| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Investment Properties The Company has adopted Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Accounting Standards Codification (“ASC”) 805 mandates that “an acquiring entity shall allocate the cost of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at date of acquisition.” ASC 805 results in an allocation of acquisition costs to both tangible and intangible assets associated with income producing real estate. Tangible assets include land, buildings, site improvements, tenant improvements and furniture, fixtures and equipment, while intangible assets include the value of in-place leases, lease origination costs (leasing commissions and tenant improvements), legal and marketing costs and leasehold assets and liabilities (above or below market leases), among others. The Company uses independent, third party consultants to assist management with its ASC 805 evaluations. The Company determines fair value based on accepted valuation methodologies including the cost, market, and income capitalization approaches. The purchase price is allocated to the tangible and intangible assets identified in the evaluation. The Company records depreciation on buildings and improvements utilizing the straight-line method over the estimated useful life of the asset, generally 5 to 42 years. The Company reviews depreciable lives of investment properties periodically and makes adjustments to reflect a shorter economic life, when necessary. Capitalized leasing commissions and tenant improvements incurred and paid by the Company subsequent to the acquisition of the investment property are amortized utilizing the straight-line method over the term of the related lease. Amounts allocated to buildings are depreciated over the estimated remaining life of the acquired building or related improvements. Acquisition and closing costs are capitalized as part of each tangible asset on a pro rata basis. Improvements and major repairs and maintenance are capitalized when the repair and maintenance substantially extend the useful life, increases capacity or improves the efficiency of the asset. All other repair and maintenance costs are expensed as incurred. The Company reviews investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable, but at least annually. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value. The Company measures any impairment of investment property when the estimated undiscounted cash flows plus its residual value, is less than the carrying value of the property. To the extent impairment has occurred, the Company charges to income the excess of the carrying value of the property over its estimated fair value. The Company estimates fair value using unobservable data such as projected future operating income, estimated capitalization rates, or multiples, leasing prospects and local market information. The Company may decide to sell properties that are held for use and the sale prices of these properties may differ from their carrying values. Other than the tenant-specific losses on impairment described below, the Company did not record any impairment adjustments to its investment properties resulting from events or changes in circumstances during the three and nine months ended September 30, 2022 and 2021, that would result in the projected value being below the carrying value of the Company’s properties. During the nine months ended September 30, 2022, two tenants defaulted on their leases and abandoned their premises. The Company determined that the carrying value of certain intangible assets and liabilities associated with these leases that were recorded as part of the purchase of the these properties should be written off. As a result, the Company recorded a loss on impairment of $36,670 for the nine months ended September 30, 2022. No such tenant-related loss on impairment was recorded during the three months ended September 30, 2022, or during the three and nine months ended September 30, 2021. Assets Held for Sale The Company may decide to sell properties that are held as investment properties. The accounting treatment for the disposal of long-lived assets is covered by ASC 360. Under this guidance, the Company records the assets associated with these properties, and any associated mortgages payable, as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year. Delays in the time required to complete a sale do not preclude a long-lived asset from continuing to be classified as held for sale beyond the initial one year period if the delay is caused by events or circumstances beyond an entity’s control and there is sufficient evidence that the entity remains committed to a qualifying plan to sell the long-lived asset. Properties classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment charge is recognized. The Company determines fair value based on the three-level valuation hierarchy for fair value measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. During February 2021, the Company committed to a plan for the sale of an asset group associated with the Clemson Best Western Hotel Property that included the land, site improvements, building, building improvements and furniture, fixtures and equipment. As of March 31, 2021, the Company recorded this asset group, and the associated mortgage payable, as held for sale. As of March 31, 2021, the date the Company originally recorded this asset group as held for sale, the Company determined that the fair value of the Clemson Best Western Property exceeded the carrying value of its asset group, and the Company did not record impairment of assets held for sale associated with this asset group. During subsequent periods since the asset group associated with the Clemson Best Western Property were initially classified as held for sale, the Company has continued to follow its disposal plan. Under ASC 