 | |
Deferred revenue | | | 99,000 | | | | 155,000 | |
Total liabilities | | | 223,839,000 | | | | 223,323,000 | |
| | | | | | | | | |
Equity | | | | | | | | |
Mobile Infrastructure Corporation Stockholders’ Equity | | | | | | | | |
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of March 31, 2022 and December 31, 2021) | | | 0 | | | | 0 | |
Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of March 31, 2022 and December 31, 2021) | | | 0 | | | | 0 | |
Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, no shares issued and outstanding | | | 0 | | | | 0 | |
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,762,375 shares issued and outstanding as of March 31, 2022 and December 31, 2021 | | | 0 | | | | 0 | |
Warrants issued and outstanding – 1,702,128 warrants as of March 31, 2022 and December 31, 2021, respectively | | | 3,319,000 | | | | 3,319,000 | |
Additional paid-in capital | | | 195,426,000 | | | | 196,176,000 | |
Accumulated deficit | | | (102,855,000 | ) | | | (101,049,000 | ) |
Total Mobile Infrastructure Corporation Stockholders’ Equity | | | 95,890,000 | | | | 98,446,000 | |
Non-controlling interest | | | 104,906,000 | | | | 107,378,000 | |
Total equity | | | 200,796,000 | | | | 205,824,000 | |
Total liabilities and equity | | $ | 424,635,000 | | | $ | 429,147,000 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| | | As of September 30, 2021 (unaudited) | | As of December 31, 2020 |
| ASSETS |
| Investments in real estate | | | | |
| Land and improvements | $ | 158,810,000 | $ | 128,284,000 |
| Buildings and improvements | | 243,467,000 | | 163,792,000 |
| Construction in progress | | 1,665,000 | | 1,320,000 |
| Intangible assets | | 9,710,000 | | 2,107,000 |
| | | 413,652,000 | | 295,503,000 |
| Accumulated depreciation and amortization | | (20,964,000) | | (17,039,000) |
| Total investments in real estate, net | | 392,688,000 | | 278,464,000 |
| | | | | |
| Fixed Assets, net of accumulated depreciation of $106,000 and $78,000 as of September 30, 2021 and December 31, 2020, respectively | | 35,000 | | 63,000 |
| Cash | | 13,084,000 | | 4,235,000 |
| Cash – restricted | | 5,134,000 | | 3,660,000 |
| Prepaid expenses | | 1,003,000 | | 1,909,000 |
| Accounts receivable, net allowance of doubtful accounts of $0.4 million and $0.7 million as of September 30, 2021 and December 31, 2020 | | 1,713,000 | | 1,114,000 |
| Investment in DST | | -- | | 2,821,000 |
| Due from related parties | | -- | | 1,000 |
| Other assets | | 211,000 | | 183,000 |
| Right of use leased asset | | -- | | 1,282,000 |
| Total assets | $ | 413,868,000 | $ | 293,732,000 |
| LIABILITIES AND EQUITY |
| Liabilities | | | | |
| Notes payable, net | $ | 207,580,000 | $ | 158,996,000 |
| Paycheck protection program loan | | 328,000 | | 348,000 |
| Accounts payable and accrued expenses | | 15,192,000 | | 11,967,000 |
| Indemnification liability | | 2,000,000 | | -- |
| Right of use lease liability | | -- | | 1,282,000 |
| Deferred management internalization | | -- | | 10,040,000 |
| Security deposits | | 166,000 | | 141,000 |
| Due to related parties | | 211,000 | | -- |
| Deferred revenue | | -- | | 140,000 |
| Total liabilities | | 225,477,000 | | 182,914,000 |
| | | | | |
| Equity | | | | |
| Mobile Infrastructure Corporation Stockholders’ Equity | | | | |
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of September 30, 2021 and December 31, 2020) | | -- | | -- |
Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of September 30, 2021 and December 31, 2020) | | -- | | -- |
Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, 0 shares issued and outstanding | | -- | | -- |
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,739,951 and 7,727,696 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | | -- | | -- |
| Warrants issued and outstanding – 1,702,128 and 0 warrants as of September 30, 2021 and December 31, 2020, respectively | | 3,319,000 | | -- |
| Additional paid-in capital | | 196,663,000 | | 198,769,000 |
| Accumulated deficit | | (99,485,000) | | (89,985,000) |
| Total Mobile Infrastructure Corporation Stockholders’ Equity | | 100,497,000 | | 108,784,000 |
| Non-controlling interest | | 87,894,000 | | 2,034,000 |
| Total equity | | 188,391,000 | | 110,818,000 |
| Total liabilities and equity | $ | 413,868,000 | $ | 293,732,000 |
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | For the Three Months Ended March 31, | |
| | | 2022 | | | 2021 | |
Revenues | | | | | | | | |
Base rent income | | $ | 2,051,000 | | | $ | 3,223,000 | |
Management income | | | 0 | | | | 341,000 | |
Percentage rent income | | | 4,329,000 | | | | 147,000 | |
Total revenues | | | 6,380,000 | | | | 3,711,000 | |
| | | | | | | | | |
Operating expenses | | | | | | | | |
Property taxes | | | 1,836,000 | | | | 1,129,000 | |
Property operating expense | | | 837,000 | | | | 282,000 | |
General and administrative | | | 1,506,000 | | | | 1,432,000 | |
Professional fees, net of reimbursement of insurance proceeds | | | 1,988,000 | | | | 1,774,000 | |
Depreciation and amortization | | | 1,967,000 | | | | 1,258,000 | |
Total operating expenses | | | 8,134,000 | | | | 5,875,000 | |
| | | | | | | | | |
Other income (expense) | | | | | | | | |
Interest expense | | | (2,539,000 | ) | | | (2,204,000 | ) |
Other Income | | | 15,000 | | | | 0 | |
Total other income (expense) | | | (2,524,000 | ) | | | (2,204,000 | ) |
Net loss | | | (4,278,000 | ) | | | (4,368,000 | ) |
Less net loss attributable to non-controlling interest | | | (2,472,000 | ) | | | 0 | |
Net loss attributable to Mobile Infrastructure Corporation’s stockholders | | $ | (1,806,000 | ) | | $ | (4,368,000 | ) |
| | | | | | | | | |
Preferred stock distributions declared - Series A | | | (54,000 | ) | | | (54,000 | ) |
Preferred stock distributions declared - Series 1 | | | (696,000 | ) | | | (696,000 | ) |
Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | | | (2,556,000 | ) | | | (5,118,000 | ) |
| | | | | | | | | |
Basic and diluted loss per weighted average common share: | | | | | | | | |
Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | | $ | (0.33 | ) | | $ | (0.66 | ) |
Weighted average common shares outstanding, basic and diluted | | | 7,762,375 | | | | 7,731,781 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCHANGES IN EQUITY
FOR THE three months ended March 31, 2022 and 2021
(UNAUDITED)
| | | | | | | | | |
| | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 |
| Revenues | | | | | | | | |
| Base rent income | $ | 3,030,000 | $ | 3,132,000 | $ | 8,530,000 | $ | 11,525,000 |
| Management income | | 1,290,000 | | 303,000 | | 2,294,000 | | 596,000 |
| Percentage rent income | | 1,203,000 | | 75,000 | | 1,443,000 | | 402,000 |
| Management income | | 1,290,000 | | 303,000 | | 2,294,000 | | 596,000 |
| Total revenues | | 5,523,000 | | 3,510,000 | | 12,267,000 | | 12,523,000 |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| Property taxes | | 864,000 | | 955,000 | | 2,656,000 | | 2,460,000 |
| Property operating expense | | 338,000 | | 263,000 | | 894,000 | | 1,374,000 |
| General and administrative | | 1,805,000 | | 1,452,000 | | 4,665,000 | | 4,681,000 |
| Professional fees, net of reimbursement of insurance proceeds | | 413,000 | | 384,000 | | 2,243,000 | | 592,000 |
| Acquisition expenses | | -- | | -- | | -- | | 3,000 |
| Depreciation and amortization | | 1,437,000 | | 1,305,000 | | 3,953,000 | | 3,948,000 |
| Impairment | | -- | | 6,475,000 | | -- | | 14,115,000 |
| Total operating expenses | | 4,857,000 | | 10,834,000 | | 14,411,000 | | 27,173,000 |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Interest expense | | (2,487,000) | | (2,326,000) | | (6,783,000) | | (6,910,000) |
| Income from or gain from sale of investment in real estate | | -- | | -- | | -- | | 694,000 |
| PPP Loan forgiveness | | -- | | -- | | 348,000 | | -- |
| Other Income | | 5,000 | | -- | | 280,000 | | 151,000 |
| Income from or gain on consolidation of DST | | 360,000 | | 44,000 | | 360,000 | | 143,000 |
| Settlement of deferred management internalization | | 10,040,000 | | -- | | 10,040,000 | | -- |
| Transaction expenses | | (12,224,000) | | -- | | (12,224,000) | | -- |
| Total other income (expense) | | (4,306,000) | | (2,282,000) | | (7,979,000) | | (5,922,000) |
| Net loss | | (3,640,000) | | (9,606,000) | | (10,123,000) | | (20,572,000) |
| Less net loss attributable to non-controlling interest | | (613,000) | | (530,000) | | (623,000) | | (563,000) |
| Net loss attributable to Mobile Infrastructure Corporation’s stockholders | $ | (3,027,000) | $ | (9,076,000) | $ | (9,500,000) | $ | (20,009,000) |
| | | | | | | | | |
| Preferred stock distributions declared - Series A | | (54,000) | | (54,000) | | (162,000) | | (162,000) |
| Preferred stock distributions declared - Series 1 | | (696,000) | | (696,000) | | (2,088,000) | | (2,088,000) |
| Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | $ | (3,777,000) | $ | (9,826,000) | $ | (11,750,000) | $ | (22,259,000) |
| | | | | | | | | |
| Basic and diluted loss per weighted average common share: | | | | | | | | |
| Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | $ | (0.49) | $ | (1.34) | $ | (1.52) | $ | (3.04) |
| Weighted average common shares outstanding, basic and diluted | | 7,739,951 | | 7,327,697 | | 7,737,257 | | 7,329,499 |
| | | Preferred stock | | | Common stock | | | | | | | | | | | | | | | | | | | | | |
| | | Number of Shares | | | Par Value | | | Number of Shares | | | Par Value | | | Warrants | | | Additional Paid-in Capital | | | Accumulated Deficit | | | Non-controlling interest | | | Total | |
Balance, December 31, 2021 | | | 42,673 | | | $ | 0 | | | | 7,762,375 | | | $ | 0 | | | $ | 3,319,000 | | | $ | 196,176,000 | | | $ | (101,049,000 | ) | | $ | 107,378,000 | | | $ | 205,824,000 | |
Distributions – Series A | | | — | | | | 0 | | | | — | | | | 0 | | | | — | | | | (54,000 | ) | | | 0 | | | | 0 | | | | (54,000 | ) |
Distributions – Series 1 | | | — | | | | 0 | | | | — | | | | 0 | | | | — | | | | (696,000 | ) | | | 0 | | | | 0 | | | | (696,000 | ) |
Net loss | | | — | | | | 0 | | | | — | | | | 0 | | | | — | | | | 0 | | | | (1,806,000 | ) | | | (2,472,000 | ) | | | (4,278,000 | ) |
Balance, March 31, 2022 | | | 42,673 | | | $ | 0 | | | | 7,762,375 | | | $ | 0 | | | $ | 3,319,000 | | | $ | 195,426,000 | | | $ | (102,855,000 | ) | | $ | 104,906,000 | | | $ | 200,796,000 | |
| | | Preferred stock | | | Common stock | | | | | | | | | | | | | | | | | |
| | | Number of Shares | | | Par Value | | | Number of Shares | | | Par Value | | | Additional Paid-in Capital | | | Accumulated Deficit | | | Non-controlling interest | | | Total | |
Balance, December 31, 2020 | | | 42,673 | | | $ | 0 | | | | 7,727,696 | | | $ | 0 | | | $ | 198,769,000 | | | $ | (89,985,000 | ) | | $ | 2,034,000 | | | $ | 110,818,000 | |
Stock Awards | | | 0 | | | | 0 | | | | 12,255 | | | | 0 | | | | 144,000 | | | | 0 | | | | 0 | | | | 144,000 | |
Distributions – Series A | | | — | | | | 0 | | | | — | | | | 0 | | | | (54,000 | ) | | | 0 | | | | 0 | | | | (54,000 | ) |
Distributions – Series 1 | | | — | | | | 0 | | | | — | | | | 0 | | | | (696,000 | ) | | | 0 | | | | 0 | | | | (696,000 | ) |
Net loss | | | — | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | (4,368,000 | ) | | | 0 | | | | (4,368,000 | ) |
Balance, March 31, 2021 | | | 42,673 | | | $ | 0 | | | | 7,739,951 | | | $ | 0 | | | $ | 198,163,000 | | | $ | (94,353,000 | ) | | $ | 2,034,000 | | | $ | 105,844,000 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | |
| | | Preferred stock | | Common stock | | Warrants | | | | | | | | |
| | | Number of Shares | | Par Value | | Number of Shares | | Par Value | | Number of Shares | | Par Value | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling interest | | Total |
| Balance, December 31, 2020 | | 42,673 | $ | -- | | 7,727,696 | $ | -- | | -- | $ | -- | $ | 198,769,000 | $ | (89,985,000) | $ | 2,034,000 | $ | 110,818,000 |
| Stock awards | | -- | | -- | | 12,255 | | -- | | -- | | -- | | 144,000 | | -- | | -- | | 144,000 |
| Distributions – Series A | | -- | | -- | | -- | | -- | | -- | | -- | | (54,000) | | -- | | -- | | (54,000) |
| Distributions – Series 1 | | -- | | -- | | -- | | -- | | -- | | -- | | (696,000) | | -- | | -- | | (696,000) |
| Net loss | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | (4,368,000) | | -- | | (4,368,000) |
| Balance, March 31, 2021 | | 42,673 | $ | -- | | 7,739,951 | $ | -- | | -- | $ | -- | $ | 198,163,000 | $ | (94,353,000) | $ | 2,034,000 | $ | 105,844,000 |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2020 | | 42,673 | | -- | | 7,727,696 | | -- | | -- | | -- | | 198,769,000 | | (89,985,000) | | 2,034,000 | | 110,818,000 |
| Distributions – Series A | | -- | | -- | | -- | | -- | | -- | | -- | | (54,000) | | -- | | -- | | (54,000) |
| Distributions – Series 1 | | -- | | -- | | -- | | -- | | -- | | -- | | (696,000) | | -- | | -- | | (696,000) |
| Net income (loss) | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | (2,105,000) | | (10,000) | | (2,115,000) |
| Balance, June 30, 2021 | | 42,673 | $ | -- | | 7,739,951 | $ | -- | | -- | $ | -- | $ | 197,413,000 | $ | (96,458,000) | $ | 2,024,000 | $ | 102,979,000 |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2020 | | 42,673 | | -- | | 7,727,696 | | -- | | -- | | -- | | 198,769,000 | | (89,985,000) | | 2,034,000 | | 110,818,000 |
| Issuance of OP Units | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | 83,930,000 | | 83,930,000 |
| Issuance of warrants | | -- | | -- | | -- | | -- | | 1,702,178 | | 3,319,000 | | -- | | -- | | -- | | 3,319,000 |
| Consolidation of DST | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | 2,553,000 | | 2,553,000 |
| Distributions – Series A | | -- | | -- | | -- | | -- | | -- | | -- | | (54,000) | | -- | | -- | | (54,000) |
| Distributions – Series 1 | | -- | | -- | | -- | | -- | | -- | | -- | | (696,000) | | -- | | -- | | (696,000) |
| Net income (loss) | | -- | | -- | | -- | | -- | | -- | | -- | | -- | | (3,027,000) | | (613,000) | | (3,640,000) |
| Balance, September 30, 2021 | | 42,673 | $ | -- | | 7,739,951 | $ | -- | | 1,702,178 | $ | 3,319,000 | $ | 196,663,000 | $ | (99,485,000) | $ | 87,894,000 | $ | 188,391,000 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
| | | Preferred stock | | Common stock | | | | | | | | |
| | | Number of Shares | | Par Value | | Number of Shares | | Par Value | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling interest | | Total |
| Balance, December 31, 2019 | | 42,673 | $ | -- | | 7,332,811 | $ | -- | $ | 194,137,000 | $ | (66,511,000) | $ | 2,619,000 | $ | 130,245,000 |
| Distributions to non-controlling interest | | -- | | -- | | -- | | -- | | -- | | -- | | (10,000) | | (10,000) |
| Redeemed Shares | | -- | | -- | | (2,741) | | -- | | (68,000) | | -- | | -- | | (68,000) |
| Distributions – Series A | | -- | | -- | | -- | | -- | | (54,000) | | -- | | -- | | (54,000) |
| Distributions – Series 1 | | -- | | -- | | -- | | -- | | (696,000) | | -- | | -- | | (696,000) |
| Net loss | | -- | | -- | | -- | | -- | | -- | | (1,150,000) | | (5,000) | | (1,155,000) |
| Balance, March 31, 2020 | | 42,673 | $ | -- | | 7,330,070 | $ | -- | $ | 193,319,000 | $ | (67,661,000) | $ | 2,604,000 | $ | 128,262,000 |
| | | | | | | | | | | | | | | | | |
| Balance, December 31, 2019 | | 42,673 | | -- | | 7,332,811 | | -- | | 194,137,000 | | (66,511,000) | | 2,619,000 | | 130,245,000 |
| Redeemed Shares | | -- | | -- | | (2,374) | | -- | | (60,000) | | -- | | -- | | (60,000) |
| Distributions – Series A | | -- | | -- | | -- | | -- | | (54,000) | | -- | | -- | | (54,000) |
| Distributions – Series 1 | | -- | | -- | | -- | | -- | | (696,000) | | -- | | -- | | (696,000) |
| Net (loss) | | -- | | -- | | -- | | -- | | -- | | (9,783,000) | | (28,000) | | (9,811,000) |
| Balance, June 30, 2020 | | 42,673 | $ | -- | | 7,327,696 | $ | -- | $ | 192,509,000 | $ | (77,444,000) | $ | 2,576,000 | $ | 117,641,000 |
| | | | | | | | | | | | | | | | | |
| Balance, December 31, 2019 | | 42,673 | | -- | | 7,332,811 | | -- | | 194,137,000 | | (66,511,000) | | 2,619,000 | | 130,245,000 |
| Distributions – Series A | | -- | | -- | | -- | | -- | | (54,000) | | -- | | -- | | (54,000) |
| Distributions – Series 1 | | -- | | -- | | -- | | -- | | (696,000) | | -- | | -- | | (696,000) |
| Net (loss) | | -- | | -- | | -- | | -- | | -- | | (9,076,000) | | (530,000) | | (9,606,000) |
| Balance, September 30, 2020 | | 42,673 | $ | -- | | 7,327,696 | $ | -- | $ | 191,759,000 | $ | (86,520,000) | $ | 2,046,000 | $ | 107,285,000 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | |
| | | For The Nine Months Ended September 30, | | For the Three Months Ended March 31, | |
| | | 2021 | | 2020 | | 2022 | | | 2021 | |
| Cash flows from operating activities: | | | | | | | | |
| Net Loss | $ | (10,123,000) | $ | (20,572,000) | | $ | (4,278,000 | ) | | $ | (4,368,000 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Depreciation and amortization expense | | 3,953,000 | | 3,948,000 | | 1,967,000 | | | 1,258,000 | |
| Amortization of loan costs | | 201,000 | | 614,000 | | 100,000 | | | 77,000 | |
| PPP Loan forgiveness | | (348,000) | | -- | |
| Gain from sale of investment in real estate | | -- | | (694,000) | |
| Amortization of right of use lease asset | | 57,000 | | 84,000 | | 0 | | | 28,000 | |
| Stock based compensation | | 144,000 | | -- | |
| Impairment | | -- | | 14,115,000 | |
| Income from or gain on consolidation of DST | | (360,000) | | (143,000) | |
| Settlement of deferred management internalization | | (10,040,000) | | -- | |
| Changes in operating assets and liabilities | | | | | |
| Due to/from related parties | | 18,000 | | (55,000) | | 20,000 | | | 0 | |
Construction in progress | | | 0 | | (138,000 | ) |
| Accounts payable | | (1,985,000) | | (1,786,000) | | 990,000 | | | 494,000 | |
| Indemnification liability | | 2,000,000 | | -- | |
Deposits | | | (340,000 | ) | | 0 | |
| Right of use lease liability | | (57,000) | | (84,000) | | 0 | | | (28,000 | ) |
| Security deposits | | 16,000 | | -- | | 0 | | | 16,000 | |
| Other assets | | (17,000) | | (79,000) | | 5,000 | | | 56,000 | |
| Deferred revenue | | (140,000) | | 18,000 | | (56,000 | ) | | (38,000 | ) |
| Accounts receivable | | (564,000) | | (603,000) | | 719,000 | | | 204,000 | |
| Prepaid expenses | | 1,419,000 | | (67,000) | | | 214,000 | | | | 750,000 | |
| Net cash used in operating activities | | (15,826,000) | | (5,304,000) | | | (659,000 | ) | | | (1,689,000 | ) |
| Cash flows from investing activities: | | | | | | | | |
| Building improvements | | (345,000) | | (921,000) | | (236,000 | ) | | 0 | |
| Acquisition of real estate | | (3,253,000) | | (78,000) | |
| Proceeds from Investments | | -- | | 48,000 | |
| Proceeds from sale of investment in real estate | | -- | | 1,436,000 | |
| Net cash (used in) provided by investing activities | | (3,598,000) | | 485,000 | |
Additions to intangible assets | | | | (52,000 | ) | | | 0 | |
Net cash (used in) investing activities | | | | (288,000 | ) | | | 0 | |
| Cash flows from financing activities | | | | | | | | |
| Proceeds from notes payable | | 3,867,000 | | 3,545,000 | | 0 | | | 1,745,000 | |
| Payments on notes payable | | (5,575,000) | | (2,544,000) | | (821,000 | ) | | (818,000 | ) |
| Issuance of OP Units | | 31,333,000 | | -- | |
| Loan fees | | (24,000) | | (44,000) | | | (467,000 | ) | | | (21,000 | ) |
| Distribution to non-controlling interest | | -- | | (10,000) | |
| Redeemed shares | | -- | | (128,000) | |
| Preferred dividends paid to stockholders | | -- | | (750,000) | |
| Net cash provided by financing activities | | 29,601,000 | | 69,000 | |
Net cash (used in) provided by financing activities | | | | (1,288,000 | ) | | | 906,000 | |
| Net change in cash and cash equivalents and restricted cash | | 10,177,000 | | (4,750,000) | | | (2,235,000 | ) | | | (783,000 | ) |
| Initial consolidation of VIE | | 146,000 | | -- | |
| Cash and cash equivalents and restricted cash, beginning of period | | 7,895,000 | | 11,644,000 | | | 16,696,000 | | | | 7,895,000 | |
| Cash and cash equivalents and restricted cash, end of period | $ | 18,218,000 | $ | 6,894,000 | | $ | 14,461,000 | | | $ | 7,112,000 | |
| | | | | | |
| Reconciliation of Cash and Cash Equivalents and Restricted Cash: | | | | | | | | |
| Cash and cash equivalents at beginning of period | $ | 4,235,000 | $ | 7,707,000 | | $ | 11,805,000 | | | $ | 4,235,000 | |
| Restricted cash at beginning of period | | 3,660,000 | | 3,937,000 | | | 4,891,000 | | | | 3,660,000 | |
| Cash and cash equivalents and restricted cash at beginning of period | $ | 7,895,000 | $ | 11,644,000 | | $ | 16,696,000 | | | $ | 7,895,000 | |
| | | | | | |
| Cash and cash equivalents at end of period | $ | 13,084,000 | $ | 3,466,000 | | $ | 9,418,000 | | | $ | 4,034,000 | |
| Restricted cash at end of period | | 5,134,000 | | 3,428,000 | | | 5,043,000 | | | | 3,078,000 | |
| Cash and cash equivalents and restricted cash at end of period | $ | 18,218,000 | $ | 6,894,000 | | $ | 14,461,000 | | | $ | 7,112,000 | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
| Interest Paid | $ | 6,582,000 | $ | 6,297,000 | | $ | 2,439,000 | | | $ | 2,127,000 | |
| Non-cash investing and financing activities: | | | | | | | | |
| Dividends declared not yet paid | $ | 2,251,000 | $ | 1,751,000 | | $ | 750,000 | | | $ | 750,000 | |
| Payments on note payable through sale of investment in real estate | $ | -- | $ | (2,500,000) | |
| Consolidation of variable interest entities, net | | 3,181,000 | | -- | |
| Assumption of debt through acquisition | | 44,478,000 | | -- | |
| Acquisition of properties through OP units and warrants | | 55,916,000 | | -- | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
MOBILE INFRASTRUCTURE CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021March 31, 2022
(UNAUDITED)
Note A — Organization and Business Operations
Mobile Infrastructure Corporation (formerly known as theThe Parking REIT, Inc.), (the “Company,” “we,” “us” or “our”), is a Maryland corporation formed on May 4, 2015. The Company focuses on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. The Company targets both parking garage and surface lot properties primarily in top 50 U.S. Metropolitan Statistical Areas (“MSAs”), with proximity to key demand drivers, such as airports, transportation hubs, educational facilities, government buildings and courthouses, sports and entertainment venues, hospital and health centers, hotels, office complexes and residences.
