| 目錄 |
美國
證券和交易委員會
華盛頓特區 20549
___________________________________________________________
表格
___________________________________________________________
| | 根據1934年證券交易法第13或15(d)節的季度報告 |
截至季度結束日期的財務報告
或者
| | 根據1934年證券交易法第13或15(d)節的轉型報告書 |
從_____到_____期間
（委託文件號）
___________________________________________________________
presidio property trust, INC.
(根據其章程規定的註冊人準確名稱)
___________________________________________________________
| | | |
| (所在州或其他司法管轄區) | (國稅局僱主 |
(主要行政辦公室地址)
(
（註冊人的電話號碼，包括區號）
| 每一類已註冊證券的標題 | 交易標的： | 在其上註冊的交易所的名稱 | ||
| 該 | ||||
| 每股面值$0.01 | ||||
| 該 | ||||
| 每股面值$0.01 | ||||
| 該 | ||||
| 購買普通股股票 | ||||
________________________________________________
請勾選此項，以指示註冊人是否在過去12個月（或者對於註冊人需要提交此類文件的期間更短）提交了每個互動數據文件的電子提交文件，該文件根據Regulation S-T的規則405（本章節的§232.405）（或者相當的市場季報表單規則）提交。 ☒
請勾選表示公司自動在過去12個月內每個互動數據文件要求按照Regulation S-t的第405條規定提交（本章第232.405條）（或公司被要求提交此類文件的較短期間）
勾選表示註冊人是大型規模加速報告人、加速報告人、非加速報告人、小型報告公司或新興成長公司。請參閱證交所法規120億.2中「大型規模加速報告人」、「加速報告人」、「小型報告公司」和「新興成長公司」的定義。
| 大型加速報告人 | ☐ | 加速文件提交人 | ☐ | |||||||||||
| | ☒ | 較小的報告公司 | | |||||||||||
| 新興增長公司 | |
如果是新興成長公司，請在複覈者處標明勾選符號，說明註冊者是否選擇不使用依據證券交易法第13(a)條規定提供的任何新的或修訂後的財務會計準則的擴展過渡期。 ☐
請用複選標記指示註冊
nt是一家s
shell 公司（如 交易所法案第120億.2條所定義）。
2024年11月18日，註冊公司已發行並流通
| 索引 | 頁面 |
||||
有關前瞻性聲明的警告性用語
本報告包含依據《聯邦證券法》的"前瞻性陳述"，涉及風險和不確定因素，其中許多超出我們的控制範圍。實際結果可能與此類前瞻性陳述中預期的結果存在重大和不利的差異，這是由於某些因素，包括本報告中列出的因素以及我們向美國證券交易委員會（"SEC"）提交的其他文件。前瞻性陳述涉及我們行業、業務策略、關於我們市場地位、未來運營、利潤率、盈利能力、資本支出、財務狀況、流動性、資本資源、現金流、經營業績和其他財務和運營信息的事項。 本報告中包含的前瞻性陳述包括但不限於有關購買和銷售物業、籌資及再融資我們的物業計劃、我們資本資源的充足性、我們所經營市場的變化、我們的業務計劃和策略以及我們的分紅支付。 在本報告中使用的"將"、"可能"、"相信"、"預計"、"計劃"、"估計"、"預期"、"應當"、"規劃"等類似表達，旨在識別前瞻性陳述，儘管並非所有前瞻性陳述都包含這些識別詞。可能導致實際結果與預期不符的重要因素包括但不限於：
| • |
與房地產業及房地產業投資相關的固有風險; |
| • |
顯著的競爭可能會降低或阻止我們物業的入住率和租金上漲，並可能減少我們物業的價值； |
| • |
商業空間需求下降和/或運營成本增加; |
| • |
任何主要租戶（或大量租戶）因其財務狀況惡化、提前終止租約、不續租或以對我們不利的條款續租而未向我們支付租金的情況。 |
| • |
我們和我們的租戶面臨的經濟條件可能對我們的財務狀況和運營結果產生重大不利影響; |
| • |
我們未能及時產生足夠的現金來償還或清償我們的債務責任。 |
| • |
我們無法借款或籌集足夠資金來維持和/或擴展我們的地產投資組合; |
| • |
房地產融資市場的不利變化，包括利率期貨和/或借貸成本的潛在增加； |
| • |
潛在損失，包括不利天氣條件、自然災害和產權索賠，可能不在保險範圍內; |
| • |
無法完成收購或處置，即使完成這些交易，也可能無法成功運營收購的物業和/或賣出物業而不產生重大的贖回成本; |
| • |
我們依賴第三方物業管理人員來管理大量物業，經紀人或代理人來出租我們的物業； |
| • |
單戶住宅供應和/或需求減少，無法獲取更多樣板房，以及購買此類房產的競爭加劇； |
| • |
恐怖主義襲擊或行動，以及與信息技術和網絡安全攻擊相關的風險，機密信息丟失及其他相關業務中斷風險； |
| • |
未能繼續符合REIT資格; |
| • |
任何法律程序的不利結果; |
| • |
影響我們業務的法律、規則和法規的變化； |
| • | 如果我們存入資金的任何銀行機構最終破產，我們可能會失去超過聯邦保險水平的任何存入資金，這可能會減少我們可用於分配或投資的現金，並可能導致我們價值的下降。 |
| • |
我們可能無法符合納斯達克資本市場（"納斯達克"）的繼續上市要求，可能導致我們的普通股被除牌，這可能會影響我們普通股的市場價格和流動性，並降低我們籌集資本的能力； |
|
| • |
激進股東的行動可能導致我們承擔重大成本，分散管理層的注意力和資源，並對我們的業務產生不利影響；和 |
|
| • |
在我們的風險因素中討論的其他風險和不確定性 年度報告在於2023年12月31日結束，於2024年4月16日提交給SEC的10-K/A表格中討論的風險因素. |
項目1.基本報表
presidio property trust, inc.及其子公司
合併資產負債表
| 9月30日, | 2023年12月31日, | |||||||
| 2024 | 2023 | |||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 房地產資產和租賃無形資產: | ||||||||
| 土地 | $ | $ | ||||||
| 建築物和改善 | ||||||||
| 租戶改進 | ||||||||
| 租賃無形資產 | ||||||||
| 房地產資產和用於投資的租賃無形資產的成本 | ||||||||
| 累計折舊及攤銷費用 | ( | ) | ( | ) | ||||
| 房地產資產和用於投資的租賃無形資產，淨值 | ||||||||
| 資產負債表中持有待售房地產資產淨額 | ||||||||
| 房地產業資產淨值 | ||||||||
| 其他資產： | ||||||||
| 現金、現金等價物和受限制的現金 | ||||||||
| 推遲租賃成本，淨額 | ||||||||
| 商譽 | ||||||||
| 投資於Conduit Pharmaceuticals市場證券（見注2和9） | ||||||||
| 遞延所得稅資產 | ||||||||
| 其他資產淨額（見注6） | ||||||||
| 其他資產總計 | ||||||||
| 資產總計 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 負債： | ||||||||
| 按揭貸款，淨額 | $ | $ | ||||||
| 與待售房地產相關的應付抵押借據淨額 | ||||||||
| 應付抵押借據總淨額 | ||||||||
| 應付賬款及應計負債 | ||||||||
| 應計房地產稅 | ||||||||
| 應付股息 | ||||||||
| 租賃負債，淨額 | ||||||||
| 低於市場租賃淨額 | ||||||||
| 總負債 | ||||||||
| 承諾和 contingencies（參見注釋10） | ||||||||
| 股東權益： | ||||||||
| D系列優先股，$ 每股面值； 授權股份數; shares issued and outstanding (liquidation preference $ 截至2024年9月30日，每股資產 截至2023年12月31日已發行和流通的股份 | ||||||||
| A系列普通股，$ 每股面值， 授權股份數; 股數和 截至2024年9月30日和2023年12月31日，分別發行和流通的股份 | ||||||||
| 追加實收資本 | ||||||||
| 分紅派息和累積虧損 | ( | ) | ( | ) | ||||
| 非控股權益前的股東權益合計 | ||||||||
| 非控股權益 | ||||||||
| 總股本 | ||||||||
| 負債和所有者權益總計 | $ | $ | ||||||
請參見合併基本報表的註釋
presidio property trust, inc.及其子公司
截至2020年6月30日和2019年6月30日三個月和六個月的營業額
(未經審計)
| 截至9月30日三個月的情況 |
截至9月30日九個月期間 |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| 營業收入: |
||||||||||||||||
| 租金收入 |
$ | $ | $ | $ | ||||||||||||
| 費用和其他收入 |
||||||||||||||||
| 總營業收入 |
||||||||||||||||
| 成本和費用： |
||||||||||||||||
| 租賃運營成本 |
||||||||||||||||
| 一般和行政 |
||||||||||||||||
| 折舊和攤銷 |
||||||||||||||||
| 房地產資產減值 |
||||||||||||||||
| 總成本和費用 |
||||||||||||||||
| 其他收入（費用）： |
||||||||||||||||
| 利息支出 - 抵押貸款 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 利息和其他收入，淨額 |
||||||||||||||||
| 房地產銷售收益，淨額 |
||||||||||||||||
| 在Conduit Pharmaceuticals的可交易證券中淨損失（見腳註9） |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| SPAC解散收益（見腳註9） |
||||||||||||||||
| 所得稅（收益）費用 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 總其他(收益)費用，淨額 |
( |
) | ( |
) | ||||||||||||
| 淨利潤（損失） |
( |
) | ( |
) | ||||||||||||
| 減：歸屬於非控股權益的收入 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 歸屬於presidio property trust, inc.股東的淨利潤（損失） |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| 減：優先股D系列分紅派息 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 歸屬於presidio property trust公司普通股股東的淨利潤（虧損） |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| 歸屬於presidio property trust公司普通股股東的每股淨利潤（虧損）： |
||||||||||||||||
| 基本和稀釋 |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| 基本及稀釋後的普通股加權平均發售價 |
||||||||||||||||
請參閱並注意基本報表註釋
presidio property trust, inc.及其子公司
股東權益變動表
截至2024年9月30日和2023年第三季度及九個月
(未經審計)
| 額外的 |
分紅派息和 |
總計 |
非- |
|||||||||||||||||||||||||||||||||
| 優先股系列D |
普通股 |
實收股本 |
累計 |
股東權益 |
控股 |
總計 |
||||||||||||||||||||||||||||||
| 股份 |
金額 |
股份 |
金額 |
資本 |
損失 |
股權 |
利益 |
股權 |
||||||||||||||||||||||||||||
| 2023年12月31日餘額 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨利潤（虧損） |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 向D系列優先股股東支付分紅 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 超過收到的出資額的分配 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| 受限股份爲基礎的補償 |
— | — | ||||||||||||||||||||||||||||||||||
| 發行股份補償A類普通股 |
— | |||||||||||||||||||||||||||||||||||
| 2024 年 3 月 31 日餘額 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨利潤（虧損） |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 向D類優先股股東派發分紅 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 分配 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| 發行優先股D類優先股，扣除發行成本淨額 |
||||||||||||||||||||||||||||||||||||
| 受限股份爲基礎的補償 |
— | — | ||||||||||||||||||||||||||||||||||
| 以成本回購A系列普通股 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| 餘額，2024年6月30日 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨利潤（虧損） |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 向D系列優先股東支付分紅派息 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 分配 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| 基於受限制的股票的補償 |
— | — | ||||||||||||||||||||||||||||||||||
| 發行A系列普通股 |
( |
) | ||||||||||||||||||||||||||||||||||
| 以成本回購A系列普通股 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| 餘額，2024年9月30日 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 額外的 |
分紅派息和 |
總計 |
非- |
|||||||||||||||||||||||||||||||||