360, during subsequent reporting periods after the asset group is classified as held for sale, it is necessary to evaluate the amounts previously used for the estimated fair value of the asset group. Up to and including the reporting periods ending December 31, 2021, the Company reviewed and reassessed the estimated fair value of the asset group and believed that the fair value, less estimated costs to sell, exceeds the Company’s carrying cost in the property. Accordingly, the Company did not record impairment of assets held for sale related to the Clemson Best Western Property for the year ended December 31, 2021. As of March 31, 2022, the Company determined that the carrying value of the asset group associated with the Clemson Best Western Hotel Property exceeded its fair value, less estimated costs to sell, and recorded impairment of assets held for sale of $175,671 on its condensed consolidated statement of operations for the nine months ended September 30, 2022. No such impairment of assets held for sale was recorded during the three and nine months ended September 30, 2021. On September 29, 2022, the Company closed on the sale of the Clemson Best Western Hotel Property to an unaffiliated purchaser. See Note 3 for additional details. Intangible Assets and Liabilities, net The Company determines, through the ASC 805 evaluation, the above and below market lease intangibles upon acquiring a property. Intangible assets (or liabilities) such as above or below-market leases and in-place lease value are recorded at fair value and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. The Company amortizes amounts allocated to tenant improvements, in-place lease assets and other lease-related intangibles over the remaining life of the underlying leases. The analysis is conducted on a lease-by-lease basis. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of its intangible assets may not be recoverable, but at least annually. During the nine months ended September 30, 2022, two tenants defaulted on their leases and abandoned their premises. The Company determined that the book value of the intangible assets and liabilities, net, associated with these leases of $36,670 that were recorded as part of the purchase of these properties should be written off. This amount is included in the loss on impairment reported on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2022. No such loss on impairment was recorded for the three months ended September 30, 2022 or for the three and nine months ended September 30, 2021. Details of the deferred costs, net of amortization, arising from the Company’s purchases of its retail center properties and flex center properties are as follows: September 30, 2022 (unaudited) December 31, 2021 Intangible Assets Leasing commissions $ 1,196,385 $ 1,153,736 Legal and marketing costs 187,197 163,019 Above market leases 239,375 360,509 Net leasehold asset 2,443,038 2,523,128 $ 4,065,995 $ 4,200,392 Intangible Liabilities Below market leases $ (2,344,281) $ (1,880,612) Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases. Adjustments to rental revenue related to the above and below market leases during the nine months ended September 30, 2022 and 2021, respectively, were as follows: For the three months ended For the nine months ended September 30, September 30, 2022 2021 2022 2021 (unaudited) (unaudited) (unaudited) (unaudited) Amortization of above market leases $ (33,862) $ (67,206) $ (159,388) $ (180,803) Amortization of below market leases 115,679 73,174 305,456 183,153 $ 81,817 $ 5,968 $ 146,068 $ 2,350 Amortization of lease origination costs, leases in place and legal and marketing costs represent a component of depreciation and amortization expense. Amortization related to these intangible assets during the three and nine months ended September 30, 2022 and 2021, respectively, were as follows: For the three months ended For the nine months ended September 30, September 30, 2022 2021 2022 2021 (unaudited) (unaudited) (unaudited) (unaudited) Leasing commissions $ (62,882) $ (54,798) $ (185,331) $ (146,473) Legal and marketing costs (18,533) (9,738) (48,000) (23,620) Net leasehold asset (242,877) (211,399) (804,469) (525,918) $ (324,292) $ (275,935) $ (1,037,800) $ (696,011) As of September 30, 2022 and December 31, 2021, the Company’s accumulated amortization of lease origination costs, leases in place and legal and marketing costs totaled $2,148,833 and $2,779,370, respectively. During the three and nine months ended September 30, 2022, the Company wrote off $166,029 and $1,663,228, respectively, in accumulated amortization related to fully amortized intangible assets and $0 and $5,108, respectively, in accumulated amortization related to the write off of assets related to the tenant defaults, discussed above. Future amortization of above and below market leases, lease origination costs, leases in place, legal and marketing costs and tenant relationships is as follows: For the remaining three months ending December 31, 2022 2023 2024 2025 2026 2027-2041 Total Intangible Assets Leasing commissions $ 60,963 $ 219,221 $ 173,352 $ 145,550 $ 107,312 $ 489,987 $ 1,196,385 Legal and marketing costs 17,759 61,506 39,837 24,004 13,160 30,931 187,197 Above market leases 29,515 97,960 45,608 21,526 15,629 29,137 239,375 Net leasehold asset 209,049 623,930 400,511 295,851 199,466 714,231 2,443,038 $ 317,286 $ 1,002,617 $ 659,308 $ 486,931 $ 335,567 $ 1,264,286 $ 4,065,995 Intangible Liabilities Below market leases, net $ (110,169) $ (368,802) $ (285,892) $ (213,348) $ (178,776) $ (1,187,294) $ (2,344,281) Conditional Asset Retirement Obligation A conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement depends on a future event that may or may not be within the Company’s control. Currently, the Company does not have any conditional asset retirement obligations. However, any such obligations identified in the future would result in the Company recording a liability if the fair value of the obligation can be reasonably estimated. Environmental studies conducted at the time the Company acquired its properties did not reveal any material environmental liabilities, and the Company is unaware of any subsequent environmental matters that would have created a material liability. The Company believes that its properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. The Company did not record any conditional asset retirement obligation liabilities during the three and nine months ended September 30, 2022 and 2021, respectively. Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents consist primarily of bank operating accounts and money markets. Financial instruments that potentially subject the Company to concentrations of credit risk include its cash and equivalents and its trade accounts receivable. The Company places its cash and cash equivalents and any restricted cash held by the Company on deposit with financial institutions in the United States which are insured by the Federal Deposit Insurance Company ("FDIC") up to $250,000. The Company's credit loss in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial institutions credit worthiness in conjunction with balances on deposit to minimize risk. As of September 30, 2022, the Company held three cash accounts with an aggregate balance that exceeded the FDIC limit by $3,306,551. As of December 31, 2021, the Company held five cash accounts with an aggregate balance that exceeded the FDIC limit by $2,377,633. Restricted cash represents (i) amounts held by the Company for tenant security deposits, (ii) escrow deposits held by lenders for real estate tax, insurance, and operating reserves, (iii) an escrow for the first year of dividends on the Company’s mandatorily redeemable preferred stock, and (iv) capital reserves held by lenders for investment property capital improvements. Tenant security deposits are restricted cash balances held by the Company to offset potential damages, unpaid rent or other unmet conditions of its tenant leases. As of September 30, 2022 and December 31, 2021, the Company reported $266,837 and $222,265, respectively, in security deposits held as restricted cash. Escrow deposits are restricted cash balances held by lenders for real estate taxes, insurance and other operating reserves. As of September 30, 2022 and December 31, 2021, the Company reported $897,434 and $1,523,837, respectively, in escrow deposits. Capital reserves are restricted cash balances held by lenders for capital improvements, leasing commissions furniture, fixtures and equipment, and tenant improvements. As of September 30, 2022 and December 31, 2021, the Company reported $944,850 and $1,267,470, respectively, in capital property reserves. September 30, 2022 December 31, (unaudited) 2021 Property and Purpose of Reserve Clemson Best Western Property - improvements $ — $ 50,012 Clemson Best Western Property - furniture, fixtures and equipment — 275,109 Franklin Square Property - leasing costs 815,561 700,000 Brookfield Center Property - maintenance reserve 129,289 92,349 Greenbrier Business Center - capital reserve — 150,000 Total $ 944,850 $ 1,267,470 Share Retirement ASC 505-30-30-8 provides guidance on accounting for share retirement and establishes two alternative methods for accounting for the repurchase price paid in excess of par value. The Company has elected the method by which the excess between par value and the repurchase price, including costs and fees, is recorded to additional paid in capital on the Company’s condensed consolidated balance sheets. During the nine months ended September 30, 2022, the Company repurchased 268,070 shares of its common stock at a total cost of $278,277 at an average price of $1.038 per common share. The Company incurred fees of $8,266 associated with these transactions. Of the total repurchase price, $2,681 was recorded to common stock and the difference, $283,862, was recorded to additional paid in capital on the Company’s condensed consolidated balance sheet. No such amounts were recorded during the three months ended September 30, 2022 or during the three and nine months ended September 30, 2021. Revenue Recognition Retail and Flex Center Property Revenues The Company recognizes minimum rents from its retail center properties and flex center properties on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset being recorded on the condensed consolidated balance sheets. As of September 30, 2022 and December 31, 2021, the Company reported $985,089 and $872,322, respectively, in unbilled rent. The Company’s leases generally require the tenant to reimburse the Company for a substantial portion of its expenses incurred in operating, maintaining, repairing, insuring and managing the shopping center and common areas (collectively defined as Common Area Maintenance or “CAM” expenses). The Company includes these reimbursements, along with other revenue derived from late fees and seasonal events, on the condensed consolidated statements of operations under the captions "Retail center property revenues” and “Flex center property tenant revenues.” (See Recent Accounting Pronouncements, below.) This significantly reduces the Company’s exposure to increases in costs and operating expenses resulting from inflation or other outside factors. The Company accrues reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. The Company calculates the tenant’s share of operating costs by multiplying the total amount of the operating costs by a fraction, the numerator of which is the total number of square feet being leased by the tenant, and the denominator of which is the average total square footage of all leasable buildings at the property. The Company also receives payments for these reimbursements from substantially