As of March 31, 2022, the Company owned 44 parking facilities in 22 separate markets throughout the United States, with a total of 15,263 parking spaces and approximately 5.3 million square feet. The Company also owns approximately 0.2 million square feet of retail/commercial space adjacent to its parking facilities.
The Company is the sole general partner of Mobile Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating Partnership, LP, a Maryland limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership, is the sole general partner of the Operating Partnership and owns approximately 45.8% of the common units of the Operating Partnership (the “OP Units”). Color Up, LLC, a Delaware limited liability company (“Color Up” or “Purchaser”) and HSCP Strategic III, LP, a Delaware limited partnership (“HS3”), are limited partners of the Operating Partnership and own approximately 44.2% and 10%, respectively, of the outstanding OP Units. Color Up is our largest stockholder and is controlled by the Company’s Chief Executive Officer and a director, Manuel Chavez, the Company’s President, Chief Financial Officer, Treasurer, Secretary and a director, Stephanie Hogue, and a director of the Company, Jeffrey Osher. HS3 is controlled by Mr. Osher.
The Company previously elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and operated in a manner that allowed the Company to qualify as a REIT through December 31, 2019. As a resultconsequence of lease modifications entered into during the COVID-19COVID-19 pandemic, the Company entered into temporary lease amendments with someearned income from a number of its tenants during the year ended December 31, 2020. The income generated under these lease amendmentsthat did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for theits taxable year ended December 31, 2020. Accordingly, the Company did not qualify for taxation as a REIT in 2020 and washas been taxed as a C corporation for the year ended December 31, 2020. The Company will be taxed as a C corporation for at leastbeginning with its next three2020 taxable years unless the Company is able to otherwise remedy its REIT status through other mechanisms potentially available. The Company is currently exploring those alternatives.
year. As a C corporation, the Company is subject to federal income tax on its taxable income at regular corporate rates. In addition, distributions to its stockholders are not deductible by the Company. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C Corporation, the Company is not required to distribute any amounts to its stockholders.
The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout North America. To a lesser extent, the Company may also invest in parking properties that contain other sources of rental income, potentially including office, retail, storage, residential, billboard or cell towers.Recapitalization
The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Maryland limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership. The Company’s subsidiary, MVP REIT II Holdings, LLC, is the approximately 50.8% limited partner of the Operating Partnership with Color Up, LLC, a Delaware limited liability company (“Color Up” or “Purchaser”) being the approximately 49.2% limited partner. Color Up is an affiliated party controlled by the Company’s Chief Executive Officer and a director, Manuel Chavez, III, the Company’s President and a director, Stephanie Hogue, and a director of the Company, Jeff Osher.
Recapitalization
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII”) and Michael V. Shustek (“Mr. Shustek” and together with VRMI and Mr. Shustek,VRMII, the “Advisor”“Former Advisor”) and Color Up LLC, (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”
On August 25, 2021, the closing of the Transaction occurred (the “Closing”). As a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will provide Managementmanagement real-time information on the performance of assets. Management is currently working to assess the timing to implement this technology in the legacy garages. Pursuant to the Closing, the Operating Partnership issued 7,481,6687,495,090 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $83.9$84.1 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.8 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. The fair value of the warrants recorded as of the Closing was approximately $3.3 million. Transaction expenses not directly related to the acquisition of the Contributed Interests or issuance of OP Units of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations.
Management assessed the potential accounting treatment for the Transaction by applying ASC Accounting Standards Codification ("ASC") 805 and determined the Transaction did not result in a change of control. As a result, the three real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, resulting in the recognition of assets and liabilities, at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisitions.
Liquidity Matters
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the nine months ended September 30, 2021, the Company had a net loss
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As of September 30, 2021, the Company has $67.1 million of notes payable which will mature within one year after the date that these condensed consolidated financial statements are issued. The Company does not have sufficient cash on hand or available liquidity to repay the maturing notes payable as they become due. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
In response, the Company is currently pursuing approvals to execute extension options on a portion of the notes payable as well as a refinancing plan which would consolidate the near-term maturities into a single, larger facility. However, the refinancing plan is subject to market conditions that are not within the Company’s control, and therefore, implementation of management’s plans cannot be deemed probable at this time. As a result, management has concluded that these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
The condensed consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amounts of liabilities that might result from the outcome of this uncertainty.
Note B — Summary of Significant Accounting Policies
Basis of Accounting
The accompanying unaudited condensed consolidated financial statements of the Company are prepared on the accrual basis of accounting and in accordance with principles generally accepted in the United States of America (“GAAP”) for interim financial information as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”),ASC, and in conjunction with rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements include accounts and related adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim period. Operating results for the three and nine months ended September 30, 2021,March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 2022. There were no significant changes to our significant accounting policies during the ninethree months ended September 30, 2021,March 31, 2022, except for those disclosed below. For a full summary of our accounting policies, refer to our 20202021 Annual Report on Form 10-K10-K as originally filed with the SEC on March 31, 2021.
The condensed consolidated balance sheet as of December 31, 2020 contained herein has been derived from the audited financial statements as of December 31, 2020 but does not include all disclosures required by GAAP.30, 2022.
Consolidation
The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, each of their wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest. For entities that meet the definition of a variable interest entity (“VIE”), the Company consolidates those entities when the Company is the primary beneficiary of the entity. The Company is determined to be the primary beneficiary when it possesses both the unilateral power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company continually evaluates whether it qualifies as the primary beneficiary and reconsiders its determination of whether an entity is a VIE upon reconsideration events. All intercompany activity is eliminated in consolidation.
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Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company's share of its equity method investees' earnings or losses is included in other income in the accompanying condensed consolidated statements of operations. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding asset impairment and purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable.
Concentration
The Company had 17 and 14 parking tenants/operators during the ninethree months ended September 30, 2021 March 31, 2022 and 2020,2021, respectively. One tenant/operator, SP + Corporation (Nasdaq: SP) (“SP+”), represented 79.3% represented 56.1% and 61.0%70.4% of the Company’s rental revenue, from base parking and management agreementsexcluding retail revenue, for the ninethree months ended September 30, 2021March 31, 2022 and September 30, 2020,2021, respectively. Premier Parking Service, LLC represented 15.0 % and 10.0% of the Company’s revenue, excluding retail revenue, for the three months ended March 31, 2022 and 2021, respectively.
In addition, the Company had concentrations in Detroit (14.3% and 18.9%), Houston (8.8% and 11.6%) and Cincinnati (21.1%(19.9% and 8.1%), Detroit (13.2% and 19.0%), Chicago (9.1% and 0.0%), and Houston (8.1% and 11.7%) based on gross book value of the real estate the Company owned, as of September 30, 2021March 31, 2022 and September 30, 2020,2021, respectively.
For the three months ended March 31,2022, 56.7% of the Company’s outstanding accounts receivable balance was with SP+. For the three months ended March 31, 2021,38.6%, 16.8% and 12.5% of the Company’s outstanding accounts receivable balance was with SP+, Premier Parking Service, LLC and ABM Parking Services Inc., respectively.
Acquisitions
All assets acquired and liabilities assumed in an acquisition of real estate accounted for as a business combination are measured at their acquisition date fair values. For acquisitions of real estate accounted for as an asset acquisition, the fair value of consideration transferred by the Company (including transaction costs) is allocated to all assets acquired and liabilities assumed on a relative fair value basis.
The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their relative fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on valuations performed by independent third parties or on the Company's analysis of comparable properties in the Company's portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable. The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.
Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market and below-market lease intangibles are amortized as a decrease or increase, respectively, to rental income over the remaining term of the lease.
In determining the amortization period for lease intangibles, the Company initially will consider the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease intangibles is charged to expense.
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In making estimates of fair values for purposes of allocating purchase price, the Company will utilize several sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the Company's pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the assetassets for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, the property is written down to fair value and an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.
The Company recorded 0 impairment charges for the three and nine months ended September 30, 2021 and $6.5 million and $14.1 million, respectively, for the three and nine months ended September 30, 2020. These charges were recorded to write down the carrying value
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when management determines that it is more likely than not that all or some portion of the deferred tax asset will not be realized. A full valuation allowance has been recorded for deferred tax assets due to the Company’s history of taxable losses.Immaterial Correction
The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than notdetermined that the position will be sustainedreimbursable property tax related to certain of its properties should have been recorded on audit, including resolutionsa gross basis in the Statement of related appealsOperations. An adjustment has been made to the Consolidated Statements of Operations for the three months ended March 31, 2021. Property taxes and rental revenue were both increased by $255,000 to properly report property tax expense and tenant reimbursement of property tax expense on a gross basis in accordance with ASC 842. This correction had no effect on the reported results of operations.
Reportable Segments
Our principal business is the ownership and operation of parking facilities. We do not distinguish our principal business, or litigation processes, if any. group our operations, by geography or size for purposes of measuring performance. Accordingly, we have presented our results as a single reportable segment.
Note C — Commitments and Contingencies
Litigation
The second step is to measurenature of the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus,Company’s business exposes our properties, the Company, has the Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted below, or routine litigation arising out of the ordinary course of business, the Company is not recorded presently subject to any uncertain tax positions as of September 30, 2021.
Per Share Datamaterial litigation nor, to its knowledge, is any material litigation threatened against the Company.
The Company calculates basic income (loss) per share by dividing net income (loss) forhas previously disclosed pending class action legal proceedings facing the period by weighted-average shares of its common stock outstanding forCompany and the respective period. Diluted income per share considers the effect of dilutive instruments, such as stock options, warrants, and convertible stock, but uses the average share price for the period in determining the number of incremental shares that are to be addedFormer Advisor and/or Mr. Shustek prior to the weighted-average numbercompletion of shares outstanding. Outstanding warrants were antidilutive asthe Transaction. As a result of the net loss forTransaction, the three and nine months ended September 30, 2021 and were excluded from the dilutive calculation.
Non-controlling Interests
Noncontrolling interests represent the portion of equity that we do not ownSettlement Agreement (as defined in the entities we consolidate. The Company classifies noncontrolling interests within permanent equity onPurchase Agreement) was entered into subject to completion of Color Up’s Tender Offer (as defined in the Purchase Agreement) for up to 900,506 shares of the Company’s condensed consolidated balance sheets. Onoutstanding Common Stock at $11.75 per share. Color Up launched the faceTender Offer on October 5, 2021 and it expired on November 5, 2021. Upon the expiration of the condensed consolidated statementsTender Offer, the terms of operations, the Company disclosesSettlement Agreement were satisfied and the amounts of net loss attributable to the parent and to the non-controlling interest.
Note C — Commitments and Contingenciesprior lawsuits settled.
The Company hadhas previously agreeddisclosed that the SEC was conducting an investigation relating to indemnify the Company. On March 11, 2021, the SEC notified the Company that they do not intend to recommend an enforcement action by the Commission against the Company.
The SEC investigation also related to the conduct of the Company’s former Advisor for certain legal costs. As partchairman and chief executive officer, Michael V. Shustek. On July 29, 2021, the SEC filed a civil lawsuit against Michael V. Shustek and his advisory firm Vestin Mortgage LLC, alleging violations of the securities laws (Case 2-21-civ-01416-JCM-BNW, U.S. District Court, District of Nevada). The SEC seeks disgorgement, injunctions, and bars against Mr. Shustek, and related penalties. Pursuant to the Transaction, the former Advisor’s rightsCompany is required to indemnification by the Company, with respectindemnify Mr. Shustek for certain claims related to the Advisor’s SEC investigation was limitedin an amount not to exceed $2 million. Management anticipates the former Advisor will seek indemnification, up to the $2 million cap, and has therefore concluded that the indemnification liability should be accrued in accordance with ASC 450. This indemnification liability was recognized by the Company upon the closing of the TransactionClosing and is included in indemnification liability. See Note K—Legal.Effective as of the Closing, Mr. Shustek resigned as Chief Executive Officer and director of the Company.
On August 25, 2021, the Company also entered into an Assignment of Claims, Causes of Action, and Proceeds Agreement, or the Assignment of Litigation Agreement, pursuant to which (i) the Company assigned to the Former Advisor all of the Company’s right, title, interest, and benefits, whether legal, equitable, or otherwise, in and to any and all of the claims and causes of action that the Company may have against certain parties and any amounts that may be recovered or awarded to the Former Advisor on such claims and (ii) the Former Advisor agreed to indemnify the Company against all liabilities in connection with the assignment.
Environmental Matters
Investments in real property create the potential for environmental liability on the part of the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. The Company has obtained a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted by independent environmental consultants on each of the properties and, in certain instances, has conducted additional investigation, including a Phase II environmental assessment. Furthermore, the Company has adopted a policy of conducting a Phase I environmental study on each property acquired and any additional investigation as warranted.
The Company believes that it complies, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Furthermore, as of September 30, 2021,March 31,2022, the Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations. The Company, however, cannot predict the impact of any unforeseen environmental contingencies or new or changed laws or regulations on properties in which the Company holds an interest, or on properties that may be acquired directly or indirectly in the future.
Note D – Acquisitions and Dispositions of Investments in Real Estate
There were no acquisitions of investments in real estate during the three months ended March 31, 2022.
2021
The following table is a summary of the parking asset acquisitions for the year ended December 31, 2021.
Property | | Location | | Date Acquired | | Property Type | | # Spaces | | Size / Acreage | | Retail Sq. Ft. | | Purchase Price |
1W7 Carpark, LLC, LLC | | Cincinnati, OH | | 8/25/2021 | | Garage | | 765 | | 1.21 | | 18,385 | | $ 32,122,000 |
222W7, LLC | | Cincinnati, OH | | 8/25/2021 | | Garage | | 1,625 | | 1.84 | | — | | $ 28,314,000 |
322 Streeter, LLC | | Chicago, IL | | 8/25/2021 | | Garage | | 1,154 | | 2.81 | | — | | $ 38,483,000 |
2nd Street, LLC | | Miami, FL | | 9/9/2021 | | Contract | | 118 | | N/A | | — | | $ 3,253,000 |
| Denver 1725 Champa Street Garage, LLC | | Denver, CO | | 11/3/2021 | | Garage | | 450 | | 0.72 | | — | | $ 16,274,000 |
The following table is a summary of the allocated acquisition value of all properties acquired by the Company for the year ended December 31, 2021.
| | | Assets |
| | | Land and Improvements | | Building and improvements | | In-Place Lease Value | | Contract Value | | Total assets acquired |
1W7 Carpark (a) | | $ 2,995,000 | | $ 28,819,000 | | $ 308,000 | | $ — | | $ 32,122,000 |
222W7 | | 4,391,000 | | 23,923,000 | | — | | — | | 28,314,000 |
322 Streeter | | 11,387,000 | | 27,096,000 | | — | | — | | 38,483,000 |
2nd Street (a) | | 93,000 | | — | | — | | 3,160,000 | | 3,253,000 |
| Denver 1725 Champa Street Garage, LLC | | 7,414,000 | | 8,860,000 | | — | | — | | 16,274,000 |
| | | $ 26,280,000 | | $ 88,698,000 | | $ 308,000 | | $ 3,160,000 | | $ 118,446,000 |
| a. | The value of in-place lease assets and the 2nd Street contract are included in intangible assets on the consolidated balance sheet. The life of the in-place lease at 1W7 is 5 years. The life of the contract at 2nd Street is indefinite. |
There were no dispositions of investments in real estate or properties held for sale as of March 31, 2022 and December 31, 2021.