| 優先股系列D |
普通股 |
實收股本 |
累計 |
股東權益 |
控股 |
總計 |
||||||||||||||||||||||||||||||
| 股份 |
金額 |
股份 |
金額 |
資本 |
損失 |
股權 |
利益 |
股權 |
||||||||||||||||||||||||||||
| 2022年12月31日餘額 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨利潤（虧損） |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 分紅派息給A股普通股東 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 分紅派息給D系列優先股東 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 超過收到的貢獻額的分配 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| 重新衡量SPAC股份的贖回價值 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| SPAC贖回的滯納稅款 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 受限股票爲基礎的補償 |
||||||||||||||||||||||||||||||||||||
| 回購D系列優先股，按成本計量 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| 發放以股票爲基礎的補償普通股 |
— | |||||||||||||||||||||||||||||||||||
| 2023年3月31日的結存 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨利潤（虧損） |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 向A類普通股股東支付的分紅 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 向D類優先股股東支付的分紅 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 超額分配的分紅 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| SPAC股份重新計量爲贖回價值 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 限制性股票相關的報酬 |
||||||||||||||||||||||||||||||||||||
| 以成本回購D類優先股 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| 普通股解禁 |
— | |||||||||||||||||||||||||||||||||||
| 餘額，2023年6月30日 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| 淨利潤 |
— | — | ||||||||||||||||||||||||||||||||||
| 限制性股票的授予 |
||||||||||||||||||||||||||||||||||||
| 向A類普通股股東支付的分紅派息 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| 向D類優先股股東支付的分紅派息 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| SPAC脫離共同控制前對應納稅的扭轉 |
— | — | ||||||||||||||||||||||||||||||||||
| 基於限制性股票的薪酬 |
||||||||||||||||||||||||||||||||||||
| 按成本回購D類優先股 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| 超額分配收到的貢獻 |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| 餘額，2023年9月30日 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
請參閱並注意基本報表註釋
合併現金流量表
(未經審計)
| 截至9月30日九個月期間 |
||||||||
| 2024 |
2023 |
|||||||
| 經營活動現金流量： |
||||||||
| 淨利潤（虧損） |
$ | ( |
) | $ | ||||
| 重分類和其他項目 |
||||||||
| 折舊和攤銷 |
||||||||
| 保修準備金 |
||||||||
| 壞賬費用 |
||||||||
| 房地產資產出售收益，淨額 |
( |
) | ( |
) | ||||
| SPAC投資去合併的收益 |
( |
) | ||||||
| Conduit Pharmaceuticals公允價值可交易證券的淨損失 |
||||||||
| 可交易證券的淨損失（收益） |
( |
) | ||||||
| SPAC信託帳戶公允價值的淨收益 |
( |
) | ||||||
| 房地產資產減值 |
||||||||
| 融資成本攤銷 |
||||||||
| 低於市場租賃的攤銷 |
( |
) | ( |
) | ||||
| 遞延租賃成本的攤銷 |
||||||||
| 直線租金調整 |
( |
) | ( |
) | ||||
| 運營資產和負債的變化： |
||||||||
| 其他資產 |
( |
) | ||||||
| 應付賬款及應計負債 |
( |
) | ( |
) | ||||
| 特別目的收購公司（SPAC）的應付賬款和應計負債 |
||||||||
| 應計房地產稅 |
( |
) | ( |
) | ||||
| 經營活動中提供的淨現金流量（流出） |
( |
) | ( |
) | ||||
| 投資活動現金流量： |
||||||||
| 房地產業收購 |
( |
) | ( |
) | ||||
| 對建築物及租戶改善的增加 |
( |
) | ( |
) | ||||
| 投資於可交易證券 |
( |
) | ||||||
| 出售有市場流通的證券收益 |
||||||||
| 將SPAC IPO收益投資於信託帳戶 |
( |
) | ||||||
| 從信託帳戶提取SPAC稅款 |
||||||||
| 從信託帳戶提取SPAC股份贖回款 |
||||||||
| 房地產業銷售獲利，淨額 |
||||||||
| 投資活動提供的淨現金流量 |
||||||||
| 融資活動的現金流： |
||||||||
| 抵押貸款應付款的收益，扣除發行成本 |
||||||||
| 償還抵押借款 |
( |
) | ( |
) | ||||
| 對非控股權益的分配，淨額 |
( |
) | ( |
) | ||||
| 贖回SPAC股份 |
( |
) | ||||||
| 發行D系列優先股，扣除發行成本 |
||||||||
| 按成本回購A系列普通股 |
( |
) | ||||||
| 按成本回購D系列優先股 |
( |
) | ||||||
| 向D系列優先股股東支付的分紅派息 |
( |
) | ( |
) | ||||
| 向A系列普通股股東支付的分紅派息 |
( |
) | ||||||
| 融資活動所使用的淨現金 |
( |
) | ( |
) | ||||
| 經營性現金流淨額 |
( |
) | ||||||
| 期初現金、現金等價物及受限制的現金餘額 |
||||||||
| 期末現金、現金等價物及受限制的現金餘額 |
$ | $ | ||||||
| 現金流信息的補充披露： |
||||||||
| 應付利息-抵押貸款票據 |
$ | $ | ||||||
| 支付了來自前一年的建築和租戶改進的附加費用 |
$ | $ | ||||||
| 所得稅已付款項 |
$ | $ | ||||||
| 非現金投資活動： |
||||||||
| Conduit Pharmaceuticals的私人warrants |
$ | $ | ||||||
| 非現金融資活動： |
||||||||
| 發行A系列普通股以獲得少數股權 |
$ | $ | ||||||
| 應付賬款中包含的未付建築和租戶改進附加費用 |
$ | $ | ||||||
| 應付分紅派息 - 普通股 A系列 |
$ | $ | ||||||
| 應付分紅派息 - 優先股 D系列 |
$ | $ | ||||||
請參閱並注意基本報表註釋
presidio property trust, inc.及其子公司
合併財務報表註釋（未經審計）
2024年9月30日
1. 組織
組織。Presidio Property Trust, Inc.（「我們」、「我們的」、「我們」或「公司」）是一家內部管理的股權房地產投資信託（「REIT」），在辦公、工業、零售和樣板房產上擁有資產。我們於1999年9月28日在加利福尼亞州註冊成立， 1999年9月28日， 並根據 2010年8月， 我們重新註冊爲馬里蘭州公司。 在2017年10月， 我們將公司名稱從「NetREIt, Inc.」更改爲「Presidio Property Trust, Inc.」通過Presidio Property Trust, Inc.及其子公司和合作夥伴，我們擁有
公司或其關聯公司在這些合併基本報表覆蓋的期間內運營以下合作關係： 一份 在這些合併基本報表涵蓋的期間內：
| • | 該公司是唯一的普通合夥人和有限合夥人在家善控股 有限合夥關係（NetREIt Palm Self-Storage LP和NetREIt Casa Grande LP），兩者在 2024年9月30日年，持有擁有生產收入的房地產的實體的所有權利。公司稱這些實體爲「NetREIt合作關係」。 | |
| • | 該公司在有限合夥關係中擔任普通合夥人和有限合夥人 |
公司已確定其擁有少於的有限合夥企業 100% 應納入公司的合併基本報表，因爲公司指揮其活動並控制這些有限合夥企業。
我們已選擇根據修訂後的《稅法》第，作爲房地產投資信託基金（REIT）進行納稅。 856 通過 860 內部收入法典的第...的 1986, 爲了保持我們作爲REIT的資格，我們必須向股東分配至少 90% 我們的REIT應稅收入，並滿足《稅法》規定的與經營結果、資產持有、分配水平和股權多樣性等相關的其他各種要求。如果我們保持REIT的納稅資格，我們通常會 在測試商譽減值時，公司可以選擇 針對從REIT合格活動中獲得的利潤，向股東分配的收益，需支付公司層面的所得稅。如果我們在任何納稅年度未能保持REIT的資格，並無法利用《稅法》中規定的某些節稅條款，所有應稅收入將按常規公司稅率，包含任何適用的替代最低稅，繳納聯邦所得稅。我們還需繳納某些州和地方的所得稅。
我們與我們的實體一起 一份 已選擇將某些子公司視爲可納稅的REIT子公司（「TRS」）以用於聯邦所得稅目的。我們進行的某些活動必須由TRS進行，例如爲我們的商業租戶提供非常規服務，並持有我們無法直接持有的資產。TRS應繳納聯邦和州所得稅。公司已經得出結論，基本報表中存在着 沒有 重大的不確定稅務立場需要在財務報表中確認。公司及其附屬公司均尚未被任何稅收司法管轄區針對稅務立場徵收任何重大利息或罰款。
流動性。公司預期的未來流動性來源 可能 包括現有現金和現金等價物、運營現金流、現有抵押貸款再融資、未來房地產銷售、新借款以及股權或債務證券的出售。未來的資本需求包括償還現有借款、維護現有房產、爲租戶改善商業建築提供資金、支付租賃佣金（視情況而定） 不 由貸款人持有的儲備存款支付），以及向股東支付的股息。該公司還在尋求可能產生收入和實現長期收益的投資，以便向我們的股東支付股息。爲了確保我們能夠有效地實現這些目標，我們會定期審查我們的流動性需求，並持續評估所有潛在的流動性來源。我如有必要，公司 可能 根據信貸環境尋求其他短期流動性替代方案，例如過渡貸款、房地產再融資貸款或銀行信貸額度。參見備註 11 股東權益，了解有關證券銷售的更多信息。
短期流動性需求包括支付我們的當前運營成本，滿足現有抵押貸款的償債要求，完成 十商業大樓的任何改進，支付租賃佣金，分配給非控制權益人，並根據需要向股東支付分紅派息。未來應付的按揭貸款本金，約爲2024及 2025 總額。 $
隨着公司的繼續運營， 可能 再融資或尋求額外融資。但是，可能有 不 保證任何此類再融資或額外融資將以可接受的條件提供給公司（如果有的話）。如果發生的事件或情況使公司確實如此 不 獲得額外資金，很可能需要減少計劃和/或某些全權支出，這可能會對公司實現其預期業務目標的能力產生重大不利影響。管理層認爲，手頭營運資金與爲商業和模型住房抵押貸款再融資的能力相結合，將至少在下一年爲運營提供資金 十二 自這些未經審計的中期財務報表發佈之日起的幾個月。
自成立以來，公司一直擔任前特殊收購公司Murphy Canyon Acquisition Corp.（"Murphy Canyon"或"SPAC"）的贊助商。 2021年10月 而且公司的某些高管和董事也擔任SPAC的高管和董事。在 2023年9月22日， 當Murphy Canyon與康德製藥有限公司（"Conduit Pharma"）完成業務合併，並將其更名爲Conduit Pharmaceuticals Inc.（"Conduit"）時。在業務合併之前，公司擁有SPAC流通普通股的約
2. SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in the 2023 year end Annual Report. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s 2023 year end Annual Report.
Basis of Presentation. The accompanying consolidated financial statements have been prepared by the Company's management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain information and footnote disclosures required for annual consolidated financial statements have been excluded pursuant to rules and regulations of the SEC. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of our financial position as of September 30, 2024, and December 31, 2023, as well as results of our operations, and cash flows as of, and for the nine months ended September 30, 2024 and 2023, respectively. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, due to real estate market fluctuations, available mortgage lending rates and other unknown factors. These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the 2023 year end Annual Report. The consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements included in the 2023 year end Annual Report.
Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Presidio Property Trust, Inc. and its subsidiaries, NetREIT Advisors, LLC and Dubose Advisors LLC (collectively, the “Advisors”), and NetREIT Dubose Model Home REIT, Inc. The consolidated financial statements also include the results of the NetREIT Partnerships and the Model Home Partnerships. As used herein, references to the “Company” include references to Presidio Property Trust, Inc., its subsidiaries, and the partnerships. All significant intercompany balances and transactions have been eliminated in consolidation.
The consolidated financial statements also include the accounts of (a) Murphy Canyon up until September 22, 2023, when it completed its business combination. Murphy Canyon was a special purpose acquisition company ("SPAC") for which we served as the financial sponsor (as described herein), and which was deemed to be controlled by us as a result of our
The Company classifies the noncontrolling interests in the NetREIT Partnerships as part of consolidated net (loss) income in 2024 and 2023 and has included the accumulated amount of noncontrolling interests as part of equity since inception in February 2010. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interest will be remeasured, with the gain or loss reported in the consolidated statements of operations. Management has evaluated the noncontrolling interests and determined that they do not contain any redemption features.
Use of Estimates. The consolidated financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates include, private warrants, the allocation of purchase price paid for property acquisitions between the components of land, building and intangible assets acquired including their useful lives, valuation of long-lived assets, and the allowance for doubtful accounts, which is based on an evaluation of the tenants’ ability to pay. Actual results could differ from those estimates.
Real Estate Assets and Lease Intangibles. Land, buildings and improvements are recorded at cost, including tenant improvements and lease acquisition costs (including leasing commissions, space planning fees, and legal fees). The Company capitalizes any expenditure that replaces, improves, or otherwise extends the economic life of an asset, while ordinary repairs and maintenance are expensed as incurred. The Company allocates the purchase price of acquired properties between the acquired tangible assets and liabilities (consisting of land, buildings, tenant improvements, and long-term debt) and identified intangible assets and liabilities (including the value of above-market and below-market leases, the value of in-place leases, unamortized lease origination costs and tenant relationships), in each case based on their respective fair values.
The Company allocates the purchase price to tangible assets of an acquired property based on the estimated fair values of those tangible assets, assuming the property was vacant. Estimates of fair value for land, building and building improvements are based on many factors, including, but not limited to, comparisons to other properties sold in the same geographic area and independent third-party valuations. In estimating the fair values of the tangible assets, intangible assets, and liabilities acquired, the Company also considers information obtained about each property as a result of its pre‑acquisition due diligence, marketing and leasing activities.
The value allocated to acquired lease intangibles is based on management’s evaluation of the specific characteristics of each tenant’s lease. Characteristics considered by management in allocating these values include, but are not limited, to the nature and extent of the existing business relationships with the tenant, growth prospects for developing new business with the tenant, the remaining term of the lease, the tenant’s credit quality, and other factors.
The value attributable to the above-market or below-market component of an acquired in-place lease is determined based upon the present value (using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of rents that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above or below-market leases are amortized on a straight-line basis as an increase or reduction of rental income over the remaining non-cancelable term of the respective leases. Amortization of above and below-market rents resulted in a net increase in rental income of approximately $
The value of in-place leases and unamortized lease origination costs are amortized to expenses over the remaining term of the respective leases, which range from less than a year to years. The amount allocated to acquired in-place leases is determined based on management’s assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased.
The amount allocated to unamortized lease origination costs is determined by what the Company would have paid to a third-party to secure a new tenant reduced by the expired term of the respective lease. The amount allocated to tenant relationships is the benefit resulting from the likelihood of a tenant renewing its lease. Amortization expense related to these assets was approximately $
Deferred Leasing Costs. Costs incurred in connection with successful property leases are capitalized as deferred leasing costs and amortized to leasing commission expense on a straight-line basis over the terms of the related leases which generally range from to years. Deferred leasing costs consist of third-party leasing commissions. Management re-evaluates the remaining useful lives of leasing costs as the creditworthiness of the tenants and economic and market conditions change. If management determines the estimated remaining life of the respective lease has changed, the amortization period is adjusted. At September 30, 2024 and December 31, 2023, the Company had net deferred leasing costs of approximately $
Cash Equivalents and Restricted Cash. At September 30, 2024 and December 31, 2023, we had approximately $
Real Estate Held for Sale and Discontinued Operations. We generally reclassify assets to "held for sale" when the disposition has been approved, it is available for immediate sale in its present condition, we are actively seeking a buyer, and the disposition is considered probable within year. Additionally, real estate sold during the current period is classified as “real estate assets held for sale” for all prior periods presented in the accompanying consolidated financial statements. Mortgage notes payable related to the real estate sold during the current period are classified as “mortgage notes payable related to properties held for sale” for all prior periods presented in the accompanying consolidated financial statements. Additionally, we record the operating results related to real estate that has been disposed of as discontinued operations for all periods presented if the operations have been eliminated and represent a strategic shift and we will not have any significant continuing involvement in the operations of the property following the sale. As of September 30, 2024, two commercial properties, Union Town Center and Research Parkway, met the criteria to be classified as "held for sale", and 5 model homes were classified as "held for sale".
Deferred Offering Costs. Deferred offering costs represent legal, accounting and other direct costs related to our offerings. As of September 30, 2024 and December 31, 2023, we have incurred approximately and $
Impairments of Real Estate Assets. We regularly review for impairment on a property-by-property basis. Impairment is recognized on a property held for use when the expected undiscounted cash flows for a property are less than the carrying amount at which time the property is written-down to fair value. The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows, including, but not limited to, revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over long periods. Since our properties typically have a long life, the assumptions used to estimate the future recoverability of carrying value requires significant management judgment. Actual results could be significantly different from the estimates. These estimates have a direct impact on net income because recording an impairment charge results in a negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell. Although our strategy is to hold our properties over the long-term, if our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to fair value and such loss could be material.
We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the three and nine months ended September 30, 2024, we recognized non-cash impairment charges of approximately $
The new impairment charges for the model homes, during the three months ended September 30, 2024, reflects the estimated sales prices for these specific model homes in October and November 2024 as a result of an abnormally short hold period, less than two years, on model homes purchased in 2022. The total impairment chargers on model homes during the three and nine months ended September 30, 2024 was approximately $
The Dakota Center property impairment of approximately $
Fair Value Measurements. Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition. The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy:
| • | Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; |
| • | Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
| • | Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. |
When available, we utilize quoted market prices from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement.
Additionally, in an inactive market, a market price quoted from an independent third-party may rely more on models with inputs based on information available only to that independent third-party. When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources. As of September 30, 2024, we did not hold any marketable securities, excluding our investments in Conduit's common stock and common stock warrants. As of December 31, 2023, our marketable securities (excluding our investments in Conduit's common stock and common stock warrants), held at a third party broker, presented on the consolidated balance sheets within other assets were measured at fair value using Level 1 market prices and totaled approximately $
On April 22, 2024, the Company entered into a lockup agreement with Conduit pursuant to which the Company agreed not to transfer or sell
Earnings per share (“EPS”). The EPS on common stock has been computed pursuant to the guidance in FASB ASC Topic 260, Earnings Per Share. The guidance requires the classification of the Company’s unvested restricted stock, which contains rights to receive non-forfeitable dividends, as participating securities requiring the two-class method of computing net income per share of common stock. In accordance with the two-class method, earnings per share have been computed by dividing the net income less net income attributable to unvested restricted shares by the weighted average number of shares of common stock outstanding less unvested restricted shares. Diluted earnings per share is computed by dividing net income by the weighted average shares of common stock and potentially dilutive securities outstanding in accordance with the treasury stock method.
Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Common Stock Warrants | ||||||||||||||||
| Placement Agent Warrants | ||||||||||||||||
| Series A Warrants | ||||||||||||||||
| Unvested Restricted Common Stock Grants | ||||||||||||||||
| Total potentially dilutive shares | ||||||||||||||||
Variable Interest Entity. We determine whether an entity is a Variable Interest Entity ("VIE") and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. Our determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether we participated in the design of the entity and the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.
We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both: (i) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.
We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance, including, but not limited to, the ability to direct operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion continually. We consolidate any VIE of which we are the primary beneficiary.
The Company was involved in the formation of an entity considered to be a VIE, prior to September 22, 2023, when Murphy Canyon completed its business combination. The Company evaluated the consolidation of this entity as required pursuant to ASC Topic 810 relating to the consolidation of such VIE. The Company’s determination of whether it is the primary beneficiary of the VIE is based in part on an assessment of whether or not the Company and its related parties have the power to direct activities of the VIE and are exposed to the majority of the risks and rewards of the entity.
Following the completion of the Murphy Canyon IPO in January 2022, we determined that Murphy Canyon was a VIE in which we had a variable interest because we participated in its formation and design, manage the significant activities, and Murphy Canyon did not have enough equity at risk to finance its activities without additional subordinated financial support. We have also determined that Murphy Canyon's public stockholders did not have substantive rights, and their equity interest constituted temporary equity, outside of permanent equity, in accordance with ASC 480-10-S99-3A. As such, we have concluded that, prior to the business combination, we were the primary beneficiary of Murphy Canyon as a VIE, as we had the right to receive benefits or the obligation to absorb losses of the entity, as well as the power to direct a majority of the activities that significantly impacted Murphy Canyon's economic performance. Since we were the primary beneficiary, Murphy Canyon was consolidated into our consolidated financial statements. See Note 9 Investment in Conduit Pharmaceuticals for additional details regarding Murphy Canyon.
Shares Subject to Possible Redemption. Given that the shares of Murphy Canyon Class A common stock issued to investors in its IPO were issued with other freestanding instruments (i.e., public warrants which were classified as permanent equity as described below), the proceeds and initial carrying value of the Class A common stock classified as temporary equity was allocated in accordance with ASC 470-20. The Murphy Canyon Class A common stock was subject to ASC 480-10-S99. In addition, because it was probable that the equity instrument would become redeemable, we had the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it became probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occurred and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. We elected to recognize the accretion resulting from changes in redemption value immediately during the three months ended March 31, 2022, and every quarter since then, until September 22, 2023 as noted above. See Note 9 Investment in Conduit Pharmaceuticals for additional details regarding Murphy Canyon.
Immaterial Error Corrections. During the second quarter of 2024, management determined that its prior treatment of accruing restricted compensation expense as a liability and included in accounts payable and accrued liabilities on the consolidated balance sheets should be treated differently. Management determined that the restricted stock compensation should be treated as equity and included in additional paid in capital in the Company’s accompanying consolidated balance sheet for the prior years in accordance with ASC 718. Compensation - Stock Compensation. Accordingly, the Company’s accompanying consolidated balance sheets and consolidated statements of changes in equity as of December 31, 2022, and December 31, 2023, respectively, and for the three months ended March 31, 2023, June 30, 2023, and March 31, 2024, respectively, reflects an adjustment to include restricted stock compensation.
On the balance sheet as of December 31, 2023, accounts payable and accrued liabilities reflects a reduction of $
During the third quarter of 2024, management determined that the consolidated statements of cash flows for the nine months ended September 30, 2023 and the year ended December 31, 2023, overstated the amount of cash outflows for building and tenant improvements as a portion of those additions were in accounts payable at the end of each period. For the nine months ended September 30, 2023 and the year ended December 31, 2023, $
As such, the Company’s consolidated statement of cash flows for the nine months ended September 30, 2023, reflects an adjustment to reduce cash outflows for unpaid building and tenant improvements. For the nine months ended September 30, 2023, net cash provided by operating activities, as previously reported, of $
The effect of correcting the errors in operating and investing cash flows for unpaid building and tenant improvements for the three months ended March 31, 2024 was $
Reclassifications. Certain prior year balance sheet, statement of operations and statement of cash flows accounts have been reclassified to conform with the current year presentation. The reclassifications did not affect net income in the prior year's consolidated statement of operations.