all its tenants on a monthly basis throughout the year. The Company recognizes differences between previously estimated recoveries and the final billed amounts in the year in which the amounts become final. Since these differences are determined annually under the leases and accrued as of December 31 in the year earned, no such revenues were recognized during the three and nine months ended September 30, 2022 and 2021. The Company recognizes lease termination fees in the period that the lease is terminated and collection of the fees is reasonably assured. Upon early lease termination, the Company provides for losses related to unrecovered intangibles and other assets. During the three and nine months ended September 30, 2022 and 2021, respectively, no such termination fees were recognized. Hotel Property Revenues Hotel revenues from the Clemson Best Western Property (and for prior year periods, the Hampton Inn Property) are recognized as earned, which is generally defined as the date upon which a guest occupies a room or utilizes the hotel’s services. Revenues from the Company’s occupancy agreement with Clemson University are recognized as earned, which is as rooms are occupied or otherwise reserved for use by the University. The Clemson University occupancy agreement ended on May 15, 2022. The Clemson Best Western Property (and for prior year periods, the Hampton Inn Property) is required to collect certain taxes and fees from customers on behalf of government agencies and remit them back to the applicable governmental agencies on a periodic basis. The Clemson Best Western Property has a legal obligation to act as a collection agent. The Clemson Best Western Property does not retain these taxes and fees; therefore, they are not included in revenues. The Clemson Best Western Property records a liability when the amounts are collected and relieves the liability when payments are made to the applicable taxing authority or other appropriate governmental agency. Hotel Property Operating Expenses All personnel of the Clemson Best Western Property (and in prior year periods, the Hampton Inn Property) are directly or indirectly employees of Marshall Hotels and Resorts, Inc. (“Marshall”), the Company’s hotel management firm. In addition to fees and services discussed above, the Hampton Inn Property and Clemson Best Western Property reimburse Marshall for all employee related service costs, including payroll salaries and wages, payroll taxes and other employee benefits paid by Marshall on behalf of the respective property. For the Clemson Best Western Property, total amounts incurred for payroll salaries and wages, payroll taxes and other employee benefits for the three and nine months ended September 30, 2022 were $198,024 and $469,839, respectively, and for the three and nine months ended September 30, 2021 were $119,345 and $339,863 , respectively and for the three and nine months ended September 30, 2021 were $250,724 and $622,844 , respectively Rent and other receivables Rent and other receivables include tenant receivables related to base rents and tenant reimbursements. Rent and other receivables do not include receivables attributable to recording rents on a straight-line basis, which are included in unbilled rent, discussed above. The Company determines an allowance for the uncollectible portion of accrued rents and accounts receivable based upon customer credit worthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. The Company considers a receivable past due once it becomes delinquent per the terms of the lease. A past due receivable triggers certain events such as notices, fees and other allowable and required actions per the lease. As of September 30, 2022 and December 31, 2021, the Company’s allowance for uncollectible rent totaled $18,219 and $13,010, respectively, which are comprised of amounts specifically identified based on management’s review of individual tenants’ outstanding receivables. Management determined that no additional general reserve is considered necessary as of September 30, 2022 and December 31, 2021, respectively. Income Taxes Beginning with the Company’s taxable year ended December 31, 2017, the REIT has elected to be taxed as a real estate investment trust for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code and applicable Treasury regulations relating to REIT qualification. In order to maintain this REIT status, the regulations require the Company to distribute at least 90% of its taxable income to shareholders and meet certain other asset and income tests, as well as other requirements. If the Company fails to qualify as a REIT, it will be subject to tax at regular corporate rates for the years in which it fails to qualify. If the Company loses its REIT status it could not elect to be taxed as a REIT for five years unless the Company’s failure to qualify was due to reasonable cause and certain other conditions were satisfied. During the three and nine months ended September 30, 2022 , , Management has evaluated the effect of the guidance provided by GAAP on Accounting for Uncertainty of Income Taxes Use of Estimates The Company has made estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and revenues and expenses during the reported period. The Company’s actual results could differ from these estimates. Noncontrolling Interests The ownership interests not held by the REIT are considered noncontrolling interests. There are four elements of noncontrolling interests in the capital structure of the Company. These noncontrolling interests have been reported in equity on the condensed consolidated balance sheets but separate from the Company’s equity. On the condensed consolidated statements of operations, the subsidiaries are reported at the condensed consolidated amount, including both the amount attributable to the Company and noncontrolling interests. The