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What changed in Presidio Property Trust, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Presidio Property Trust, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+324 added−296 removedSource: 10-K (2024-04-16) vs 10-K (2023-03-28)

Top changes in Presidio Property Trust, Inc.'s 2023 10-K

324 paragraphs added · 296 removed · 202 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

42 edited+17 added−24 removed48 unchanged
Biggest changeIn addition, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock (voting together as a class with all other series of parity preferred stock the Company may issue upon which like voting rights have been conferred and are exercisable) is required at any time for the Company to (i) authorize or issue any class or series of its stock ranking senior to the Series D Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up or (ii) to amend any provision of the Company charter so as to materially and adversely affect any rights of the Series D Preferred Stock or to take certain other actions. 6 Table of Contents In the event of our 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 we have legally available for distribution to our stockholders, subject to the preferential rights of the holders of any class or series of stock we 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 our common stock or any other class or series of our stock we may issue that ranks junior to the Series D Preferred Stock as to liquidation rights.
Biggest changeIn addition, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock (voting together as a class with all other series of parity preferred stock the Company may issue upon which like voting rights have been conferred and are exercisable) is required at any time for the Company to (i) authorize or issue any class or series of its stock ranking senior to the Series D Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up or (ii) to amend any provision of the Company charter so as to materially and adversely affect any rights of the Series D Preferred Stock or to take certain other actions.
Hightower is responsible for managing the day-to-day activities of the Dubose Advisors and NetREIT Advisors and the model homes division. Mr. Heilbron and Mr. Katz are responsible for recommending all Company property acquisitions and dispositions. Our Board of Directors Our Management is subject to the direction and supervision of our Board of Directors.
Hightower is responsible for managing the day-to-day activities of Dubose Advisors, NetREIT Advisors and the model homes division. Mr. Heilbron and Mr. Katz are responsible for recommending all Company property acquisitions and dispositions. Our Board of Directors Our Management is subject to the direction and supervision of our Board of Directors.
Sales of our common stock, if any, through the Manager, will be by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market or any other existing trading market for the common stock in the U.S. or to or through a market maker.
Sales of our common stock, if any, through the Manager, will be by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through Nasdaq or any other existing trading market for the common stock in the U.S. or to or through a market maker.
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 Series A Common Stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022.
The Series A Warrants commenced trading on Nasdaq 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 Series A Common Stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022.
(“ NetREIT Dubose ”) is engaged in the business of acquiring model homes from third party homebuilders in sale-leaseback transactions whereby a homebuilder sells the Model Home to NetREIT Dubose and leases back the Model Home under a triple net lease ( “ NNN ” ) for use in marketing its residential development.
Our model home business (“ NetREIT Dubose ”) is engaged in the business of acquiring model homes from third party homebuilders in sale-leaseback transactions whereby a homebuilder sells the Model Home to NetREIT Dubose and leases back the Model Home under a triple net lease ( “ NNN ” ) for use in marketing its residential development.
For their services, each of the Advisors receives ongoing management fees, acquisition fees and has the right to receive certain other fees when a partnership sells or otherwise disposes of a model home. NetREIT Advisors manages NetREIT Dubose and NetREIT Model Homes, Inc. and Dubose Advisors manages DMHI #202, DMHI #203, DMHI #204, DMHI #205 and DMHI #206.
For their services, each of the Advisors receives ongoing management fees, acquisition fees and has the right to receive certain other fees when a partnership sells or otherwise disposes of a model home. NetREIT Advisors manages NetREIT Dubose and NetREIT Model Homes, Inc. and Dubose Advisors manages DMHI #202, DMHI #203, DMHI #204, DMHI #205, DMHI #206, and DMHI #207.
Share Repurchase Program On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.
On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.
We qualified as a REIT for the fiscal year ended December 31, 2022. HUMAN CAPITAL RESOURCES Due to the nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas , including property management, asset management and strategy, accounting, business development and management.
We qualified as a REIT for the fiscal year ended December 31, 2023. HUMAN CAPITAL RESOURCES Due to the nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas , including property management, asset management and strategy, accounting, business development and management.
As of December 31, 2022, the Company owned: • 10.3% of DMHI #202, which raised $2.9 million, and was formed to raise up to $5.0 million through the sale of partnership units. • 2.3% of DMHI #203, which raised $4.4 million, and was formed to raise up to $5.0 million through the sale of partnership units. • 3.6% of DMHI #204, which raised $2.8 million, and was formed to raise up to $5.0 million through the sale of partnership units. • 4.0% of DMHI #205, which has raised $2.5 million, and was formed in 2019 to raise up to $5.0 million through the sale of partnership units. • 8.5% of DMHI #206, which has raised $1.2 million, and was formed in 2020 to raise up to $5.0 million through the sale of partnership units.
As of December 31, 2023 , the Company owned: • 10.3% of DMHI #202, which raised $2.9 million, and was formed to raise up to $5.0 million through the sale of partnership units. • 2.3% of DMHI #203, which raised $4.4 million, and was formed to raise up to $5.0 million through the sale of partnership units. • 3.6% of DMHI #204, which raised $2.8 million, and was formed to raise up to $5.0 million through the sale of partnership units. • 4.0% of DMHI #205, which has raised $2.5 million, and was formed in 2019 to raise up to $5.0 million through the sale of partnership units. • 8.5% of DMHI #206, which has raised $1.2 million, and was formed in 2020 to raise up to $5.0 million through the sale of partnership units.
We focus on regionally dominant markets across the United States which we believe have attractive growth dynamics driven in part by important economic factors such as strong office-using employment growth; net in-migration of a highly educated workforce; a large student population; the stability provided by healthcare systems, government or other large institutional employer presence; low rates of unemployment; and lower cost of living versus gateway markets.
We focus on regionally dominant markets across the United States which we believe have attractive growth dynamics driven in part by important economic factors such as strong employment growth; net in-migration of a highly educated workforce; a large student population; the stability provided by major healthcare systems; government or other large institutional employer presence; low rates of unemployment; and lower cost of living versus gateway markets.
The Series D Preferred Stock has no stated maturity, will not be subject to any sinking fund or other mandatory redemption, and will not be convertible into or exchangeable for any of our other securities. Use of Leverage We use mortgage loans secured by our individual properties in order to maximize the return for our stockholders.
The Series D Preferred Stock has no stated maturity, will not be subject to any sinking fund or other mandatory redemption, and will not be convertible into or exchangeable for any of our other securities. 6 Table of Contents Use of Leverage We use mortgage loans secured by our individual properties in order to maximize the return for our stockholders.
This partnership continues to raise capital through the sale of additional limited partnership units. • 100% of NetREIT Model Homes, Inc. 4 Table of Contents We provide management services to our limited partnerships through our wholly-owned subsidiaries, NetREIT Advisors, LLC (“NetREIT Advisors”) and Dubose Advisors LLC (“Dubose Advisors”), which we refer to collectively as the Advisors.
This partnership continues to raise capital through the sale of additional limited partnership units. • 100% of NetREIT Model Homes, Inc. We provide management services to our limited partnerships through our wholly-owned subsidiaries, NetREIT Advisors, LLC (“NetREIT Advisors”) and Dubose Advisors LLC (“Dubose Advisors”), which we refer to collectively as the Advisors.
If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we will fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, from sales of equity or debt securities, or we will reduce the rate of distribution to the stockholders.
If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we will fund a portion of these needs from additional borrowings of secured or unsec ured indebtedness, from real estate sales, from sales of equity or debt securities, or we will reduce the rate of distribution to the stockholders.
The Series A Warrants and the shares of Series A Common Stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022.
The Series A Warrants and the shares of Series A Common Stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the Securities and Exchange Commission (the "SEC") and was declared effective January 21, 2022.
Katz, Chief Investment Officer of the Company; and • Steve Hightower, President of NetREIT Dubose. 8 Table of Contents Mr. Heilbron has overall responsibility for the day-to-day activities of the Company. Mr. Sragovicz oversees financial matters, including financi al reporting, budgeting, forecasting, funding activities, tax and insurance. Mr.
Katz, Chief Investment Officer of the Company; and • Steve Hightower, President of NetREIT Dubose and member of the Board of Directors. 8 Table of Contents Mr. Heilbron has overall responsibility for the day-to-day activities of the Company. Mr. Benten oversees financial matters, including financi al reporting, budgeting, forecasting, funding activities, tax and insurance. Mr.
We currently operate five limited partnerships in connection with NetREIT Dubose: Dubose Model Home Investors #202, LP (“ DMHI #202 ”), Dubose Model Home Investors #203, LP (“ DMHI #203 ”), Dubose Model Home Investors #204, LP (“ DMHI #204 ”), Dubose Model Home Investors #205, LP (“ DMHI #205 ”), and Dubose Model Home Investors #206, LP (“ DMHI #206 ”).
We currently operate six limited partnerships in connection with NetREIT Dubose: Dubose Model Home Investors #202, LP (“ DMHI #202 ”), Dubose Model Home Investors #203, LP (“ DMHI #203 ”), Dubose Model Home Investors #204, LP (“ DMHI #204 ”), Dubose Model Home Investors #205, LP (“ DMHI #205 ”), Dubose Model Home Investors #206, LP (“ DMHI #206 ”), and Dubose Model Home Investors #207, LP (“ DMHI #207 ”).
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.
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.
Our Management is currently comprised of: • Jack K. Heilbron, Chairman of the Board of Directors, Chief Executive Officer and President of the Company, President and Director of NetREIT Dubose, and President of NetREIT Advisors; • Adam Sragovicz, Chief Financial Officer of the Company and Dubose Advisors; • Gary M.
Our Management is currently comprised of: • Jack K. Heilbron, Chairman of the Board of Directors, Chief Executive Officer and President of the Company, President and Director of NetREIT Dubose, and President of NetREIT Advisors; • Ed Bentzen, Chief Financial Officer of the Company; • Gary M.
At December 31, 2022, $30.2 million of our total debt contained recourse to the Company, of which $24.8 million was related to the model homes properties. We have used both fixed and variable interest rate debt to finance our properties. Wherever possible, we prefer to obtain fixed rate mortgage financing as it provides better cost predictability.
At December 31, 2023, $11.2 million of our total debt contained recourse to the Company, of which $5.9 million was related to the model homes properties. We have used both fixed and variable interest rate debt to finance our properties. Wherever possible, we prefer to obtain fixed rate mortgage financing as it provides better cost predictability.
RECENT DEVELOPMENTS Significant Transactions in 2022 and 2021 Acquisitions during the year ended December 31, 2022: • We acquired 31 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2022. The purchase price for these properties was $15.6 million.
RECENT DEVELOPMENTS Significant Transactions in 2023 and 2022 Acquisitions during the year ended December 31, 2023: • We acquired 40 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2023. The purchase price for these properties was $21.9 million.
Among other things, our Board of Directors must approve each real property acquisition our Management proposes. As of December 31, 2022, there were five directors comprising our Board of Directors, four of whom are independent directors (“Independent Directors”). One of our directors, Mr. Heilbron is not independent. Mr.
Among other things, our Board of Directors must approve each real property acquisition our Management proposes. As of December 31, 2023, there were six directors comprising our Board of Directors, four of whom are independent directors (“Independent Directors”). Two of our directors, Mr. Heilbron and Mr. Hightower, are not independent.
In 2023, we have $6.8 million of principal payments on mortgage notes payable related to the model home properties, including $6.2 million payments related to mortgage notes payable that mature in 2023. We plan to refinance a significant portion of the mortgage notes payable or sell the model home properties to repay the mortgage notes payable.
In 2024, we have $13.1 million of principal payments on mortgage notes payable related to the model home properties, including $12.5 million payments related to mortgage notes payable that mature in 2024. We plan to refinance a significant portion of the mortgage notes payable or sell the model home properties to repay the mortgage notes payable.
At-the-Market Offering On November 8, 2021, we entered into an At-the-Market Offering Agreement (the “Sales Agreement”) with The Benchmark Company, LLC (the “Manager”) pursuant to which the Manager will act as the Company’s sales agent with respect to the issuance and sale of up to $4,399,000 of our Series A Common Stock from time to time in an at-the-market public offering.
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. 4 Table of Contents At-the-Market Offering On November 8, 2021, we entered into an At-the-Market Offering Agreement (the “Sales Agreement”) with The Benchmark Company, LLC (the “Manager”) pursuant to which the Manager will act as the Company’s sales agent with respect to the issuance and sale of up to $4,399,000 of our Series A Common Stock from time to time in an at-the-market public offering.
As of December 31, 2022, we had a total of 18 full-time employees.
As of December 31, 2023, we had a total of 15 full-time employees.
Preferred Stock Series D On June 15, 2021, we completed an offering of 800,000 shares of our 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock ("Series D Preferred Stock") for cash consideration of $25.00 per share to a syndicate of underwriters led by The Benchmark Company, LLC, as representative, resulting in approximately $18.1 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses.
Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a share of Series A Common Stock at expiration, rounded down to the nearest number of whole shares. 5 Table of Contents Preferred Stock Series D On June 15, 2021, we completed an offering of 800,000 shares of our 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock ("Series D Preferred Stock") for cash consideration of $25.00 per share to a syndicate of underwriters led by The Benchmark Company, LLC, as representative, resulting in approximately $18.1 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses.
Management's Discussion and Analysis of Financial Condition and Result of Operations included elsewhere in this Annual Report on Form 10-K. 2 Table of Contents Our main objective is to maximize long-term stockholder value through the acquisition, management, leasing and selective redevelopment of high-quality office and in dustrial properties.
Management's Discussion and Analysis of Financial Condition and Result of Operations included elsewhere in this Annual Report on Form 10-K. 2 Table of Contents Our main objective is to maximize long-term stockholder value through the management, leasing and selective redevelopment of our existing commercial property portfolio, and selectively acquiring future properties which are anticipated to provide accretive economic returns.
Overall the commercial properties and Model Homes adequately covered their debt servicing needs during the year ended December 31, 2022, and management expect this to continue during the next twelve months.
Our short-term liquidity needs include satisfying the debt service requirements of our existing mortgages. Overall the commercial properties and Model Homes adequately covered their debt servicing needs during the year ended December 31, 2023, and management expect this to continue during the next twelve months.