Subsequent Events. We evaluate subsequent events up until the date the consolidated financial statements are issued.
Recently Issued and Adopted Accounting Pronouncements. In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes, to enhance income tax disclosures, provide more information about tax risks and opportunities present in worldwide operations, and to disaggregate existing income tax disclosures. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We have not yet adopted ASU 2023-09 and are currently evaluating the impact on our financial statement disclosures.
In November 2023, FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting, establishing improvements to reportable segments disclosures to enhance segment reporting under Topic 280. This ASU aims to change how public entities identify and aggregate operating segments and apply quantitative thresholds to determine their reportable segments. This ASU also requires public entities that operate as a single reportable segment to provide all segment disclosures in Topic 280, not just entity level disclosures. The guidance will be effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and the amendments should be applied retrospectively to all periods presented in the financial statements. We have not yet adopted ASU 2023-07 and are currently evaluating the impact on our financial statement disclosures.
In August 2023, FASB issued Accounting Standards Update ("ASU") ASU 2023-05, "Business Combinations - Joint Venture Formations (Subtopic 805- 60): Recognition and Initial Measurement" ("ASU 2023-05"). ASU 2023-05 addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. Prior to the amendment, the FASB did not provide specific authoritative guidance on the initial measurement of assets and liabilities assumed by a joint venture upon its formation. ASU 2023-05 requires a joint venture to recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. The Company has elected not to early adopt ASU 2023-05 and does not expect the adoption will have a significant impact on our consolidated financial statements.
In March 2024, the SEC issued final climate-disclosure rules to enhance and standardize climate‐related disclosures by public companies. With regards to financial statements, the rules requires disclosure of (i) capitalized costs, expenditures expensed, charges, and losses incurred as a result of severe weather events and other natural conditions, subject to applicable one percent and de minimis disclosure thresholds; (ii) capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a company's plans to achieve its disclosed climate-related targets or goals; and (iii) if the estimates and assumptions the company uses to produce the financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions was impacted. The rules are effective for annual periods beginning January 1, 2025 and are to be applied prospectively. On April 4, 2024, the SEC voluntarily stayed the rules pending judicial review as a result of litigation.
In November 2024, FASB issued Accounting Standards Update ASU 2024-03, Income Statement—Reporting Comprehensive, Income—Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses (“ASU 2024-03”). This ASU is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We have not yet adopted ASU 2024-03 and are currently evaluating the impact on our financial statement disclosures.
3. RECENT REAL ESTATE TRANSACTIONS
Acquisitions during the nine months ended September 30, 2024:
| • | The Company acquired |
Acquisitions during the nine months ended September 30, 2023:
| • | The Company acquired |
Dispositions during the nine months ended September 30, 2024:
| • | The Company sold |
Dispositions during the nine months ended September 30, 2023:
| • | The Company sold |
4. REAL ESTATE ASSETS
The Company owns a diverse portfolio of real estate assets. The primary types of properties the Company invests in are office, industrial, retail, and triple-net leased model home properties. We have commercial properties located in Colorado, in North Dakota, in Southern California, in Texas and in Maryland. Our model home properties are located in
| • | | |
| • | ||
| • | |
A summary of the properties owned by the Company, including their lease intangibles, as of September 30, 2024 and December 31, 2023 is as follows:
| Date | Real estate assets and lease intangibles, net | ||||||||||||
| Property Name | Acquired | Location | September 30, 2024 | December 31, 2023 | |||||||||
| Genesis Plaza (1) | August 2010 | | $ | $ | |||||||||
| Dakota Center (2) | May 2011 | | |||||||||||
| Grand Pacific Center (3) | March 2014 | | |||||||||||
| Arapahoe Center | December 2014 | | |||||||||||
| Union Town Center (4) | December 2014 | | |||||||||||
| West Fargo Industrial | August 2015 | | |||||||||||
| 300 N.P. | August 2015 | | |||||||||||
| Research Parkway (4) | August 2015 | | |||||||||||
| One Park Center (5) | August 2015 | | |||||||||||
| Shea Center II (6) | December 2015 | | |||||||||||
| Mandolin (7) | August 2021 | | |||||||||||
| Baltimore | December 2021 | | |||||||||||
| Commercial properties | |||||||||||||
| Model Home properties (8) | 2017 - 2024 | | |||||||||||
| Total real estate assets and lease intangibles, net | $ | $ | |||||||||||
| (1) | Genesis Plaza is owned by two tenants-in-common, NetREIT Genesis and NetREIT Genessis II, each of which own
|
| (2) | The non-recourse loan on the Dakota Center property matured on July 6, 2024. During October 2024, management has agreed with the lender to sell the property to settle the loan balance. Due to the uncertainties in the Fargo market, we have impaired the property’s book value and recorded an impairment charge of approximately $
|
| (3) | Grand Pacific Center, Bismarck, ND, was removed from held-for-sale after signing a major lease with KLJ Engineering on December 7, 2022 for approximately
|
| (4) | As of September 30, 2024, Union Town Center and Research Parkway have been listed for sale, and included in the real estate assets held for sale, net on the consolidated balance sheet as of September 30, 2024. We expect a sale to take place during the fourth quarter of 2024, prior to the maturity of their loans. If the sales take longer than expected, we have options available to extend the maturity of the loans to accommodate for a longer sales period.
|
| (5) | During the year ended December 31, 2023, we recorded a $
|
| (6) | On December 31, 2022, the lease for our largest tenant, Halliburton, expired. Halliburton was located in our Shea Center II property in Colorado, and made up approximately $
|
| (7) | A portion of the proceeds from the sale of Highland Court were used in like-kind exchange transactions pursued under Section 1031 of the Code for the acquisition of our Mandolin property. Mandolin is owned by NetREIT Palm Self-Storage LP, through its wholly owned subsidiary NetREIT Highland LLC, and the Company is the sole general partner and owns
|
| (8) | Includes Model Homes listed as held for sale as of September 30, 2024 and December 31, 2023. During the three and nine months ended September 30, 2024, we recorded an impairment charge for model homes totaling $ |
For the three and nine months ended September 30, 2024 depreciation expense totaled approximately $
The following table summarizes the net value of other intangible assets acquired and the accumulated amortization for each class of intangible asset:
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
| Lease Intangibles | Accumulated Amortization | Lease Intangibles, net | Lease Intangibles | Accumulated Amortization | Lease Intangibles, net | |||||||||||||||||||
| In-place leases | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Leasing costs | ( | ) | ( | ) | ||||||||||||||||||||
| Above-market leases | ( | ) | ||||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||
At September 30, 2024, and December 31, 2023, there were gross lease intangible assets and accumulated amortization related to the lease intangible assets included in real estate assets held for sale.
The net value of acquired intangible liabilities was approximately $
Future aggregate approximate amortization expense for the Company's lease intangible assets is as follows:
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total | $ |
6. OTHER ASSETS
Other assets consist of the following:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Deferred rent receivable | $ | $ | ||||||
| Prepaid expenses, deposits and other | ||||||||
| Notes receivable | ||||||||
| Accounts receivable, net | ||||||||
| Right-of-use assets, net | ||||||||
| Deferred offering costs | ||||||||
| Investment in marketable securities (not including Conduit) | ||||||||
| Total other assets | $ | $ | ||||||
As of September 30, 2024, we did not own common shares of other publicly traded REITs. As of December 31, 2023, we owned common shares of
7. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following:
| Principal as of | |||||||||||||||||
| September 30, | December 31, | Loan | Interest | ||||||||||||||
| Mortgage note property | 2024 | 2023 | Type | Rate (1) | Maturity | ||||||||||||
| Dakota Center (2) | $ | $ | Fixed | % | 7/6/2024 | ||||||||||||
| Research Parkway (6) | Fixed | % | 1/5/2025 | ||||||||||||||
| Arapahoe Service Center (6) | Fixed | % | 1/5/2025 | ||||||||||||||
| Union Town Center (6) | Fixed | % | 1/5/2025 | ||||||||||||||
| One Park Centre (6) | Fixed | % | 9/5/2025 | ||||||||||||||
| Genesis Plaza (6) | Fixed | % | 9/6/2025 | ||||||||||||||
| Shea Center II | Fixed | % | 1/5/2026 | ||||||||||||||
| West Fargo Industrial (3) | Fixed | % | 7/6/2029 | ||||||||||||||
| Grand Pacific Center (4) | Fixed | % | 5/5/2033 | ||||||||||||||
| Baltimore | Fixed | % | 4/6/2032 | ||||||||||||||
| Mandolin | Fixed | % | 4/20/2029 | ||||||||||||||
| Subtotal, Presidio Property Trust, Inc. Properties | $ | $ | |||||||||||||||
| Model Home mortgage notes (5) | Fixed | 2024 - 2029 | |||||||||||||||
| Mortgage Notes Payable | $ | $ | |||||||||||||||
| Unamortized loan costs | ( | ) | ( | ) | |||||||||||||
| Mortgage Notes Payable, net | $ | $ | |||||||||||||||
| (1) | Interest rates as of September 30, 2024. |
| (2) | The non-recourse loan on the Dakota Center property matured on July 6, 2024. Management has been in negotiations with the special servicer of the loan in modifying and/or extending the loan or possibly selling the building. We have not been able to come to an agreement regarding a situation in which the loan is modified or extended. As such, in October 2024 we have offered the property for sale in conjunction with the lender’s approval in attempts to make the lender whole, although there is no guarantee we will be able to do so. The loan is considered non-recourse and we will not be required to make up the difference if the property sells for less than the loan balance. See Note 4. Real Estate Assets above for further discussion on impairment of the property. |
| (3) | On June 20, 2024, the Company, through its subsidiary, refinanced the mortgage loan on our West Fargo Industrial properties, and entered into a loan agreement for approximately $ |
| (4) | On May 5, 2023, the Company, through its subsidiary, refinanced the mortgage loan on our Grand Pacific Center property and entered into a construction loan related to the tenant improvement associated with the KLJ Engineering LLC lease to occupy |
| (5) | As of September 30, 2024, there were model homes included as real estate assets held for sale. Our model homes have stand-alone mortgage notes at interest rates ranging from |
| (6) | These mortgage loans mature within the next twelve months and management is reviewing various options for the loan maturity, including but not limited to refinancing, restructuring and or selling these properties. As we get closer to the loan maturity date, the Company will finalize our plans. Union Town Center and Research Parkway have been listed for sale, and included in the real estate assets held for sale, net on the consolidated balance sheet as of September 30, 2024. We expect a sale to take place during the fourth quarter of 2024, prior to the maturity of the loans for Union Town Center and Research Parkway. If the sales take longer than expected, we have options available to extend the maturity of the loan to accommodate for a longer sales period. As of September 30, 2024, we were reviewing terms sheets to refinance the loan on Arapahoe Service Center from third party lenders. |
The loan agreement between NetREIT Model, Homes, Inc. (“NRMH”) and its Lender has a covenant for a Fixed Charge Coverage Ratio (“FCCR”) as defined for NRMH as of any date that equals (a) the sum of (i) EBITDA for the period ended as of such date minus (ii) distributions for the period ended as of such date divided by (b) the sum of (i) principal payments paid for the period ended as of such date plus (ii) interest expense for period ended as of such date. The FCCR is to be no less than
Scheduled principal payments of mortgage notes payable were as follows as of September 30, 2024:
| Commercial | Model | |||||||||||
| Properties | Homes | Total Principal | ||||||||||
| Years ending December 31: | Notes Payable | Notes Payable | Payments | |||||||||
| 2024 | $ | $ | $ | |||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| Thereafter | ||||||||||||
| Total | $ | $ | $ | |||||||||
8. NOTES PAYABLE
On April 22, 2020, the Company received an Economic Injury Disaster Loan of $
As of September 30, 2024, we had issued one promissory note to our majority owned subsidiary, Dubose Model Home Investors 202 LP, for the refinancing of one model home property in Texas, for approximately $
9. INVESTMENT IN CONDUIT PHARMACEUTICALS
Sponsorship of Special Purpose Acquisition Company. On January 7, 2022, we announced our sponsorship, through our wholly-owned subsidiary, Murphy Canyon Acquisition Sponsor, LLC (the "Sponsor"), of a special purpose acquisition company ("SPAC") initial public offering. The SPAC raised $
The Murphy Canyon IPO of
On November 8, 2022, the SPAC entered into an agreement and plan of merger with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company ("Conduit Pharma"), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and the SPAC's wholly owned subsidiary. The merger agreement provided that the SPAC's Cayman Island subsidiary will merge with and into Conduit Pharma, with Conduit Pharma surviving the merger as the SPAC's wholly owned subsidiary and the public company renamed "Conduit Pharmaceuticals Inc." ("Conduit").