Note E — Related Party Transactions and Arrangements
The transactions described in this Note were approved by a majority of the Company’s Board of Directors (including a majority of the independent directors) not otherwise interested in such transactions as fair and reasonable to the Company.
Two of the Company’s Cincinnati assets, 1W7 Carpark and 222W7, are currently operated by PCA, Inc., dba Park Place Parking. Park Place Parking is a private parking operator that is wholly owned by relatives of the Company’s CEO. The Company’s CEO is neither an owner ornor beneficiary of Park Place Parking. Park Place Parking has been operating these assets for four and three years, respectively. Both assets were acquired with their management agreements in place and at the same terms under which they were operating prior to the Transaction. As of March 31,2022, Park Place Parking owed the Company approximately $133,000 which is included in accounts receivable on the consolidated balance sheet.
The Company has an investment in MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”). As a result ofPursuant to the Transaction, MVP Realty Advisors, LLC (the “Former Advisor”)Closing, the Former Advisor and Mr. Shustek, were replaced as manager of MVP Parking, DST, LLC, the entity that manages MVP St. Louis, by Manuel Chavez, the CEO of the Company.Company's CEO.
Note E – AcquisitionsDuring 2021, VRMI and VRMII acquired $11.5 million of outstanding notes payable the Company had with various lenders. As of March 31, 2022, these notes payable are included in notes payable and paycheck protection program loan on the consolidated balance sheet and interest expense of $0.2 million is included on consolidated statement of operations.
As described in Note A, on August 25, 2021, of March 31, 2022, the Company acquired three parking assetsowed VRMI approximately $20,000. All amounts are related to AP trade invoices for professional fees and travel paid by the Company or related party.
In March 2022, the Company entered into an agreement with an estimated fair valueaffiliate of $98.8 million. In addition, on September 9, 2021, the Company acquired the rights to a property in Miami, Florida, which consists of 118 individual parking stalls in the Financial District of Miami, Florida. The fair value of the perpetual right to operate the parking facility is considered an indefinite-lived asset that enablesBombe Asset Management LLC ("Bombe") requiring the Company to operate these parking stallsbe allocated, bear and (where practicable) pay directly certain costs and expenses of such party. During the three months ended March 31, 2022, the Company incurred approximately $1.0 million pursuant to this agreement and such amount is included in perpetuity.professional fees on the consolidated statement of operations.
The following table is a summary
| Property | Location | Date Acquired | Property Type | # Spaces | Size / Acreage | Retail Sq. Ft. | Purchase Price |
| 1W7 Carpark, LLC, LLC | Cincinnati, OH | 8/25/2021 | Garage | 765 | 1.21 | 18,385 | $32,071,000 |
| 222W7, LLC | Cincinnati, OH | 8/25/2021 | Garage | 1,625 | 1.84 | -- | $28,269,000 |
| 322 Streeter, LLC | Chicago, IL | 8/25/2021 | Garage | 1,154 | 2.81 | -- | $38,421,000 |
| 2nd Street, LLC | Miami, FL | 9/09/2021 | Contract | 118 | N/A | -- | $3,253,000 |
The following table is a summary of the allocated acquisition value of all properties acquired by the Company for the quarter ended September 30, 2021.
| | | | | | | | | | | |
| | | Assets |
| | | Land and Improvements | | Building and improvements | | In-Place Lease Value | | Contract Value | | Total assets acquired |
| 1W7 Carpark (a) | $ | 2,995,000 | $ | 28,768,000 | $ | 308,000 | $ | -- | $ | 32,071,000 |
| 222W7 | | 4,391,000 | | 23,878,000 | | -- | | -- | | 28,269,000 |
| 322 Streeter | | 11,387,000 | | 27,034,000 | | -- | | -- | | 38,421,000 |
| 2nd Street (a) | | 93,000 | | -- | | -- | | 3,160,000 | | 3,253,000 |
| | $ | 19,066,000 | $ | 79,475,000 | $ | -- | $ | 3,160,000 | $ | 102,014,000 |
| (a)
| The value of In-place lease assets and Contracts are included in Intangible assets on the Condensed Consolidated Balance Sheets. The life of the in-place lease at 1W7 is 5 years. The life of the contract at 2nd Street is indefinite.
|
Note F — Stock-Based CompensationLicense Agreement
On August 25,2021, the Company entered into a Software License and Development Agreement, or the License Agreement, with an affiliate of Bombe, or the Supplier, pursuant to which the Company granted to the Supplier a limited, non-exclusive, non-transferable, worldwide right and license to access certain software and services for a fee of $5,000 per month.
Tax Matters Agreement
On August 25,2021, the Company, the Operating Partnership and Color Up entered into the Tax Matters Agreement, or the Tax Matters Agreement, pursuant to which the Operating Partnership agreed to indemnify Color Up and certain affiliates and transferees of Color Up, together, the Protected Partners, against certain adverse tax consequences in connection with (1) (i) a taxable disposition of certain specified properties and (ii) certain dispositions of the Protected Partners’ interest in the Operating Partnership, in each case, prior to the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied); and (2) the Operating Partnership’s failure to provide the Protected Partners the opportunity to guarantee a specified amount of debt of the Operating Partnership during the period ending on the tenth anniversary of the completion of the Transaction (or earlier, if certain conditions are satisfied). In addition, and for so long as the Protected Partners own at least 20% of the units in the Operating Partnership received in the Transaction, the Company agreed to use commercially reasonable efforts to provide the Protected Partners with similar guarantee opportunities.
Note F — Stock-Based Compensation
On October 14, 2020, the Compensation Committee of the Board of Directors of the Company approved the award of non-restricted shares to the Company’s four independent directors and to the Company’s former chief financial officer, J. Kevin Bland. Total stock-compensation expense for the year ended December 31, 2020 was approximately $144,000.
The non-restricted shares were issued by the Company on March 1, 2021 at a price of $11.75 per share. This price equals the net asset value of the Company, which was approved by the Board of Directors.
Directors in January 2021. The shares awarded fully vested immediately upon issuance and these shares are were not from issued pursuant to the Company’s Long-Term Incentive Plan. NoNaN share-based compensation awards were granted during outstanding as of March 31, 2022 and 2021.
Note G - Intangible Assets
A schedule of the Company’s intangible assets and related accumulated amortization and accretion as of March 31,2022 and December 31, 2021 is as follows:
| | | As of March 31, 2022 | | | As of December 31, 2021 | |
| | | Gross carrying amount | | | Accumulated amortization | | | Gross carrying amount | | | Accumulated amortization | |
Value of in-place leases | | $ | 2,397,000 | | | | 1,384,000 | | | $ | 2,398,000 | | | | 1,311,000 | |
Value of lease commissions | | | 152,000 | | | | 87,000 | | | | 152,000 | | | | 82,000 | |
Value of indefinite lived contract (1) | | | 3,160,000 | | | | -- | | | | 3,160,000 | | | | -- | |
Value of technology | | | 4,099,000 | | | | 237,000 | | | | 4,046,000 | | | | 133,000 | |
Total intangible assets | | $ | 9,808,000 | | | | 1,708,000 | | | $ | 9,756,000 | | | | 1,526,000 | |
(1) Indefinite-Lived in-place contract includes the 2nd Street, LLC property in Miami, FL acquired on November 3, 2021. Refer to Note D - Acquisitions and Dispositions of Investments in Real Estate.
Long-Term Incentive PlanAmortization of the acquired in-place leases and lease commissions are included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization expense associated with intangible assets totaled $176,000 and $74,000 for the three months ended March 31,2022 and 2021, respectively.
A schedule of future amortization and accretion of acquired intangible assets for the three months ended March 31,2022 and thereafter is as follows:
Three Months Ended March 31, 2022 | | Acquired in-place leases | | | Lease commissions | | | Technology | |
2022 (Remainder) | | $ | 216,000 | | | $ | 16,000 | | | $ | 326,000 | |
2023 | | | 287,000 | | | | 21,000 | | | | 418,000 | |
2024 | | | 270,000 | | | | 19,000 | | | | 418,000 | |
2025 | | | 156,000 | | | | 8,000 | | | | 418,000 | |
2026 | | | 68,000 | | | | 1,000 | | | | 418,000 | |
Thereafter | | | 16,000 | | | | -- | | | | 1,864,000 | |
| | | $ | 1,013,000 | | | $ | 65,000 | | | $ | 3,862,000 | |
Note H - Earnings Per Share
Basic and diluted loss per weighted average common share (“EPS”) is calculated by dividing net income (loss) attributable to the Company’s common stockholders, including any participating securities, by the weighted average number of shares outstanding for the period. Outstanding warrants were antidilutive as a result of the net loss for the three months ended March 31, 2022 and therefore were excluded from the dilutive calculation. The Company did not have any additional dilutive shares resulting in basic loss per share equaling dilutive loss per share for the three months ended March 31,2022 and 2021.
The Company’s board of directors has adopted a long-term incentive plan whichfollowing table reconciles the Company may use to attractnumerator and retain qualified directors, officers, employees and consultants. The Company’s long-term incentive plan will offer these individuals an opportunity to participatedenominator used in computing the Company’s growth through awards inbasic and diluted per-share amounts for net loss attributable to common stockholders for the form of, or based on, the Company’s common stock. The Company currently anticipates that it will not issue awards under the Company’s long-term incentive plan, although it may do so in the future, including possible equity grants to the Company’s independent directors as a form of compensation.three months ended March 31,2022 and 2021:
The long-term incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company’s affiliates selected by the board of directors for participation in the Company’s long-term incentive plan. Stock options granted under the long-term incentive plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock on the date of grant of any such stock options. Stock options may not have an exercise price that is less than the fair market value of a share of the Company’s common stock on the date of grant.
| | | For the three months ended March 31, 2022 | | | For the three months ended March 31, 2021 | |
Numerator: | | | | | | | | |
Net loss attributable to common stockholders | | $ | (2,556,000 | ) | | $ | (5,118,000 | ) |
Denominator: | | | | | | | | |
Basic and dilutive weighted average shares of Common Stock outstanding | | | 7,762,375 | | | | 7,731,781 | |
Basic and diluted loss per weighted average common share: | | | | | | | | |
Basic and dilutive | | $ | (0.33 | ) | | $ | (0.66 | ) |
The Company’s Board of Directors or a committee appointed by its Board of Directors will administer the long-term incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the long-term incentive plan if the grant or vesting of the awards would jeopardize the Company’s status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under its charter. Unless otherwise determined by the Company’s Board of Directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.
The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between the Company and its stockholders that causes the per-share value of the Company’s common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the long-term incentive plan will be adjusted proportionately and the board of directors will make such adjustments to the long-term incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the long-term incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.
The Company’s Board of Directors may in its sole discretion at any time determine that all or a portion of a participant’s awards will become fully vested. The board may discriminate among participants or among awards in exercising such discretion. The long-term incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by the Board of Directors and stockholders, unless extended or earlier terminated by the Board of Directors. The Company’s board of directors may terminate the long-term incentive plan at any time. The expiration or other termination of the long-term incentive plan will not, without the participant’s consent, have an adverse impact on any award that is outstanding at the time the long-term incentive plan expires or is terminated. The Board of Directors may amend the long-term incentive plan at any time, but no amendment will adversely affect any award without the participant’s consent and no amendment to the long-term incentive plan will be effective without the approval of the Company’s stockholders if such approval is required by any law, regulation or rule applicable to the long-term incentive plan. There are no awards outstanding under the long-term incentive plan.
Note G I — Notes Payable and Paycheck Protection Program Loan
As of September 30, 2021,March 31, 2022, the principal balances on notes payable are as follows:
| Property | Original Debt Amount | Monthly Payment | Balance as of 9/30/21 | Lender | Term | | Interest Rate | Loan Maturity |
| Parking REIT, Inc (5) | $1,200,000 | (5) | $0 | Color Up, LLC | 7 months | | 7.00% | 12/31/2021 |
| MVP Clarksburg Lot | $476,000 | Interest Only | $476,000 | Vestin Realty Mortgage I | 1 Year | | 7.00% | 8/25/2022 |
| MCI 1372 Street | $574,000 | Interest Only | $574,000 | Vestin Realty Mortgage I | 1 Year | | 7.00% | 8/25/2022 |
| MVP Milwaukee Old World | $771,000 | Interest Only | $1,871,000 | Vestin Realty Mortgage I | 1 Year | | 7.00% | 8/25/2022 |
| MVP Milwaukee Clybourn | $191,000 | Interest Only | $191,000 | Vestin Realty Mortgage I | 1 Year | | 7.00% | 8/25/2022 |
| MVP Wildwood NJ Lot, LLC | $1,000,000 | Interest Only | $1,000,000 | Vestin Realty Mortgage I | 1 Year | | 7.00% | 8/25/2022 |
| MVP Raider Park Garage, LLC (4) | $7,400,000 | Interest Only | $6,931,000 | LoanCore | 1 Year | | Variable | 12/9/2021 |
| MVP New Orleans Rampart, LLC (4) | $5,300,000 | Interest Only | $4,965,000 | LoanCore | 1 Year | | Variable | 12/9/2021 |
| MVP Hawaii Marks Garage, LLC (4) | $13,500,000 | Interest Only | $12,646,000 | LoanCore | 1 Year | | Variable | 12/9/2021 |
| MVP Milwaukee Wells, LLC (4) | $2,700,000 | Interest Only | $2,529,000 | LoanCore | 1 Year | | Variable | 12/9/2021 |
| MVP Indianapolis City Park, LLC (4) | $7,200,000 | Interest Only | $6,744,000 | LoanCore | 1 Year | | Variable | 12/9/2021 |
| MVP Indianapolis WA Street, LLC (4) | $3,400,000 | Interest Only | $3,185,000 | LoanCore | 1 Year | | Variable | 12/9/2021 |
| MVP Cincinnati Race Street, LLC | $2,550,000 | Interest Only | $3,450,000 | Vestin Realty Mortgage II | 1 Year | | 7.00% | 8/25/2022 |
| Minneapolis Venture | $2,000,000 | Interest Only | $4,000,000 | Vestin Realty Mortgage I | 1 Year | | 7.00% | 8/25/2022 |
| SBA PPP Loan | $329,000 | *** | $329,000 | Small Business Administration | 5 Year | | 1.00% | 5/3/2026 |
| MVP Memphis Poplar (3) | $1,800,000 | Interest Only | $1,800,000 | LoanCore | 5 Year | | 5.38% | 3/6/2024 |
| MVP St. Louis (3) | $3,700,000 | Interest Only | $3,700,000 | LoanCore | 5 Year | | 5.38% | 3/6/2024 |
| Mabley Place Garage, LLC | $9,000,000 | $44,000 | $7,864,000 | Barclays | 10 year | | 4.25% | 12/6/2024 |
| MVP Houston Saks Garage, LLC | $3,650,000 | $20,000 | $3,087,000 | Barclays Bank PLC | 10 year | | 4.25% | 8/6/2025 |
| Minneapolis City Parking, LLC | $5,250,000 | $29,000 | $4,553,000 | American National Insurance, of NY | 10 year | | 4.50% | 5/1/2026 |
| MVP Bridgeport Fairfield Garage, LLC | $4,400,000 | $23,000 | $3,818,000 | FBL Financial Group, Inc. | 10 year | | 4.00% | 8/1/2026 |
| West 9th Properties II, LLC | $5,300,000 | $30,000 | $4,668,000 | American National Insurance Co. | 10 year | | 4.50% | 11/1/2026 |
| MVP Fort Worth Taylor, LLC | $13,150,000 | $73,000 | $11,613,000 | American National Insurance, of NY | 10 year | | 4.50% | 12/1/2026 |
| MVP Detroit Center Garage, LLC | $31,500,000 | $194,000 | $28,503,000 | Bank of America | 10 year | | 5.52% | 2/1/2027 |
| MVP St. Louis Washington, LLC (1) | $1,380,000 | $8,000 | $1,311,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| St. Paul Holiday Garage, LLC (1) | $4,132,000 | $24,000 | $3,924,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| Cleveland Lincoln Garage, LLC (1) | $3,999,000 | $23,000 | $3,797,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Denver Sherman, LLC (1) | $286,000 | $2,000 | $271,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Milwaukee Arena Lot, LLC (1) | $2,142,000 | $12,000 | $2,034,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Denver 1935 Sherman, LLC (1) | $762,000 | $4,000 | $723,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Louisville Broadway Station, LLC (2) | $1,682,000 | Interest Only | $1,682,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Whitefront Garage, LLC (2) | $6,454,000 | Interest Only | $6,454,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Houston Preston Lot, LLC (2) | $1,627,000 | Interest Only | $1,627,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Houston San Jacinto Lot, LLC (2) | $1,820,000 | Interest Only | $1,820,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| St. Louis Broadway, LLC (2) | $1,671,000 | Interest Only | $1,671,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| St. Louis Seventh & Cerre, LLC (2) | $2,057,000 | Interest Only | $2,058,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Indianapolis Meridian Lot, LLC (2) | $938,000 | Interest Only | $938,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Preferred Parking, LLC | $11,330,000 | Interest Only | $11,330,000 | Key Bank | 10 year | ** | 5.02% | 8/1/2027 |
| 1W7 Carpark, LLC | $11,000,000 | $19,000 | $10,336,000 | Associated Bank | 1 year | | Variable | 5/1/2022 |
| 222W7, LLC | $8,250,000 | $15,000 | $8,208,000 | Associated Bank | 1 year | | Variable | 10/1/2022 |
| 322 Streeter LLC | $25,900,000 | Interest Only | $25,900,000 | American National Insurance Co. | 5 year | * | 3.50% | 2/12/2025 |
| Corporate D&O Insurance (6) | $450,000 | $38,000 | $338,000 | MetaBank | 1 year | | 3.95% | 7/31/2022 |
| St Louis Cardinal Lot DST, LLC (7) | $6,000,000 | Interest Only | $6,000,000 | Cantor Commercial Real Estate | 10 year | ** | 5.25% | 5/31/2027 |
| Less unamortized loan issuance costs | (1,011,000) | | | | | |
| | | | $207,908,000 | | | | | |
Loan | | Original Debt Amount | | | Monthly Payment | | | Balance as of 3/31/22 | | Lender | | Term (in years) | | | Interest Rate | | Loan Maturity |
Corporate D&O Insurance (6) | | $ | 450,000 | | | $ | 38,000 | | | $ | 114,000 | | MetaBank | | | 1 | | | | 3.95 | % | 7/31/2022 |
MVP Clarksburg Lot | | $ | 476,000 | | | Interest Only | | | $ | 476,000 | | Vestin Realty Mortgage I | | | 1 | | | | 7.00 | % | 8/25/2022 |
MCI 1372 Street | | $ | 574,000 | | | Interest Only | | | $ | 574,000 | | Vestin Realty Mortgage I | | | 1 | | | | 7.00 | % | 8/25/2022 |
MVP Milwaukee Old World | | $ | 771,000 | | | Interest Only | | | $ | 1,871,000 | | Vestin Realty Mortgage I | | | 1 | | | | 7.00 | % | 8/25/2022 |
MVP Milwaukee Clybourn | | $ | 191,000 | | | Interest Only | | | $ | 191,000 | | Vestin Realty Mortgage I | | | 1 | | | | 7.00 | % | 8/25/2022 |
MVP Wildwood NJ Lot, LLC | | $ | 1,000,000 | | | Interest Only | | | $ | 1,000,000 | | Vestin Realty Mortgage I | | | 1 | | | | 7.00 | % | 8/25/2022 |
MVP Cincinnati Race Street, LLC | | $ | 2,550,000 | | | Interest Only | | | $ | 3,450,000 | | Vestin Realty Mortgage II | | | 1 | | | | 7.00 | % | 8/25/2022 |
Minneapolis Venture | | $ | 2,000,000 | | | Interest Only | | | $ | 4,000,000 | | Vestin Realty Mortgage I | | | 1 | | | | 7.00 | % | 8/25/2022 |
SBA PPP Loan | | $ | 328,000 | | | | *** | | | $ | 328,000 | | Small Business Administration | | | 5 | | | | 1.00 | % | 10/22/2022 |
1W7 Carpark, LLC (5) | | $ | 11,000,000 | | | $ | 19,000 | | | $ | 10,207,000 | | Associated Bank | | | 1 | | | Variable | | 4/1/2023 |