Dispositions during the year ended December 31, 2022: We review our portfolio of investment properties for value appreciation potential on an ongoing basis, and dispose of any properties that no longer satisfy our requirements in this regard, taking into account tax and other considerations.
The purchase price consisted of cash payments of $4.8 million and mortgage notes of $10.8 million. We review our portfolio of investment properties for value appreciation potential on an ongoing basis, and dispose of any properties that no longer satisfy our requirements in this regard, taking into account tax and other considerations.
During the year ended December 31, 2021, the Company repurchased 29,721 shares of our Series A Common Stock at an average price of approximately $3.7223 per share, including a commission of $0.035 per share, for a total cost of $110,631.
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 $ 15.97 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.2 million for the Series D Preferred Stock.
During year ended December 31, 2022, we disposed of the following properties: • World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million. • 31 model homes for approximately $17.5 million and the Company recognized a gain of approximately $5.4 million. 3 Table of Contents Dispositions during the year ended December 31, 2021: During year ended December 31, 2021, we disposed of the following properties: • Waterman Plaza, which was sold on January 28, 2021, for approximately $3.5 million and the Company recognized a loss of approximately $0.2 million. • Garden Gateway, which was sold on February 19, 2021, for approximately $11.2 million and the Company recognized a loss of approximately $1.4 million. • Highland Court, which was sold on May 20, 2021, for approximately $10.2 million and the Company recognized a loss of approximately $1.6 million. • Executive Office Park, which was sold on May 21, 2021, for approximately $8.1 million and the Company recognized a gain of approximately $2.5 million. • 44 model homes for approximately $20.7 million and the Company recognized a gain of approximately $3.2 million.
Dispositions during the year ended December 31, 2022: During year ended December 31, 2022, we disposed of the following properties: • World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million. • 31 model homes for approximately $17.5 million and the Company recognized a gain of approximately $5.4 million.
The limited partnerships typically raise private equity to invest in Model Home Properties and lease them back to the homebuilders.
The limited partnerships typically raise private equity to invest in Model Home Properties and lease them back to the homebuilders. When the model homes' lease ends, these properties are sold to independent third parties as residential homes.
Our commercial property tenant base is highly diversified and consists of approximately 156 individual commercial tenants with an average remaining lease term of approximately 3 years as of December 31, 2022 .
Our commercial property tenant base is highly diversified and consists of approximately 155 individual commercial tenants with an average remaining lease term of approximately 3.1 years as of December 31, 2023. As of December 31, 2023, one commercial tenant represented 6.43% of our annualized based rent, while our ten largest tenants represented approximately 34.48% of our annualized base rent.
Also, if more stringent requirements are imposed on us in the future, the costs of compliance could have a material adverse effect on us and our financial condition. LEGAL PROCEEDINGS We are periodically subject to various legal proceedings and claims that arise in the ordinary course of business.
Also, if more stringent requirements are imposed on us in the future, the costs of compliance could have a material adverse effect on us and our financial condition. MANAGEMENT OF THE COMPANY Our Management We refer to our executive officers and any directors who are affiliated with them as our “Management” .
Dubose, a previously non-independent director stepped down as a director in March 2022. See Item 9B Other Information, in Part II of this 10-K for more information. OUR REIT STATUS We elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2000.
OUR REIT STATUS We elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2000.
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. 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.
Share 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.
Our management team is working to fill the 45,535 square foot space as quickly as possible, and has already leased approximately 20% of the space to a tenant during January 2023. In addi tion, our commercial property tenant base has limited exposure to any single indust ry. For more information, see Part II - Item 7.
We will continue to work on filling the space during 2024. In addi tion, our commercial property tenant base has limited exposure to any single indust ry. For more information, see Part II - Item 7.
Our human capital management strategy, which we refer to as our people strategy, is tightly aligned with our business needs.
Our human capital management strategy, which we refer to as our people strategy, is tightly aligned with our business needs. During 2023, our human capital efforts were focused on retaining top talent, and continuing to increase our agility to meet the quickly changing needs of the business.
Halliburton Energy Services, Inc. was located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base rent. The tenant did not renew the lease and we placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary.
On December 31, 2022, the lease for our former largest tenant at that time, Halliburton Energy Services, Inc. ("Halliburton"), expired. Halliburton was located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base rent as of December 31, 2022.
Our Model Home business was started in March 2010 through the acquisition of certain assets and rights from Dubose Model Homes USA . Subsequent to its formation, NetREIT Dubose raised $10.6 million pursuant to a private placement of its common stock (the private placement terminated on December 31, 2013).
As of December 31, 2023 , we owned 110 model homes with a net book value of approximately $50.8 million . 3 Table of Contents Our Model Home business was started in March 2010 through the acquisition of certain assets and rights from Dubose Model Homes USA .
As of December 31, 2022 , none of our mortgage loans include variable interest rate provisions. In August 2023 and September 2023, we have two mortgage loans, on West Fargo Industries and Grand Pacific Center, which are subject to possible interest rate resets.
As of December 31, 2023, none of our mortgage loans included variable interest rate provisions. On August 5, 2023, the lender for our West Fargo Industries property increased the interest rate to 6.70%.
The building is 100% occupied under a 5 year triple net lease to Johns Hopkins University’s Bloomberg School of Public Health and was purchased with all cash. • We acquired 18 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2021.
The purchase price consisted of cash payments of $6.6 million and mortgage notes of $15.3 million. Acquisitions during the year ended December 31, 2022: • We acquired 31 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2022. The purchase price for the properties was $15.6 million.
As of December 31, 2022, there have been no sales under the Sales Agreement. 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.
As of December 31, 2023, there have been no sales under the Sales Agreement. Sponsorship of Special Purpose Acquisition Company The Company served as the sponsor of Murphy Canyon Acquisition Corp., a former special purpose acquisition company ("Murphy Canyon" or the “SPAC”), since the SPAC’s creation in October 2021 until its initial business combination in September 2023.
Removed
As of December 31, 2022 , two commerci al tenants represented more than 5.0% of our annualized base rent, one of which represented 8.57% of our annualized based rent, while our ten largest tenants represented approximately 37.46% of our annualized base rent. On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired.
Added
Halliburton did not renew the lease, which expired on December 31, 2022, and we placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if ne cessary, none of which has been utilized as of December 31, 2023 .
Removed
The purchase price consisted of cash payments of $4.8 million and mortgage notes of $10.8 million.
Added
Our management team is working to fill the 45,535 square foot space as quickly as possible, and has leased approximately 20% of the space to a tenant during 2023 and has reviewed various third party proposals for the remaining 80%. As of December 31, 2023, none of the third party proposals have fit into our long-term plans.
Removed
Acquisitions during the year ended December 31, 2021: • On August 17, 2021, the Company, through its 61.3% owned subsidiaries, NetREIT Palm Self Storage, LP and NetREIT Highland LLC, acquired a single story newly constructed 10,500 square foot building in Houston, Texas for a purchase price of approximately $4.9 million, in connection with a like-kind exchange transaction pursued under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code").
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Dispositions during the year ended December 31, 2023: During year ended December 31, 2023, we disposed of the following properties: • 22 model homes for approximately $11.7 million and the Company recognized a gain of approximately $3.2 million.
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The building is 100% occupied under a 15-year triple net lease and was purchased with all cash. • On December 22, 2021, the Company purchased a 31,752 square foot building in Baltimore, Maryland for a purchase price of approximately $8.9 million.
Added
Model Home Properties Our Model Home properties are located in five states throughout the United St ates.
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The purchase price for the properties was $8.4 million. The purchase price consisted of cash payments of $2.7 million and mortgage notes of $5.7 million.
Added
This partnership continues to raise capital through the sale of additional limited partnership units. • 3.8% of DMHI #207, which has raised $2.6 million, and was formed in 2023 to raise up to $5.0 million through the sale of partnership units.
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Model Home Properties Our Model Home properties are located in three states throughout the United States. As of December 31, 2022, we owned 92 model homes with a net book value of approximately $37.9 million. NetREIT Dubose Model Home REIT, Inc.
Added
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.
Removed
As of December 31, 2022 , NetREIT Dubose had sold all of its properties and distributed all available cash to its shareholders, including the Company.
Added
Certain officers and directors of the Company also served as officers and directors of the SPAC during this period. On September 22, 2023, Murphy Canyon completed its business combination with Conduit Pharmaceuticals Limited (“Conduit Pharma”) and changed its name to Conduit Pharmaceuticals Inc. (“Conduit”).
Removed
Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently.
Added
Immediately prior to the business combination, the Company owned approximately 65% of the SPAC’s outstanding shares of common stock.
Removed
The registration statement and prospectus relating to the initial public offering (“IPO”) of the SPAC, Murphy Canyon Acquisition Corp.
Added
Upon consummation of the business combination, the SPAC’s shares of Class B common stock were converted into shares of its Class A common stock and the shares of Class A common stock were then reclassified as a single class of Conduit common stock.
Removed
(“Murphy Canyon”), was declared effective by the Securities and Exchange Commission (the “SEC”) on February 2, 2022 and SPAC units, consisting of one share of Class A common stock, par value $0.0001 per share, of Murphy Canyon and one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of common stock at a price of $11.50 per share, began trading on the Nasdaq Global Market on February 3, 2022.
Added
As a result of the business combination, the Company was issued (i) 3,306,250 shares of Conduit’s common stock due to the conversion of the shares of the SPAC’s Class B common stock into shares of the SPAC’s Class A common stock and then reclassification into shares of Conduit common stock, (ii) 754,000 shares of Conduit common stock, which prior to the business combination were shares of the SPAC’s Class A common stock and (iii) private warrants to purchase 754,000 shares of Conduit common stock, which prior to the business combination were warrants to purchase 754,000 shares of the SPAC’s Class A common stock.
Removed
The Murphy Canyon IPO closed on February 7, 2022, raising gross proceeds for Murphy Canyon of $132,250,000, including the exercise in full by the underwriters of their over-allotment option. In connection with the IPO, we purchased, through the Sponsor, 754,000 placement units (the “placement units”) at a price of $10.00 per unit, for an aggregate purchase price of $7,540,000.
Added
Also in the business combination, shareholders and debtholders of Conduit Pharma were issued 65,000,000 shares of Conduit common stock. Immediately following the consummation of the business combination, the Company transferred 45,000 shares of Conduit common stock and warrants to purchase 45,000 shares of Conduit common stock to the SPAC’s independent directors as compensation for their services.
Removed
The Sponsor has agreed to transfer an aggregate of 45,000 placement units (15,000 each) to each of Murphy Canyon’s independent directors. Immediately following the IPO, Murphy Canyon began to evaluate acquisition candidates.
Added
As a result, the Company owned approximately 6.5% of Conduit’s common stock immediately following the business combination and currently owns approximately 6.3% of Conduit’s common stock.
Removed
On November 8, 2022, Murphy Canyon entered into an agreement and plan of merger with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and Murphy Canyon’s wholly owned subsidiary.
Added
In connection with the business combination, the Company’s officers and directors who also served as officers and directors of the SPAC resigned from the SPAC, with the exception of the Company’s former Chief Financial Officer who resigned from the Company.
Removed
If the merger agreement is approved by Murphy Canyon’s stockholders and the transactions under the merger agreement are consummated, Murphy Canyon’s Cayman Island subsidiary will merge with and into Conduit, with Conduit surviving the merger as Murphy Canyon’s wholly owned subsidiary.
Added
In the event of our 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 we have legally available for distribution to our stockholders, subject to the preferential rights of the holders of any class or series of stock we 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 our common stock or any other class or series of our stock we may issue that ranks junior to the Series D Preferred Stock as to liquidation rights.
Removed
Pursuant to the merger agreement, the outstanding ordinary shares (including the shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the merger) of Conduit will be converted into an aggregate of 65,000,000 shares of Murphy Canyon’s newly issued common stock, with each such outstanding Conduit ordinary share (including the ordinary shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the merger) converted into newly issued shares of Murphy Canyon’s common stock on a pro rata basis. 5 Table of Contents Initially, Murphy Canyon was required to complete its initial business combination transaction by 12 months from the consummation of its initial public offering or up to 18 months if it extended the period of time to consummate a business combination in accordance with its certificate of incorporation.
Added
The loan agreement states that the lender may, upon not less than sixty (60) days prior, give written notice to the Company to increase the interest rates effective on August 5, 2023, and August 5, 2026, to the rate then being quoted by the lender for new three-year commercial mortgage loans of similar size and quality with like terms and security (provided that in no event shall the new rate be less than the initial rate).
Removed
On January 26, 2023, at a special meeting of the stockholders, the stockholders approved a proposal to amend the Murphy Canyon’s certificate of incorporation to extend the date by which it has to consummate a business combination up to 12 times, each such extension for an additional one month period, from February 7, 2023, to February 7, 2024.
Added
We have $10.4 million of principal payments on mortgage notes payable relating to commercial properties in 2024, one of which is maturing in 2024. The loan on Dakota Center matures in July 2024 and management has reached out to the lender seeking an extension and additional provision to change the terms of the loan and maturity date.
Removed
The stockholders also approved a related proposal to amend the trust agreement allowing Murphy Canyon to deposit into the trust account, for each one-month extension, one-third of 1% of the funds remaining in the trust account following the redemptions made in connection with the approval of the extension proposal at the special meeting.
Added
We have also inquired with other lenders to refinance the property. If we are unsuccessful in refinancing the property or changing the terms of the original loan, management would consider selling the property and paying the loan in full or surrendering the property to the current lender.
Removed
In connection with the stockholders’ vote at the special meeting, 11,037,272 shares of common stock were tendered for redemption, which were redeemed in February 2023. After the redemptions, there were 2,187,728 shares SPAC Class A common stock subject to possible redemption.
Removed
On March 3, 2023 we loaned Murphy Canyon $300,000 to fund its trust account and for operating expenses, and may lend up to $1.5 million in total.
Removed
The loan is non-interest bearing, unsecured and will be repayable in full upon the earlier of (i) the date on which Murphy Canyon consummates its initial business combination and (ii) the date that its winding up is effective.