On January 27, 2023, the merger agreement was amended to provide for only one class of authorized common stock of the SPAC following the business combination, instead of both authorized Class A common stock and Class B common stock as set forth in the original merger agreement. On May 11, 2023, the merger agreement was further amended to provide for (i) removal of the provision that indicates that no tax opinion would be delivered in connection with the closing, (ii) a closing obligation that that the SPAC either (a) be exempt from the provisions of Rule 419 promulgated under the Securities Act of 1933, as amended, other than through its net tangible assets or (b) have at least $
The investments held in Trust for the SPAC Class A common stockholders generated approximately $
As of immediately prior to the consummation of the SPAC's business combination, which occurred on September 22, 2023, the Company, through its subsidiary, had loaned the SPAC $
On September 22, 2023, the SPAC completed its business combination with Conduit Pharma and changed its name to Conduit Pharmaceuticals Inc. ("Conduit"). Immediately prior to the business combination, the Company owned approximately
Following the completion of the Murphy Canyon IPO in February 2022, we determined that Murphy Canyon is a Variable Interest Entity ("VIE") in which we had a variable interest because Murphy Canyon did not have enough equity at risk to finance its activities without additional subordinated financial support. Since the business combinations with Conduit on September 22, 2023, we have determined that Conduit's (formally Murphy Canyon) public stockholders have substantive rights and we no longer have control of Conduit's activity. Since we are no longer the controlling party, or have a majority of the issued and outstating common stock, the Company deconsolidated Conduit from our consolidated financial statements. In connection with the deconsolidation we recorded a gain of approximately $
Since deconsolidating Conduit, on September 22, 2023, our investments in Conduit's common stock (CDT) and public common stock warrants (CDTTW) and Private CDT Warrants presented on the consolidated balance sheets were measured at fair value using Level 1 and Level 3 market prices, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $
On April 22, 2024, the Company entered into a lockup agreement with Conduit pursuant to which the Company agreed not to transfer or sell
10. COMMITMENTS AND CONTINGENCIES
Environmental matters. The Company monitors its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, the Company is not currently aware of any environmental liability with respect to the properties that would have a material effect on the Company's financial condition, results of operations and cash flow. Further, the Company is not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that the Company believes would require additional disclosure or recording of a loss contingency.
Financial Markets. The Company monitors concerns over economic recession, interest rate increases, policy priorities of the U.S. presidential administration, trade wars, labor shortages, and inflation, any of which may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, the economic and geopolitical ramifications of the military conflicts in the Middle East and Ukraine, including sanctions, retaliatory sanctions, nationalism, supply chain disruptions and other consequences, could impact commercial real estate fundamentals and result in lower occupancy, lower rental rates, and declining values in our real estate portfolio and in the collateral securing our loan investments. We have not currently experienced a direct material impact to our Company or operations; however, we will continue to monitor the financial markets for events that could impact our commercial real estate properties.
11. STOCKHOLDERS' EQUITY
Preferred Stock. The Company is authorized to issue up to
On June 15, 2021, the Company completed its secondary offering of
On June 20, 2024, the Company entered into an underwriting agreement with The Benchmark Company, LLC pursuant to which the Company issued and sold in an underwritten public offering
Dividends:
Holders of shares of the Series D Preferred Stock are entitled to receive cumulative cash dividends at a rate of
Voting Rights:
Holders of shares of the Series D Preferred Stock will generally have no voting rights. However, if the Company does not pay dividends on the Series D Preferred Stock for eighteen or more monthly dividend periods (whether or not consecutive), the holders of the Series D Preferred Stock (voting separately as a class with the holders of all other classes or series of the Company's preferred stock it may issue upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series D Preferred Stock in the election referred to below) will be entitled to vote for the election of additional directors to serve on the Company's Board of Directors until the Company pays, or declares and sets apart funds for the payment of, all dividends that it owes on the Series D Preferred Stock, subject to certain limitations.
In addition, the affirmative vote of the holders of at least -thirds of the outstanding shares of Series D Preferred Stock (voting together as a class with all other series of parity preferred stock the Company may issue upon which like voting rights have been conferred and are exercisable) is required at any time for the Company to (i) authorize or issue any class or series of its stock ranking senior to the Series D Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up or (ii) to amend any provision of the Company charter so as to materially and adversely affect any rights of the Series D Preferred Stock or to take certain other actions.
Liquidation Preference:
In the event of the Company's voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Series D Preferred Stock will be entitled to be paid out of the assets the Company has legally available for distribution to its stockholders, subject to the preferential rights of the holders of any class or series of its stock the Company may issue ranking senior to the Series D Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up, a liquidation preference of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any distribution of assets is made to holders of the Company's common stock or any other class or series of the Company's stock it may issue that ranks junior to the Series D Preferred Stock as to liquidation rights.
In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the Company's available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series D Preferred Stock and the corresponding amounts payable on all shares of other classes or series of the Company's stock that it issues ranking on parity with the Series D Preferred Stock in the distribution of assets, then the holders of the Series D Preferred Stock and all other such classes or series of stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
Redemption:
Commencing on or after June 15, 2026, the Company may redeem, at its option, the Series D Preferred Stock, in whole or in part, at a cash redemption price equal to $
In accordance with the terms of the Series D Preferred Stock, the Series D monthly dividend has been approved by the Board of Directors through September 30, 2024 in the amount of $
Common Stock. The Company is authorized to issue up to
On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of
In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to
Genesis Plaza is owned by two tenants-in-common, NetREIT Genesis and NetREIT Genessis II, each of which own
Stock Repurchase Program. While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $
Cash Dividends on Common Stock and Preferred Stock. For the three and nine months ended September 30, 2024, the Company has declared a cash dividend on shares of Series A Common Stock. For the three and nine months ended September 30, 2023, the Company declared and paid approximately $
Series A Common Stock
| Quarter Ended | 2024 | 2023 | ||||||
| Distributions Declared | Distributions Declared | |||||||
| March 31 | $ | $ | ||||||
| June 30 | ||||||||
| September 30 | ||||||||
| Total | $ | $ | ||||||
Series D Preferred Stock
| Month | 2024 | 2023 | ||||||
| Distributions Declared | Distributions Declared | |||||||
| January | $ | $ | ||||||
| February | ||||||||
| March | ||||||||
| April | ||||||||
| May | ||||||||
| June | ||||||||
| July | ||||||||
| August | ||||||||
| September | ||||||||
| Total | $ | $ | ||||||
Partnership Interests. Through the Company, its subsidiaries, and its partnerships, we own
12. SHARE-BASED INCENTIVE PLAN
The Company maintains a restricted stock incentive plan for the purpose of attracting and retaining officers, employees, and non-employee board members. Share awards generally vest in equal annual installments over a -to--year period from date of issuance. Non-vested shares have voting rights and are eligible for any dividends paid on shares of common stock. The Company recognized compensation cost for these fixed awards over the service vesting period, which represents the requisite service period, using the straight-line method. Prior to our IPO, the value of non-vested shares was calculated based on the offering price of the shares in the most recent private placement offering of $
During our Annual Stockholders meeting, held on May 26, 2022, the Company's 2017 Incentive Award Plan was amended to increase the available shares for issuance from
| Outstanding shares: | Common Shares | |||
| Balance at December 31, 2023 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Balance at September 30, 2024 | ||||
The non-vested restricted shares outstanding as of September 30, 2024, will vest over the next to years. As of September 30, 2024, there were approximately
Share-based compensation expense was approximately $
13. SEGMENTS
The Company's reportable segments consist of types of real estate properties for which the Company's decision-makers internally evaluate operating performance and financial results: Office/Industrial Properties, Model Home Properties and Retail Properties. The Company also has certain corporate-level activities, including accounting, finance, legal administration, and management information systems which are not considered separate operating segments. There is no material inter-segment activity.
The Company evaluates the performance of its segments based upon net operating income ("NOI"), which is a non-GAAP supplemental financial measure. The Company defines NOI for its segments as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees and provision for bad debt) excluding interest expense. NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, real estate acquisition fees and expenses and corporate general and administrative expenses. The Company uses NOI to evaluate the operating performance of the Company's real estate investments and to make decisions about resource allocations.
The following tables compare the Company's segment activity to its results of operations and financial position as of and for the three and nine months ended September 30, 2024, and September 30, 2023:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Office/Industrial Properties: | ||||||||||||||||
| Rental, fees and other income | $ | $ | $ | $ | ||||||||||||
| Property and related expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net operating income, as defined | ||||||||||||||||
| Model Home Properties: | ||||||||||||||||
| Rental, fees and other income | ||||||||||||||||
| Property and related expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net operating income, as defined | ||||||||||||||||
| Retail Properties: | ||||||||||||||||
| Rental, fees and other income | ||||||||||||||||
| Property and related expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net operating income, as defined | ||||||||||||||||
| Reconciliation to net income: | ||||||||||||||||
| Total net operating income, as defined, for reportable segments | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment of real estate assets | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on Conduit Pharmaceuticals marketable securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on deconsolidation of SPAC | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of real estate | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| September 30, | December 31, | |||||||
| Assets by Reportable Segment: | 2024 | 2023 | ||||||
| Office/Industrial Properties: | ||||||||
| Land, buildings and improvements, net (1) | $ | $ | ||||||
| Total assets (2) | $ | $ | ||||||
| Model Home Properties: | ||||||||
| Land, buildings and improvements, net (1) | $ | $ | ||||||
| Total assets (2) | $ | $ | ||||||
| Retail Properties: | ||||||||
| Land, buildings and improvements, net (1) | $ | $ | ||||||
| Total assets (2) | $ | $ | ||||||
| Reconciliation to Total Assets: | ||||||||
| Total assets for reportable segments | $ | $ | ||||||
| Other unallocated assets: | ||||||||
| Cash, cash equivalents and restricted cash | ||||||||
| Other assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| (1) | Includes lease intangibles. |
| (2) | Includes land, buildings and improvements, cash, cash equivalents, and restricted cash, current receivables, deferred rent receivables and deferred leasing costs and other related intangible assets, all shown on a net basis. |
| For the Nine Months Ended September 30, | ||||||||
| Capital Expenditures by Reportable Segment | 2024 | 2023 | ||||||
| Office/Industrial Properties: | ||||||||
| Capital expenditures and tenant improvements, office | $ | $ | ||||||
| Model Home Properties: | ||||||||
| Acquisition of operating properties, model home | ||||||||
| Retail Properties: | ||||||||
| Capital expenditures and tenant improvements, retail | ||||||||
| Totals: | ||||||||
| Acquisition of operating properties, net | ||||||||
| Capital expenditures and tenant improvements | ||||||||
| Total real estate investments | $ | $ | ||||||
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2000. As a REIT, U.S. federal income tax law generally requires us to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that we pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. We are also subject to U.S. federal, state and local income taxes on our domestic taxable REIT subsidiaries ("TRS") based on the tax jurisdictions in which they operate.