222W7th Holdco, LLC (5) | | $ | 8,250,000 | | | $ | 15,000 | | | $ | 8,097,000 | | Associated Bank | | | 1 | | | Variable | | 4/1/2023 |
MVP Raider Park Garage, LLC (4)(5) | | $ | 7,400,000 | | | Interest Only | | | $ | 6,932,000 | | LoanCore | | | 1 | | | Variable | | 4/1/2023 |
MVP New Orleans Rampart, LLC (4)(5) | | $ | 5,300,000 | | | Interest Only | | | $ | 4,965,000 | | LoanCore | | | 1 | | | Variable | | 4/1/2023 |
MVP Hawaii Marks Garage, LLC (4)(5) | | $ | 13,500,000 | | | Interest Only | | | $ | 12,646,000 | | LoanCore | | | 1 | | | Variable | | 4/1/2023 |
MVP Milwaukee Wells, LLC (4)(5) | | $ | 2,700,000 | | | Interest Only | | | $ | 2,529,000 | | LoanCore | | | 1 | | | Variable | | 4/1/2023 |
MVP Indianapolis City Park, LLC (4)(5) | | $ | 7,200,000 | | | Interest Only | | | $ | 6,744,000 | | LoanCore | | | 1 | | | Variable | | 4/1/2023 |
MVP Indianapolis WA Street, LLC (4)(5) | | $ | 3,400,000 | | | Interest Only | | | $ | 3,185,000 | | LoanCore | | | 1 | | | Variable | | 4/1/2023 |
MVP Memphis Poplar (3) | | $ | 1,800,000 | | | Interest Only | | | $ | 1,800,000 | | LoanCore | | | 5 | | | | 5.38 | % | 3/6/2024 |
MVP St. Louis (3) | | $ | 3,700,000 | | | Interest Only | | | $ | 3,700,000 | | LoanCore | | | 5 | | | | 5.38 | % | 3/6/2024 |
Mabley Place Garage, LLC | | $ | 9,000,000 | | | $ | 44,000 | | | $ | 7,767,000 | | Barclays | | | 10 | | | | 4.25 | % | 12/6/2024 |
322 Streeter Holdco LLC | | $ | 25,900,000 | | | Interest Only | | | $ | 25,846,000 | | American National Insurance Co. | | | 5 | * | | | 3.50 | % | 3/1/2025 |
MVP Houston Saks Garage, LLC | | $ | 3,650,000 | | | $ | 20,000 | | | $ | 3,034,000 | | Barclays Bank PLC | | | 10 | | | | 4.25 | % | 8/6/2025 |
Minneapolis City Parking, LLC | | $ | 5,250,000 | | | $ | 29,000 | | | $ | 4,479,000 | | American National Insurance, of NY | | | 10 | | | | 4.50 | % | 5/1/2026 |
MVP Bridgeport Fairfield Garage, LLC | | $ | 4,400,000 | | | $ | 23,000 | | | $ | 3,750,000 | | FBL Financial Group, Inc. | | | 10 | | | | 4.00 | % | 8/1/2026 |
West 9th Properties II, LLC | | $ | 5,300,000 | | | $ | 30,000 | | | $ | 4,596,000 | | American National Insurance Co. | | | 10 | | | | 4.50 | % | 11/1/2026 |
MVP Fort Worth Taylor, LLC | | $ | 13,150,000 | | | $ | 73,000 | | | $ | 11,434,000 | | American National Insurance, of NY | | | 10 | | | | 4.50 | % | 12/1/2026 |
MVP Detroit Center Garage, LLC | | $ | 31,500,000 | | | $ | 194,000 | | | $ | 28,131,000 | | Bank of America | | | 10 | | | | 5.52 | % | 2/1/2027 |
MVP St. Louis Washington, LLC (1) | | $ | 1,380,000 | | | $ | 8,000 | | | $ | 1,295,000 | | KeyBank | | | 10 | * | | | 4.90 | % | 5/1/2027 |
St. Paul Holiday Garage, LLC (1) | | $ | 4,132,000 | | | $ | 24,000 | | | $ | 3,877,000 | | KeyBank | | | 10 | * | | | 4.90 | % | 5/1/2027 |
Cleveland Lincoln Garage, LLC (1) | | $ | 3,999,000 | | | $ | 23,000 | | | $ | 3,752,000 | | KeyBank | | | 10 | * | | | 4.90 | % | 5/1/2027 |
MVP Denver Sherman, LLC (1) | | $ | 286,000 | | | $ | 2,000 | | | $ | 268,000 | | KeyBank | | | 10 | * | | | 4.90 | % | 5/1/2027 |
MVP Milwaukee Arena Lot, LLC (1) | | $ | 2,142,000 | | | $ | 12,000 | | | $ | 2,010,000 | | KeyBank | | | 10 | * | | | 4.90 | % | 5/1/2027 |
MVP Denver 1935 Sherman, LLC (1) | | $ | 762,000 | | | $ | 4,000 | | | $ | 715,000 | | KeyBank | | | 10 | * | | | 4.90 | % | 5/1/2027 |
MVP Louisville Broadway Station, LLC (2) | | $ | 1,682,000 | | | Interest Only | | | $ | 1,682,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
MVP Whitefront Garage, LLC (2) | | $ | 6,454,000 | | | Interest Only | | | $ | 6,454,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
MVP Houston Preston Lot, LLC (2) | | $ | 1,627,000 | | | Interest Only | | | $ | 1,627,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
MVP Houston San Jacinto Lot, LLC (2) | | $ | 1,820,000 | | | Interest Only | | | $ | 1,820,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
St. Louis Broadway, LLC (2) | | $ | 1,671,000 | | | Interest Only | | | $ | 1,671,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
St. Louis Seventh & Cerre, LLC (2) | | $ | 2,057,000 | | | Interest Only | | | $ | 2,057,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
MVP Indianapolis Meridian Lot, LLC (2) | | $ | 938,000 | | | Interest Only | | | $ | 938,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.03 | % | 5/6/2027 |
St Louis Cardinal Lot DST, LLC (7) | | $ | 6,000,000 | | | Interest Only | | | $ | 6,000,000 | | Cantor Commercial Real Estate | | | 10 | ** | | | 5.25 | % | 5/31/2027 |
MVP Preferred Parking, LLC | | $ | 11,330,000 | | | Interest Only | | | $ | 11,330,000 | | Key Bank | | | 10 | ** | | | 5.02 | % | 8/1/2027 |
Less unamortized loan issuance costs | | | $ | (1,377,000 | ) | | | | | | | | | | |
| | | | | | | | | | | $ | 205,965,000 | | | | | | | | | | | |
(1)(1)
| The Company issued a promissory note to KeyBank for $12.7 million secured by athe pool of properties, including (i) MVP Denver Sherman, LLC, (ii) MVP Denver 1935 Sherman, LLC, (iii) MVP Milwaukee Arena, LLC, (iv) MVP St. Louis Washington, LLC, (v) St. Paul Holiday Garage, LLC and (vi) Cleveland Lincoln Garage, LLC.properties. |
(2)(2)
| The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by athe pool of properties, including (i) MVP Indianapolis Meridian Lot, LLC, (ii) MVP Louisville Station Broadway, LLC, (iii) MVP White Front Garage Partners, LLC, (iv) MVP Houston Preston Lot, LLC, (v) MVP Houston San Jacinto Lot, LLC, (vi) St. Louis Broadway Group, LLC, and (vii) St. Louis Seventh & Cerre, LLC.properties. |
(3)(3)
| On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”Louis 2013”), and MVP PF Memphis Poplar 2013, LLC (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis2013 and MVP Memphis Poplar $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis 2013and MVP Memphis Poplar. |
(4)(4)
| On November 30, 2018, subsidiaries of the Company, consisting of MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Park, Garage, LLC, MVP Indianapolis WashingtonWA Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, and MVP Milwaukee Wells LLC (the “Borrowers”) entered into a loan agreement, dated as of November 30, 2018 (the(the “Loan Agreement”), with LoanCore Capital Credit REIT LLC (the “LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan the Borrowers $39.5 million to repay and discharge the outstanding KeyBank Revolving Credit Facility. On July 9, 2020, the Company entered into a loan modification agreement with LoanCore Capital Credit REIT, LLC for the following notes payable: (i) MVP Raider Park Garage, LLC, (ii) MVP New Orleans Rampart, LLC, (iii) MVP Hawaii Marks Garage, LLC, (iv) MVP Milwaukee Wells, LLC, (v) MVP Indianapolis City Park, LLC, (vi) MVP Indianapolis WA Street, LLC. The Agreement defers a portion of the required monthly interest payments from June 2020 through November 2020 and reduces the LIBOR Floor from 1.95% to 0.50%, the Modified LIBOR Floor. In December 2020, this loan reverted back to normal payment terms. On December 8, 2020, the Company, as guarantor, entered into the Second Amendment to Loan Agreement and Loan Documents (the “Second Amendment”). Pursuant to the Second Amendment, the Borrowers were granted the option to extend the maturity date of the Loan for two one-year periods upon the satisfaction of certain conditions, payment of certain amounts due under the Loan Agreement and, in connection with the Borrowers’ exercise of their option with respect to the first extension period, delivery by the Company of a partial payment guaranty. On December 8, 2020, the Borrowers exercised their option to extend the term of the Loan to December 9, 2021 and the Company delivered a $5.0 million partial payment guaranty. On August 25, 2021, pursuant to the closingClosing of the Color Up/Bombe Transaction, the Company made a $2.5 million principal payment. |
(5)(5)
| During 2021,On March 29, 2022, the Company entered into a Credit Agreement (the "Credit Agreement") with KeyBanc Capital Markets, as lead arranger, and KeyBank, National Association, as administrative agent. The Credit Agreement refinances the Company’s current loan agreements for these properties. The Credit Agreement will provide for, among other things, a $75,000,000 revolving credit facility, maturing on April 1, 2023. Credit Agreement may be extended to October 1, 2023 if no event of default is in existence upon receipt of written request 120 – 60 days prior to maturity date and payment of an extension fee pursuant to the Purchaseterms of the Credit Agreement (the “Revolving Facility”). The Revolving Facility may be increased by up to an additional $75,000,000 provided that no event of default has occurred and is continuing and certain other conditions are satisfied. Borrowings under the Revolving Facility bear interest at a SOFR benchmark rate or Alternate Base Rate, plus a margin of between 1.75% and 3.00%, with respect to SOFR loans, or 0.75% to 2.00%, with respect to base rate loans, based on the Company’s leverage ratio as calculated under the Credit Agreement. The Credit Agreement is secured by the pool of properties and requires compliance with certain financial covenants. The Credit Agreement also includes financial covenants that require the Company requestedto (i) maintain a total leverage ratio not to exceed 65.0%, (ii) not to exceed certain fixed charge coverage ratios, and received(iii) maintain a $1,200,000 loan from Color Up, LLCcertain tangible net worth. The loans held with LoanCore and Associated Bank were paid off on April 15, 2022 and April 21, 2022, respectively, resulting in $18.9 million remaining available on the Purchaser under the Purchase Agreement, evidenced by a convertible promissory note. In connection with the closingcredit line of the Transaction, the principal then outstanding and all accrued and unpaid interest was converted into limited partner interests of the Operating Partnership. This note was paid in full on August 25, 2021 at the Closing of the Transaction.
first$75,000,000 tranche. |
(6)(6)
| On September 30, 2021, the Company entered into a loan with Meta Bank to finance $337,500 of the Directors & Officers insurance policy premium. The loan matures on July 31, 2022. |
(7)(7) | Pursuant to the Closing of the Transaction, the Company recorded the $6.0 million loan with Cantor Commercial Real Estate upon the consolidation of its investment in MVP St. Louis Cardinal Lot, DST. Company recorded the $6.0 million loan with Cantor Commercial Real Estate upon the consolidation of its investment in MVP St. Louis Cardinal Lot, DST. See Note I for further information. |
* 2 Year Interest Only
** 10 Year Interest Only
*** To be determined by Lender if request for forgiveness is deniedForgiveness was approved by the Small Business Administration (SBA) on May 2, 2022
Reserve funds are generally required for repairs and replacements, real estate taxes, and insurance premiums. Some notes contain various terms and conditions including debt service coverage ratios and debt yield limits. Borrowers for sixseven of the Company’s loans totaling $90.0 $95.8 million and twoseven loans totaling $47.5$96.0 million failed to meet loan covenants as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. As a result, these borrowers are subject to additional cash management procedures, which resulted in approximately $309,000$549,000 and $79,000$359,000 of restricted cash at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. In order to exit these procedures, certain debt service coverage ratios or debt yield tests must be exceeded for two consecutive quarters to return to less restrictive cash management procedures.
During 2020, the Company and the lenders modified loan agreements to defer or cancel payments into repair and replacement reserves commencing between April 2020 and August 2020 and lasting three to six months. At September 30, 2021 and December 31, 2020, the Company had $0 and $172,000 in deferred repair and maintenance reserve payments, respectively.
As of September 30, 2021,March 31, 2022, future principal payments on notes payable are as follows:
| 2021 (remainder) | $ | 38,156,000 | |
| 2022 | | 32,408,000 | |
2022 (remainder) | | | $ | 21,867,000 | |
| 2023 | | 2,499,000 | | 57,803,000 | |
| 2024 | | 15,282,000 | | 15,282,000 | |
| 2025 | | 31,012,000 | | 30,958,000 | |
2026 | | | 22,630,000 | |
| Thereafter | | 89,562,000 | | | 66,932,000 | |
| Total | $ | 208,919,000 | | $ | 215,472,000 | |
- 13 -
The following table showsThere were no notes payable paid in full during the ninethree months ended September 30, 2021:March 31, 2022.
| Loan | Original Debt Amount | Monthly Payment | Balance as of 09/30/2021 | Lender | Term | Interest Rate | Loan Maturity |
| Corporate D&O Insurance | $1,185,000 | $150,000 | -- | MetaBank | 1 Year | 3.60% | 02/28/2021 |
| SBA PPP Loan (1) | $348,000 | $14,700 | -- | Small Business Administration | 2 Year | 1.00% | 10/22/2022 |
| Color Up, LLC | $400,000 | N/A | -- | Color Up, LLC | 7 months | 7.00% | 12/31/2021 |
(1) – Full amount of loan forgiven during May 2021.
Note H J — Fair Value
A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:
| | 1. | Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| | 2. | Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable. |
| | 3. | Level 3 – Model-derived valuations with unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The Company's financial instruments include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. Due to their short maturities, the carrying amounts of these assets and liabilities approximate fair value. The estimated fair value of the Company’s debt was approximately $215.6$211.3 million and $149.9 $161.2 million as of September 30,March 31, 2022 and December 31, 2021 and 2020,, respectively, which is considered a Level 2 measurement.
AssetsOur real estate assets are measured and liabilities measuredrecognized at fair value, Level 3less costs to sell held-for-sale properties, on a non-recurringnonrecurring basis may include Assets Helddependent upon when we determine an impairment has occurred. When the Company impairs assets that have operational impairment indicators, management uses an independent third-party to determine the fair value primarily using the income capitalization approach based on the contracted rent to be received from the operator or the sales comparison approach. The income capitalization approach reflects the property’s income-producing capabilities based on the assumption that value is created by the expectation of benefits to be derived in the future. The sales comparison approach utilizes sales of comparable properties, adjusted for Sale.differences, to indicate value. These methods are considered Level 2 measurements in the hierarchy.
Note I K – Variable Interest Entities
The Company, through a wholly owned subsidiary of its Operating Partnership, owns a 51.0% beneficial interest in MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”). MVP St. Louis is the owner of a 2.56-acre, 376-vehicle commercial parking lot, known as the Cardinal Lot (the “Property”).Lot.
At the time of the initial investment, the Company conducted an analysis and concluded that the 51% investment in the DST should not be consolidated, as the Company was not the primary beneficiary because the power to direct the activities that most significantly impact the economic performance of MVP St. Louis was held by MVP Parking DST, LLC (the “Manager”) and certain subsidiaries of the Manager. The investment in MVP St. Louis was accounted for using the equity method of accounting through August 25, 2021.
Pursuant toIn connection with the closing of the Transaction on August 25, 2021,Closing, the former advisor of the Company, MVP Realty Advisors, LLC (the “Former Advisor”("MVPRA”) transferred ownership of the Manager to Manuel Chavez, III, the CEOChief Executive Officer of the Company. This change in structure was deemed a reconsideration event and therefore the Company reevaluated whether it had control. Based on the Company's evaluation, the Company began consolidating the investment in MVP St. Louis and MVP St. Louis Cardinal Lot Master Tenant, LLC, which had total assets and liabilities of approximately $12.0 million and approximately $6.2 million, respectively, as of August 25, 2021. These assets and liabilities were recorded at fair value as of the date of consolidation, and a gain of $360,000 was recognized in the Statement of Operations.
Amounts related to MVP St. Louis included in the consolidated balance sheet are as follows:
| | | September 30, 2021 |
ASSETS | | (Unaudited) |
Investments in real estate | $ | 11,790,000 |
Cash | | 105,000 |
Cash – restricted | | 41,000 |
Accounts receivable | | 51,000 |
Prepaid expenses | | 11,000 |
Total assets | $ | 11,998,000 |
| | | |
LIABILITIES | | |
Notes payable | $ | 5,961,000 |
Accounts payable and accrued liabilities | | 78,000 |
Due to related party | | 193,000 |
Total liabilities | | 6,232,000 |
| | | March 31, 2022 | |
| | | (Unaudited) | |
ASSETS | | | | |
Investments in real estate | | $ | 11,808,000 | |
Cash | | | 165,000 | |
Cash – restricted | | | 239,000 | |
Accounts receivable | | | 146,000 | |
Prepaid expenses | | | 11,000 | |
Total assets | | $ | 12,369,000 | |
| | | | | |
LIABILITIES | | | | |
Notes payable | | $ | 5,963,000 | |
Accounts payable and accrued liabilities | | | 223,000 | |
Total liabilities | | $ | 6,186,000 | |
- 14 -
Summarized Statements of Operations—Operations—Unconsolidated Real Estate Affiliates—Affiliates—Equity Method Investments
| | | For the three months ended March 31, 2021 | |
Revenue | | $ | 182,000 | |
Expenses | | | (199,000 | ) |
Net income | | $ | (17,000 | ) |
| | | | | | | | | |
For the three months ended September 30, 2021 | | For the three months ended September 30, 2020 | | For the nine months ended September 30, 2021 | | For the nine months ended September 30, 2020 |
Revenue | $ | 122,000 | $ | 183,000 | $ | 488,000 | $ | 365,000 |
Expenses | | (61,000) | | (91,000) | | (434,000) | | (180,000) |
Net income | $ | 61,000 | $ | 92,000 | $ | 54,000 | $ | 185,000 |
Note J L – Right of Use Leased Asset and Lease Liability
The Company executed a lease agreement for its office space at 9130 W. Post Rd., Suite 200, Las Vegas, NV 89148 with a commencement date of January 10, 2020. The lease had a ten-year term with an annual payment of $180,480 per annum during the lease term. The lease is accounted for as an operating lease under ASU 2016-02, Leases – (Topic 842). The Company recognized a Right of Use (“ROU”) Leased Asset and a ROU Lease Liability on the lease commencement date. Through the discounting of the remaining lease payments at the Company’s incremental borrowing rate of 5.382%, the value of both the ROU asset and ROU liability recognized at commencement date was approximately $1.4 million. As a result of the Closing of the Transaction on August 25, 2021, the Company terminated this lease effective September 30, 2021. The unamortized value of the ROU Lease Asset and a ROU Lease liability, on this date, were each approximately $1.2 million. These balances were written off and the company paid a $961,000 lease termination fee at Closing included in Transaction expenses in the consolidated statement of operations.
The Company recognized approximately $54,000 and $45,000 of operating lease expense during the three months ended September 30, 2021 and 2020, respectively.
The Company recognized approximately $163,000 and $135,000 of operating lease expense during the nine months ended September 30, 2021 and 2020, respectively. This expense is included in general and administrative expense.
Note K — Legal
The Company has previously disclosed pending class action legal proceedings facing the Company and the Former Advisor and/or Mr. Shustek prior to the completion of the Transaction. As a result of the Transaction, the Settlement Agreement (as defined in the Purchase Agreement) was entered into subject to completion of Color Up’s Tender Offer (as defined in the Purchase Agreement) for up to 900,506 shares of the Company’s outstanding common stock at $11.75 per share. Color Up launched the Tender Offer on October 5, 2021 and it expired on November 5, 2021. Upon the expiration of the Tender Offer, the terms of the Settlement Agreement were satisfied and the prior lawsuits settled.