Removed
Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a share of Series A Common Stock at expiration, rounded down to the nearest number of whole shares.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+33 added−24 removed315 unchanged
Biggest changeWe may use borrowed funds or funds from other sources to pay distributions, which may adversely impact our operations; • a future issuance of stock could dilute the value of our common stock, Series D Preferred Stock or Series A Warrants, ; • our sponsorship of Murphy Canyon requires significant capital deployment, entails certain risks and may not be successful, which would likely have a material adverse effect on our future expansion, revenues, and profits; and • inflation may materially and adversely affect our income, cash flow, results of operations, financial condition, liquidity, the ability to service our debt obligations, the market price of our securities and our ability to pay dividends and other distributions to our stockholders; 11 Table of Contents Risks Related to our Business, Properties and Operations We face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs.
Biggest changeWe may use borrowed funds or funds from other sources to pay distributions, which may adversely impact our operations; • a future issuance of stock could dilute the value of our common stock, Series D Preferred Stock or Series A Warrants, ; • the value of our equity investment in Conduit may decline due to factors outside of our control, which would likely have a material adverse effect on our future expansion, revenues, and profits; • the possibility that we may not comply with Nasdaq’s continued listing requirements, which may result in our common stock being delisted, which could affect our common stock’s market price and liquidity and reduce our ability to raise capital; • the possibility that if any of the banking institutions in which we deposit funds ultimately fails, we may lose any amounts of our deposits over federally insured levels which could reduce the amount of cash we have available to distribute or invest and could result in a decline in our value; • inflation may materially and adversely affect our income, cash flow, results of operations, financial condition, liquidity, the ability to service our debt obligations, the market price of our securities and our ability to pay dividends and other distributions to our stockholders; and • actions of activist stockholders may cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business. 11 Table of Contents Risks Related to our Business, Properties and Operations We face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs.
Under Maryland law, cash dividends on stock may only be paid if, after giving effect to the dividends, our total assets exceed our total liabilities and we are able to pay our indebtedness as it becomes due in the ordinary course of business.
Under Maryland law, cash dividends on stock may only be paid if, after giving effect to the dividends, our total assets exceed our total liabilities and we are able to pay our indebtedness as it becomes due in the ordinary course of business.
Some of these risks include: • we face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs; • disruptions in the financial markets and uncertain economic conditions could adversely affect the value of our real estate investments; • our inability to sell a property at the time and on the terms we desire could limit our ability to realize a gain on our investments and pay distributions to our stockholders; • we may acquire properties in joint ventures, partnerships or through limited liability companies, which could limit our ability to control or liquidate such holdings; • we may acquire properties “as is,” which increases the risk that we will have to remedy defects or costs without recourse to the seller; • our model home business is substantially dependent on the supply and/or demand for single family homes; • a significant percentage of our properties are concentrated in a small number of states, which exposes our business to the effects of certain regional events and occurrences; • we currently are dependent on internal cash from our operations, financing and proceeds from property sales to fund future property acquisitions, meet our operational costs and pay dividends to our stockholders; • we depend on key personnel, and the loss of such persons could impair our ability to achieve our business objectives; • we may change our investment and business policies without stockholder consent, and such changes could increase our exposure to operational risks; 10 Table of Contents • provisions of Maryland law may limit the ability of a third party to acquire control of us by requiring our Board of Directors or stockholders to approve proposals to acquire our company or effect a change in control; • our management faces certain conflicts of interest with respect to their other positions and/or interests outside of our company, which could hinder our ability to implement our business strategy and to generate returns to our stockholders; • we have significant outstanding indebtedness, which requires that we generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default under the terms of our debt; • failure to qualify as a REIT could adversely affect our operations and our ability to pay distributions; • as a REIT, we may be subject to tax liabilities that reduce our cash flow; • the tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes; • our business, financial condition, results of operations and cash flows may be adversely affected by the recent COVID-19 pandemic or of new epidemics; • our cash available for distributions may not be sufficient to pay distributions on the common stock at expected levels, and we cannot assure you of our ability to pay distributions in the future.
Some of these risks include: • we face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs; • disruptions in the financial markets and uncertain economic conditions could adversely affect the value of our real estate investments; • our inability to sell a property at the time and on the terms we desire could limit our ability to realize a gain on our investments and pay distributions to our stockholders; • we may acquire properties in joint ventures, partnerships or through limited liability companies, which could limit our ability to control or liquidate such holdings; • we may acquire properties “as is,” which increases the risk that we will have to remedy defects or costs without recourse to the seller; • our model home business is substantially dependent on the supply and/or demand for single family homes; • a significant percentage of our properties are concentrated in a small number of states, which exposes our business to the effects of certain regional events and occurrences; • we currently are dependent on internal cash from our operations, financing and proceeds from property sales to fund future property acquisitions, meet our operational costs and pay dividends to our stockholders; • we depend on key personnel, and the loss of such persons could impair our ability to achieve our business objectives; • we may change our investment and business policies without stockholder consent, and such changes could increase our exposure to operational risks; 10 Table of Contents • provisions of Maryland law may limit the ability of a third party to acquire control of us by requiring our Board of Directors or stockholders to approve proposals to acquire our company or effect a change in control; • our management faces certain conflicts of interest with respect to their other positions and/or interests outside of our company, which could hinder our ability to implement our business strategy and to generate returns to our stockholders; • we have significant outstanding indebtedness, which requires that we generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default under the terms of our debt; • failure to qualify as a REIT could adversely affect our operations and our ability to pay distributions; • as a REIT, we may be subject to tax liabilities that reduce our cash flow; • the tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes; • our business, financial condition, results of operations and cash flows may be adversely affected by a resurgence of the recent COVID-19 pandemic or of new epidemics; • our cash available for distributions may not be sufficient to pay distributions on the common stock at expected levels, and we cannot assure you of our ability to pay distributions in the future.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Series D Preferred Stock include: • actual or anticipated variations in our quarterly results of operations or distributions, including as a result of the recent COVID-19 pandemic and its impact on our business, financial condition, results of operations and cash flows; • changes in our FFO, earnings estimates or recommendations by securities analysts; • publication of research reports about us or the real estate industry generally; 33 Table of Contents • the extent of investor interest; • publication of research reports about us or the real estate industry; • increases in market interest rates that lead purchasers of our shares to demand a higher yield; • changes in market valuations of similar companies; • strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy; • the reputation of REITs generally and the reputation of REITs with portfolios similar to ours; • the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies); • adverse market reaction to any additional debt that we incur or acquisitions that we make in the future; • additions or departures of key management personnel; • future issuances by us of our common stock or other equity securities; • actions by institutional or activist stockholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this annual report; and • general market and economic conditions.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Series D Preferred Stock include: • actual or anticipated variations in our quarterly results of operations or distributions, including as a result of the recent COVID-19 pandemic and its impact on our business, financial condition, results of operations and cash flows; • changes in our FFO, earnings estimates or recommendations by securities analysts; • publication of research reports about us or the real estate industry generally; 34 Table of Contents • the extent of investor interest; • publication of research reports about us or the real estate industry; • increases in market interest rates that lead purchasers of our shares to demand a higher yield; • changes in market valuations of similar companies; • strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy; • the reputation of REITs generally and the reputation of REITs with portfolios similar to ours; • the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies); • adverse market reaction to any additional debt that we incur or acquisitions that we make in the future; • additions or departures of key management personnel; • future issuances by us of our common stock or other equity securities; • actions by institutional or activist stockholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this annual report; and • general market and economic conditions.
The price of the Series D Preferred Stock in the market may be higher or lower than the price holders of the Series D Preferred stock paid for it depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. 32 Table of Contents These factors include, but are not limited to, the following: • prevailing interest rates, increases in which may have an adverse effect on the market price of the Series D Preferred Stock; • trading prices of similar securities; • our history of timely dividend payments; • the annual yield from dividends on the Series D Preferred Stock as compared to yields on other financial instruments; • general economic and financial market conditions; • government action or regulation; • the financial condition, performance and prospects of us and our competitors; • changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; • our issuance of additional preferred equity or debt securities; and • actual or anticipated variations in quarterly operating results of us and our competitors.
The price of the Series D Preferred Stock in the market may be higher or lower than the price holders of the Series D Preferred stock paid for it depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. 33 Table of Contents These factors include, but are not limited to, the following: • prevailing interest rates, increases in which may have an adverse effect on the market price of the Series D Preferred Stock; • trading prices of similar securities; • our history of timely dividend payments; • the annual yield from dividends on the Series D Preferred Stock as compared to yields on other financial instruments; • general economic and financial market conditions; • government action or regulation; • the financial condition, performance and prospects of us and our competitors; • changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; • our issuance of additional preferred equity or debt securities; and • actual or anticipated variations in quarterly operating results of us and our competitors.
Concerns over economic recession, the COVID-19 pandemic, interest rate increases, policy priorities of the U.S. presidential administration, trade wars, labor shortages, or inflation may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability.
Concerns over economic recession, the recent COVID-19 pandemic, interest rate increases, policy priorities of the U.S. presidential administration, trade wars, labor shortages, or inflation may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability.
The Series D Preferred Stock is trading on the Nasdaq Capital Market but there is no guarantee that an active and liquid trading market to sell the Series D Preferred Stock will be sustained. Because the Series D Preferred Stock has no stated maturity date, investors seeking liquidity may be limited to selling their shares in the secondary market.
The Series D Preferred Stock is trading on Nasdaq but there is no guarantee that an active and liquid trading market to sell the Series D Preferred Stock will be sustained. Because the Series D Preferred Stock has no stated maturity date, investors seeking liquidity may be limited to selling their shares in the secondary market.
In addition, making a balloon payment may leave us with insufficient cash to pay the distributions that are required to maintain our qualification as a REIT. At December 31, 2022, excluding our model homes business, we have no mortgage that requires a balloon payment in 2023.
In addition, making a balloon payment may leave us with insufficient cash to pay the distributions that are required to maintain our qualification as a REIT. At December 31, 2023, excluding our model homes business, we have no mortgage that requires a balloon payment in 2023.
These conditions include: • changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties; • fluctuations in interest rates, including anticipated interest rate increases in 2023, which could adversely affect our ability to obtain financing on favorable terms or at all, and negatively impact the value of properties and the ability of prospective buyers to obtain financing for properties we intend to sell; • the inability of tenants to pay rent; • the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as location, rental rates, amenities and safety record; • competition from other real estate investors with significant capital, including other real estate operating companies, publicly traded REITs and institutional investment funds; • increased operating costs, including increased real property taxes, maintenance, insurance and utilities costs; • weather conditions that may increase or decrease energy costs and other weather-related expenses; • oversupply of commercial space or a reduction in demand for real estate in the markets in which our properties are located; • changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; and • civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes, wind and hail damage and floods, which may result in uninsured and underinsured losses.
These conditions include: • changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties; • fluctuations in interest rates, including potential interest rate increases in 2024, which could adversely affect our ability to obtain financing on favorable terms or at all, and negatively impact the value of properties and the ability of prospective buyers to obtain financing for properties we intend to sell; • the inability of tenants to pay rent; • the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as location, rental rates, amenities and safety record; • competition from other real estate investors with significant capital, including other real estate operating companies, publicly traded REITs and institutional investment funds; • increased operating costs, including increased real property taxes, maintenance, insurance and utilities costs; • weather conditions that may increase or decrease energy costs and other weather-related expenses; • oversupply of commercial space or a reduction in demand for real estate in the markets in which our properties are located; • changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; and • civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes, wind and hail damage and floods, which may result in uninsured and underinsured losses.
As a result of the effects of the COVID-19 pandemic, we have been and may continue to be impacted by one or more of the following: ● a decrease in real estate rental revenue (our primary source of operating cash flow), as a result of temporary rent deferrals, rent abatement and/or rent reductions, rent freezes or declines impacting new and renewal rental rates on properties, longer lease-up periods for both anticipated and unanticipated vacancies (in part, due to “shelter-in-place” mandates), lower revenue recognized as a result of waiving late fees, as well as our tenants’ ability and willingness to pay rent, and our ability to continue to collect rents, on a timely basis or at all; ● a complete or partial closure of one or more of our properties resulting from government or tenant action (since Q1, 2021, all of our commercial properties were reopened); ● reductions in demand for commercial space and the inability to provide physical tours of our commercial spaces may result in our inability to renew leases, re-lease space as leases expire, or lease vacant space, particularly without concessions, or a decline in rental rates on new leases; ● the inability of one or more major tenants to pay rent, or the bankruptcy or insolvency of one or more major tenants, may be increased due to a downturn in its business or a weakening of its financial condition as a result of shelter-in-place orders, phased re-opening of its business, or other pandemic related causes; ● the inability to decrease certain fixed expenses at our properties despite decreased operations at such properties; ● the inability of our third-party service providers to adequately perform their property management and/or leasing activities at our properties due to decreased on-site staff; ● the effect of existing and future orders by governmental authorities in any of our markets, which might require homebuilders to cease operations for an uncertain or indefinite period of time, which could significantly affect new home orders and deliveries, and negatively impact their home sales revenue and ability to perform on their lease obligations to the Company in such markets; ● difficulty accessing capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deterioration in credit and financing conditions, which may affect our access to capital and our commercial tenants’ ability to fund their business operations and meet their obligations to us; ● the financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of debt agreements; ● a decline in the market value of real estate may result in the carrying value of certain real estate assets exceeding their fair value, which may require us to recognize an impairment to those assets; 14 Table of Contents ● future delays in the supply of products or services may negatively impact our ability to complete the renovations and lease-up of our buildings on schedule or for their original estimated cost; ● a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow or change the complexion of our portfolio of properties; ● our insurance may not cover loss of revenue or other expenses resulting from the pandemic and related shelter-in-place rules; ● unanticipated costs and operating expenses and decreased anticipated revenue related to compliance with regulations, such as additional expenses related to staff working remotely, requirements to provide employees with additional mandatory paid time off and increased expenses related to sanitation measures performed at each of our properties, as well as additional expenses incurred to protect the welfare of our employees, such as expanded access to health services; ● the potential for one or more members of our senior management team to become sick with COVID-19 and the loss of such services could adversely affect our business; ● the increased vulnerability to cyber-attacks or cyber intrusions while employees are working remotely has the potential to disrupt our operations or cause material harm to our financial condition; and ● complying with REIT requirements during a period of reduced cash flow could cause us to liquidate otherwise attractive investments or borrow funds on unfavorable conditions.