During the nine months ended September 30, 2024, we recorded a current income tax provision of $168,140 related to activities of our taxable REIT subsidiaries. There was a $
We have calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the projected full fiscal year to the TRS pretax income or loss excluding unusual or infrequently occurring discrete items for the reporting period, and have accounted for the REIT's minimum state income taxes as a discrete item in the reporting period.
15. RELATED PARTY
During the three and nine months ended September 30, 2024 and three and nine months ended September 30, 2023, the Company leased portions of its corporate headquarters to Puppy Toes, Inc., a company owned by the Chief Executive Officer and his wife, and to Centurion Counsel, Inc., which is owned by Puppy Toes, Inc. Rent billed to these entities from the Company totaled $
Additionally, we receive full payroll reimbursement for employee services provided to Centurion Counsel and Puppy Toes, Inc. during the three and nine months ended September 30, 2024, which totaled approximately $
16. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date the financial statements were issued. Based upon this review, except as disclosed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements other than disclosed below.
During October 2024, the Company paid part of an accrued bonus to the former CFO with shares of CDT common stock. The total number of CDT common stock shares transferred to our former CFO was
The non-recourse loan on the Dakota Center matured on July 6, 2024. Management has been in negotiations with the special servicer of the loan in modifying and/or extending the loan or possibly selling the building. We have not been able to come to an agreement regarding a situation in which the loan is modified or extended. As such, in October 2024 we have offered the property for sale in conjunction with the lender’s approval in attempts to make the lender whole, although there is no guarantee we will be able to do so. The loan is considered non-recourse and we will not be required to make up the difference if the property sells for less than the loan balance. See Note 4. Real Estate Asset above for further discussion on impairment of the property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our 2023 year end Annual Report.
We may refer to the three months ended September 30, 2024, and September 30, 2023, as the "2024 Quarter" and the "2023 Quarter," respectively.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" and/or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and also of which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this 10-Q and our 2023 year end Annual Report on Form 10-K/A for the year ended December 31, 2023, filed with the SEC on April 16, 2024, respectively. Additional factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to, the risks associated with the ownership of real estate in general and our real estate assets in particular; the economic health of the metro regions where we conduct business; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to the use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to e-commerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; weather conditions, natural disasters and pandemics; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2023 year end Annual Report. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.
OVERVIEW
The Company operates as an internally managed, diversified REIT, with primary holdings in office, industrial, retail, and triple-net leased model home properties. In October 2017, we changed our name from "NetREIT, Inc." to "Presidio Property Trust, Inc." The Company acquires, owns, and manages a geographically diversified portfolio of real estate assets, including office, industrial, retail and model home residential properties leased to homebuilders located in the United States. As of September 30, 2024, the Company owned or had an equity interest in:
| • |
Eight office buildings and one industrial property ("Office/Industrial Properties"), which total approximately 758,175 rentable square feet; |
| • |
Three retail shopping centers ("Retail Properties"), which total approximately 65,242 rentable square feet; and |
| • |
83 model home residential properties ("Model Homes" or "Model Home Properties"), totaling approximately 251,602 square feet, leased back on a triple-net basis to homebuilders that are owned by five affiliated limited partnerships and one wholly-owned corporation, all of which we control. |
We own five commercial properties located in Colorado, four in North Dakota, one in Southern California, one in Texas and one in Maryland. Our model home properties are located in three states. While geographical clustering of real estate enables us to reduce our operating costs through economies of scale by servicing several properties with less staff, it makes us susceptible to changing market conditions in these discrete geographic areas. We do not develop properties but acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition. We consider a property to be stabilized once it has achieved an 80% occupancy rate for a full year as of January 1 of such year or has been operating for three years.
Most of our office and retail properties are leased to a variety of tenants ranging from small businesses to large public companies, many of which are not investment grade. We have, in the past, entered into, and intend in the future to enter into, purchase agreements for real estate having net leases that require the tenant to pay all of the operating expenses or pay increases in operating expenses over specific base years. Most of our office leases are for terms of three to five years with annual rental increases. Our model homes are typically leased back for two to three years to the home builder on a triple-net lease. Under a triple-net lease, the tenant is required to pay all operating, maintenance and insurance costs and real estate taxes with respect to the leased property.
We seek to diversify our portfolio by commercial real estate segments, including office, industrial, retail and model home properties to reduce the adverse effect of a single under-performing segment and/or tenant. We further mitigate risk at the tenant level through our credit review process, which varies by tenant class. For example, our commercial and industrial tenants tend to be corporations or individually owned businesses. In these cases, we typically obtain financial records, including financial statements and tax returns (depending on the circumstance), and run credit reports for any prospective tenant to support our decision to enter into a rental arrangement. We also typically obtain security deposits from these commercial tenants. Our Model Home commercial tenants are well-known homebuilders with established credit histories. These tenants are subjected to financial review and analysis prior to us entering into a sales-leaseback transaction.
In June 2024, the Board of Directors established the Strategic Planning and Cyber Committee (the "Strategic Committee"). The purpose of the Strategic Committee is to: assist the Board in carrying out its responsibilities of oversight over the Company's business strategy, make recommendations to the Board on the Company's strategic direction and objectives and serve as a liaison between the Board and management, and assist the Board in fulfilling its responsibilities of oversight with regard to the Company's identification, assessment, and management of the Company's cybersecurity risks. There can be no assurance that the work of the Strategic Committee will result in any transaction being pursued or consummated. In addition, there is no formal timetable for the Strategic Committee's exploration of potential strategic alternatives, and the Company does not intend to disclose any developments with respect to the Strategic Committee's activities unless and until the Company determines that further disclosure is appropriate or required by law or regulation.
For additional information regarding our Common Stock activity, see Footnote 12. Stockholders' Equity in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.
For details regarding our sponsorship of a special purpose acquisition company, Murphy Canyon Acquisition Corp. ("Murphy Canyon" or the "SPAC"), see Note 9, Investment in Conduit Pharmaceuticals, in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.
SIGNIFICANT TRANSACTIONS IN 2024 AND 2023
| • |
The Company acquired 19 model homes for approximately $9.7 million. The purchase price was paid through cash payments of approximately $3.0 million and mortgage notes of approximately $6.7 million. |
| • |
The Company acquired 25 model homes for approximately $13.7 million. These acquisitions were paid for with approximately $4.2 million in cash payments and approximately $9.5 million in mortgage loans. There were no other commercial properties acquired during this period. |
| • |
The Company sold 46 model homes for approximately $22.3 million, net of sales costs, and recognized a gain of approximately $3.2 million. |
| • |
The Company sold 15 model homes for approximately $7.8 million, net of sales costs, and recognized a gain of approximately $2.3 million. |
CRITICAL ACCOUNTING POLICIES
There have been no material changes to our critical accounting policies as previously disclosed in our 2023 year end Annual Report.
MANAGEMENT EVALUATION OF RESULTS OF OPERATIONS
Management’s evaluation of operating results includes an assessment of our ability to generate the cash flow necessary to pay operating expenses, general and administrative expenses, debt service and to fund distributions to our stockholders. As a result, management’s assessment of operating results gives less emphasis to the effects of unrealized gains and losses and other non-cash charges, such as depreciation and amortization and impairment charges, which may cause fluctuations in net income for comparable periods but have no impact on cash flows. Management’s evaluation of our potential for generating cash flow includes assessments of our recently acquired properties, our non-stabilized properties, long-term sustainability of our real estate portfolio, our future operating cash flow from anticipated acquisitions, and the proceeds from the sales of our real estate assets.
In addition, management evaluates the results of the operations of our portfolio and individual properties with a primary focus on increasing and enhancing the value, quality and quantity of properties in our real estate holdings. Management focuses its efforts on improving underperforming assets through re-leasing efforts, including negotiation of lease renewals and rental rates. Properties are regularly evaluated for potential added value appreciation and cashflow and, if lacking such potential, are sold with the equity reinvested in new acquisitions or otherwise allocated in a manner we believe is accretive to our stockholders. Our ability to increase assets under management is affected by our ability to raise borrowings and/or capital, coupled with our ability to identify appropriate investments.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED September 30, 2024 and 2023
Revenues. Total revenues were approximately $4.7 million for the three months ended September 30, 2024, compared to approximately $4.5 million for the same period in 2023. As of September 30, 2024, we had approximately $131.4 million in net real estate assets including 83 model homes, compared to approximately $138.4 million in net real estate assets including 102 model homes at September 30, 2023. The change in revenue is directly related to the new commercial real estate leases at Grand Pacific Center, and model home transaction fees earned by the Company during the current period, slightly offset by the reduction in model home income during the current quarter.
Rental Operating Costs. Rental operating costs increased 8.1%, totaling approximately $1.6 million for the three months ended September 30, 2024, compared to approximately $1.5 million for the same period in 2023, due to the increased cost of operating our commercial properties. Rental operating costs as a percentage of total revenue was 33.8% and 33.0% for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, our model home assets made up 30.5% of our total real estate assets, which is down from 33.2% as of September 30, 2023. Model home rental operating costs are relatively low for model home assets as they are leased on a triple net basis. Additionally, for the three months ended September 30, 2024, our gross revenue from model home assets represented approximately 21.2% of our total revenue, compared to 24.4% for the three months ended September 30, 2023. This percentage is expected to decrease in 2024 as a large number of model homes were sold during the three and nine months ended September 30, 2024. There were no acquisitions or sales of retail, office or industrial properties during the three months ended September 30, 2024; however, management is selling two of our commercial real estate assets, totaling approximately $11.1 million, over the next 12 months, which will reduce future rental income until those proceeds are reinvested.
General and Administrative Expenses. General & Administrative (“G&A”) expenses for the three months ended September 30, 2024 and 2023 totaled approximately $1.6 million and $1.6 million, respectively. G&A expenses as a percentage of total revenue was 34.5% and 36.5% for the three months ended September 30, 2024 and 2023, respectively. G&A expenses was relatively flat for the three months ended September 30, 2024 when compared to the three months ended September 30, 2023.
Depreciation and Amortization. Depreciation and amortization expense was approximately $1.5 million for the three months ended September 30, 2024, compared to approximately $1.4 million for the same period in 2023.
Asset Impairments. We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the three months ended September 30, 2024, we recognized a non-cash impairment charge of approximately $0.7 million related to three model homes and one commercial property. The impairment on our commercial property, Dakota Center, was the result of the loan maturing in July and the Company not being able to reach an agreement with the lenders regarding a loan modification or extension. In October the lender has agreed to a sale of the property to settle the balance of the non-recourse loan. Due to the uncertainties in the Fargo market, we decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets. As such, we recorded an impairment charge of approximately $0.7 million as of September 31, 2024. The new impairment charges for the three model homes reflects the estimated sales prices for these specific model homes in October and November 2024 as a result of an abnormally short hold period, less than two years, on model homes purchased in 2022. The builder changed their product style in the neighborhoods where these model homes are located, in Texas, after we had purchased the homes. We do not believe these losses are indicative of our overall model home portfolio. During the three months ended September 30, 2024, we sold four model homes for approximately $2.2 million and the Company recognized a net gain of approximately $0.4 million. We expect to record a net gain on model home sales in the fourth quarter of 2024 as well. The Company did not recognize a non-cash impairment to our real estate assets during the three months ended September 30, 2023.
Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges was approximately $1.5 million for the three months ended September 30, 2024, compared to approximately $1.4 million for the same period in 2023. The weighted average interest rate on our outstanding debt was 5.44% and 5.06% as of September 30, 2024 and 2023, respectively. Mortgage notes payable totaled approximately $103.2 million and $103.3 million as of September 30, 2024 and 2023, respectively.
Gain on Sale of Real Estate Assets, net. The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. During the three months ended September 30, 2024, we sold four model homes for approximately $2.2 million, net of selling costs, and the Company recognized a net gain of approximately$0.4 million. We expect to record a net gain on model home sales in the fourth quarter of 2024 as well. During the three months ended September 30, 2023, we sold five model homes for approximately $2.5 million, net of selling costs, and the Company recognized a net gain of approximately $0.8 million.
Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended September 30, 2024 and 2023 totaled approximately $0.4 million and $0.7 million, respectively.
Loss on Conduit remeasurement. On April 22, 2024, the Company entered into a lockup agreement with Conduit pursuant to which the Company agreed not to transfer or sell 2,700,000 of its 4,015,250 shares of Conduit common stock for a period of one year. In consideration for entering into the lockup agreement, Conduit issued the Company a warrant ("Private CDT Warrants") to purchase 540,000 shares of common stock at an exercise price of $3.12 per share, with a two year term and exercisable one year after the date of issue. The Private CDT Warrants meet the ASC 321 scope exception for derivative instruments and are accounted for as a derivative under ASC 815. As such, the Private CDT Warrants were recorded at fair value on the date of issuance and subsequently measured at fair value each period, with changes in fair value reported in gain or loss on Conduit Pharmaceuticals marketable securities. As of June 30 2024, the Private CDT Warrants were valued at $156,000 based on a Level 3 fair value measurement. As of September 30, 2024, the Private CDT Warrants fair value was adjusted to zero, which is included in the total Investment in Conduit Pharmaceuticals marketable securities on the September 30, 2024 consolidated balance sheet. Our investments in Conduit's common stock (3,990,319 shares of CDT) and public common stock warrants (709,000 warrants of CDTTW) presented on the consolidated balance sheets were measured at fair value using Level 1 market prices, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $0.5 million as of September 30, 2024. The combined value of our Investment in Conduit Pharmaceuticals marketable securities, including the Private CDT Warrants, totaled $0.5 million as of September 30, 2024. In connection with these fair market value adjustments during the three months ended September 30, 2024, we recorded a net loss on our investment in Conduit of approximately $3.9 million.
RESULTS OF OPERATIONS FOR THE nine MONTHS ENDED September 30, 2024 and 2023
Revenues. Total revenues were approximately $14.1 million for the nine months ended September 30, 2024, compared to approximately $13.1 million for the same period in 2023. As of September 30, 2024, we had approximately $131.4 million in net real estate assets including 83 model homes, compared to approximately $138.4 million in net real estate assets including 102 model homes at September 30, 2023. The average number of model homes held during the nine months ended September 30, 2024 and 2023 was 84 and 102, respectively. The change in revenue is directly related to the increase in model home transaction fees during the current period, new commercial real estate leases, mainly at Grand Pacific Center, and the management fees earned from Conduit Pharma during the current period, which was terminated in June 2024. Below is additional revenue and asset information for real estate segments as of September 30, 2024.
| % of Gross Revenue |
||||||||
| For the Nine Months Ended September 30, |
||||||||
| 2024 |
2023 |
|||||||
| Segment |
||||||||
| Office/Industrial |
64.8 | % | 66.9 | % | ||||
| Retail |
10.9 | % | 10.6 | % | ||||
| Model Home |
24.2 | % | 22.5 | % | ||||
| % of Total Real Estate Assets as of |
||||||||
| September 30, |
December 31, |
|||||||
| 2024 |
2023 |
|||||||
| Segment (1) |
||||||||
| Office/Industrial |
57.5 | % | 55.3 | % | ||||
| Retail |
12.0 | % | 11.5 | % | ||||
| Model Home |
30.5 | % | 33.2 | % | ||||
(1) Includes lease intangibles and the land purchase option related to property acquisitions.
Rental Operating Costs. Rental operating costs were slightly higher totaling $4.7 million for the nine months ended September 30, 2024, compared to approximately $4.5 million for the same period in 2023. Rental operating costs as a percentage of total revenue was 33.0% and 33.9% for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, our model home assets made up 30.5% of our total real estate assets, which is down from 33.2% as of September 30, 2023. Model home rental operating costs are relatively low for model home assets as they are leased on a triple net basis. Additionally, for the nine months ended September 30, 2024, our gross revenue from model home assets represented approximately 24.2% of our total revenue, compared to 22.5% for the nine months ended September 30, 2023. This percentage is expected to decrease in 2024 as a large number of model homes were sold during the nine months ended September 30, 2024. There were no acquisitions or sales of retail, office or industrial properties during the nine months ended September 30, 2024; however, management is selling two of our commercial real estate assets, totaling approximately $11.1 million, over the next 12 months, which will reduce future rental income until those proceeds are reinvested.
General and Administrative Expenses. G&A expenses for the nine months ended September 30, 2024 and 2023 totaled approximately $5.9 million and $5.4 million, respectively. G&A expenses as a percentage of total revenue was 42.0% and 41.2% for the nine months ended September 30, 2024 and 2023, respectively. G&A expenses increased by approximately $0.5 million mainly related to the 2024 annual meeting and settlement with Zuma Capital and certain individuals and entities affiliated or associated with Zuma Capital Management, LLC (Zuma Capital"). This included additional consulting fees, higher proxy solicitation fees and legal fees, which increased by an aggregate of approximately $0.6 million in 2024 as compared to 2023. Additionally, stock compensation and bonus accruals increased during the nine months ended September 30, 2024 by approximately $0.5 million as compared to the same period in 2023 related to De-SPAC success bonuses to current and former employees. This was slightly offset by the reduction in salaries and employees cost by approximately $0.2 million in 2024 as compared to 2023, and the approximately $0.2 million reduction of D&O insurance related to the SPAC in 2023 that was not consolidated during 2024.
Depreciation and Amortization. Depreciation and amortization expense was approximately $4.2 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively.
Asset Impairments. We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the nine months ended September 30, 2024, we recognized a non-cash impairment charge of approximately $0.9 million related to model homes and one commercial property. The impairment on our commercial property, Dakota Center, was the result of the loan maturing in July and the Company not being able to reach an agreement with the lenders regarding a loan modification or extension. In October the lender has agreed to a sale of the property to settle the balance of the non-recourse loan. Due to the uncertainties in the Fargo market, we decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets and for long-lived assets to be disposed of, to be in line with the current loan balance and estimated closing costs, which is the expected sales price. As such, we recorded an impairment charge of approximately $0.7 million, as of September 31, 2024. The new impairment charges for the model homes reflects the estimated and actual sales prices for these specific model homes that were sold after the end of each quarter. This was the result of an abnormally short hold period, less than two years, on model homes purchased in 2022. The builder changed their product style in the neighborhoods where these model homes are located, in Texas, after we had purchased the homes. We do not believe these losses are indicative of our overall model home portfolio. During the nine months ended September 30, 2024, we sold 46 model homes for approximately $22.3 million, net of sales costs, and the Company recognized a net gain of approximately $3.2 million. We expect to record a net gain on model home sales in the fourth quarter of 2024 as well. The Company did not recognize a non-cash impairment to our real estate assets during the nine months ended September 30, 2023.
Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges was approximately $4.5 million for the nine months ended September 30, 2024, compared to approximately $3.6 million for the same period in 2023. The weighted average interest rate on our outstanding debt was 5.44% and 5.06% as of September 30, 2024 and 2023, respectively. Mortgage notes payable totaled approximately $103.2 million and $103.3 million as of September 30, 2024 and 2023, respectively.
Geographic Diversification Tables
The following tables show a list of commercial properties owned by the Company grouped by state and geographic region as of September 30, 2024:
| State |
No. of Properties |
Aggregate Square Feet |
Approximate % of Square Feet |
Current Base Annual Rent |
Approximate % of Aggregate Annual Rent |
|||||||||||||||
| California |
1 | 57,807 | 7.0 | % | $ | 1,515,541 | 13.0 | % | ||||||||||||
| Colorado |
5 | 324,245 | 39.4 | % | 5,507,742 | 47.3 | % | |||||||||||||
| Maryland |
1 | 31,752 | 3.9 | % | 724,453 | 6.2 | % | |||||||||||||
| North Dakota |
4 | 399,113 | 48.4 | % | 3,554,545 | 30.6 | % | |||||||||||||
| Texas |
1 | 10,500 | 1.3 | % | 342,692 | 2.9 | % | |||||||||||||
| Total |
12 | 823,417 | 100.0 | % | $ | 11,644,973 | 100.0 | % | ||||||||||||
The following tables show a list of our Model Home properties by geographic region as of September 30, 2024:
| State |
No. of Properties |
Aggregate Square Feet |
Approximate % of Square Feet |
Current Base Annual Rent |
Approximate of Aggregate % Annual Rent |
|||||||||||||||
| Arizona |
2 | 6,822 | 2.7 | % | $ | 149,196 | 4.2 | % | ||||||||||||
| Florida |
4 | 9,875 | 3.9 | % | 170,256 | 4.8 | % | |||||||||||||
| Texas |
77 | 234,905 | 93.4 | % | 3,248,760 | 91.0 | % | |||||||||||||
| Total |
83 | 251,602 | 100.0 | % | $ | 3,568,212 | 100.0 | % | ||||||||||||
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, the sale of our investment in Conduit Pharma, and the sale of our equity or issuance of debt securities or bonds. Our cash and restricted cash at September 30, 2024 was approximately $7.2 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. We also are actively seeking model home investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.
Our short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of our existing mortgages, completing tenant improvements, paying leasing commissions, and funding dividends to stockholders. Future principal payments due on our mortgage notes payables during 2024 total approximately $11.7 million, of which approximately $2.3 million is related to model home properties. During the next 12 months, five commercial property loans, in addition to the Dakota Center which matured in July 2024, for Research Parkway, Arapahoe Service Center, Union Town Center, One Park, and Genesis Plaza, have mortgage loans that will mature totaling approximately $28.4 million. The loan on the Dakota Center matured on July 6, 2024. Management was in negotiations with the special servicer of the loan in modifying and/or extending; however no agreement could be reached and in October we had agreed with the lender to sell the property in order to settle the balance on the non-recourse loan. The Company and the lender are currently reviewing real estate brokers to sell the property on the open market with the hopes of obtaining the best sales price; however there can be no guarantee the property will sell for more than the loan balance.
Management has begun discussions with various lenders to either restructure, extend or refinance the other three loans. Additionally, management may consider selling these properties if we are unsuccessful in extending the maturity dates or are unable to raise additional funds to pay these non-recourse loans in full. Only the loan on Research Parkway, for $1.6 million has recourse to the Company. Management expects certain model homes will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past. Additional principal payments will be made with cash flows from ongoing operations. On December 31, 2022, the lease for our largest tenant at that time, Halliburton, expired. Halliburton was located in our Shea Center II property in Colorado and did not renew the lease. We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary, in connection with Halliburton's vacant space, none of which has been used as of December 31, 2023. This reserve amount is included in "Cash, cash equivalents and restricted cash" on the consolidated balance sheet. Our management team is working to fill the 45,535 square foot space and has leased approximately 35% of the space to a tenant during 2023 and 2024 and has reviewed various third party proposals for the remaining 65%. As of September 30, 2024, management is pursuing third party tenants who fit into our long-term plans, however, there is no guarantee we will be successful in signing these new tenants.