SEC Investigation
The Company has previously disclosed thataccounts for rental income and percentage rent income in accordance with ASC 842 - Leases. The majority of the SEC was conducting an investigation relatingCompany’s leases are largely similar and the lease agreements generally contain similar provisions and features, without substantial variations. All leases are currently classified as operating leases. The following table summarizes the components of lease revenue recognized during the three months ended March 31,2022 and 2021 included within the Company's Consolidated Statements of Operations:
| | | Three Months Ended March 31, |
Lease revenue | | 2022 | 2021 |
Fixed contractual payments | | $ | 1,748,000 | $ | 2,398,000 |
Variable lease payments | | | 4,636,000 | | 489,000 |
Straight-line rental income | | | 4,000 | | 48,000 |
Approximate future fixed contractual lease payments to the Company. On be received under non-cancelable operating leases in effect as of March 11, 2021, the SEC notified the Company that they do not intend to recommend an enforcement action by the Commission against the Company. 31, 2022, assuming no new or renegotiated leases or option extensions on lease agreements, are as follows:
For the year ended, | | | Future lease payments due |
2022 (Remainder) | | | $ | 4,199,000 |
2023 | | | | 4,816,000 |
2024 | | | | 4,312,000 |
2025 | | | | 3,345,000 |
2026 | | | | 2,480,000 |
Thereafter | | | | 416,000 |
Note M - Income Taxes
The SEC investigation also relatesCompany previously elected to be taxed as a REIT for federal income tax purposes and operated in a manner that allowed the conductCompany to qualify as a REIT through December 31, 2019. As a consequence of the Company’s former chairman and chief executive officer, Michael V. Shustek. On July 29, 2021,COVID-19 pandemic, the SEC filedCompany earned income from a civil lawsuit against Michael V. Shustek and his advisory firm Vestin Mortgage LLC, alleging violationsnumber of distressed tenants that did not constitute qualifying REIT income for purposes of the securities laws (Case 2-21-civ-01416-JCM-BNW, U.S. District Court, District of Nevada). The SEC seeks disgorgement, injunctions,annual REIT gross income tests, and, bars against Mr. Shustek,as a result, the Company was not in compliance with the annual REIT income tests for the year ended December 31, 2020. Accordingly, the Company did not qualify for taxation as a REIT in 2020 and related penalties. Pursuant to the Closing of the Transaction,has been taxed as a C corporation beginning with its 2020 taxable year. As a C corporation, the Company is requiredsubject to indemnify Mr. Shustekfederal income tax on its taxable income at regular corporate rates.
A full valuation allowance for certain claims related to the SEC investigation in an amount not to exceed $2 million. This liabilitydeferred tax assets was recognized byhistorically provided each year since the Company uponbelieved that as a REIT it was more likely than not that it would not realize the Closingbenefits of its deferred tax assets. As a taxable C Corporation, the Company has evaluated its deferred tax assets for the three months ended March 31,2022, which consist primarily of net operating losses and is includedits investment in indemnification liability.
Asthe Operating Partnership (as a result of the Transaction on August 25, 2021, Mr. Shustek resigned as Chief Executive OfficerClosing). Management assesses the available positive and directornegative evidence to estimate whether sufficient future taxable income will be generated to permit use of the Company.existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. Due to the ongoing impact to the Company of the COVID-19 pandemic to the Company, the Company has determined that it will continue to record a full valuation allowance against its deferred tax assets for the three months ended March 31,2022. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur.
Note L N — Preferred Stock and Warrants
The Company reviewed the relevant ASC’s, specifically ASC 480 – Distinguishing Liabilities from Equity and ASC 815 – Derivatives and Hedging, in connection with the presentation of the Series A and Series 1 preferred stock. Below is a summary of the Company’s preferred stock offerings.
Series A Preferred Stock
On November 1, 2016, the Company commenced an offering of up to $50 million in shares of the Company’s Series A Convertible Redeemable Preferred Stock (“Series A”A Preferred Stock”), par value $0.0001 per share, together with warrants to acquire the Company’s common stock,Common Stock, in a Regulation D 506(c)506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company closed the offering on March 24, 2017 and raised approximately $2.5 million, net of offering costs, in the Series A private placements.
The holders of the Series A Preferred Stock are entitled to receive, when and as authorized by the boardBoard of directorsDirectors and declared by the Company out of funds legally available for the payment of dividends, cash dividends at the rate of 5.75% per annum of the initial stated value of $1,000 per share. Since a Listing Event, as defined in the charter, did not occur by March 31, 2018, the cash dividend rate has been increased to 7.50%, until a Listing Event at which time, the annual dividend rate will be reduced to 5.75% of the Stated Value.
Subject to the Company’s redemption rights as described below, each Series A share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series A Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 90 days after the occurrence of a Listing Event or (ii) the second anniversary of the final closing of the Series A offering (whether or not a Listing Event has occurred). Each Series A share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series A Conversion Price”) determined as follows:
If a Series A Conversion Notice with respect to any Series A share is received on or after the second anniversary of the final closing of the Series A offering, and at the time of receipt of such Series A Conversion Notice, a Listing Event has not occurred, the Series A Conversion Price will be equal to 100% of the Company’s net asset value per share.
If the Amended Charter becomes effective, the date by which holders of Series A must provide notice of conversion will be changed from the day immediately preceding the first anniversary of the issuance of such share to December 31, 2017. This change will conform the terms of the Series A with the terms of the Series 1 with respect to conversions.
At any time, from time to time, after the 20th trading day after the date of a Listing Event, the Company (or its successor) will have the right (but not the obligation) to redeem, in whole or in part, the Series A at the redemption price equal to 100% of the Stated Value, initially $1,000 per share, plus any accrued but unpaid dividends if any, to and including the date fixed for redemption. If the Company (or its successor) chooses to redeem any Shares, the Company (or its successor) has the right, in its sole discretion, to pay the redemption price in cash or in equal value of common stock of the Company (or its successor), based on the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the redemption, in exchange for the Series A. The Company (or its successor) also will have the right (but not the obligation) to redeem all or any portion of the Series A subject to a Series A Conversion Notice for a cash payment to the holder thereof equal to the applicable redemption price, by delivering a redemption notice to the holder of such Shares on or prior to the 10th trading day prior to the close of trading on the applicable Conversion Date.
Each investor in the Series A offering received, for every $1,000$1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company’s common stockCommon Stock if the Company’s common stockCommon Stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stockCommon Stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. IfAs a listing event does Listing Event did not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expireexpired automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2021, there were detachable warrants that could be exercised for 84,510 shares of the Company’s common stock, if a listing event occurs on or before March 22, 2022, after the 90th day following the occurrence of a listing event. If a listing event does occur before the anniversary date, these potential warrants will then expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at September 30, 2021 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to the Company would be approximately $2.1 million and the Company would as a result issue an additional 84,510 shares of common stock.
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On March 24, 2020, the Company’s Board of Directors unanimously authorized the suspension of the payment of distributions on the Series A;A Preferred Stock; however, such distributions will continue to accrue in accordance with the terms of the Series A.A Preferred Stock. Since initial issuance, the Company had declared distributions of approximately $1,044,000 of which approximately $597,000 had been paid to Series A stockholders. As of March 31,2022 and December 31, 2021, approximately $447,000 and $393,000 of Series A Preferred Stock distributions that were accrued and unpaid, respectively, are included in accounts payable and accrued expenses on the consolidated balance sheet.
Series 1 Preferred Stock
On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock (“Series 1”1 Preferred Stock”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b)506(b) private placement of shares of Series 1 Preferred Stock, together with warrants to acquire the Company’s common stock,Common Stock, to accredited investors. On January 31, 2018, the Company closed this offering.
The holders of the Series 1 Preferred Stock are entitled to receive, when and as authorized by the Company’s boardBoard of directorsDirectors and declared by us out of legally available funds, cumulative, cash dividends on each Shareshare at an annual rate of 5.50% of the Stated Valuestated value pari passu with the dividend preference of the Series A Preferred Stock and in preference to any payment of any dividend on the Company’s common stock;Common Stock; provided however, that Qualified Purchasers (who purchased $1.0 million or more in a single closing) are entitled to receive, when and as authorized by the Company’s board of directors and declared by us out of legally available funds, cumulative, cash dividends on each Series 1 share held by such Qualified Purchaser at an annual rate of 5.75% of the Stated Value (instead of the annual rate of 5.50% for all other holders of the Series 1 shares) until April 7, 2018, at which time, the annual dividend rate will be reduced to 5.50% of Stated Value; provided further, however, that since a Listing Event, as defined in the charter, has not occurred by April 7, 2018, the annual dividend rate on all Series 1 Preferred Stock shares (without regard to Qualified Purchaser status) has been increased to 7.00% of the Stated Valuestated value until the occurrence of a Listing Event, at which time, the annual dividend rate will be reduced to 5.50% of the Stated Value.stated value. Based on the number of Series 1 Preferred Stock shares outstanding at September 30,December 31, 2021, the increased dividend rate costs the Company approximately $150,000 more per quarter in Series 1 dividends.
Subject to the Company’s redemption rights as described below, each Series 1 share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series 1 Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 45 days after the occurrence of a Listing Event or (ii) April 7, 2019 (whether or not a Listing Event has occurred). Each Series 1 share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series 1 Conversion Price”) determined as follows:
If a Series 1 Conversion Notice is received on or after April 7, 2019, and at the time of receipt of such Series 1 Conversion Notice, a Listing Event has not occurred, the Series 1 Conversion Price for such Share will be equal to 100% of the Company’s net asset value per share, or NAV per share.
At any time, from time to time, on and after the later of (i) the 20th trading day after the date of a Listing Event, if any, or (ii) April 7, 2018, the Company (or its successor) will have the right (but not the obligation) to redeem, in whole or in part, the Series 1 Preferred Stock at the redemption price equal to 100% of the Stated Value, initially $1,000 per share, plus any accrued but unpaid dividends if any, to and including the date fixed for redemption. In case of any redemption of less than all of the shares by the Company, the shares to be redeemed will be selected either pro rata or in such other manner as the board of directors may determine. If the Company (or its successor) chooses to redeem any shares, the Company (or its successor) has the right, in its sole discretion, to pay the redemption price in cash or in equal value of common stock of the Company (or its successor), based on the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the redemption, in exchange for the shares. The Company (or its successor) also will have the right (but not the obligation) to redeem all or any portion of the Series 1 Preferred Stock subject to a Series 1 Conversion Notice for a cash payment to the holder thereof equal to the applicable redemption price, by delivering a Redemption Notice to the holder of such Shares on or prior to the 10th trading day prior to the close of trading on the Conversion Date for such Shares.
Each investor in the Series 1 offering received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company’s common stockCommon Stock if the Company’s common stockCommon Stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stockCommon Stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing eventListing Event does not occur on or prior to the fifth anniversary of the final closing date of the Series A1 offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing eventListing Event does occur on or before January 31, 2023, the five-yearfive-year anniversary date, these warrants will then expire five years from the 90th90th day after the occurrence of a listing event.Listing Event. The Company engaged a third-partythird-party expert to value these warrants and the estimated value as of September 30, 2021March 31,2022 is immaterial. As of September 30, 2021,March 31,2022, there were detachable warrants that may be exercised for 1,382,675 shares of the Company’s common stockCommon Stock after the 90th day following the occurrence of a listing event.Listing Event. If all the potential warrants outstanding at September 30, 2021March 31,2022 became exercisable because of a listing eventListing Event and were exercised at the minimum price of $25 per share, gross proceeds to the Company would be approximately $34.6 million and as a result the Company would issue an additional 1,382,675 shares of common stock.Common Stock.
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On March 24, 2020, the Company’s Board of Directors unanimously authorized the suspension of the payment of distributions on the Series 1 Preferred Stock, however, such distributions will continue to accrue in accordance with the terms of the Series 1.1 Preferred Stock. Since initial issuance, the Company had declared distributions of approximately $12.2 million of which approximately $6.4 million had been paid to Series 1 Preferred Stock stockholders. As of March 31, 2022 and December 31, 2021, approximately $5.8 million and $5.1 million of Series 1 Preferred Stock distributions that were accrued and unpaid, respectively, are included in accounts payable and accrued expenses on the consolidated balance sheet.
Warrants
On August 25, 2021, in connection with the Closing, of the Transaction, the Company entered into a warrant agreement (the “Warrant Agreement”) pursuant to which it issued warrants (the “Warrants”) to the Purchaser to purchase up to 1,702,128 shares of Common Stock, at an exercise price of $11.75 per share for an aggregate cash purchase price of up to $20.0 million.million (the “Common Stock Warrants”). Each whole Common Stock Warrant entitles the registered holder thereof to purchase one whole share of Common Stock at a price of $11.75 per share (the “Warrant Price”), subject to customary adjustments, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or listingListing of the Common Stock on the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange. The Common Stock Warrants will expire five years after the date of the Warrant Agreement.
The Company assesses its warrants as either equity or a liability based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Management estimates the fair value of these warrants using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate.
As of September 30, 2021, March 31, 2022, all outstanding warrants issued by the Company were classified as equity.
Note M — Subsequent EventsTender Offer
On October 5, 2021, Color Up, LLC (“Purchaser”) initiated a Tender Offer (the “Offer”) to purchase up to 900,506 shares of common stockCommon Stock of the Company, at a price of $11.75 per share (the “Shares”). The Offer expired at 5:00 pm Eastern Time on November 5, 2021. A total of 878,082 Shares were validly tendered and not validly withdrawn pursuant to the Offer (the “Tendered Shares”), and the Purchaser accepted for purchase all such Tendered Shares. The Purchaser initiated payment of an aggregate of approximately $10.3 million to the Company stockholders participating in the Offer.
Effective November 8, 2021, the Purchaser executed a subscription agreement with the Company pursuant to which the Purchaser acquired the remaining 22,424 Shares not purchased through the Offer at $11.75$11.75 per share. As a result of the Offer and the purchase of Shares pursuant to the subscription agreement, the Purchaser directly owns 2,624,831 shares (approximately 33.81%) of Company common stock as of November 8, 2021.
Securities Purchase Agreement
On November 2, 2021, the Company, entered into a securities purchase agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, and HSCP Strategic III, L.P., a Delaware limited partnership (“(“HS3”) affiliated with Purchaser,Jeffrey Osher, a director of the Company, pursuant to which the Operating Partnership issued and sold to HS3(a)HS3 (a) 1,702,128 newly issued common units of limited partnership of the Operating Partnership (“OP Units”); and (b) 425,532 newly-issued Class A units of limited partnership of the Operating Partnership (“Class A Units”) which entitle HS3 to purchase up to 425,532 additional OP Units (the “Additional OP Units”) at an exercise price equal to $11.75 per Additional OP Unit, subject to adjustment as provided in the Class A Unit Agreement,agreement, and HS3 paid to the Operating Partnership cash consideration of $20.0 million. The Company intends to useused proceeds from the Purchase Agreement for working capital purposes, including expenses related to the Purchase Agreement and the acquisition of two parking lots and related assets. The Additional OP Units are available to be exercised only upon completion of a liquidity event, as defined in the Purchase Agreement.
On November 3, 2021, the Company, through Denver 1725 Champa Street Garage, LLC, an entity wholly owned by the Company, acquired a multi-level parking garage consisting of approximately 450 parking spaces, located in downtown Denver, Colorado, for a purchase price of approximately $16.1 million, plus acquisition and related transaction costs. The source of funds for this acquisition were the proceeds from the Purchase Agreement, disclosed above.Convertible Noncontrolling Interests
Effective asAs of November 12, 2021,March 31,2022, the Company changed its name from “The Parking REIT, Inc.” to “Mobile Infrastructure Corporation”, pursuant to ArticlesOperating Partnership (“OP”) had approximately 17.0 million OP units outstanding. Under the terms of Amendment to its Articles of Amendment and Restatement filed with the Maryland State Department of Assessments and Taxation.
Also, effective November 12, 2021, the Company amended itsThird Amended and Restated BylawsLimited Partnership Agreement, OP Unit holders may elect to reflectexchange OP Units for shares of the changeCompany’s Common Stock upon completion of its name described above.a liquidity event. The Company’s new website is www.mobileit.com.OP Units outstanding as of March 31, 2022 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets. There were 0 outstanding convertible OP Units as of March 31, 2021.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan (“DRIP”) allows stockholders to invest distributions in additional shares of our Common Stock, subject to certain limits. Stockholders who elect to participate in the DRIP may choose to invest all or a portion of their cash distributions in shares of our Common Stock at a price equal to our most recent estimated value per share. On March 22, 2018 the Company suspended payment of distributions and as such there are currently no distributions to invest in the DRIP.
Share Repurchase Program
On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for hardship repurchases in connection with a shareholder’s death. Repurchase requests made in connection with the death of a stockholder were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company had established an estimated NAV per share, 100% of such amount as determined by the Company’s Board of Directors, subject to any special distributions previously made to the Company’s stockholders. On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
ITEM 2. MANAGEMENT’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a financial review and analysis of the Company’s financial condition and results of operations for the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Conditions and Results of Operations in the Company’s annual report on Form 10-K for the year ended December 31, 2020.2021. As used herein, the terms "we," "our" and "us" refer to Mobile Infrastructure Corporation, and, as required by context, Mobile Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating Partnership, LP, which the Company refers to as the "operating partnership,"Operating Partnership," and to their subsidiaries.
Forward-Looking Statements
Certain statements included in this quarterly report on Form 10-Q (this "Quarterly Report") that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential" or the negative of such terms and other comparable terminology.
The forward-looking statements included herein are based upon the Company’s current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on operations and future prospects include, but are not limited to:
| | •● | the fact that the Company has a limited operating history, as property operations beganthe Company was formed in 2016;2015; |
| | •● | the Company’s ability to complete a liquidity event; |
| ● | the Company’s ability to generate sufficient cash flows to pay distributions to the Company’s stockholders; |
| ● | the impact on our business and those of our tenants from epidemics, pandemics or outbreaks of an illness, disease or virus (including COVID-19), including lockdowns and similar mandates; |
| ● | the fact that the Company has experienced net losses since inception and may continue to experience additional losses; |
| | •● | changes in economic conditions generally and the real estate and debt markets specifically, including economic trends impacting parking facilities; |
| ● | risks inherent in the real estate business, including tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; |
| ● | competitive factors that may limit the Company’s ability to make investments or attract and retain tenants; |
| ● | the ability of leases under our New Lease Structure (as defined below) to provide increases in same property rental revenue as compared to our prior leases; |
| ● | the Company’s ability to attain its investment strategy or increase the value of its portfolio; |
| ● | the loss of key personnel could have a material adverse effect upon the Company's ability to conduct and manage the Company's business; |
| ● | the performance of properties the Company has acquired or may acquire or loans the Company has made or may make that are secured by real property; |
| | •● | changes in economic conditions generallythe Company’s ability to successfully integrate pending acquisitions and the real estatetransactions and debt markets specifically, including economic trends impacting parking facilities;implement an operating strategy; |
| | •● | potential damage and costs arising from natural disasters, terrorism and other extraordinary events, including extraordinary events affecting parking facilities included in the Company’s portfolio; |
| | •● | risks inherent in the real estate business, including ability to secure leases or parking management contracts at favorable terms, tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; |
| • | competitive factors that may limit the Company’s ability to make investments or attract and retain tenants;act on its pipeline of acquisitions; |
| | •● | the Company’s ability to generate sufficient cash flows to pay distributions to the Company’s stockholders; |
| • | the Company’s ability to successfully integrate pending acquisitions and transactions and implement an operating strategy; |
| • | the Company’s ability to list shares of common stock on a national securities exchange or complete another liquidity event; |
| • | the availability of capital and debt financing generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions, covenants and requirements of that debt; |
| | •● | changes in interest rates; |
| | •● | changes to generally accepted accounting principles, or GAAP; |
| • | the Company’s ability to negotiate amendments or extensions to existing debt agreements.agreements; |
| | •● | the impact on our business and those of our tenants from epidemics, pandemics or outbreaks of an illness, disease or virus (including COVID-19); |
| • | the Company’s loss of REIT status and ability to remediate its loss of REIT status under U.S. federal income tax law; and |
| | •● | potential adverse impacts from changes to the U.S. tax laws.laws; and |
| ● | changes to generally accepted accounting principles, or GAAP. |
Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward – looking statements made after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward – looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved. As a result of many factors, including the above and the risks identified in our filings with the Securities and Exchange Commission, our actual results could differ materially from the results expressed or implied in these forward-looking statements.