As a result of the effects of the COVID-19 pandemic, we had been impacted and may in the future be impacted by one or more of the following if there is a resurgence of COVID-19 or development of another pandemic: ● a decrease in real estate rental revenue (our primary source of operating cash flow), as a result of temporary rent deferrals, rent abatement and/or rent reductions, rent freezes or declines impacting new and renewal rental rates on properties, longer lease-up periods for both anticipated and unanticipated vacancies (in part, due to “shelter-in-place” mandates), lower revenue recognized as a result of waiving late fees, as well as our tenants’ ability and willingness to pay rent, and our ability to continue to collect rents, on a timely basis or at all; ● a complete or partial closure of one or more of our properties resulting from government or tenant action (since Q1, 2021, all of our commercial properties were reopened); ● reductions in demand for commercial space and the inability to provide physical tours of our commercial spaces may result in our inability to renew leases, re-lease space as leases expire, or lease vacant space, particularly without concessions, or a decline in rental rates on new leases; ● the inability of one or more major tenants to pay rent, or the bankruptcy or insolvency of one or more major tenants, may be increased due to a downturn in its business or a weakening of its financial condition as a result of shelter-in-place orders, phased re-opening of its business, or other pandemic related causes; ● the inability to decrease certain fixed expenses at our properties despite decreased operations at such properties; ● the inability of our third-party service providers to adequately perform their property management and/or leasing activities at our properties due to decreased on-site staff; ● the effect of existing and future orders by governmental authorities in any of our markets, which might require homebuilders to cease operations for an uncertain or indefinite period of time, which could significantly affect new home orders and deliveries, and negatively impact their home sales revenue and ability to perform on their lease obligations to the Company in such markets; ● difficulty accessing capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deterioration in credit and financing conditions, which may affect our access to capital and our commercial tenants’ ability to fund their business operations and meet their obligations to us; ● the financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of debt agreements; ● a decline in the market value of real estate may result in the carrying value of certain real estate assets exceeding their fair value, which may require us to recognize an impairment to those assets; 14 Table of Contents ● future delays in the supply of products or services may negatively impact our ability to complete the renovations and lease-up of our buildings on schedule or for their original estimated cost; ● a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow or change the complexion of our portfolio of properties; ● our insurance may not cover loss of revenue or other expenses resulting from the pandemic and related shelter-in-place rules; ● unanticipated costs and operating expenses and decreased anticipated revenue related to compliance with regulations, such as additional expenses related to staff working remotely, requirements to provide employees with additional mandatory paid time off and increased expenses related to sanitation measures performed at each of our properties, as well as additional expenses incurred to protect the welfare of our employees, such as expanded access to health services; ● the potential for one or more members of our senior management team to become sick with COVID-19 and the loss of such services could adversely affect our business; ● the increased vulnerability to cyber-attacks or cyber intrusions while employees are working remotely has the potential to disrupt our operations or cause material harm to our financial condition; and ● complying with REIT requirements during a period of reduced cash flow could cause us to liquidate otherwise attractive investments or borrow funds on unfavorable conditions.
An active trading market for our warrants may not continue to exist or remain active. Although our Series A Warrants were listed on the Nasdaq Capital Market on or around January 24, 2022 under the symbol SQFTW, an active trading market for our warrants may not be sustained.
An active trading market for our warrants may not continue to exist or remain active. Although our Series A Warrants were listed on Nasdaq on or around January 24, 2022 under the symbol SQFTW, an active trading market for our warrants may not be sustained.
In particular, an increase in market interest rates may result in higher yields on other financial instruments and may lead purchasers of Series D Preferred Stock to demand a higher yield on the price paid for the Series D Preferred Stock, which could adversely affect the market price of the Series D Preferred Stock. 31 Table of Contents If the Series D Preferred Stock is delisted, the ability to transfer or sell shares of the Series D Preferred Stock may be limited and the market value of the Series D Preferred Stock will likely be materially adversely affected.
In particular, an increase in market interest rates may result in higher yields on other financial instruments and may lead purchasers of Series D Preferred Stock to demand a higher yield on the price paid for the Series D Preferred Stock, which could adversely affect the market price of the Series D Preferred Stock. 32 Table of Contents If the Series D Preferred Stock is delisted, the ability to transfer or sell shares of the Series D Preferred Stock may be limited and the market value of the Series D Preferred Stock will likely be materially adversely affected.
If our stockholders sell substantial amounts of our Series D Preferred Stock in the public market following, the market price of our Series D Preferred Stock could decrease significantly. The perception in the public market that our stockholders might sell shares of Series D Preferred Stock could also depress our market price.
If our stockholders sell substantial amounts of our Series D Preferred Stock in the public market, the market price of our Series D Preferred Stock could decrease significantly. The perception in the public market that our stockholders might sell shares of Series D Preferred Stock could also depress our market price.
If an active market for our warrants does not continue, it may be difficult for you to sell the Series A Warrants without depressing the market price for such securities. 35 Table of Contents Holders of our warrants will have no rights as a common stockholder until such holders exercise their warrants and acquire shares of our Series A Common Stock.
If an active market for our warrants does not continue, it may be difficult for you to sell the Series A Warrants without depressing the market price for such securities. 36 Table of Contents Holders of our warrants will have no rights as a common stockholder until such holders exercise their warrants and acquire shares of our Series A Common Stock.
A decline in the price of shares of our Series D Preferred Stock might impede our ability to raise capital through the issuance of additional shares of our Series D Preferred Stock or other equity securities and could result in a decline in the value of the shares of our Series D Preferred Stock. 34 Table of Contents Broad market fluctuations could negatively impact the market price of our Series D Preferred Stock.
A decline in the price of shares of our Series D Preferred Stock might impede our ability to raise capital through the issuance of additional shares of our Series D Preferred Stock or other equity securities and could result in a decline in the value of the shares of our Series D Preferred Stock. 35 Table of Contents Broad market fluctuations could negatively impact the market price of our Series D Preferred Stock.
Holders of shares of the Series D Preferred Stock should not expect us to redeem the Series D Preferred Stock on or after the date they become redeemable at our option. 30 Table of Contents The Series D Preferred Stock is a perpetual equity security.
Holders of shares of the Series D Preferred Stock should not expect us to redeem the Series D Preferred Stock on or after the date they become redeemable at our option. 31 Table of Contents The Series D Preferred Stock is a perpetual equity security.
The Series D Preferred Stock do not contain any terms relating to or limiting our indebtedness or affording the holders of shares of the Series D Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of shares of the Series D Preferred Stock, so long as the rights, preferences, privileges or voting power of the Series D Preferred Stock or the holders thereof are not materially and adversely affected. 29 Table of Contents As a holder of shares of the Series D Preferred Stock, you have extremely limited voting rights.
The Series D Preferred Stock does not contain any terms relating to or limiting our indebtedness or affording the holders of shares of the Series D Preferred Stock protection in the event of a highly leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of shares of the Series D Preferred Stock, so long as the rights, preferences, privileges or voting power of the Series D Preferred Stock or the holders thereof are not materially and adversely affected. 30 Table of Contents As a holder of shares of the Series D Preferred Stock, you have extremely limited voting rights.
Any funds used for ADA compliance will reduce our net income and the amount of cash available for distributions to our stockholders. Our property taxes could increase due to property tax rate changes, reassessments or changes in property tax laws, which would adversely impact our cash flows.
Any funds used for ADA compliance will reduce our net income and the amount of cash available for distributions to our stockholders. 37 Table of Contents Our property taxes could increase due to property tax rate changes, reassessments or changes in property tax laws, which would adversely impact our cash flows.
The financial aspects of the COVID-19 pandemic are difficult to predict and may not directly correlate to the severity of outbreaks at a particular place or time.
The financial aspects of the COVID-19 pandemic or any other pandemic are difficult to predict and may not directly correlate to the severity of outbreaks at a particular place or time.
We may be adversely affected by trends in office real estate. In 2022, approximately 63% of our net operating income was from our office properties, and approximately 59% in 2021. Work from home, flexible work schedules, open workplaces, videoconferencing, and teleconferencing are becoming more common, particularly as a result of the COVID-19 pandemic.
We may be adversely affected by trends in office real estate. In 2023, approximately 54% of our net operating income was from our office properties, and approximately 63% in 2022. Work from home, flexible work schedules, open workplaces, videoconferencing, and teleconferencing are becoming more common, particularly as a result of the COVID-19 pandemic.
Our success substantially depends upon the continued contributions of certain key personnel in evaluating and securing investments, selecting tenants and arranging financing. Our key personnel include Jack K. Heilbron, our Chief Executive Officer and President, Adam Sragovicz, our Chief Financial Officer, and Gary Katz, our Chief Investment Officer, each of whom would be difficult to replace.
Our success substantially depends upon the continued contributions of certain key personnel in evaluating and securing investments, selecting tenants and arranging financing. Our key personnel include Jack K. Heilbron, our Chief Executive Officer and President, Ed Bentzen, our Chief Financial Officer, and Gary Katz, our Chief Investment Officer, each of whom would be difficult to replace.
These changes could result in sweeping reform in many laws and regulations, including without limitation, those relating to taxes, small business aid and recovery from the COVID-19 pandemic. In addition, political discourse continues to be abrasive and an inability of the legislative and executive branches to engage in bipartisan politics may lead to instability on legislative, economic and social matters.
These changes could result in sweeping reform in many laws and regulations, including without limitation, those relating to taxes and small business aid. In addition, political discourse continues to be abrasive and an inability of the legislative and executive branches to engage in bipartisan politics may lead to instability on legislative, economic and social matters.
For example, our distributions were suspended for the periods from the third quarter of 2017 through the third quarter of 2018 and for the final three quarters of 2019 through the third quarter of 2020. We have made quarterly distribution to our Series A Common stockholders since the fourth quarter of 2020 through the fourth quarter of 2022.
For example, our distributions were suspended for the periods from the third quarter of 2017 through the third quarter of 2018 and for the final three quarters of 2019 through the third quarter of 2020. We have made quarterly distribution to our holders of Series A Common Stock since the fourth quarter of 2020 through the fourth quarter of 2023.
The current outbreak of the novel coronavirus (COVID-19), and the resulting volatility it has created, has disrupted our business and we expect that the COVID-19 pandemic may in the future significantly and adversely impact our business, financial condition and results of operations, and that other potential pandemics or outbreaks could materially adversely affect our business, financial condition, results of operations and cash flows.
The recent outbreak of COVID-19, and the resulting volatility it created, has disrupted our business and we expect that any resurgence in the COVID-19 pandemic may in the future significantly and adversely impact our business, financial condition and results of operations, and that other potential pandemics or outbreaks could materially adversely affect our business, financial condition, results of operations and cash flows.
Our total gross indebtedness as of December 31, 2022 was approximately $97.8 million . We may incur additional debt for various purposes, including, without limitation, to fund future acquisitions and operational needs. The terms of our outstanding indebtedness provide for significant principal and interest payments.
Our total gross indebtedness as of December 31, 2023 was approximately $108.5 million. We may incur additional debt for various purposes, including, without limitation, to fund future acquisitions and operational needs. The terms of our outstanding indebtedness provide for significant principal and interest payments.
For example, there has been significant inflation in the price of lumber, largely as a result of supply shortages specific to the lumber industry resulting from the pandemic, that may affect construction and renovation costs in our industry.
For example, there has been significant inflation in the price of lumber, largely as a result of supply shortages specific to the lumber industry resulting from the COVID-19 pandemic, that has affected construction and renovation costs in our industry.
A change in our investment policies may, among other things, increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could materially affect our ability to achieve our investment objectives. 21 Table of Contents If we are deemed to be an investment company under the Investment Company Act, including due to our sponsorship of the Murphy Canyon SPAC, our stockholders ’ investment return may be reduced.
A change in our investment policies may, among other things, increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could materially affect our ability to achieve our investment objectives. 21 Table of Contents If we are deemed to be an investment company under the Investment Company Act, our stockholders’ investment return may be reduced.
The global impact of the outbreak has been rapidly evolving and many countries, including the United States (including the states and cities that comprise the San Diego, California; Denver and Colorado Springs, Colorado; Fargo and Bismarck, North Dakota; and other metro regions where we own and operate properties) have instituted quarantines, “shelter in place” mandates, and rules and restrictions on travel and the types of businesses that may continue to operate.
Many countries, including the United States (including the states and cities that comprise the San Diego, California; Denver and Colorado Springs, Colorado; Fargo and Bismarck, North Dakota; and other metro regions where we own and operate properties) had instituted quarantines, “shelter in place” mandates, and rules and restrictions on travel and the types of businesses that may continue to operate.
Risks Related to our Common Stock, Preferred Stock and Series A Warrants Our Series D Preferred Stock is subordinate to our existing and future debt, and your interests could be diluted by the issuance of additional preferred stock and by other transactions.
Our Series D Preferred Stock is subordinate to our existing and future debt, and your interests could be diluted by the issuance of additional preferred stock and by other transactions.
At December 31, 2022, excluding our model home properties, we had a total of approximately $73.0 million of secured financing on our properties.
At December 31, 2023, excluding our model home properties, we had a total of approximately $73.7 million of secured financing on our properties.
The value of our equity investment in Murphy Canyon, as carried on the consolidated balance sheet included in the financial statements accompanying this Form 10-K, is approximately $7.56 million, which we have computed in accordance with accounting principles generally accepted in the United States (“GAAP”), and which constitutes [a significant portion/ the majority] of the carrying value of our total assets as reflected on our consolidated balance sheet.
The value of our equity investment in Conduit, as carried on the consolidated balance sheet included in the financial statements accompanying this Form 10-K, is approximately $7.56 million, which we have computed in accordance with accounting principles generally accepted in the United States (“GAAP”), and which constitutes approximately 41% of the carrying value of our total assets as reflected on our consolidated balance sheet as of December 31, 2023.