Company’s condensed consolidated statements of changes in stockholders’ equity includes beginning balances, activity for the period and ending balances for shareholders’ equity, noncontrolling interests and total equity. The first noncontrolling interest is in the Hampton Inn Property, which the Company and the noncontrolling owner sold on August 31, 2021. Prior to its sale, the Hampton Inn Property’s net income (loss) was allocated to the noncontrolling ownership interest based on its percent ownership. During the three and nine months ended September 30, 2021, 22 percent of the Hampton Inn’s net income of $7,224 and $90,202 , respectively, or respectively No such allocation was necessary during the three and nine months ended September 30, 2022 due to the sale of the property on August 31, 2021. The second noncontrolling interest is in the Hanover Square Property in which the Company owns an 84 percent tenancy in common interest through its subsidiary and an outside party owns a 16 percent tenancy in common interest. The Hanover Square Property’s net income (loss) is allocated to the noncontrolling ownership interest based on its 16 percent ownership. During the three and nine months ended September 30, 2022, 16 percent of the Hanover Square Property’s net income of $52,923 and $96,382 , respectively, or and $15,421 , respectively $89,996 , respectively, and $14,398 , respectively, The third noncontrolling interest is in the Parkway Property in which the Company owns an 82 percent tenancy in common interest through its subsidiary and an outside party owns an 18 percent tenancy in common interest. The Parkway Property's net income is allocated to the noncontrolling ownership interest based on its 18 percent ownership. During the three and nine months ended September 30, 2022, 18 percent of the Parkway Property's net income of $93,231 and $172,368 , respectively, and $31,027 , respectively The fourth noncontrolling ownership interest are the units in the Operating Partnership that are not held by the REIT. In 2017, 125,000 Operating Partnership units were issued to members of the selling LLC which owned the Hampton Inn Property who elected to participate in a 721 exchange, which allows the exchange of interests in real property for shares in a real estate investment trust. These members of the selling LLC invested $1,175,000 in the Operating Partnership in exchange for 125,000 Operating Partnership units. Additionally, as discussed above, effective on January 1, 2020, 93,850 Operating Partnership units were issued in exchange for approximately 3.45 percent of the noncontrolling owner’s tenant in common interest in the Hampton Inn Property. On August 31, 2020, a unitholder converted 5,319 Operating Partnership units into shares of Common Stock. As of September 30, 2022, there were 213,531 Operating Partnership units outstanding. The Operating Partnership units not held by the REIT represent 1.21 percent and 1.31 percent of the outstanding Operating Partnership units as of September 30, 2022 and December 31, 2021, respectively. The noncontrolling interest percentage is calculated at any point in time by dividing the number of units not owned by the Company by the total number of units outstanding. The noncontrolling interest ownership percentage will change as additional common or preferred shares are issued by the REIT, or additional Operating Partnerships units are issued or as units are exchanged for the Company’s $0.01 par value per share Common Stock. During periods when the Operating Partnership’s noncontrolling interest changes, the noncontrolling ownership interest is calculated based on the weighted average Operating Partnership noncontrolling ownership interest during that period. The Operating Partnership’s net loss is allocated to the noncontrolling unit holders based on their ownership interest. During the three and nine months ended September 30, 2022, a weighted average of 1.21 and 1.21 percent of the Operating Partnership’s net loss of $1,233,543 and $1,671,091 , respectively, or $14,926 and $20,275 , respectively was allocated to the noncontrolling unit holders. During the three and nine months ended September 30, 2021, a weighted average of 1.31 and 2.05 percent, respectively, of the Operating Partnership’s net (loss) income of ( $34,331 ) and $147,189 , respectively, or ( $450 ) and $3,023 , respectively, was allocated to the noncontrolling unit holders. Recent Accounting Pronouncements For each of the accounting pronouncements that affect the Company, the Company has elected or plans to elect to follow the rule that allows companies engaging in an initial public offering as an Emerging Growth Company to follow the private company implementation dates. Accounting for Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) Leases significant provisions of this standard include (i) defining the “lease term” to include the non-cancelable period together with periods for which there is a significant economic incentive for the lessee to extend or not terminate the lease; (ii) defining the initial lease liability to be recorded on the balance sheets to contemplate only those variable lease payments that depend on an index or that are in substance “fixed,” (iii) a dual approach for determining whether lease expense is recognized on a straight-line or accelerated basis, depending on whether the lessee is expected to consume more than an insignificant portion of the leased asset’s economic benefits and (iv) a requirement to bifurcate certain lease and non-lease components. The lease standard was effective for public companies for fiscal years beginning after December 15, 2018 (including interim periods within those fiscal years) and for private companies, fiscal years beginning after December 15, 2019, with early adoption permitted. The FASB subsequently deferred the effective date of ASU 2016-0 |