This report may include market data and forecasts with respect to the REIT, real estate and parking industries. Although the Company is responsible for all
Overview
The Company focuses primarily on acquiring, owning and managingleasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout North Americathe United States. The Company targets both parking garage and owns 43surface lot properties primarily in top 50 U.S. Metropolitan Statistical Areas ("MSAs"), with proximity to key demand drivers, such as airports, transportation hubs, educational facilities, government buildings and courthouses, sports and entertainment venues, hospital and health centers, hotels, office complexes and residences.
As of March 31, 2022, the Company owned 44 parking facilities in 17 states.22 separate markets throughout the United States, with a total of 15,263 parking spaces and approximately 5.3 million square feet. The Company also owns approximately 0.2 million square feet of retail/commercial space adjacent to its parking facilities. The Company owns substantially all of its assets and conducts its operations through the Operating Partnership,Partnership.
Management of the Company has been focused on the undertaking of four strategic objectives to reposition the Company for its next phase of growth and a potential liquidity event. The Company converted all management contracts back to leases under the New Lease Structure effective as of January 1, 2022, so that the Company once again has qualifying income from a REIT-test perspective beginning in 2022. The second objective was to focus on the balance sheet and the Company’s upcoming debt maturities. During the first quarter, the Company extended maturities and refinanced 2022 maturities with a facility from KeyBank, which itgreatly improved the cost of interest on that debt. Management’s third objective was to focus heavily on the performance of each asset, working with the operators to create a business plan for each asset to improve cash flow and rental income to the Company. Those business plans were finalized in the first quarter of 2022 and are currently being implemented with our tenant-operators. The Company anticipates that asset-level performance will continue to improve through 2022. Finally, management continues to focus on the fourth objective which is the approximately 50.8%remediation of REIT status for the Company and evaluating options for a potential liquidity event, including a potential listing on a national securities exchange.
Objectives
The Company closed on the Transaction on August 25, 2021, which resulted in a new management team. In addition, as of December 3, 2021, Ms. Hogue was appointed Chief Financial Officer of the Company. Over the next twelve months management will be focused predominantly on the following:
| • | Identifying paths for remediation of REIT status, which is desirable as the Company moves towards a potential liquidity event; |
| • | Working with the third-party operators to optimize the performance of our parking facilities and other assets to move towards cash flow positivity; |
| • | Reducing corporate overhead to move the Company towards profitability; and |
| • | Pursuing options for refinancing the near-term debt maturities. |
The Company’s strategic plan includes pursuing acquisitions as well as a potential liquidity event, which may include a potential listing event or other alternatives intended to provide the Company scale and capacity to grow beyond its current asset base.
Since the Closing, our new management team has been working closely with our tenants to evaluate capital requirements of the assets, with a view to understanding current and future demand drivers of those assets. The Company has been implementing the recently contributed proprietary technology which will provide real-time information on the performance of assets. Going forward under the New Lease Structure (as defined below), the Company is involved with capital expenditures related to upgrades and optimization of our parking facilities, including but not limited partner.to gate arm systems, lighting, and large capital improvements to structure and concrete. We expect to maintain an active dialogue with our tenants for the betterment of the Company’s portfolio.
Investment Strategy & Criteria
Because of the Company’s management team’s long experience in the parking industry, the new management team often receives off-market calls for parking facilities that are not yet being marketed for sale, as well as have early notices on properties just getting ready to be marketed. As such, the Company has a pipeline of acquisitions that is both bespoke and actionable, that the Company believes are off-market and largely unavailable to our competitors. The Company intends to continue to consolidate the industry through acquisitions, partnering with both owners and operator tenants, to create a meaningful pipeline and scale.
The Company’s investment strategy has historically focused primarily on acquiring, owning and leasing parking facilities, including parking lots, parking garages and other parking structures throughout the United States. The Company has historically focused primarily on investing in income-producing parking lots and garages with air rights in MSAs. In expanding the Company’s portfolio, the Company will seek geographically diverse investments that address multiple key demand drivers and demonstrate consistent consumer use, that are expected to generate cash flows and provide greater predictability during periods of economic uncertainty. Such targeted investments include, but are not limited to, parking facilities near one or more of the following key demand drivers:
| • | Airports |
| • | Transportation hubs |
| • | Educational facilities |
| • | Government buildings and courthouses |
| • | Sports and entertainment venues |
| • | Hospitals and health centers |
| • | Hotels |
| • | Office complexes |
| • | Residences |
The Company generally targets parking facilities that are near multiple key demand drivers so as not to be solely reliant on a single source of income. Parking garages in downtown cores constitute a large portion of the Company’s parking facilities as they serve multiple key demand drivers.
As a result of the COVID-19 pandemic, such key demand drivers have been and are expected to be diminished for an indeterminate period of time with an uneven return to downtown cores across our properties. Many state and local governments have restricted public gatherings, which has in some cases eliminated or severely reduced the demand for parking.
The Company is working closely with current tenants to understand the return to each individual market, both as the Company considers the key demand drivers of the Company’s current assets, as well as new assets that the Company may consider acquiring as part of our investment strategy.
The Company is focused on acquiring properties that are expected to generate cash flow, located in populated MSAs and expected to produce income within 12 months of the properties’ acquisition.
In the event of a future acquisition of properties, the Company would expect the foregoing criteria to serve as guidelines; however, management and the Company’s Board of Directors may vary from these guidelines to acquire properties which they believe represent value or growth opportunities.
The Company’s investments are subject to various federal, state, local and foreign laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. The Company has obtained or intends to obtain all permits and approvals necessary under current law to operate its investments.
The Company cannot assure you that the Company will attain investment objectives or that the value of the Company’s assets will not decrease. The Company’s Board of Directors reviews the Company’s investment policies at least annually to determine whether the Company's investment policies continue to be in the best interests of the Company’s stockholders.
See Note A - Organization and Business Operations in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for information on the Company's recapitalization.
Impact of COVID-19
The ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributedcontributing to significant volatilityvolatility. The return to normalized movement within and negative pressure in financialbetween states and cities is relatively uneven among markets and resulted in unprecedented job losses causing many to fear an imminent global recession. The COVID-19 pandemic continues to negatively impact almost every industry directly or indirectly, including ours andindustries, which has impacted the industries in whichperformance of our tenants operate, with much of the impact still unknown. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spendingassets, as well as other unanticipated consequences remain unknown. In particular, many of the Company’s properties are located in urban centers, near government buildings, and sports centers. Demand for parkingentertainment centers, or hotels. While the employment level in these locations depends in large part on customer traffic, and conditions that leadthe United States has nearly returned to a decline in customer traffic have had and may2019 levels, many companies continue to deploy a work-from-home or hybrid remote strategy for employees. We anticipate that a hybrid work structure for traditional central business district office workers will be the normalized state going-forward. This has impacted the performance of many of our assets that have office exposure and underscores the importance of a material and adverse impact on those businesses.multi-demand driver strategy in repositioning current and/or acquiring new assets. During 2020 and 2021, many state and local governments restricted public gatherings and implemented social distancing measures, which has in some cases eliminated or severely reduced the demand for parking. Such events are adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or cause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, may impact or eliminate the rental revenue the Company generates from its leases with them. Some stateState governments and other authorities have been in varying stages ofincreasingly lifting or modifying some of these measures, which will encourage greater movement around and some have already been forced to, and others may inbetween cities. Should COVID-19 restrictions be reinstated, the future, reinstitute these measures or impose new, more restrictive measures, if the risks, or the perception of the risks, related to the COVID-19 pandemic worsen at any time. The Company’s rental revenue and the return on its investments has been and may continue to be adversely affected by the COVID-19 pandemic and may be further materially adversely affected to the extent that economic conditions result in the elimination of jobs or the migration of jobs from the urban centers where the Company’s parking facilities are situated to other locations. In particular, a majority of the Company’s property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking.
The Company experienced certain disruptions However, we see increasing demand for multi-use assets that have exposure to entertainment and sporting venues or have exposure to driving travel through hotel relationships. As restrictions continue to lift across the United States, we anticipate a return to normal, in base rent revenue and percentage rent revenue during the nine months ended September 30, 2021. For further information regarding the impact of COVID-19 on the Company see Results of operations for the three and nine months ended September 30, 2021 comparedparticular a return to the three and nine months ended September 30, 2020. While the Company is currently unable to completely estimate the future impact that the COVID-19 pandemic and efforts to contain its spread will have on the Company’s business and on its tenants, as of September 30, 2021, the Company had entered into lease amendments with certain tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent initially from May 2020 through July 2020 and certain second amendments that provide for reduced rent through October 2021; (ii) conversion of certain leases to management agreements pursuant todriving vacations, which the operator will receive a monthly fee; or (iii) extension of certain leases. The extent of the impact of COVID-19 on the Company’s financial and operational performance will depend on certain developments, including the duration and spread of any new outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted. The extent to which COVID-19 may positively impact the Company’s financial condition or resultslonger-term outlook of operations cannot be determined at this time.
In response to the COVID-19 pandemic, the Company entered into certain lease amendments and new lease agreements with tenants and operators during 2020. These amendments and agreements are described in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Lease amendments and agreements entered into during 2021, through the date of this filing, generally contained temporary reductions in base rent payments with gross receipts percentage rent splits between the Company and the tenant.
Recapitalization
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII” and together with VRMI and Mr. Shustek, the “Advisor”) and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”
On August 25, 2021, the closing of the Transaction occurred (the “Closing”). As a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will provide Management real-time information on the performance of assets. Management is currently working with employees to assess the timing to implement this technology in the legacy garages. Pursuant to the Closing, the Operating Partnership issued 7,481,668 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $87.5 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.8 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. Of the 7,481,668 OP Units issued, 4,127,952 and 340,426 OP Units were issued for the Contributed Interests and technology, respectively. transaction expenses of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations.
Management assessed the potential accounting treatment for the Transaction by applying ASC 805 and determined the Transaction did not result in a change of control. As a result, the three real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, resulting in the recognition of assets and liabilities, at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisitions.
Objectives
The Company closed on the Transaction on August 25, 2021, which included significant changes in the management team, including naming a new Chief Executive Officer, Manuel Chavez and President, Stephanie Hogue (the “New Management Team”). As a result, the objectives of the Company over the next twelve months will be focused predominantly on the following:
| • | Identifying paths for remediation of REIT status, which is necessary as the Company moves towards a liquidity event; |
| • | Working with the third-party operators to optimize the performance of the assets to move towards cash flow positivity; |
| • | Reducing corporate overhead to move the company towards profitability; and |
| • | Pursuing options for refinancing the near-term debt maturities. |
The Company’s strategic plan includes pursuing acquisitions as well as a potential listing on a national stock exchange to provide liquidity to shareholders. The above four objectives are the immediate steps in moving towards a listing event in the medium term, which is expected to provide the Company scale and capacity to grow beyond its current asset base.
The New Management Team expects to work closely with our tenant-operators to evaluate capital requirements of the assets, with a view to understanding current and future demand drivers of those assets. The Company has been implementing the recently contributed proprietary technology which will provide real-time information on the performance of assets. Going forward under new leases, the Company will now be active and responsible for all capital expenditures related to upgrades and optimization of the assets, including but not limited to gate arm systems, lighting, and large capital improvements to structure and concrete. We expect to maintain an active dialogue with our tenant operators for the betterment of the Company’s assets.
Investment Strategy & Criteria
The Company’s investment strategy has historically focused primarily on acquiring, owning and managing parking facilities, including parking lots, parking garages and other parking structures throughout North America. The Company historically focused primarily on investing in income-producing parking lots and garages with air rights in central business districts. In building its current portfolio, the Company sought geographically targeted investments that present key demand drivers, that were expected to generate cash flows and provide greater predictability during periods of economic uncertainty. Such targeted investments include, but are not limited to, parking facilities near one or more of the following demand drivers:
| • | Downtown core |
| • | Government buildings and courthouses |
| • | Sporting venues |
| • | Hospitals and health centers |
| • | Hotels |
As a result of the COVID-19 pandemic, such demand drivers have been and are expected to be diminished for an indeterminate period of time with an uneven return to downtown cores across the Company’s located properties. Many state and local governments have restricted public gatherings, which has in some cases eliminated or severely reduced the demand for parking.
We are working closely with our current operator tenants to understand the return to each individual market, both as we consider the demand drivers of our current assets, as well as new assets that we may consider acquiring as part of our normal course.
The Company is focused on acquiring properties that are expected to generate cash flow, located in populated metropolitan areas and produce income within 12 months of the Company’s acquisition.
In the event of a future acquisition, the Company would expect the foregoing criteria to serve as guidelines, however, management and the Company’s Board of Directors may vary from these guidelines to acquire properties which they believe represent value or growth opportunities.
Results of Operations for the three months ended September 30, 2021,March 31, 2022, compared to the three months ended September 30, 2020.March 31, 2021.
| | | For the Three Months Ended September 30, | | For the Three Months Ended March 31, | |
| | | 2021 | | 2020 | | $ Change | | % Change | | 2022 | | | 2021 | | | $ Change | | | % Change | |
| Revenues | | | | | | | | | | | | | | | | |
| Base rent income | $ | 3,030,000 | $ | 3,132,000 | $ | (102,000) | | (3.3%) | | $ | 2,051,000 | | | $ | 3,223,000 | | | $ | (1,172,000 | ) | | (36.4 | )% |
Management income | | | $ | — | | | $ | 341,000 | | | $ | (341,000 | ) | | (100.0 | )% |
| Percentage rent income | | 1,203,000 | | 75,000 | | 1,128,000 | | 1504.0% | | | 4,329,000 | | | | 147,000 | | | $ | 4,182,000 | | | 2844.9 | % |
| Management income | | 1,290,000 | | 303,000 | | 987,000 | | 325.7% | |
| Total revenues | $ | 5,523,000 | $ | 3,510,000 | $ | 2,013,000 | | 57.4% | | $ | 6,380,000 | | | $ | 3,711,000 | | | $ | 2,669,000 | | | 71.9 | % |
Rental revenueRevenues
The $2,669,000 increase in rental revenues, which includes reimbursement revenue, is primarily attributable to (1) the acquisition of threefive parking assets on August 25, 2021which total revenue of $1,686,000 and (2) increasing demandthe New Lease Structure, as defined below.
In 2021, the Company began amending certain leases to the New Lease Structure such that tenants pay base rent and percentage rent in an amount equal to a designated percentage of the amount by which gross revenues at the property during any lease year exceed a negotiated base amount; tenants are also financially responsible for all, or substantially all, property-level operating and maintenance expenses, subject to certain exceptions, or the Company's "New Lease Structure". Percentage rent is typically based on the amount by which gross revenues of the parking facility exceeds a base amount. The Company negotiates base rent, percentage rent and the base amount used in the calculation of percentage rent with the applicable tenant based on economic factors applicable to the particular parking facility and geographic market. As of January 1, 2022, the majority of the Company’s leases are structured under the New Lease Structure.
| | | For the Three Months Ended March 31, | |
| | | 2022 | | | 2021 | | | $ Change | | | % Change | |
Operating expenses | | | | | | | | | | | | | | | | |
Property taxes | | $ | 1,836,000 | | | $ | 1,129,000 | | | $ | 707,000 | | | | 62.6 | % |
Property operating expense | | | 837,000 | | | | 282,000 | | | | 555,000 | | | | 196.8 | % |
General and administrative | | | 1,506,000 | | | | 1,432,000 | | | | 74,000 | | | | 5.2 | % |
Professional fees | | | 1,988,000 | | | | 1,774,000 | | | | 214,000 | | | | 12.1 | % |
Depreciation and amortization expenses | | | 1,967,000 | | | | 1,258,000 | | | | 709,000 | | | | 56.4 | % |
Total operating expenses | | | 8,134,000 | | | | 5,875,000 | | | | 2,259,000 | | | | 38.5 | % |
Property taxes
The increase in property taxes during the three months ended September 30, 20212022 compared to the same period in the prior year as a result of partial recovery from COVID-19 restrictions, implemented during 2020, intended to prevent its spread, including restrictions on public gatherings and implementing social distancing measures. As a result of COVID-19, the Company transitioned certain leases to management agreements in 2020. Per these management agreements, the tenant operated the property on behalf of the Company and paid their operating expenses from gross parking revenue and was required to remit an agreed upon percentage of the remainder to the Company instead of base rent payments. Revenues from these properties are recorded as management income. During 2021 the Company returned a number of these agreements back to leases. The Company is in process of returning all management agreements to leases, which will be a key component of remediating REIT status.
During the three months ended September 30, 2021 and 2020 the Company earned percentage rent on the following properties:
| | | For the Three Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Percentage rent income | | | | | | | | |
| MVP St Louis 2013 | $ | 23,000 | $ | -- | $ | 23,000 | | 100.0% |
| Mabley Place Garage | | 155,000 | | -- | | 155,000 | | 100.0% |
| MVP Ft Worth Taylor | | 142,000 | | -- | | 142,000 | | 100.0% |
| MVP Milwaukee Old World | | 21,000 | | -- | | 21,000 | | 100.0% |
| MVP Mini Venture | | 20,000 | | -- | | 20,000 | | 100.0% |
| MVP Milwaukee Arena | | 136,000 | | -- | | 136,000 | | 100.0% |
| Denver Sherman | | 5,000 | | -- | | 5,000 | | 100.0% |
| MVP Bridgeport Fairfield Garage | | 39,000 | | -- | | 39,000 | | 100.0% |
| Minneapolis City Parking | | 30,000 | | -- | | 30,000 | | 100.0% |
| Cleveland Lincoln | | 1,000 | | -- | | 1,000 | | 100.0% |
| MVP St Paul Holiday | | 56,000 | | -- | | 56,000 | | 100.0% |
| MVP St Louis 7th & Cere | | 65,000 | | -- | | 65,000 | | 100.0% |
| Raider Park | | 29,000 | | 75,000 | | (46,000) | | -61.3% |
| MVP Detroit Center Garage | | 401,000 | | -- | | 401,000 | | 100.0% |
| St. Louis Broadway | | 30,000 | | -- | | 30,000 | | 100.0% |
| MVP New Orleans Rampart | | - | | -- | | - | | |
| MVP Hawaii Marks | | 50,000 | | -- | | 50,000 | | 100.0% |
| Total revenues | $ | 1,203,000 | $ | 75,000 | $ | 1,128,000 | | 1504.0% |
Variances in percentage rent earnings in 2021 compared to 2020 are due primarily to the conversion of property management agreements back to leases and fluctuations in transient parking business as a result of restrictions intended to slow the spread of COVID-19 and varying speeds of the opening of cities.
| | | For the Three Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Operating expenses | | | | | | | | |
| Property taxes | $ | 864,000 | $ | 955,000 | $ | (91,000) | | (9.5%) |
| Property operating expense | | 338,000 | | 263,000 | | 75,000 | | 28.5% |
| General and administrative | | 1,805,000 | | 1,452,000 | | 353,000 | | 24.3% |
| Professional fees | | 413,000 | | 384,000 | | 29,000 | | 7.6% |
| Depreciation and amortization expenses | | 1,437,000 | | 1,305,000 | | 132,000 | | 10.1% |
| Impairment | | -- | | 6,475,000 | | (6,475,000) | | (100.0%) |
| Total operating expenses | | 4,857,000 | | 10,834,000 | | (5,977,000) | | (55.2%) |
| Income (loss) from operations | $ | 666,000 | $ | (7,324,000) | $ | 7,990,000 | | (109.1%) |
Property taxes
The decrease in property taxes in 2021 compared to 2020 is attributable primarily to (1) the lease amendmentsNew Lease Structure, which increased the property tax burden on the Company in 2020 which resulted in certain one-time increases in expense during the three months ended September 30, 2020. For leases that are executed after the Transaction,as it is the Company’s intent to besolely responsible for asset levelthe property taxes.
Property operating expense
The increase in property operating expense in 2021 compared to 2020 is attributable primarily to COVID-19 restrictions in 2020, that reducedtax payments under the demand for parking in certain locations which in turn reduced required repairsNew Lease Structure and maintenance expenses and other property operating expenses.
General and administrative
The increase in general and administrative expenses from 2020 to 2021 of approximately $350,000 was primarily attributable to an increase in payroll and related expenses of approximately $230,000 and increases in other office and administrative expenses.
Professional fees
Professional fees increased approximately $29,000 in(2) the three months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily due to additional consultation fees of approximately $21,000 during the three months ended September 30, 2021.