Such impacts could have a material adverse effect on our business, financial condition, results from operation and growth prospects. In 2022, the United States Federal Reserve raised interest rates multiple times over the course of the year and is expected raise interest rates several times in 2023 as well.
Such impacts could have a material adverse effect on our business, financial condition, results from operation and growth prospects. In 2022 and 2023, the United States Federal Reserve raised interest rates multiple times and may raise interest rates in 2024 as well.
Our payment of distributions to a tax-exempt stockholder will constitute UBTI, however, if the tax-exempt stockholder has incurred debt to acquire its shares. Therefore, tax-exempt stockholders are not assured all dividends received will be tax-free.
Our payment of distributions to a tax-exempt stockholder will constitute UBTI, however, if the tax-exempt stockholder has incurred debt to acquire its shares. Therefore, tax-exempt stockholders are not assured all dividends received will be tax-free. We have identified a material weakness in our internal control over financial reporting.
Our model home portfolio consists of properties currently located in three states, although a significant concentration of our model homes is located in Texas. As of December 31, 2022 , approximately 96% of our model homes were located in Texas.
Our model home portfolio consists of properties currently lo cated in five states, although a signif icant concentration of our model homes is located in Texas. As of December 31, 2023 , approximately 91% of our model homes were located in Texas.
Additionally, future laws or regulations could impose an unanticipated material environmental liability on any of the properties that we purchase. 36 Table of Contents The presence of contamination, or our failure to properly remediate contamination of our properties, may adversely affect the ability of our tenants to operate the contaminated property, may subject us to liability to third parties, and may inhibit our ability to sell or rent such property or borrow money using such property as collateral.
The presence of contamination, or our failure to properly remediate contamination of our properties, may adversely affect the ability of our tenants to operate the contaminated property, may subject us to liability to third parties, and may inhibit our ability to sell or rent such property or borrow money using such property as collateral.
Similarly, despite general economic concerns resulting from the COVID-19 pandemic, there has been home price inflation in many markets, which may affect our ability to purchase Model Homes at prices we consider to be reasonable.
Similarly, despite general economic concerns resulting from the COVID-19 pandemic, there has been home price inflation in many markets, which may affect our ability to purchase Model Homes at prices we consider to be reasonable. Our portfolio of marketable securities, including covered call options, is subject to market, interest and credit risk that may reduce its value.
On September 16, 2022, the appellate court ruled to temporarily stay enforcement of the trial court's order, which prevented the California Secretary of State from collecting diversity data on corporate disclosure forms pursuant to AB 979, pending a further order of the appellate court. 37 Table of Contents To the extent that this ruling of the appellate court permits the Secretary of State of California to collect and report diversity data, we may be required to comply with additional disclosure requirements.
On September 16, 2022, the appellate court ruled to temporarily stay enforcement of the trial court’s order, which prevented the California Secretary of State from collecting diversity data on corporate disclosure forms pursuant to AB 979, pending a further order of the appellate court.
Further, the spread of the COVID-19 outbreak has caused severe disruptions in the U.S. and global economy and financial markets, and could potentially create widespread business continuity issues of an unknown magnitude and duration.
Further, the spread of the COVID-19 outbreak caused severe disruptions in the U.S. and global economy and financial markets, and could potentially create additional widespread business continuity issues of an unknown magnitude and duration if there is a resurgence of COVID-19. 13 Table of Contents The COVID-19 pandemic has had, and in the future may continue to have, repercussions across regional and global economies and financial markets.
Litigation regarding AB 979 will continue. We cannot assure that we can recruit, attract and/or retain qualified members of our Board of Directors and meet gender and diversity quotas under Nasdaq Listing Rules or any California law that may become applicable to us, which may expose us to financial penalties and adversely affect our reputation.
We cannot assure that we can recruit, attract and/or retain qualified members of our Board and meet gender and diversity quotas under Nasdaq Listing Rules or any California law that may become applicable to the Company, which may expose us to financial penalties and adversely affect our reputation. 38 Table of Contents The costs of complying with environmental regulatory requirements, of remediating any contaminated property, or of defending against claims of environmental liability could adversely affect our operating results.
This restriction may have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.
This restriction may have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock. 28 Table of Contents Dividends payable by REITs generally are taxed at the higher ordinary income rate, which could reduce the net cash received by stockholders and may be detrimental to our ability to raise additional funds through any future sale of our common stock.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. 28 Table of Contents The stock ownership limit imposed by the Code for REITs and our charter may discourage a takeover that could otherwise result in a premium price for our stockholders.
The stock ownership limit imposed by the Code for REITs and our charter may discourage a takeover that could otherwise result in a premium price for our stockholders.
As of December 31, 2022 , we owned common shares of 18 different publicly traded REITs and an immaterial amount of covered call options in three of those same REITs. The gross fair market value on our publicly traded REIT securities was $798,206 , with covered call options totaling $457 .
We maintain a portfolio of marketable securities. As of December 31, 2023, we owned common shares of 3 different publicly traded REITs and no written covered call options in any of those same REITs. The fair market value on our publicly traded REIT securities was $45,149, based on the December 31, 2023 closing prices.
In connection with Murphy Canyon’s IPO, we purchased, through the Sponsor, 754,000 private placement units at a price of $10.00 per unit, for an aggregate purchase price of $7,540,000. We currently own approximately 65% of Murphy Canyon’s outstanding shares. The founder shares and private placement units will be worthless if Murphy Canyon does not complete an initial business combination.
In connection with our sponsorship of the SPAC, we purchased founder shares in the SPAC for an aggregate purchase price of $25,000 in 2021 and in connection with the SPAC’s IPO in 2022, we purchased 754,000 private placement units at a price of $10.00 per unit, for an aggregate purchase price of $7,540,000.
While these restrictions have been lifted, new variants of the coronavirus and/or the continued spread of the virus could cause government authorities to extend, reinstitute and/or adopt new restrictions. As a result, the COVID-19 pandemic may negatively impact almost every industry, both inside and outside these metro regions, directly or indirectly and has created business continuity issues.
While these restrictions have been lifted, new variants of the coronavirus and/or the continued spread of the virus could cause government authorities to extend, reinstitute and/or adopt new restrictions.
The full extent of the impacts on our business over the long term are largely uncertain and dependent on a number of factors beyond our control.
In addition, jurisdictions where we own and operate properties had implemented rent freezes, eviction freezes, or other similar restrictions. The full extent of the impacts on our business over the long term are dependent on a number of factors beyond our control.
As of December 31, 2022 , the net fair value of our publicly traded REIT securities was $797,749 based on the December 31, 2022 closing price. Changes in the value of our portfolio of marketable securities could adversely affect our earnings.
Changes in the value of our portfolio of marketable securities could adversely affect our earnings.
Any of these occurrences would adversely affect our operating income.
Any of these occurrences would adversely affect our operating income. ITEM 1B. UNRESOLVED STAFF COMMENTS We have no unresolved staff comments regarding our periodic or current reports.
We are not registered as an investment company under the Investment Company Act of 1940, based on exceptions we believe are available to us. Our investment in the Murphy Canyon SPAC discussed above could give rise to a determination that we are an investment company subject to registration under the Investment Company Act.
We are not registered as an investment company under the Investment Company Act, based on exceptions we believe are available to us. If at any time the character of our investments could cause us to be deemed an investment company for purposes of the Investment Company Act, we could be required to register under the Investment Company Ac.
Further, even if Murphy Canyon is able to consummate its IBC, we can provide no assurance that the value of this equity investment will not decline significantly based upon a variety of factors, including, without limitation, shareholder and general market reaction to any IBC, redemption requests received from Murphy Canyon stockholders in connection with any proposed IBC, and Murphy Canyon stockholder dilution resulting from additional capital raises or other financing transactions undertaken by Murphy Canyon in connection with its IBC.
We can provide no assurance that the value of our equity investment in Conduit will not decline significantly based upon a variety of factors wholly outside of our control, including, without limitation, the performance of Conduit’s business, general market and economic conditions and stockholder dilution resulting from any capital raises or other financing transactions undertaken by Conduit. 24 Table of Contents Risks Related to our Indebtedness We have significant outstanding indebtedness, which requires that we generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default under the terms of our debt.
The full impact of these measures, as well as potential responses to them by Russia, is unknown. Such conditions 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.
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.
Our sponsorship of Murphy Canyon requires significant capital deployment, entails the risk of losing our entire investment, and may not be successful, which would likely have a material adverse effect on our future expansion, revenues, and profits. We purchased, through the Sponsor, founder shares in Murphy Canyon for an aggregate purchase price of $25,000.
We have deployed significant capital to own equity of Conduit, and the value of our equity investment in Conduit may decline due to factors outside of our control, which would likely have a material adverse effect on our future expansion, revenues, and profits.
For instance, a number of our commercial tenants temporarily closed their offices or stores and requested temporary rent deferral or rent abatement during the pandemic. In addition, jurisdictions where we own and operate properties have implemented, or may implement, rent freezes, eviction freezes, or other similar restrictions.
As a result, the possibility remains that the COVID-19 pandemic may negatively impact almost every industry, both inside and outside these metro regions, directly or indirectly and has created business continuity issues. For instance, a number of our commercial tenants temporarily closed their offices or stores and requested temporary rent deferral or rent abatement during the pandemic.
Removed
For example, the conflict between Russia and Ukraine has lead to disruption, instability and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional sanctions and controls.
Added
Compliance with the Investment Company Ac, as a registered investment company, would require us to significantly alter our business and could impair our ability to operate as REIT, with potential adverse impacts on our business, and, thus, our stockholders.
Removed
To date our business has not been significantly impacted by the COVID-19 pandemic. 13 Table of Contents The COVID-19 pandemic has had, and in the future may continue to have, repercussions across regional and global economies and financial markets.
Added
If any of the banking institutions in which we deposit funds ultimately fails, we may lose any amounts of our deposits over federally insured levels which could reduce the amount of cash we have available to distribute or invest and could result in a decline in our value.
Removed
The significance, extent and duration of the impact of COVID-19 remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population.
Added
Continued uncertainty in the banking industry and additional bank failures could adversely impact our ability to maintain our business or access company funds. The banking industry is currently facing instability. We expect that the banking industry, particularly smaller banks, may continue to face potential failures. We currently hold a majority of our funds at a Western Alliance bank.
Removed
The rapid development and volatility of this situation precludes us from making any prediction as to the ultimate adverse impact of COVID-19. As a result, we cannot provide an estimate of the overall impact of the COVID-19 pandemic on our business or when, or if, we (or our tenants) will be able to resume fully normal operations.
Added
We may need to coordinate and diversify banking relationships in order to have business continuity. If a bank where we hold funds experiences at bank failure, we may not be able to access funds or may lose funds which would have a negative impact on the financial condition of the business and our ability to conduct business.
Removed
Nevertheless, COVID-19 presents material uncertainty and risk with respect to our business, financial performance and condition, operating results and cash flows. Our portfolio of marketable securities, including covered call options, is subject to market, interest and credit risk that may reduce its value. We maintain a portfolio of marketable securities.
Added
Following the SPAC’s business combination with Conduit Pharma, we currently own approximately 6.3% of Conduit’s outstanding shares.
Removed
We terminated our Series A Common Stock private placement on December 31, 2011 and closed on a preferred stock financing in August 2014, which financing was repaid in September 2020. Additionally, we consummated a preferred stock financing in June 2021 and in July 2021 completed a public offering of common stock and concurrent private placement of warrants.
Added
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.
Removed
We intend to conduct our operations so that we will not be deemed to be an investment company.
Added
If our remediation of this material weakness is not effective, or if we experience additional material weakness in the future or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock, and our financial performance may be adversely impacted.
Removed
The SPAC IPO registration statement and related prospectus includes an exception permitting us to transfer our ownership in the founder shares at any time to the extent that we determine, in good faith, that such transfer is necessary to ensure that we comply with the Investment Company Act.
Added
Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we maintain internal control over financial reporting that meets applicable standards.
Removed
In addition, the Sponsor has loaned or expect to loan Murphy Canyon up to $1,500,000. Accordingly, we will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to shareholders rather than liquidate.
Added
We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met.
Removed
If Murphy Canyon is unable to consummate its IBC successfully, then we would likely be unable to recover any portion of this equity investment.
Added
Because there are inherent limitations in all control systems, there can be no assurance that all control issues have been or will be detected.
Removed
Our officers, including our Chairman, Chief Executive Officer and President, Mr. Heilbron, will allocate some of their time to Murphy Canyon, thereby causing potential conflicts of interest in their determination as to how much time to devote to our affairs. This potential conflict of interest could have a negative impact on our operations. Mr.
Added
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.
Removed
Heilbron, our Chairman, Chief Executive Officer and President, Mr. Sragovicz, our Chief Financial Officer, and Mr. Bentzen, our Chief Accounting Officer, also serve in these positions for Murphy Canyon, and Mr. Heilbron and Mr. Sragovicz additionally serve as directors of Murphy Canyon.
Added
In connection with the preparation and audit of the financial statements as of and for the fiscal years ended December 31, 2023, a certain material weakness was identified in our internal control over financial reporting.
Removed
These officers may not commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and Murphy Canyon’s operations. These officers are engaged in Murphy Canyon and are not obligated to contribute any specific number of hours per week to our affairs.
Added
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.
Removed
While we do not believe that the time devoted to the SPAC will undermine their ability to fulfill their duties with respect to our Company, if the business affairs of Murphy Canyon require them to devote substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs which may have a negative impact on our operations. 24 Table of Contents Risks Related to our Indebtedness We have significant outstanding indebtedness, which requires that w e generate sufficient cash flow to satisfy the payment and other obligations under the terms of our debt and exposes us to the risk of default under the terms of our debt.
Added
This material weakness is primarily related to a non-recuring significant transaction for income tax provision 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. 29 Table of Contents If this material weakness is not remediated, it could potentially result in a misstatement of account balances or disclosures that would result in a material misstatement of our annual or interim financial statements that would not be prevented or detected.