While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock, which expired in September 2023. In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which shall expire in November 2024. During the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock. During the nine months ended September 30, 2024, we repurchased 137,709 shares of our Series A Common Stock, for a total cost of $97,394, with an average price of approximately $0.7072 per share. There were no repurchases of Series D Preferred Stock during the nine months ended September 30, 2024. Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost.
There can be no assurance that the Company will refinance loans, take out additional financing or capital will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans, reduce certain discretionary spending or even sell properties, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2024 and 2025 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months. If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we plan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we may reduce or suspend the rate of dividends to our stockholders.
Our long-term liquidity needs include the capital necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and while seeking to reinvest the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives.
For the three and nine months ended September 30, 2024, the Company has not declared a cash dividend for the Series A Common stockholders. For the three and nine months ended September 30, 2023, the Company declared and paid approximately $0.3 million and $0.9 million in a cash dividend, respectively. For the three and nine months ended September 30, 2024, the Company declared and paid approximately $0.6 million and $1.7 million in monthly cash dividends, respectively for the Series D Preferred stockholders. For the three and nine months ended September 30, 2023, the Company declared and paid approximately $0.5 million and $1.6 million in monthly cash dividends, respectively.
The Company is reviewing when it may pay dividends to our common stockholders on a quarterly basis again, cash permitting, and intends to continue on a monthly basis to pay dividends to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends. The Company is still considering how much it may declare during 2024 on the Series A Common Stock, as there was no cash dividend declared or paid during the nine months ended September 30, 2024. The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the nine months ended September 30, 2024 and 2023.
Series A Common Stock:
| Quarter Ended |
2024 |
2023 |
||||||
| Distributions Declared |
Distributions Declared |
|||||||
| March 31 |
$ | - | $ | 0.022 | ||||
| June 30 |
- | 0.023 | ||||||
| September 30 |
- | 0.023 | ||||||
| Total |
$ | - | $ | 0.045 | ||||
Series D Preferred Stock:
| Month |
2024 |
2023 |
||||||
| Distributions Declared |
Distributions Declared |
|||||||
| January |
$ | 0.19531 | $ | 0.19531 | ||||
| February |
0.19531 | 0.19531 | ||||||
| March |
0.19531 | 0.19531 | ||||||
| April |
0.19531 | 0.19531 | ||||||
| May |
0.19531 | 0.19531 | ||||||
| June |
0.19531 | 0.19531 | ||||||
| July |
0.19531 | 0.19531 | ||||||
| August |
0.19531 | 0.19531 | ||||||
| September |
0.19531 | 0.19531 | ||||||
| Total |
$ | 1.75779 | $ | 1.75779 | ||||
Our long-term liquidity needs include the proceeds necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and while seeking to reinvest the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, issue debt instruments, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives.
Cash Equivalents and Restricted Cash
At September 30, 2024, and December 31, 2023, we had approximately $7.2 million and $6.5 million in cash equivalents, respectively, including $3.5 million and $3.7 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts, short-term bonds and cash held in bank accounts at third-party institutions. During 2024 and 2023, we did not experience any loss or lack of access to our cash or cash equivalents. Approximately $1.5 million to 2.0 million of our cash balance is intended for capital expenditures on existing properties, net of any construction financing (some of which is held in deposits reserve accounts by our lenders) during the rest of the year. We intend to use the remainder of our existing cash and cash equivalents for asset/property acquisitions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditions are met), or dividends to our stockholders.
As of September 30, 2024, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $27.5 million, excluding loans eliminated through consolidation, collateralized by a total of 82 Model Homes. These loans generally have a term at issuance of three to five years. As of September 30, 2024, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $335,826 and 6.74%, respectively. Our debt to estimated market value on all our model home properties is approximately 56.0%, excluding any loans eliminated through consolidation. We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions. The Company anticipates that any new mortgages used to acquire commercial properties or model homes in the near future will be at rates higher than our currently weighted average interest rate. As of September 30, 2024, we had issued one promissory note to our majority owned subsidiary, Dubose Model Home Investors 202 LP, for the refinancing of one model home property in Texas, for approximately $0.3 million with an interest rate of 5.55% per annum and original maturity date of August 15, 2024, which was extended for another year with an interest rate of 8.0% per annum. This note payable and note receivable, including interest expense and interest income related to this promissory note, is eliminated through consolidation on our financial statements. This property was subsequently sold in October 2024, and the loan was paid in full.
Cash Flow for the nine months ended September 30, 2024, and September 30, 2023
Operating Activities: Net cash used in operating activities for the nine months ended September 30, 2024, totaled approximately $1.0 million, as compared to cash used in operating activities of $0.4 million for the nine months ended September 30, 2023. The change in net cash used in operating activities is mainly due to changes in net income, which fluctuates due to new leases, leasing renewals, tenant move outs and model home sales and acquisitions, as well as changes in non-cash addbacks or subtractions such as straight-line rent.
Investing Activities: Net cash provided by investing activities for the nine months ended September 30, 2024, was approximately $10.7 million compared to approximately $129.0 million used in investing activities during the same period in 2023. The change from each period was primarily related to the gross cash withdrawal of approximately $114.1 million during the first quarter of 2023 for SPAC redemptions. There were no similar transactions during the nine months ended September 30, 2024. Proceeds from the sale of real estate assets total approximately $22.3 million, net of selling costs, while cash used in real estate acquisition and capital improvement totaled approximately $11.7 million, for the nine months ended September 30, 2024.
We currently project that we could spend up to $1.5 million to $2.0 million (some of which is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio during the next 12 months. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties. We may spend more on capital expenditures in the future due to rising construction costs. Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.
Financing Activities: Net cash used in financing activities during the nine months ended September 30, 2024, was $8.9 million compared to $137.4 million provided by financing activities for the same period in 2023 and was primarily due to the following activities for the nine months ended September 30, 2024:
| • | Proceeds from mortgage notes payable, net of issuance costs totaled approximately $13.6 million. | |
| • | Proceeds from the issuance of Series D Preferred Stock, net of offering costs, totaled approximately $1.2 million. | |
| • | Repayment of mortgage notes payable totaled approximately $18.9 million for the nine months ended September 30, 2024. | |
| • | Distributions to noncontrolling interest of approximately $3.1 million for the nine months ended September 30, 2024. | |
| • | Dividends paid to Series D Preferred Stockholders of approximately $1.7 million for the nine months ended September 30, 2024. | |
Off-Balance Sheet Arrangements
On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock. Each share of Common Stock and accompanying Common Stock Warrants were sold together at a combined offering price of $5.00, and each share of Common Stock and accompanying Pre-Funded Warrant were sold together at a combined offering price of $4.99. The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $0.01 per share. The Common Stock Warrants have an exercise price of $5.50 per share, exercisable upon issuance and will expire five years from the date of issuance.
In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares of Series A Common Stock, representing 4.0% of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants. The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $6.25 and will expire five years from the date of issuance.
Common Stock Warrants:
If all the potential Common Stock Warrants outstanding at September 30, 2024, were exercised at the price of $5.00 per share, gross proceeds to us would be approximately $10.0 million and we would as a result issue an additional 2,000,000 shares of common stock.
Placement Agent Warrants:
If all the potential Placement Agent Warrants outstanding at September 30, 2024, were exercised at the price of $6.25 per share, gross proceeds to us would be approximately $0.5 million and we would as a result issue an additional 80,000 shares of common stock.
January 14, 2022, was the record date with respect to the distribution of five-year listed warrants (the “Series A Warrants”). The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022. The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. The Series A Warrants give the holder the right to purchase one share of common stock at $7.00 per share, for a period of five years. Should warrant holders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.
Series A Warrants:
If all the potential Series A Warrants outstanding at September 30, 2024, were exercised at the price of $7.00 per share, gross proceeds to us would be approximately $101.2 million and we would as a result issue an additional 14,450,069 shares of common stock.
Inflation
Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the clients’ sales volumes. We expect that inflation will cause these lease provisions to result in rent increases over time. During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation.
However, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Inflation and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In connection with the preparation and audit of the financial statements as of and for the fiscal year ended December 31, 2023, a material weakness was identified in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. This material weakness primarily relates to a non-recuring significant transaction for income tax provision under ASC 740, Income Taxes, and comprises the following:
| ● |
We lack a formal review and approval process in connection with the annual income tax provision, specifically related to REIT and non-REIT subsidiaries and the ownership of Conduit shares received by the Company in the de-SPAC transaction on September 22, 2023. |
| ● |
We did not design adequate internal controls under an appropriate financial reporting framework, including monitoring controls and certain entity level controls with regards to the income tax provision. |
If this material weakness is not remediated, it could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. We are implementing measures designed to improve our internal control over financial reporting to remediate this material weakness, although they have not been fully remediated as of the date of this filing.
The material weakness will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively. We commenced the remediation plan and will be documenting and implementing such plan, followed with testing such controls over time. We cannot predict the success of such efforts or the outcome of its assessment of the remediation efforts. Our efforts may not remediate this material weakness in our internal control over financial reporting, or additional material weaknesses may be identified in the future. A failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our common stock.
Changes in Internal Control over Financial Reporting
We are adding controls around the calculation and preparation of income tax provisions and expenses, we are engaging with third party experts, and will continually identify and monitor the taxable status of each subsidiary for annual reporting. There were no additional changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Furthermore, we do not believe that these controls have been impacted by COVID-19 related circumstances, including remote work arrangements with our employees.
None.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Stock Repurchase Program. While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock, which expired in September 2023. In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which shall expire in November 2024. During the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock. During the nine months ended September 30, 2024, we repurchased 137,709 shares of our Series A Common Stock, for a total cost of $97,394, with an average price of approximately $0.7072 per share. There were no repurchases of Series D Preferred Stock during the nine months ended September 30, 2024. Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost. The repurchased shares will be treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders' equity at cost. The following table contains information for shares of common stock repurchased during the nine months ended September 30, 2024.
Stock repurchases for Series A Common Stock.
| Month |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
||||||||||||
| January 2024 |
— | $ | — | — | $ | 6,000,000 | ||||||||||
| February 2024 |
— | — | — | 6,000,000 | ||||||||||||
| March 2024 |
— | — | — | 6,000,000 | ||||||||||||
| April 2024 |
— | — | — | 6,000,000 | ||||||||||||
| May 2024 |
— | — | — | 6,000,000 | ||||||||||||
| June 2024 |
10,446 | 0.729 | 10,446 | 5,992,387 | ||||||||||||
| July 2024 |
— | — | — | 5,992,387 | ||||||||||||
| August 2024 |
44,190 | 0.679 | 44,190 | 5,962,369 | ||||||||||||
| September 2024 |
83,073 | 0.719 | 83,073 | 5,902,606 | ||||||||||||
| Total |
137,709 | $ | 0.707 | 137,709 | $ | 5,902,606 | ||||||||||
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
None.
| Exhibit |
Description |
|
| 31.1 |
||
| 31.2 |
||
| 32.1 |
| 101.INS |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 19, 2024 | Presidio Property Trust, Inc. |
|
| By: |
/s/ Jack K. Heilbron |
|
| Name: |
Jack K. Heilbron |
|
| Title: |
Chief Executive Officer |
|
| By: |
/s/ Ed Bentzen | |
| Name: |
Ed Bentzen | |
| Title: |
Chief Financial Officer |
|