Depreciation and amortization expenses
The increase in depreciation and amortization expenses was due tofive properties acquired during the third quarterand fourth quarters of 2021.
Impairment
During the three months ended September 30, 2021, no impairment was recorded. During the three months ended September 30, 2020 the Company recorded approximately $6.5 million of asset impairment charges. These charges were recorded to write down the carrying value of these assets to their current fair market values. See Note B —D – SummaryAcquisitions and Dispositions of Significant Accounting PoliciesInvestments in Real Estate in Part I, Item 1 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
| | | For the Three Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Other income (expense) | | | | | | | | |
| Interest expense | $ | (2,487,000) | $ | (2,326,000) | $ | (161,000) | | 6.9% |
| PPP Round #1 forgiveness | | -- | | -- | | -- | | -- |
| Gain from sale of investment in real estate | | -- | | -- | | -- | | -- |
| Income from DST | | -- | | 44,000 | | (44,000) | | (100.0%) |
| Settlement of deferred management internalization | | 10,040,000 | | -- | | 10,040,000 | | 100.0% |
| Transaction expenses | | (12,224,000) | | -- | | (12,224,000) | | (100.0%) |
| Gain on consolidation of DST | | 122,000 | | -- | | 122,000 | | 100.0% |
| Other income | | 5,000 | | -- | | 5,000 | | 100.0% |
| Total other expense | $ | (4,544,000) | $ | (2,282,000) | $ | (2,262,000) | | 99.1% |
Property operating expense
The increase in property operating expense in 2022 compared to 2021 is attributable primarily to increased insurance, professional services related to engineering surveys and other operating expenses attributable to the five properties acquired during the third and fourth quarters of 2021.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
General and administrative
The increase in general and administrative expenses from 2021 to 2022 of approximately $74,000 was primarily attributable to an increase in payroll and related expenses of approximately $195,000 and an increase in travel and other office related expenses of $199,000 offset by a decrease in corporate directors and officers insurance of $285,000 and a related refund of $50,000.
Professional fees
Professional fees increased approximately $214,000 in the three months ended March 31, 2022 compared to the same period in the prior year due to increased organizational and governance costs. This was partially offset by a decrease from the settlement of previously disclosed legal investigations.
See Note C — Commitments and Contingencies in Part I, Item 1- Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Depreciation and amortization expenses
The increase in depreciation and amortization expenses was due to the five properties acquired during the third and fourth quarters of 2021 and the $4.0 million of technology acquired as a result of the Transaction.
See Note D – Acquisitions and Dispositions of Investments in Real Estate in Part I, Item 1–Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
| | | For the Three Months Ended March 31, | |
| | | 2022 | | | 2021 | | | $ Change | | | % Change | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | $ | (2,539,000 | ) | | $ | (2,204,000 | ) | | $ | (335,000 | ) | | | 15.2 | % |
Other income | | | 15,000 | | | | — | | | | 15,000 | | | | 100.0 | % |
Total other expense | | $ | (2,524,000 | ) | | $ | (2,204,000 | ) | | | (320,000 | ) | | | 14.5 | % |
Interest expense
The increase ofin interest expense of approximately $130,000$335,000 was primarily attributable to the new loans assumed as part of the Transaction and due to higher private loan balances and higher interest rates on the Company’s private loan balances of approximately $11.6 million partially offset by a lower interest rate on the Company’s $55.5$55.3 million variable rate loans. Total loan amortization cost for the three months ended September 30, 2021March 31, 2022 and 2020,2021, was approximately $100,000 and $200,000,$77,000, respectively.
For additional information seeSee Note GI – Notes Payable and Paycheck Protection Program Loan in Part I, Item 11- Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Gain on sale of investment in real estateLiquidity and Capital Resources
There were no sales of investments in real estate during the three months ended September 30, 2021 or 2020.
Income from DSTEffective March 29, 2022, the Company secured a $75.0 million loan with a $75.0 million accordion feature (the “Credit Facility”) with KeyBanc Capital Markets, as lead arranger, and Gain on DST consolidationKeyBank National Association, as administrative agent. The initial $75.0 million will be used for debt maturities in 2022, whereas the accordion can be utilized for acquisitions, capital expenditures and other working capital requirements. This refinancing significantly reduced cash paid for interest payments, thus improving our cash position, as well as provided flexibility for working capital and growth via acquisitions.
The decrease in incomeCompany’s principal source of funds to meet our operating expenses, pay debt service obligations and make distributions to our stockholders will be rents from MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”), is due totenants at the impact of COVID-19. Beginning in March 2020, MVP St. Louis did not generate distributable net income due to the delay of the opening of the major league baseball season and the fact that no fans were allowed to attend the games in 2020 when the season opened. Due to prior losses, MVP St. Louis did not generate distributable net income during the three months ended September 30, 2021.
Pursuant to the closing of the Transaction on August 25, 2021, management determined the change in structure of its investment in MVP St. Louis, DST lot, was deemed a reconsideration event. Based on the Company's evaluation,Company’s parking facilities. Although the Company began consolidating the investment in MVP St. Louis, respectively, as of August 25, 2021 and this change in structure resulted in a gain of approximately $0.1 million.
For additional information see Note I – Variable Interest Entities in Part I, Item 1 Noteshas no present intention to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Transaction Expenses
Pursuant to the Closing of the Transaction on August 25, 2021, transaction expenses of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations during the three months ended September 30, 2021.
Results of Operations for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
| | | For the Nine Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Revenues | | | | | | | | |
| Base rent income | $ | 8,530,000 | $ | 11,525,000 | $ | (2,995,000) | | (26.0%) |
| Percentage rent income | | 1,443,000 | | 402,000 | | 1,698,000 | | 284.9% |
| Management income | | 2,294,000 | | 596,000 | | 1,041,000 | | 259.0% |
| Total revenues | $ | 12,267,000 | $ | 12,523,000 | $ | (256,000) | | (2.0%) |
Rental revenue
The decrease in rental revenues is primarily attributable to the continued decreased demand for parking as a result of COVID-19 and restrictions intended to prevent its spread, including restrictions on public gatherings and implementing social distancing measures, which in some cases eliminated or severely reduced the demand for parking. In addition, as a result of COVID-19,do so, the Company transitioned certain leases to management agreements. Per these management agreements, the tenant now operates the property on behalf ofalso may sell properties that the Company and pays their operating expenses from gross parking revenue and is required to remit an agreed upon percentage of the remainder toowns or place mortgages on properties that the Company instead of base rent payments. Revenues from these properties are recorded as management income.
During the nine months ended September 30, 2021 and 2020 the Company earned percentage rent on the following properties:
| | | | | | | | | For the Nine Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Percentage rent income | | | | | | | | |
| MVP St Louis 2013 | $ | 29,000 | $ | -- | $ | 29,000 | | 100.0% |
| Mabley Place Garage | | 192,000 | | -- | | 192,000 | | 100.0% |
| MVP Ft Worth Taylor | | 183,000 | | 94,000 | | 89,000 | | 94.7% |
| MVP Milwaukee Old World | | 21,000 | | -- | | 21,000 | | 100.0% |
| MVP Mini Venture | | 42,000 | | -- | | 42,000 | | 100.0% |
| MVP Milwaukee Arena | | 136,000 | | -- | | 136,000 | | 100.0% |
| Denver Sherman | | 6,000 | | 31,000 | | (25,000) | | -80.6% |
| MVP Bridgeport Fairfield Garage | | 49,000 | | -- | | 49,000 | | 100.0% |
| Minneapolis City Parking | | 47,000 | | -- | | 47,000 | | 100.0% |
| Cleveland Lincoln | | 1,000 | | -- | | 1,000 | | 100.0% |
| MVP St Paul Holiday | | 56,000 | | -- | | 56,000 | | 100.0% |
| MVP St Louis 7th & Cere | | 65,000 | | -- | | 65,000 | | 100.0% |
| Raider Park | | 29,000 | | 75,000 | | (46,000) | | -61.3% |
| MVP Detroit Center Garage | | 493,000 | | 153,000 | | 340,000 | | 222.2% |
| St. Louis Broadway | | 30,000 | | 5,000 | | 25,000 | | 500.0% |
| MVP New Orleans Rampart | | - | | 44,000 | | (44,000) | | -100.0% |
| MVP Hawaii Marks | | 64,000 | | -- | | 64,000 | | 100.0% |
| Total revenues | $ | 1,443,000 | $ | 402,000 | $ | 1,041,000 | | 259.0% |
Variances in percentage rent earnings in 2021 comparedowns to 2020 are due primarily to the conversion of property management agreements back to leases and fluctuations in transient parking business as a result of the lessening of restrictions intended to slow the spread of COVID-19 and varying speeds of the opening of cities.
| | | For the Nine Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Operating expenses | | | | | | | | |
| Property taxes | $ | 2,656,000 | $ | 2,460,000 | $ | 196,000 | | 8.0% |
| Property operating expense | | 894,000 | | 1,374,000 | | (480,000) | | (34.9%) |
| General and administrative | | 4,665,000 | | 4,681,000 | | (16,000) | | (0.3%) |
| Professional fees | | 2,243,000 | | 592,000 | | 1,651,000 | | 278.9% |
| Acquisition expenses | | -- | | 3,000 | | (3,000) | | (100.0%) |
| Depreciation and amortization expenses | | 3,953,000 | | 3,948,000 | | 5,000 | | 0.1% |
| Impairment | | -- | | 14,115,000 | | (14,115,000) | | (100.0%) |
| Total operating expenses | | 14,411,000 | | 27,173,000 | | (12,763,000) | | (47.0%) |
| Income (loss) from operations | $ | (2,144,000) | $ | (14,650,000) | $ | 12,506,000 | | (85.4%) |
Property taxes
The increase in property taxes during the nine-months ended 2021 compared to 2020 is attributable primarily to certain new lease agreements which have increased the property tax burden on the Company in 2021. These agreements were entered into during the second quarter of 2020. As a result, the impact is larger during the nine months ended September 30, 2021 than during the same period in the prior year. These new agreements generally allocate a larger portion of the properties’ annual property tax expense to the Company than previous agreements.
Property operating expense
The decrease in property operating expense in 2021 compared to 2020 is attributable primarily to COVID-19 restrictions that reduced the demand for parking in certain locations which in turn reduced required repairs and maintenance expenses and other property operating expenses.
General and administrative
The decrease in general and administrative expenses from 2020 to 2021 was primarily attributable to a decrease in director and officer insurance expense of approximately $300,000 offset by an increase in investor services expenses of approximately $100,000 and increases in other expenses.
Professional fees
Professional fees increased approximately $1.7 million in the nine months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily due to lower insurance proceeds received to reimburse the Company for legal fees, during the nine months ended September 30, 2021 for claims made against the director and officer insurance policy compared to the same period in the prior year. These reimbursements were related to legal expenses incurred relating to lawsuits filed in 2019 and the SEC investigation, which was initiated in June of 2019.
See Note K – Legal in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Impairment
No impairment was recorded during the nine months ended September 30, 2021. During the nine months ended September 30, 2020 the Company recorded approximately $14.1 million of asset impairment charges. These charges were recorded to write down the carrying value of these assets to their current fair values. See Note B — Summary of Significant Accounting Policies in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
| | | For the Nine Months Ended September 30, |
| | | 2021 | | 2020 | | $ Change | | % Change |
| Other income (expense) | | | | | | | | |
| Interest expense | $ | (6,783,000) | $ | (6,910,000) | $ | 127,000 | | (1.8%) |
| Other income | | 280,000 | | 151,000 | | 129,000 | | 85.4% |
| Gain from sale of investment in real estate | | -- | | 694,000 | | (694,000) | | (100.0%) |
| PPP Round #1 forgiveness | | 348,000 | | -- | | 348,000 | | 100.0% |
| Income from DST | | -- | | 143,000 | | (143,000) | | (100.0%) |
| Settlement of deferred management internalization | | 10,040,000 | | -- | | 10,040,000 | | 100.0% |
| Gain DST | | 122,000 | | -- | | 122,000 | | 100.0% |
| Transaction expenses | | (12,224,000) | | -- | �� | (12,224,000) | | (100.0%) |
| Total other expense | $ | (8,217,000) | $ | (5,922,000) | $ | (2,295,000) | | 38.8% |
Interest expense
The decrease of interest expense of approximately $150,000 was primarily due to a lower interest rate on the Company’s $55.5 million variable rate loans partially offset by higher rates and balances in the approximately $11.6 million of private loans. Total loan amortization cost for the nine months ended September 30, 2021 and 2020, was approximately $200,000 and $600,000, respectively.
For additional information see Note G – Notes Payable and Paycheck Protection Program Loan in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Other income
During February 2021, the Company received a one-time cost of contract payment of $275,000 from SP+.
During May 2021, the Company received notification from the SBA stating that the round 1 PPP loan was forgiven in the amount of approximately $348,000.
During January 2020, the Company earned $144,000 from a tenant for the early termination of the parking lease at MVP Memphis Poplar.
During February 2020, the Company received approximately $6,000 for the energy efficiency fee at Detroit Center Garage. Upon the completion of the lighting project at this property last year, the tenant agreed that if the energy costs did not meet or surpass $46,000 for the year, then the tenant would pay the Company 80% of the difference.
Income from DST and Gain DST
The decrease in income from MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”), is due to the impact of COVID-19. Beginning in March 2020, MVP St. Louis did not generate distributable net income due to the delay of the opening of the major league baseball season and the fact that no fans were allowed to attend the games in 2020 when the season opened. Due to prior losses, MVP St. Louis did not generate distributable net income during the nine months ended September 30, 2021.
Pursuant to the closing of the Transaction on August 25, 2021, management determined the change in structure of its investment in MVP St. Louis, DST lot, was deemed a reconsideration event. Based on the Company's evaluation, the Company began consolidating the investment in MVP St. Louis, respectively, as of August 25, 2021 and this change in structure resulted in a gain of approximately $0.1 million.
For additional information see Note I – Variable Interest Entities in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Gain from sale of investment in real estate
There were no sales of investments in real estate during the nine months ended September 30, 2021. On May 26, 2020 the Company sold a parking garage in San Jose, CA for cash consideration of $4.1 million to UC 88 Garage Owner LLC, a third-party buyer. The Company used $2.5 million of the proceeds to pay off the existing promissory note secured by the MVP San Jose 88 Garage, LLC. The property was originally purchased in June 2016 for approximately $3.6 million. The gain on sale was approximately $700,000.
Transaction Expenses
Pursuant to the Closing of the Transaction on August 25, 2021, transaction expenses of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations during the nine months ended September 30, 2021.
Liquidity and Capital Resources
The Company owns substantially all of its assets and conducts its operations through the Operating Partnership, of which it is the approximately 50.8% limited partner.raise capital.
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the nine months ended September 30, 2021, the Company had a net loss of $14.8 million and had $18.1 million in cash, cash equivalents and restricted cash. In connection with preparing the unaudited condensed consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for one year from the issuance of the September 30, 2021 financial statements.
no commercial paper outstanding, nor have we entered into any swaps or hedges.
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realizationCompany’s short-term and long-term liquidity needs will consist primarily of funds necessary for payments of indebtedness, acquisitions of assets, development of properties, and the satisfaction of liabilitiescapital expenditures. Existing development activities expected to be completed in the normal course of business.
As of September 30, 2021, the Company has $67.1 million of notes payable which will mature within one year after the date that these condensed consolidated financial statementsnear-term are issued. The Company does not have sufficient cash on hand or available liquidityexpected to repay the maturing notes payable as they become due. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
In response, the Company is currently pursuing approvals to execute extension options on a portion of the notes payable as well as a refinancing plan which would consolidate the near-term maturities into a single, larger facility. However, the refinancing plan is subject to market conditions that are not within the Company’s control, and therefore, implementation of management’s plans cannot be deemed probable at this time. As a result, management has concluded that these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
The condensed consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amounts of liabilities that might result from the outcome of this uncertainty.
cost approximately $2.1 million.
Sources and Uses of Cash
The following table summarizes our cash flows for the ninethree months ended September 30, 2021March 31, 2022 and 2020:2021:
| | | For the Nine Months Ended September 30, |
| | | 2021 | | 2020 |
| Net cash used in operating activities | $ | (15,826,000) | $ | (5,304,000) |
| Net cash provided by (used in) investing activities | | (3,598,000) | | 485,000 |
| Net cash provided by financing activities | | 29,601,000 | | 69,000 |
| | | For the Three Months Ended March 31, | |
| | | 2022 | | | 2021 | |
Net cash used in operating activities | | $ | (659,000 | ) | | $ | (1,689,000 | ) |
Net cash used in investing activities | | | (288,000 | ) | | | — | |
Net cash provided by (used in) financing activities | | | (1,288,000 | ) | | | 906,000 | |
Comparison of the ninethree months ended September 30, 2021March 31, 2022 to the ninethree months ended September 30, 2020:March 31, 2021:
The Company’s cash and cash equivalents and restricted cash were approximately $18.2$14.5 million as of September 30, 2021,March 31, 2022, which was an increase of approximately $11.3$7.4 million from the same period in 2020.balance of $7.1 million as of March 31, 2021.
Cash flows from operating activities
Net cash used in operating activities during the ninethree months ended September 30, 2021March 31, 2022 was approximately $15.8$0.7 million, compared to approximately $5.3$1.7 million for the same periodthree months ended March 31, 2021. The decrease in 2020. The increasecash used in operating activities was primarily dueattributable to the Transaction expenses of approximately $12.2 million contributing to a higher net loss, net of non-cash items, than during the prior period.an increase in accounts payable resulting from increased organizational and governance costs.
Cash flows from investing activities
Net cash used in investing activities for the ninethree months ended September 30, 2021March 31, 2022 was approximately $3.6$0.3 million comparedprimarily attributable to approximately $500,000building improvements and additions to intangible assets. There was no cash used in or provided by investing activities during the ninethree months ended September 30, 2020. This increase is due to the purchaseMarch 31, 2021.
Cash flows from financing activities
Net cash provided byused in financing activities for the ninethree months ended September 30, 2021March 31, 2022 was approximately $29.6$1.3 million compared to approximately $70,000$0.9 million net cash provided by financing activities duringfor the same period in 2020.three months ended March 31, 2021. The changeincrease in cash provided byused in financing activities was primarily dueattributable to an increase in loan fees resulting from the cash contribution atCredit Facility as well as proceeds from notes payable of approximately $1.7 million during the Closing of the Transaction. three months ended March 31, 2021.
Company Indebtedness
On March 29, 2022, the Company entered into the Credit Facility. The initial $75.0 million has been used to refinance certain of the Company’s current loans for various properties and will also be available for our general corporate purposes, including liquidity, acquisitions and working capital. The Company will borrow under the Credit Facility in U.S. dollars and expects borrowings under the Credit Facility to bear interest at a floating rate based upon a Secured Overnight Financing Rate, or SOFR, benchmark rate or an alternate base rate, plus a margin of between 1.75% and 3.00%, with respect to SOFR loans, or 0.75% to 2.00%, with respect to base rate loans, based on the leverage ratio as calculated pursuant to our Credit Facility.
The obligations under the Credit Agreement underlying the Credit Facility are guaranteed by the Company and other guarantors. The Credit Agreement contains customary representations, warranties, conditions to borrowing, covenants and events of default, including certain covenants that limit or restrict, subject to certain exceptions, the ability of the Company, the Operating Partnership and other subsidiaries to sell or transfer assets, enter into a merger or consolidate with another company, create liens, make investments or acquisitions or incur certain indebtedness. The Credit Agreement also includes financial covenants that require the Company to (i) maintain a total leverage ratio not to exceed 65.0%, (ii) not to exceed certain fixed charge coverage ratios, and (iii) maintain a certain tangible net worth.
The Credit Facility matures on April 1, 2023, as may be extended pursuant to the terms of the Credit Agreement.
The Company's loan with Bank of America, N.A. for the MVP Detroit Center Garage, LLC ("MVP Detroit") garage requires the Company to maintain approximately $2.3 million in liquidity at all times, which is defined as unencumbered cash and cash equivalents. As of the date of this filing, the Company was in compliance with this lender requirement.
The Company may establish capital reserves with respect to particular investments. The Company also may, but is not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. The Company’s lenders also may require working capital reserves.