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Item 2. Properties

Properties — owned and leased real estate

22 edited+2 added−6 removed2 unchanged
Biggest changeAnnualized Base Rent per Square Foot (1) For the Years Ended December 31, 2018 2019 2020 2021 2022 Annualized Base Rent (2) Net Rentable Square Feet Office/ Industrial Properties: Garden Gateway Plaza (3) $ 10.60 $ 12.62 $ 13.45 N/A N/A N/A 115,052 Executive Office Park (3) $ 12.34 $ 13.29 $ 13.65 N/A N/A N/A 49,864 Genesis Plaza $ 20.62 $ 28.15 $ 22.97 $ 25.71 $ 26.26 $ 1,217,583 57,807 Dakota Center $ 14.21 $ 12.87 $ 13.24 $ 13.22 $ 14.09 $ 1,206,666 119,434 Grand Pacific Center $ 14.29 $ 13.97 $ 13.71 $ 13.79 $ 13.90 $ 730,296 93,153 Arapahoe Center $ 14.22 $ 14.69 $ 15.18 $ 11.87 $ 13.75 $ 1,086,730 79,023 West Fargo Industrial $ 6.78 $ 6.65 $ 6.77 $ 6.81 $ 6.80 $ 962,867 150,099 300 N.P. $ 16.51 $ 13.67 $ 14.86 $ 14.89 $ 16.72 $ 403,444 34,517 Highland Court (3)(5) $ 24.59 $ 19.33 $ 22.33 N/A N/A N/A 93,536 One Park Centre $ 20.27 $ 19.51 $ 21.85 $ 23.42 $ 20.35 $ 1,195,415 69,174 Shea Center II (6) $ 18.53 $ 18.47 $ 19.24 $ 20.37 $ 19.40 $ 2,161,231 121,306 Baltimore N/A N/A N/A $ 21.50 $ 21.93 $ 696,321 31,752 Retail Properties: World Plaza (4) $ 4.64 $ 13.63 $ 9.93 $ 14.28 N/A N/A 55,810 Waterman Plaza (3) $ 18.88 $ 16.30 $ 12.42 N/A N/A N/A 21,170 Union Town Center $ 24.91 $ 25.63 $ 23.73 $ 23.86 $ 25.22 $ 809,626 44,042 Research Parkway $ 22.07 $ 22.58 $ 29.09 $ 22.69 $ 23.53 $ 223,500 10,700 Mandolin (5) N/A N/A N/A $ 30.75 $ 31.37 $ 329,385 10,500 (1) Annualized Base Rent (defined as cash rent including abatements) divided by the percentage occupied divided by rentable square feet.
Biggest changeAnnualized Base Rent per Square Foot (1) For the Years Ended December 31, 2019 2020 2021 2022 2023 Annualized Base Rent (2) Net Rentable Square Feet Office/ Industrial Properties: Garden Gateway Plaza (3) $ 12.62 $ 13.45 N/A N/A N/A N/A 115,052 Executive Office Park (3) $ 13.29 $ 13.65 N/A N/A N/A N/A 49,864 Genesis Plaza (4) $ 28.15 $ 22.97 $ 25.71 $ 26.26 $ 29.34 $ 1,425,269 57,807 Dakota Center $ 12.87 $ 13.24 $ 13.22 $ 14.09 $ 15.45 $ 1,073,530 119,554 Grand Pacific Center (5) $ 13.97 $ 13.71 $ 13.79 $ 13.90 $ 14.57 $ 1,240,771 94,943 Arapahoe Center $ 14.69 $ 15.18 $ 11.87 $ 13.75 $ 14.43 $ 1,003,734 79,023 West Fargo Industrial $ 6.65 $ 6.77 $ 6.81 $ 6.80 $ 7.09 $ 1,021,825 150,099 300 N.P. $ 13.67 $ 14.86 $ 14.89 $ 16.72 $ 15.32 $ 350,917 34,517 Highland Court (3)(6) $ 19.33 $ 22.33 N/A N/A N/A N/A 93,536 One Park Centre $ 19.51 $ 21.85 $ 23.42 $ 20.35 $ 23.81 $ 1,234,697 69,174 Shea Center II (4) $ 18.47 $ 19.24 $ 20.37 $ 19.40 $ 19.17 $ 1,502,576 121,306 Baltimore N/A N/A 21.50 $ 21.93 $ 22.37 $ 710,248 31,752 Retail Properties: World Plaza (3) $ 13.63 $ 9.93 $ 14.28 N/A N/A N/A 55,810 Waterman Plaza (3) $ 16.30 $ 12.42 N/A N/A N/A N/A 21,170 Union Town Center $ 25.63 $ 23.73 $ 23.86 $ 25.22 $ 24.65 $ 888,278 44,042 Research Parkway $ 22.58 $ 29.09 $ 22.69 $ 23.53 $ 23.74 $ 254,050 10,700 Mandolin (6) N/A N/A 30.75 $ 31.37 $ 32.00 $ 335,973 10,500 (1) Annualized Base Rent (defined as cash rent including abatements) divided by the percentage occupied divided by rentable square feet.
(3) 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 61.3% of NetREIT Palm Self-Storage LP.
(4) 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 61.3% of NetREIT Palm Self-Storage LP.
Substantially all of our revenues consist of base rents received under leases that generally have terms that range from one to five years. Th e majority of our ex isting leases as of December 31, 2022 contain contractual rent increases that provide for increases in the base rental payments. Our tenants consist of local, regional and national businesses.
Substantially all of our revenues consist of base rents received under leases that generally have terms that range from one to five years. Th e majority of our ex isting leases as of December 31, 2023 contain contractual rent increases that provide for increases in the base rental payments. Our tenants consist of local, regional and national businesses.
After January 1, 2009, acquisition related costs and expenses were expensed when incurred. (2) Genesis Plaza is owned by two tenants-in-common, each of which own 57% and 43%, respectively, and we beneficially own an aggregate of 76.4%, based on our ownership percentages of each tenant-in-common.
After January 1, 2009, acquisition related costs and exp enses were expensed when incurred. (2) Genesis Plaza is owned by two tenants-in-common, each of which own 57% and 43%, respectively, and we beneficially own an aggregate of 76.4%, based on our ownership percentages of each tenant-in-common.
(5) 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.
(6) 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 61.3% of NetREIT Palm Self-Storage LP.
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 61.3% of NetREIT Palm Self-Storage LP. 44 Table of Contents
All model homes are sold at the end of the lease period. 41 Table of Contents Physical Occupancy Table for Last 5 Years The following table presents the percentage occupancy for each of our properties, excluding our Model Home Properties, as of December 31 for each of the last five years.
All model homes are sold at the end of the lease period. 42 Table of Contents Physical Occupancy Table for Last 5 Years The following table presents the percentage occupancy for each of our properties, excluding our Model Home Properties, as of December 31st for each of the last five years.
Date Percentage Occupancy as of the Year Ended December 31, Acquired 2018 2019 2020 2021 2022 Office/ Industrial Properties: Garden Gateway Plaza (1) 03/07 68.1 % 76.4 % 76.4 % N/A N/A Executive Office Park (1) 07/08 99.9 % 100.0 % 97.7 % N/A N/A Genesis Plaza 08/10 58.3 % 78.5 % 74.7 % 85.6 % 96.2 % Dakota Center 05/11 98.2 % 86.0 % 86.0 % 73.5 % 71.8 % Grand Pacific Center 03/14 72.6 % 71.8 % 74.2 % 56.6 % 56.4 % Arapahoe Center 12/14 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % West Fargo Industrial 08/15 75.9 % 77.1 % 82.0 % 90.8 % 94.3 % 300 N.P. 08/15 82.3 % 73.0 % 72.8 % 64.8 % 75.5 % Highland Court (1)(2) 08/15 78.5 % 70.1 % 64.5 % N/A N/A One Park Centre 08/15 72.7 % 79.1 % 84.8 % 80.5 % 84.9 % Shea Center II (4) 12/15 88.2 % 90.9 % 91.2 % 91.6 % 95.4 % Baltimore 12/21 N/A N/A N/A 100.0 % 100.0 % Retail Properties: World Plaza (3) 09/07 22.6 % 100.0 % 100.0 % 100.0 % N/A Waterman Plaza (1) 08/08 100.0 % 90.7 % 85.9 % N/A N/A Union Town Center 12/14 100.0 % 100.0 % 100.0 % 87.4 % 72.9 % Research Parkway 08/15 100.0 % 100.0 % 100.0 % 100.0 % 88.8 % Mandolin (2) 08/21 N/A N/A N/A 100.0 % 100.0 % (1) Property was sold during the year ended December 31, 2021.
Date Percentage Occupancy as of the Year Ended December 31, Acquired 2019 2020 2021 2022 2023 Office/ Industrial Properties: Garden Gateway Plaza (1) 03/07 76.4 % 76.4 % N/A N/A N/A Executive Office Park (1) 07/08 100.0 % 97.7 % N/A N/A N/A Genesis Plaza 08/10 78.5 % 74.7 % 85.6 % 96.2 % 100.0 % Dakota Center 05/11 86.0 % 86.0 % 73.5 % 71.8 % 58.1 % Grand Pacific Center 03/14 71.8 % 74.2 % 56.6 % 56.4 % 89.7 % Arapahoe Center 12/14 100.0 % 100.0 % 100.0 % 100.0 % 88.0 % West Fargo Industrial 08/15 77.1 % 82.0 % 90.8 % 94.3 % 100.0 % 300 N.P. 08/15 73.0 % 72.8 % 64.8 % 75.5 % 66.4 % Highland Court (1)(2) 08/15 70.1 % 64.5 % N/A N/A N/A One Park Centre 08/15 79.1 % 84.8 % 80.5 % 84.9 % 75.0 % Shea Center II 12/15 90.9 % 91.2 % 91.6 % 95.4 % 67.1 % Baltimore 12/21 N/A N/A 100.0 % 100.0 % 100.0 % Retail Properties: World Plaza (1) 09/07 100.0 % 100.0 % 100.0 % N/A N/A Waterman Plaza (1) 08/08 90.7 % 85.9 % N/A N/A N/A Union Town Center 12/14 100.0 % 100.0 % 87.4 % 72.9 % 79.5 % Research Parkway 08/15 100.0 % 100.0 % 100.0 % 88.8 % 100.0 % Mandolin (2) 08/21 N/A N/A 100.0 % 100.0 % 100.0 % (1) Property was sold prior in previous periods.
In addition, through our Model Home subsidiary and our investments in five limited partnerships and one corporation, we own a total of 92 Model Home properties located in three states. We directly manage the operations and leasing of our properties.
In addition, through our Model Home subsidiary and our investments in six limited partnerships and one corporation, we own a total of 110 Model Home properties located in five states. We directly manage the operations and leasing of our properties.
As of December 31, 2022, we owned or had an equity interest in nine office/industrial buildings totaling approximately 756,265 rentable square feet and three retail centers totaling approximately 65,242 rentable square feet.
As of December 31, 2023, we owned or had an equity interest in nine office/industrial buildings totaling approximately 758,175 rentable square feet and three retail centers totaling approximately 65,242 rentable square feet.
Date Acquired Year Property Constructed Purchase Price (1) Occupancy Percent Ownership Mortgage On property Office/Industrial Properties: Genesis Plaza, San Diego, CA (2) 57,807 08/10 1989 10,000 96.2 % 76.4 % 6,056 Dakota Center, Fargo, ND 119,434 05/11 1982 9,575 71.8 % 100.0 % 9,443 Grand Pacific Center, Bismarck, ND (4) 93,153 03/14 1976 5,350 56.4 % 100.0 % 3,496 Arapahoe Center, Colorado Springs, CO 79,023 12/14 2000 11,850 100.0 % 100.0 % 7,602 West Fargo Industrial, West Fargo, ND 150,099 08/15 1998/2005 7,900 94.3 % 100.0 % 4,030 300 N.P., West Fargo, ND 34,517 08/15 1922 3,850 75.5 % 100.0 % - One Park Centre, Westminster CO 69,174 08/15 1983 9,150 84.9 % 100.0 % 6,163 Shea Center II, Highlands Ranch, CO (5) 121,306 12/15 2000 25,325 95.4 % 100.0 % 17,230 Baltimore, Baltimore, MD 31,752 12/21 2006 8,892 100.0 % 100.0 % 5,670 Total Office/Industrial Properties 756,265 $91,892 85.5 % $59,690 Retail Properties: Union Town Center, Colorado Springs, CO 44,042 12/14 2003 11,212 72.9 % 100.0 % 8,025 Research Parkway, Colorado Springs, CO 10,700 08/15 2003 2,850 88.8 % 100.0 % 1,648 Mandolin, Houston, TX (3) 10,500 08/21 2021 4,892 100.0 % 61.3 % 3,636 Total Retail Properties 65,242 $18,954 79.9 % $13,309 (1) Prior to January 1, 2009, “Purchase Price” includes our acquisition related costs and expenses for the purchase of the property.
Date Acquired Year Property Constructed Purchase Price (1) Occupancy Percent Ownership Mortgage On property Office/Industrial Properties: Genesis Plaza, San Diego, CA (2) 57,807 08/10 1989 $ 10,000 100.0 % 76.4 % $ 5,937 Dakota Center, Fargo, ND 119,554 05/11 1982 9,575 58.1 % 100.0 % 9,197 Grand Pacific Center, Bismarck, ND (3) 94,943 03/14 1976 5,350 89.7 % 100.0 % 5,471 Arapahoe Center, Colorado Springs, CO 79,023 12/14 2000 11,850 88.0 % 100.0 % 7,426 West Fargo Industrial, West Fargo, ND 150,099 08/15 1998/2005 7,900 96.0 % 100.0 % 3,923 300 N.P., West Fargo, ND 34,517 08/15 1922 3,850 66.4 % 100.0 % - One Park Centre, Westminster CO 69,174 08/15 1983 9,150 75.0 % 100.0 % 6,044 Shea Center II, Highlands Ranch, CO 121,306 12/15 2000 25,325 67.1 % 100.0 % 16,951 Baltimore, Baltimore, MD 31,752 12/21 2006 8,892 100.0 % 100.0 % 5,670 Total Office/Industrial Properties 758,175 $ 91,892 81.0 % $ 60,619 Retail Properties: Union Town Center, Colorado Springs, CO 44,042 12/14 2003 11,212 79.5 % 100.0 % 7,870 Research Parkway, Colorado Springs, CO 10,700 08/15 2003 2,850 100.0 % 100.0 % 1,589 Mandolin, Houston, TX (4) 10,500 08/21 2021 4,892 100.0 % 61.3 % 3,573 Total Retail Properties 65,242 $ 18,954 86.2 % $ 13,032 (1) Prior to January 1, 2009, “Purchase Price” includes our acquisition related costs and expenses for the purchase of the property.