To the extentOver time, management intends to both extend and sculpt our maturity wall, so that the working capital reserve is insufficient to satisfy the Company’s cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing, if such borrowing becomes available in the future or sale or issuanceour maturities are spread over multiple years. As of OP Units. In addition, subject to certain exceptions and limitations, the Company may incur indebtedness in connection with the acquisition of any real estate asset to the extent such indebtedness becomes available to the Company in the future, refinance the debt thereon, arrange for the leveraging of any previously unencumbered property or reinvest the proceeds of financing or refinancing in additional properties.
In response to the COVID-19 pandemic, the Company entered into certain temporary loan modification agreements and new loan agreements with certain lenders during 2020. All of these loans had reverted back to their normal payment terms on or before June 30, 2021. These modification agreements are described in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Loan modification agreements and new loan agreements entered into during 2021, through the date of this filing, are described below.
Pursuant to the Closing of the Transaction, the Company refinanced the following loanshas significant commercial mortgage-backed securities (“CMBS”) debt with Vestin Realty Mortgage I and II. Each loan is interest only, bears interest at 7.0% and matures on August 25, 2022.
| Loan | Lender | | Balance as of 9/30/21 |
| MVP Clarksburg Lot | Vestin Realty Mortgage I | $ | 476,000 |
| MCI 1372 Street | Vestin Realty Mortgage I | | 574,000 |
| MVP Milwaukee Old World | Vestin Realty Mortgage I | | 1,871,000 |
| MVP Milwaukee Clybourn | Vestin Realty Mortgage I | | 191,000 |
| MVP Wildwood NJ Lot, LLC | Vestin Realty Mortgage I | | 1,000,000 |
| MVP Cincinnati Race Street, LLC | Vestin Realty Mortgage II | | 3,450,000 |
| Minneapolis Venture | Vestin Realty Mortgage I | | 4,000,000 |
| Total | | $ | 11,562,000 |
On February 8, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into an Amended and Restated Promissory Note Agreement with multiple lenders. The agreement increased the interest rate from 8%prohibitive defeasance, which will limit our ability to 9%, an additional $845,000 was funded increasing the note balancerefinance our CMBS debt prior to $1,807,000 and the maturity date ofor any permitted prepayment date. As our loans approach maturity, we will assess the note was extendedlowest cost, most flexible options available to December 31, 2021. This loan was refinanced with Vestin Realty Mortgage I at the Closing of the Transaction and bears interest at 7.0% and matures on August 25, 2022.
On March 12, 2021, MVP Cincinnati Race St., LLC, a subsidiary of the Company entered into an Amended and Restated Promissory Note Agreementrefinance those loans accordingly. Our intent over the mid-term period is to work with multiple lenders. In which an additional $900,000 was funded, increasing the note balancelending relationships to $3,450,000 and the maturity date of the note was extendedmaintain a revolver that can address upcoming maturities, should market conditions not permit us to December 31, 2021 and the interest rate increased to 9%. All other terms remained the same. This loan was refinancedrefinance with Vestin Realty Mortgage II at the Closing of the Transaction and bears interest at 7.0% and matures on August 25, 2022.
On June 2, 2021, the Company issued a $400,000 Convertible Promissory Note (the “Note) to the Purchaser. The Note accrued interest at a rate of 7.0% per annum and has a maturity date of December 31, 2021, unless an amount equal to the principal and accrued interest is converted into limited partnership interests of the Operating Partnership at the closing of the Transaction. On the Closing, the outstanding principal balance and any unpaid accrued interest was automatically converted into OP Units at a conversion price equal to the quotient of the outstanding balance divided by $11.75, rounded to the nearest whole unit. On July 1, 2021, the Company entered into an additional $400,000 Note under the same terms. On August 1, 2021, the Company entered into an additional $400,000 Convertible Promissory Note with the Purchaser under the same terms. This loan was paid in full at the Closing of the Transaction on August 25, 2021.
On July 14, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into an Amended and Restated Promissory Note Agreement with multiple lenders. An additional $255,000 was funded increasing the note balance to $2,062,000. All other terms of this note remained the same. This loan was refinanced with Vestin Realty Mortgage I at the Closing of the Transaction and bears interest at 7.0% and matures on August 25, 2022.longer-term debt.
Distributions and Stock Dividends
On March 22, 2018, the Company suspended the payment of distributions on its common stock.Common Stock. There can be no assurance that cash distributions to the Company’s common stockholders will be resumed in the future. The actual amount and timing of distributions, if any, will be determined by the Company’s board of directors in its discretion and typically will depend on the amount of funds available for distribution, which is impacted by current and projected cash requirements, tax considerations and other factors.
The Company is not currently and may not in the future generate sufficient cash flow from operations to fully fund distributions. The Company does not currently anticipate that it will be able to resume the payment of distributions. However, if distributions do resume, all or a portion of the distributions may be paid from other sources, such as cash flows from equity offerings, financing activities, borrowings, or by way of waiver or deferral of fees. The Company has not established any limit on the extent to which distributions could be funded from these other sources. Accordingly, the amount of distributions paid may not reflect current cash flow from operations and distributions may include a return of capital, (rather than a return on capital). If the Company pays distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted. The level of distributions will be determined by the board of directors and depend on several factors including current and projected liquidity requirements, anticipated operating cash flows and tax considerations, and other relevant items deemed applicable by the board of directors.
Preferred Series AThe Company did not repurchase any of its shares during the three months ended March 31, 2022. During the three months ended March 31, 2022, the Company did not pay dividends on its shares of Common Stock and does not intend to pay dividends on its shares of Common Stock in 2022. No cash dividends can be made on the Common Stock until the preferred distributions are paid. See Note N – Equity in the notes to the consolidated financial statements included in Part I, Item 1 - Notes to the Consolidated Financial Statements of this Quarterly Report for additional information.
Dividend Reinvestment Plan
TheFrom inception through March 31, 2022, the Company offered up to $50had paid approximately $1.8 million in cash, issued 83,437 shares of its Common Stock as a Dividend Reinvestment Plan (“DRIP”) and issued 153,826 shares of its Common Stock in distributions to the Company’s Series A Convertible Redeemable Preferred Stock (“Series A”), par value $0.0001 per share, together with warrants to acquirestockholders. All of the Company’s common stock, incash distributions were paid from offering proceeds and constituted a Regulation D 506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016,return of capital. On March 22, 2018, the Company filed with the State Departmentsuspended payment of Assessmentsdistributions and Taxation of Maryland Articles Supplementaryas such there are currently no distributions to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company commenced the private placement of the Shares to accredited investors on November 1, 2016 and closed the offering on March 24, 2017. The Company raised approximately $2.5 million, net of offering costs,invest in the Series A private placements.DRIP.
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The offering price was $1,000 per share. In addition, each investor in the Series A received, for every $1,000 in shares subscribed by such investor, 30 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2021, there were 84,510 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. If all the potential warrants outstanding at September 30, 2021 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, the Company would issue an additional 84,510 shares of common stock and would receive gross proceeds of approximately $2.1 million.Preferred Stock
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A Preferred Stock and Series 1 Preferred Stock; however, such distributions will continue to accrue in accordance with the terms of the Series A.A Preferred Stock and Series 1 Preferred Stock.
As of March 31, 2022 and 2021, approximately $447,000 and $233,000 of accrued and unpaid Series A Preferred Stock distributions, respectively, are included in accounts payable and accrued liabilities on the consolidated balance sheet.
As of March 31, 2022 and 2021, approximately $5.8 million and $3.0 million of accrued and unpaid Series 1 Preferred Stock distributions, respectively, are included in accounts payable and accrued liabilities on the consolidated balance sheet.
For additional information see Note LN —Preferred Stock and WarrantsEquity in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various related party transactions, agreements and fees.Company’s Preferred Stock.
From initial issuance through September 30, 2021, the Company had declared distributions of approximately $937,000 of which approximately $597,000 had been paid to Series A stockholders.Warrants
Preferred Series 1 Stock
On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock (“Series 1”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1, together with warrants to acquire the Company’s common stock, to accredited investors. On January 31, 2018, the Company closed this offering. The Company had raised approximately $36.0 million, net of offering costs, in the Series 1 private placements and had 39,811 shares of Series 1 issued and outstanding.
The offering price is $1,000 per share. In addition, each investor in the Series 1 will receive, for every $1,000 in shares subscribed by such investor, 35 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series 1 offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before January 31, 2023, the five-year anniversary date, these warrants then will expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2021, there were 1,382,675 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. If all the potential warrants outstanding at September 30, 2021 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, the Company would issue an additional 1,382,675 shares of common stock and would receive gross proceeds of approximately $34.6 million.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in accordance with the terms of the Series 1.
For additional information see Note L —Preferred Stock and Warrants in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various related party transactions, agreements and fees.
From issuance date through September 30, 2021, the Company had declared distributions of approximately $10.8 million of which approximately $6.4 million had been paid to Series 1 stockholders.
Warrants
On August 25, 2021, in connection with the Closing, of the Transaction, the Company entered into a warrant agreement (the “Warrant Agreement”) pursuant to which it issued warrants (the “Warrants”) to the PurchaserColor Up to purchase up to 1,702,128 shares of Common Stock, at an exercise price of $11.75 per share for an aggregate cash purchase price of up to $20.0 million. Each whole Warrant entitles the registered holder thereof to purchase one whole share of Common Stock at a price of $11.75 per share (the “Warrant Price”), subject to customary adjustments, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or listingListing of the Common Stock on the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange. The Warrants will expire five years after the date of the Warrant Agreement.
The Company assesses its warrants as either equity or a liability based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Management estimates the fair value of these warrants using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate. As of September 30, 2021,March 31, 2022, all outstanding warrants issued by the Company were classified as equity.
Inflation
The Company expects to include provisions See Note N - Equityin its tenant leases designed to protect the Company from the impact of inflation. These provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. DuePart I, Item 1 - Notes to the generally long-term natureCondensed Consolidated Financial Statements of these leases, annual rent increases may not be sufficient to cover inflationthis Quarterly Report for a discussion of preferred stocks and rent may be below market.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when management determines that it is more likely than not that all or some portion of the deferred tax asset will not be realized. A full valuation allowance has been recorded for deferred tax assets due to the Company’s history of taxable losses.
The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of September 30, 2021.warrants.
Critical Accounting Policies
Our 20202021 Annual Report on Form 10-K, originally filed with the SEC on March 31, 2021,30, 2022, contains a description of our critical accounting policies and estimates, including those relating to real estate investments and acquisitions. There have been no significant changes to our critical accounting policies during 2021.2022.
Subsequent Events
See Note M —Subsequent Events in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various subsequent events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing the Company’s business plan, the Company expects that the primary market risk to which the Company will be exposed is interest rate risk. The Company’s primary interest rate exposure will be the one-month LIBOR rate. In order to mitigate this risk, the Company entered into an Interest Rate Protection Agreement for the $37M LoanCore loan (rate cap) that caps the loan’s interest rate at the loan’s LIBOR Floor. This rate cap, which is immaterial, effectively fixes the rate on this loan to the current rate of 5.60% and eliminates the threat of rising interest rates on this floating rate loan.Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
-
In connection with the filing of this Form 10-Q for the quarter ended March 31, -
The Company's2022, our Chief Executive Officer ("CEO") and our Chief Financial Officer have("CFO") evaluated the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,1934. As a result of this evaluation, our CEO and CFO concluded that the material weaknesses previously identified in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021, were still present as of March 31, 2022 (“the Evaluation Date”). Based on those material weaknesses, and the evaluation of our disclosure controls and procedures, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.Evaluation Date.
(b) Remediation Plan and Status
Our remediation efforts previously identified in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021, are ongoing and we continue our initiatives to implement and document policies, procedures, and internal controls. Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2022 and beyond. While we believe the steps taken to date and those planned for implementation will improve our internal controls over financial reporting, we have not completed all remediation efforts. The planned remediation activities described in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2021 highlight our commitment to remediating our identified material weaknesses and remain largely unchanged through the date of filing this Quarterly Report.
(c) Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the thirdfirst quarter of 2021,2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note KC —Legal Commitments and Contingencies in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a description of a purported class action lawsuit that was filed on March 12, 2019, additional actions in Maryland and the SEC investigation.
On April 6, 2021, a Stipulation and Agreement of Compromise, Settlement and Release was approved by the Circuit Court for Baltimore County (the “Stipulation”) for the resolution of putative class action litigation in which the Company was a defendant (the “Settlement”). The Settlement was a condition to the Closing of the Transaction. The Stipulation also provides that Purchaser has agreed to commence the Tender Offer. The Tender Offer commenced on October 5, 2021 and expired on November 5, 2021
The Company has previously disclosed pending class action legal proceedings facing the Company and the Former Advisor and/or Mr. Shustek prior to the completion of the Transaction. Pursuant to the Closing of the Transaction, the Settlement Agreement (as defined in the Purchase Agreement) was entered into subject to completion of Color Up’s Tender Offer for up to 900,506 shares of the Company’s outstanding common stock at $11.75 per share. Color Up launched the Tender Offer on October 5, 2021 and it expired on November 5, 2021. Upon the expiration of the Tender Offer, the terms of the Settlement Agreement were satisfied and the prior lawsuits settled.Report.
The nature of the Company’s business exposes its properties, the Company, its Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted above or routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company.
ITEM 1A. RISK FACTORS
There have been noThe following risk factors are material changes fromonly and should be read in conjunction with the risk factors set forthin the Company’s annual report on Form 10-K for the year ended December 31, 2021.
An increase in fuel prices may adversely affect our operating environment and costs.
Fuel prices have a direct impact on the ability and frequency of consumers to engage in activities related to transportation. Increases in the price of fuel may result in higher transportation costs and adversely affect consumer use at the Company’s parking garages. Increases in fuel costs also can lead to other non-recoverable, direct expense increases to us through, for example, increased costs of energy. Increases in energy costs for our tenants are typically recovered from lessees, although our share of energy costs increases as a result of lower occupancies, and higher operating cost reimbursements impact the ability to increase underlying rents. Rising fuel prices also may increase the cost of construction and the cost of materials that are petroleum-based, thus affecting the development of our existing assets or our tenants’ ongoing development projects.
ITEM 5. OTHER INFORMATION
Common Shares NAV
The Company is undertaking an appraisal to establish an estimated NAV per share of the Company’s common stock. The Company expects to disclose the results thereof in the second or third quarter. Please see “Item 1A. Risk Factors— Risks Related to an Investment in the Company–Stockholders should not rely on the estimated NAV per share as being an accurate measure of the current value of our shares of Common Stock” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share Repurchase Program
On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for hardship repurchases in connection with a shareholder’s death. Repurchase requests made in connection with the death of a stockholder were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company had established an estimated NAV per share, 100% of such amount as determined by the Company’s board of directors, subject to any special distributions previously made to the Company’s stockholders. The Company did not repurchase shares of common stock pursuant to the hardship exception under this program during the three months ended September 30, 2021.
As
March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
Recent Sales of Unregistered Securities
Effective November 8, 2021, Purchaser executed a subscription agreement with the Company pursuant to which Purchaser acquired the remaining 22,424 shares of the Company’s common stock pursuant to the Tender Offer (the “Offer”). As a result of the Tender Offer and the purchase of Shares by the Purchaser, Purchaser directly owns 2,624,831 shares (approximately 33.81%) of Company common stock as of November 8, 2021. See Note M —Subsequent Events in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a description of the Tender Offer and sale of equity securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. MINE AND SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
Effective November 18, 2021, the Company appointed Stephanie Hogue, President, as a co-principal financial officer for purposes of the certifications required on this Form 10-Q and other reports required by the Securities Exchange Act of 1934, as amended. In connection with this appointment, there is no additional compensation awarded or changes to Ms. Hogue’s compensation package disclosed in her employment agreement filed as Exhibit 10.11 to the Form 8-K filed on August 31, 2021. Ms. Hogue’s biographical information is included in the Form 8-K filed on August 31, 2021.
ITEM 6. EXHIBITS
3.1(1) | | Articles of Amendment and Restatement of THE PARKING REIT, Inc. |
3.2(2) | | Articles of Amendment of THE PARKING REIT, Inc. |
3.3(8)3.3(5) | | Articles of Amendment of MOBILE INFRASTRUCTURE CORPORATION |
3.4(3)3.4(6) | | Certificate of Correction to the Articles of Amendment and Restatement of Mobile Infrastructure Corporation |
3.5(3) | | Articles Supplementary for Series A Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. |
3.5(4)3.6(4) | | Articles Supplementary for Series 1 Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. |
3.6(8)3.7(5) | | Amended & Restated Bylaws of MOBILE INFRASTRUCTURE CORPORATION. |
3.7(6)31.1(*) | | Second Amended and Restated Agreement of Limited Partnership of MVP REIT II Operating Partnership, LP. Dated November 2, 2021 |
10.1(7) | | Tax Matters Agreement, dated August 25, 2021, by and between The Parking REIT, Inc., MVP REIT II Operating Partnership, L.P. and each Protected Partner |
10.2(7) | | Stockholders Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and The Investors Identified on the Signature pages thereto. |
10.3(7) | | Assignment of Claims, Causes of Action, and Proceeds, dated August 25, 2021, by The Parking REIT, Inc. in favor of Michael V. Shustek, MVP Realty Advisors, LLC, Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc. and their designees, successors, representatives, heirs and assigns. |
10.4(7) | | Warrant Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and Color Up, LLC. |
10.5(7) | | Amended and Restated Registration Rights Agreement, dated November 2, 2021, by and among The Parking REIT, Inc. and the Holders. |
10.6(7) | | Termination of Registration Rights Agreement, dated August 25, 2021, by and among The Parking REIT, Inc., MVP Realty Advisors, LLC, Michael V. Shustek, Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc. |
10.7(7) | | Software License and Development Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and DIA Land Co., LLC. |
10.8(7) | | First Amendment to Services Agreement, dated August 25, 2021, by and among the Parking REIT, Inc., MVP REIT II Operating Partnership, LP, Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc., MVP Realty Advisors, LLC and Michael V. Shustek. |
10.9(7) | | First Amendment to Contribution Agreement, dated August 25, 2021, by and among The Parking REIT, Inc., Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc., MVP Realty Advisors, LLC and Michael V. Shustek. |
10.10(7)** | | Employment Agreement, dated August 25, 2021, by and between the Company and Manuel Chavez. |
10.11(7)** | | Employment Agreement, dated August 25, 2021, by and between the Company and Stephanie Hogue. |
10.12(6) | | Securities Purchase Agreement, dated as November 2, 2021, by and among The Parking REIT, Inc., MVP REIT II Operating Partnership, L.P. and HSCP Strategic III, L.P. |
10.13(6) | | Class A Unit Agreement, dated November 2, 2021, by and MVP REIT II Operating Partnership, L.P. and HSCP Strategic III, L.P. |
31.1(*) | | Certification of Chief Executive Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2(*) | | Certification of Chief Financial Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. |
32(*) | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101(*) | | The following materials from the Company’s Quarterly Report on Form 10-Q for the sixthree months ended June 30, 2021,March 31, 2022, formatted in XBRL (extensibleiXBRL (inline extensible Business Reporting LanguageLanguage): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statement of Stockholder’s Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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* | | Filed concurrently herewith. |
**(1) | | Management compensatory agreement. |
(1) | | Filed previously with Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 on September 24, 2015 and incorporated herein by reference. |
(2) | | Filed previously on Form 8-K on December 18, 2017 and incorporated herein by reference. |
(3) | | Filed previously on Form 8-K on October 28, 2016 and incorporated herein by reference. |
(4) | | Filed previously on Form 8-K on March 30, 2017 and incorporated herein by reference. |
(5) | | Filed previously with the Registration Statement on Form S-11 on July 28, 2015 and incorporated herein by reference. |
(6) | | Filed previously on Form 8-K on November 4, 2021 and incorporated herein by reference. |
(7) | | Filed previously on Form 8-K on August 31, 2021 and incorporated herein by reference. |
(8) | | Filed previously on Form 8-K on November 12, 2021 and incorporated herein by reference. |
| (6) | | Filed previously on Form 8-K on March 21, 2022 and incorporated herein by reference. |
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.
| | Mobile Infrastructure Corporation |
| | | |
| | By: | /s/ Manuel Chavez III |
| | | Manuel Chavez III |
| | | Chief Executive Officer |
| | Date: | November 18, 2021May 16, 2022 |
| | | |
| | By: | /s/ Stephanie Hogue |
| | | Stephanie Hogue |
| | | President and Chief Financial Officer |
| | Date: | November 18, 2021May 16, 2022 |
| | | |
| By: | /s/ J. Kevin Bland |
| | J. Kevin Bland |
| | Chief Financial Officer |
| Date: | November 18, 2021 |