(4) 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 33,296 usable square feet, a term of 122 months, starting annualized rent of $532,736, and a commencement date estimated to be between November 1, 2023 and March 1, 2024.
(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 33,296 usable square feet, a term of 122 months, and starting annualized rent of $532,736. KLJ Engineering moved into the building during December 2023, with rent commencing on February 28, 2024.
Our largest tenant represented approximately 8.57% of total revenues for the year ended December 31, 2022. 38 Table of Contents Geographic Diversification Table The following table shows a list of properties we owned as of December 31, 2022, grouped by the state where each of our investments is located.
Geographic Diversification Table The following table shows a list of properties we owned as of December 31, 2023, grouped by the state where each of our investments is located.
Our properties generally attract a mix of diversified tenants creating lower risk in periods of economic fluctuations.
Our properties generally attract a mix of diversified tenants creating lower risk in periods of economic fluctuations. Our largest tenant represented approximately 6.43% of total revenues for the year ended December 31, 2023.
Model Home Properties: Geographic Region No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent Midwest 2 6,153 2.2 % $ 80,844 2.7 % Southeast 2 3,978 1.4 % 78,492 2.6 % Southwest 88 268,749 96.4 % 2,824,404 94.7 % Total 92 278,880 100.0 % $ 2,983,740 100.0 % 39 Table of Contents The following table summarizes information relating to our properties (excluding model homes) at December 31, 2022: Property Summary ($ in000's) Property Location Sq., Ft.
Model Home Properties: Geographic Region No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent Midwest 4 12,307 3.7 % $ 182,748 4.3 % Southeast 4 9,875 2.9 % 172,428 4.0 % Southwest 102 312,174 93.4 % 3,926,124 91.7 % Total 110 334,356 100.0 % $ 4,281,300 100.0 % 40 Table of Contents The following table summarizes information relating to our properties (excluding model homes) at December 31, 2023: Property Summary ($ in000's) Property Location Sq., Ft.
Model Home Properties: Expiration Year (1) Number of Leases Expiring Square Footage Annual Rental From Lease Percent of Total 2023 61 186,028 $ 1,753,824 58.8 % 2024 31 92,852 1,229,916 41.2 % 92 278,880 $ 2,983,740 100.0 % (1) These leases are subject to extensions by the home builder depending on sales of the total development.
Model Home Properties: Expiration Year (1) Number of Leases Expiring Square Footage Annual Rental From Lease Percent of Total 2024 71 214,566 2,396,376 56.0 % 2025 39 119,790 1,884,924 44.0 % 110 334,356 $ 4,281,300 100.0 % (1) These leases are subject to extensions by the home builder depending on sales of the total development.
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 61.3% of NetREIT Palm Self-Storage LP. (3) Property was sold during the year ended December 31, 2022.
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 61.3% of NetREIT Palm Self-Storage LP. 43 Table of Contents Annualized Base Rent Per Square Foot for Last 5 Years The following table presents the average effective annual rent per square foot for each of our properties, excluding our Model Home Properties, as of December 31, 2023.
(2) Annualized Base Rent is based upon actual rents due as of December 31, 2022. (3) Property was sold during the year ended December 31, 2021. (4) Property was sold during the year ended December 31, 2022.
(2) Annualized Base Rent is based upon actual rents due as of December 31, 2023. (3) Property was sold during prior periods. (4) Annualized base rent at Genesis Plaza and Shea Center II does not include space rent by the Company, which totals 9,224 square feet at Genesis Plaza and 2,972 square feet at Shea Center II.
Top Ten Tenants Physical Occupancy Table The following table sets forth certain information with respect to our top 10 tenants at our Office/Industrial and Retail Properties. 40 Table of Contents As of December 31, 2022 Tenant Number of Leases (1) Annualized Base Rent % of Total Annualized Base Rent Halliburton Energy Services, Inc. 1 944,851 8.57 % Johns Hopkins University 1 696,321 6.32 % Finastra USA Corporation 1 507,360 4.60 % MasTec North America, Inc. 1 353,258 3.20 % L&T Care LLC 1 329,385 2.99 % Wells Fargo Bank, N.A. 1 289,751 2.63 % Nova Financial & Investment Corporation 1 263,240 2.39 % Republic Indemnity of America 1 262,825 2.39 % Meissner Jacquet Real Estate Management Group, Inc. 1 247,134 2.24 % Fredrikson & Byron P.A. 1 234,999 2.13 % $ 4,129,124 37.46 % (1) On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired.
Top Ten Tenants Physical Occupancy Table The following table sets forth certain information with respect to our top 10 tenants at our Office/Industrial and Retail Properties. 41 Table of Contents As of March, 2023 Tenant Number of Leases Annualized Base Rent % of Total Annualized Base Rent John Hopkins University 1 710,248 6.43 % KLJ Engineering LLC (1) 1 536,080 4.85 % Finastra USA Corporation 1 525,480 4.76 % MasTec North America, Inc. 1 362,182 3.28 % L&T Care LLC 1 335,973 3.04 % Wells Fargo Bank, NA 1 293,742 2.66 % Republic Indemnity of America 1 270,710 2.45 % Nova Financial & Investment Corporation 1 269,155 2.44 % Meissner Jacquet Real Estate Management Group, Inc. 1 255,177 2.31 % Fredrikson & Byron P.A. 1 249,270 2.26 % $ 3,808,017 34.48 % (1) Grand Pacific Center, Bismarck, ND, signed a major lease with KLJ Engineering on December 7, 2022 for approximately 33,296 usable square feet, a term of 122 months, and starting annualized rent of $532,736.
Our management team is working to fill the 45,535 square foot space as quickly as possible, and has already leased approximately 20% of the space to a tenant during January 2023. Lease Expirations Tables The following table sets forth lease expirations for our properties as of December 31, 2022, assuming that none of the tenants exercise their renewal options.
KLJ Engineering moved into the building during December 2023, with rent commencing on February 28, 2024. Lease Expirations Tables The following table sets forth lease expirations for our properties as of December 31, 2023, assuming that none of the tenants exercise their renewal options.
Office/Industrial and Retail Properties: 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 % $ 1,217,582 11.0 % Colorado (1) 5 324,245 39.4 % 5,476,502 49.7 % Maryland 1 31,752 3.9 % 696,321 6.3 % North Dakota 4 397,203 48.4 % 3,303,274 30.0 % Texas 1 10,500 1.3 % 329,385 3.0 % Total 12 821,507 100.0 % $ 11,023,064 100.0 % (1) In February 2023, the Annual Base Rent for Colorado dropped to approximately $4.9 million due to the loss of Halliburton Energy Services, Inc. which was located in our Shea Center II property.
Office/Industrial and Retail Properties: 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 % $ 1,425,269 12.9 % Colorado 5 324,245 39.4 % 4,883,335 44.2 % Maryland 1 31,752 3.9 % 710,248 6.4 % North Dakota (1) 4 399,113 48.4 % 3,687,043 33.5 % Texas 1 10,500 1.3 % 335,973 3.0 % Total 12 823,417 100.0 % $ 11,041,868 100.0 % (1) In December 2023, JLK Engineering moved into a North Dakota property under a 10-year lease, with rent commencing on February 28, 2024.
Office/Industrial and Retail Properties: Expiration Year Number of Leases Expiring Square Footage Annual Rental From Lease Percent of Total 2022 (1) 3 62,868 $ 1,084,714 9.8 % 2023 56 137,273 1,902,590 17.3 % 2024 20 58,699 1,010,993 9.2 % 2025 23 130,463 2,084,009 18.9 % 2026 20 148,168 2,447,014 22.2 % 2027 15 48,202 843,371 7.6 % Thereafter 19 97,588 1,650,373 15.0 % Totals 156 683,261 $ 11,023,064 100.0 % (1) On December 31, 2022, three of our leases expired and were not renewed.
Office/Industrial and Retail Properties: Expiration Year Number of Leases Expiring Square Footage Annual Rental From Lease Percent of Total 2023 (1) 20 23,297 $ 254,966 2.3 % 2024 27 61,354 1,021,491 9.3 % 2025 29 141,493 2,384,600 21.6 % 2026 34 207,887 3,179,628 28.8 % 2027 13 48,840 924,512 8.4 % 2028 18 73,658 1,481,512 13.4 % Thereafter 14 101,459 1,795,159 16.2 % Totals 155 657,988 $ 11,041,868 100.0 % (1) One lease at our Dakota Center property in Fargo, ND expired on December 31, 2023 and was not renewed.
Removed
(5) The loss of Hallibur ton Energy Services, Inc. from our Shea Center II property in Colorado, has dropped the occupancy to approximately 66% in February 2023.
Added
This tenant made up less than 2% of our total portfolio rent, but accounted for approximately 20% of our Dakota Center rent. Management is looking into various options to replace the loss of this tenant.
Removed
Hallibur ton Energy Services, Inc. was located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base rent. We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary.
Added
(5) Grand Pacific Center, Bismarck, ND, signed a major lease with KLJ Engineering on December 7, 2022 for approximately 33,296 usable square feet, a term of 122 months, and starting annualized rent of $532,736. KLJ Engineering moved into the building during December 2023, with rent commencing on February 28, 2024.
Removed
One of them was Halliburton Energy Services, Inc., located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base rent. We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary.
Removed
Our management team is working to fill the 45,535 square foot space as quickly as possible, and has already leased approximately 20% of the space to a tenant during January 2023.
Removed
(4) The loss of Hallibur ton Energy Services, Inc. from our Shea Center II property in Colorado, has dropped the occupancy to approximately 66% in February 2023. 42 Table of Contents Annualized Base Rent Per Square Foot for Last 5 Years The following table presents the average effective annual rent per square foot for each of our properties, excluding our Model Home Properties, as of December 31, 2022.
Removed
(6) The Annualized Base Rent for Shea Center II, includes Hallibur ton Energy Services, Inc. which totals $944,851 for the year ended December 31, 2022. 43 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
ITEM 3. LEGAL PROCEEDINGS We are subject to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our financial position, results of operation or liquidity. ITEM 4.
Added
ITEM 3. LEGAL PROCEEDINGS From time to time, we may become involved in various lawsuits or legal proceedings which arise in the ordinary course of business. Neither the Company nor any of the Company’s properties are presently subject to any material litigation nor, to the Company’s knowledge, is there any material threatened litigation. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 44 Part II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES 44 ITEM 6. RESERVED 47 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 48 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 62 ITEM 8.
Biggest changeITEM 4. MY SAFETY DISCLOSURES 45 Part II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES 45 ITEM 6. RESERVED 48 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 49 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 64 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

13 edited+1 added−3 removed9 unchanged
Biggest changeSeries 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 2022 — $ — — $ — February 2022 — - — — March 2022 — - — — April 2022 — - — — May 2022 — - — — June 2022 10,411 2.97 10,411 9,858,450 July 2022 — - — — August 2022 — - — — September 2022 151,194 1.63 151,194 5,753,034 October 2022 — - — — November 2022 — - — — December 2022 35,026 1.02 35,026 5,717,340 Total 196,631 $ 1.59 196,631 $ 5,717,340 46 Table of Contents Series D Preferred 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 2022 — $ — — $ — February 2022 — — — — March 2022 — — — — April 2022 — — — — May 2022 — — — — June 2022 — — — — July 2022 — — — — August 2022 — — — — September 2022 3,939 21.42 3,939 3,915,614 October 2022 — — — — November 2022 — — — — December 2022 2,074 18.20 2,074 3,877,859 Total 6,013 $ 20.31 6,013 $ 3,877,859
Biggest changeSeries 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 2023 — $ — — $ 5,717,340 February 2023 — — — 5,717,340 March 2023 — — — 5,717,340 April 2023 — — — 5,717,340 May 2023 — — — 5,717,340 June 2023 — — — 5,717,340 July 2023 — — — 5,717,340 August 2023 — — — 5,717,340 September 2023 — — — 5,717,340 October 2023 — — — 5,717,340 November 2023 (1) — — — 6,000,000 December 2023 — — — 6,000,000 Total — $ — — $ 6,000,000 (1) On November 17, 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. 47 Table of Contents Series D Preferred 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 2023 — $ — — $ 3,877,859 February 2023 — $ — — 3,877,859 March 2023 386 $ — 386 3,870,912 April 2023 1,711 $ 17.88 1,711 3,840,326 May 2023 5,439 $ 16.96 5,439 3,748,066 June 2023 5,076 $ 16.17 5,076 3,665,987 July 2023 565 $ 16.28 565 3,656,786 August 2023 919 $ 16.14 919 3,641,955 September 2023 951 $ 15.63 951 3,627,090 October 2023 5,283 $ 15.35 5,283 3,545,970 November 2023 (1) 2,711 $ 14.05 2,711 4,000,000 December 2023 — $ — — 4,000,000 Total 23,041 $ 15.97 23,041 $ 4,000,000 (1) On November 17, 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.
The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis for holders of Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends.
The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis for holders of Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future cash dividends.
On January 24, 2022, our Series A Warrants began trading on the Nasdaq Capital Market under the symbol "SQFTW". Performance Graph Not required. Number of Common Stockholders As of March 27, 2023, there were approximately 6,000 holders of our Series A Common Stock .
On January 24, 2022, our Series A Warrants began trading on the Nasdaq Capital Market under the symbol "SQFTW". Performance Graph Not required. Number of Common Stockholders As of March 27, 2024, there were approximately 6,000 holders of our Series A Common Stock.
Dividend Payments 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 years ended December 31, 2022 and 2021.
Dividend Payments 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 years ended December 31, 2023 and 2022.
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.
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.
Issuer Purchases of Equity Securities On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.
On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.
Our goal is to make cash dividend distributions out of our operating cash flow and proceeds from the sale of properties. During 2022, we paid dividends to holders of our Series A Common Stock of approximately $4.5 million related to 2022.
Our goal is to make cash dividend distributions out of our operating cash flow and proceeds from the sale of properties. During 2023, we paid dividends to holders of our Series A Common Stock of approximately $1.2 million. During 2022, we paid dividends to our holders of Series A Common Stock of approximately $3.1 million.
Series A Common Stock Quarter Ended 2022 2021 Distributions Declared Distributions Declared March 31 $ 0.105 $ 0.101 June 30 0.106 0.102 September 30 0.020 0.103 December 31 0.021 0.104 Total $ 0.252 $ 0.410 44 Table of Contents Series D Preferred Stock Month 2022 2021 Distributions Declared Distributions Declared January $ 0.19531 $ — February 0.19531 — March 0.19531 — April 0.19531 — May 0.19531 — June 0.19531 0.10417 July 0.19531 0.19531 August 0.19531 0.19531 September 0.19531 0.19531 October 0.19531 0.19531 November 0.19531 0.19531 December 31 0.19531 0.19531 Total $ 2.34372 $ 1.27603 Warrant Dividend We set a record date of January 14, 2022 with respect to the distribution of the Series A Warrants.
Series A Common Stock Quarter Ended 2023 2022 Distributions Declared Distributions Declared March 31 $ 0.022 $ 0.105 June 30 0.023 0.106 September 30 0.023 0.020 December 31 0.023 0.021 Total $ 0.091 $ 0.252 45 Table of Contents Series D Preferred Stock Month 2023 2022 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 October 0.19531 0.19531 November 0.19531 0.19531 December 31 0.19531 0.19531 Total $ 2.34372 $ 2.34372 Warrant Dividend We set a record date of January 14, 2022 with respect to the distribution of the Series A Warrants.
During 2021, we paid dividends to our holders of Series A Common Stock of approximately $1.0 million related to 2021. To the extent that we make dividends in excess of our earnings and profits, as computed for federal income tax purposes, these dividends will represent a return of capital, rather than a dividend, for federal income tax purposes.
To the extent that we pay dividends in excess of our earnings and profits, as computed for federal income tax purposes, these dividends will represent a return of capital, rather than a dividend, for federal income tax purposes.
During the year ended December 31, 2021, the Company repurchased 29,721 shares of our Series A Common Stock at an average price of approximately $3.7223 per share, including a commission of $0.035 per share, for a total cost of $110,631.
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 $ 15.97 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.2 million for the Series D Preferred Stock.
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. 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.
Issuer Purchases of Equity Securities 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.
During the years ended December 31, 2022 and December 31, 2021, all dividends to holders of our Series A Common Stock were non-taxable as they were considered return of capital to the stockholders. 45 Table of Contents Equity Compensation Plan Information We established the 1999 Flexible Incentive Plan (“1999 Plan”) for the purpose of attracting and retaining employees, which was superseded by the 2017 Incentive Award Plan (“2017 Plan”).
During the years ended December 31, 2023 and December 31, 2022, all dividends to holders of our Series A Common Stock were non-taxable as they were considered return of capital to the stockholders. 46 Table of Contents Securities authorized for issuance under equity compensation plans Information regarding securities authorized for issuance under the Company’s equity compensation plans is contained in Part III, Item 11 of this Annual Report.
Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. The following tables contain information for shares of Series A Common Stock and Series D Preferred Stock repurchased during the year ended December 31, 2022 .
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 tables contain information for shares of Series A Common Stock and Series D Preferred Stock repurchased during the year ended December 31, 2023.
Removed
The 1999 Plan provided that the maximum number of shares to be issued under the 1999 Plan would be an amount equal to 10% of the Company’s issued and outstanding common stock at such time; the aggregate number of common stock that may be issued under the 2017 Plan is 2,500,000 shares.
Added
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.
Removed
At December 31, 2022 , approximately 651,000 restricted shares of common stock had been issued under the 1999 Plan and approximately 1,017,346 shares of Restricted Stock as defined in the 2017 Plan had been issued under such plan.
Removed
At December 31, 2022 , the amount of shares of common stock available for future grants under the 2017 Plan was approximately 1,483,000 shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

72 edited+68 added−36 removed90 unchanged
Biggest changeAdditionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
Biggest changeThe following table presents as of December 31, 2023 the Company’s assets subject to measurement at fair value on a nonrecurring basis (in thousands): Fair Value Measurements as of December 31, 2023 Level 1 Level 2 Level 3 Total Assets: Goodwill for Dubose Model Homes $ - $ - $ 1,123,000 $ 1,123,000 Goodwill for NTR Property Management - - 451,000 451,000 Total Assets $ - $ - $ 1,574,000 $ 1,574,000 The following table presents as of December 31, 2022 the Company’s assets subject to measurement at fair value on a nonrecurring basis (in thousands): Fair Value Measurements as of December 31, 2022 Level 1 Level 2 Level 3 Total Assets: Goodwill for Dubose Model Homes $ - $ - $ 1,123,000 $ 1,123,000 Goodwill for NTR Property Management - - 1,300,000 1,300,000 Total Assets $ - $ - $ 2,423,000 $ 2,423,000 Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.
If our cash flow from operating activities is n ot 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 the rate of dividends to our stockholders.
If our cash flow from operating activities is n ot 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.
Presidio Property Trust’s office, industrial and retail properties are located California, Colorado, Maryland, North Dakota and Texas. Our Model Home Properties are located in three states, primarily in Texas. We acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition.
Presidio Property Trust’s office, industrial and retail properties are located California, Colorado, Maryland, North Dakota and Texas. Our Model Home Properties are located in five states, primarily in Texas. We acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition.
Our geographical clustering of assets enables us to reduce our operating costs through economies of scale by servicing a number of properties with less staff, but it also makes us more susceptible to changing market conditions in these discrete geographic areas. 48 Table of Contents 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.
Our geographical clustering of assets enables us to reduce our operating costs through economies of scale by servicing a number of properties with less staff, but it also makes us more susceptible to changing market conditions in these discrete geographic areas. 49 Table of Contents 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.
Mortgage notes payable related to the real estate sold during the current period is classified as “notes payable related to real estate held for sale” for all prior periods presented in the accompanying condensed consolidated financial statements.
Mortgage notes payable related to the real estate sold during the current period is classified as “notes payable related to real estate held for sale” for all prior periods presented in the accompanying consolidated financial statements.
Real estate sold or to be sold during the current period is classified as “real estate held for sale” for all prior periods presented in the accompanying condensed consolidated financial statements.
Real estate sold or to be sold during the current period is classified as “real estate held for sale” for all prior periods presented in the accompanying consolidated financial statements.
The cost of buildings are depreciated over estimated useful lives of 39 years, the costs of improvements are amortized over the shorter of the estimated life of the asset or term of the tenant lease (which range from 1 to 10 years), the costs associated with acquired tenant intangibles over the remaining lease term and the cost of furniture, fixtures and equipment are depreciated over 4 to 5 years. 55 Table of Contents Earnings per share ( “ EPS ” ).
The cost of buildings are depreciated over estimated useful lives of 39 years, the costs of improvements are amortized over the shorter of the estimated life of the asset or term of the tenant lease (which range from 1 to 10 years), the costs associated with acquired tenant intangibles over the remaining lease term and the cost of furniture, fixtures and equipment are depreciated over 4 to 5 years. 56 Table of Contents Earnings per share ( “ EPS ” ).
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. 53 Table of Contents Impairment of Real Estate Assets .
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. 54 Table of Contents Impairment of Real Estate Assets .
Sales of real estate are recognized generally upon the transfer of control, which usually occurs when the real estate is legally sold. The application of these criteria can be complex and required us to make assumptions. We believe the relevant criteria were met for all real estate sold during the periods presented. 54 Table of Contents Income Taxes.
Sales of real estate are recognized generally upon the transfer of control, which usually occurs when the real estate is legally sold. The application of these criteria can be complex and required us to make assumptions. We believe the relevant criteria were met for all real estate sold during the periods presented. 55 Table of Contents Income Taxes.
Series A Warrants: If all the potential Series A Warrants outstanding at December 31, 2022, were exercised at the price of $7.00 per share, gross proceeds to us would be approximately $101.2 million and we would as a result issue an additional 14,450,069 shares of common stock.
Series A Warrants: If all the potential Series A Warrants outstanding at December 31, 2023, 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.
We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2022 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months.
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 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months.
Common Stock Warrants: If all the potential Common Stock Warrants outstanding at December 31, 2022, were exercised at the price of $5.00 per share, gross proceeds to us would be approximately $10 million and we would as a result issue an additional 2,000,000 shares of common stock.
Common Stock Warrants: If all the potential Common Stock Warrants outstanding at December 31, 2023, were exercised at the price of $5.00 per share, gross proceeds to us would be approximately $10 million and we would as a result issue an additional 2,000,000 shares of common stock.
Placement Agent Warrants: If all the potential Placement Agent Warrants outstanding at December 31, 2022, 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. 61 Table of Contents January 14, 2022 was the record date with respect to the distribution of five-year listed warrants (the “Series A Warrants”).
Placement Agent Warrants: If all the potential Placement Agent Warrants outstanding at December 31, 2023, 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. 63 Table of Contents January 14, 2022 was the record date with respect to the distribution of five-year listed warrants (the “Series A Warrants”).
We currently project that we could spend up to $4.1 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 rest of the year.
We currently project that we could spend up to $1.2 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 rest of the year.
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.
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 or other assets.
We further supplement this at the tenant level through our credit review process, which varies by tenant class. For example, our commercial and industrial tenants tend to be corporations or individual owned businesses.
We further supplement this 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.
These tenants are subjected to financial review and analysis prior to us entering into a sales-leaseback transaction. Our ownership of the underlying property provides a further means to avoiding significant credit losses.
These tenants are subjected to financial review and analysis prior to us entering into a sale-leaseback transaction. Our ownership of the underlying property provides a further means to avoiding significant credit losses.
If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.
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.
The SPAC offered $132,250,000 units, with each unit consisting of one share of common stock and three-quarters of one redeemable warrant. 50 Table of Contents The Sponsor purchased an aggregate of 828,750 units (the “placement units”) of the SPAC at a price of $10.00 per unit, for an aggregate purchase price of $8,287,500.
The SPAC offered $132,250,000 units, with each unit consisting of one share of common stock and three-quarters of one redeemable warrant. The Sponsor purchased an aggregate of 828,750 units (the “placement units”) of the SPAC at a price of $10.00 per unit, for an aggregate purchase price of $8,287,500.
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 years ended December 31, 2022 and 2021 .
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 years ended December 31, 2023 and 2022 .
We, through our wholly-owned subsidiary, owned approximately 23.49% of the issued and outstanding stock in the entity upon the initial public offering being declared effective and consummated (excluding the private placement units described below), and that following the completion of its initial business combination that the SPAC will operate as a separately managed, publicly traded entity.
We, through our wholly-owned subsidiary, owned approximately 23.49% of the issued and outstanding stock in the entity upon the initial public offering being declared effective and consummated (excluding the private placement units described below), and following the completion of its initial business combination, the SPAC operates as a separately managed, publicly traded entity.
Our cash and restricted cash at December 31, 2022 was approximately $16.5 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 le nder-held reserve deposits), and the payment of dividends to our stockholders.
Our cash and restricted cash at December 31, 2023 was approximately $6.5 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 le nder-held reserve deposits), and the payment of dividends to our stockholders.
Approximately $4.1 million of our cash and restricted cash balance is intended for capital expenditures on existing properties (including deposits held in reserve accounts by our lenders) over the next 12 months of 2023.
Approximately $1.2 million of our cash and restricted cash balance is intended for capital expenditures on existing properties (including deposits held in reserve accounts by our lenders) over the next 12 months.
On November 8, 2022, the SPAC entered into an agreement and plan of merger with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and the SPAC’s wholly owned subsidiary.
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.
Management expects certain model home and commercial properties will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company ha s done in the past. Additional principal payments will be made with cash flows from ongoing operations.
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 ha s done in the past. Additional principal payments will be made with cash flows from ongoing operations.
Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts and cash held in bank accounts at third-party institutions. During the years ended December 31, 2022 and 2021 , we did not experience any loss or lack of access to our cash or cash equivalents.
Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts and cash held in bank accounts at third-party institutions. During the years ended December 31, 2023 and 2022 , we did not experience any loss or lack of access to our cash or cash equivale nts.
Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are: For the Year Ended December 31, 2022 2021 Common Stock Warrants 2,000,000 2,000,000 Placement Agent Warrants 80,000 80,000 Series A Warrants 14,450,069 — Unvested Common Stock Grants 349,042 295,471 Total potentially dilutive shares 16,879,111 2,375,471 RESULTS FROM OPERATIONS FOR THE YEARS ENDED December 31, 2022 AND 2021 Our results from operations for 2022 and 2021 are not indicative of those expected in future periods as we expect that rental income, interest expense, rental operating expense, general and administrative expenses, and depreciation and amortization will significantly change in future periods as a result of the assets sold over the last two years.
Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are: For the Year Ended December 31, 2023 2022 Common Stock Warrants 2,000,000 2,000,000 Placement Agent Warrants 80,000 80,000 Series A Warrants 14,450,069 14,450,069 Unvested Common Stock Grants 760,995 349,042 Total potentially dilutive shares 17,291,064 16,879,111 RESULTS FROM OPERATIONS FOR THE YEARS ENDED December 31, 2023 AND 2022 Our results from operations for 2023 and 2022 are not indicative of those expected in future periods as we expect that rental income, interest expense, rental operating expense, general and administrative expenses, and depreciation and amortization will significantly change in future periods as a result of the assets sold over the last two years.
Interest expense, including amortization of deferred finance charges was approximately $4.7 million for the year ended December 31, 2022 compared to approximately $4.5 million for the same period in 2021 , an increase of approximately $0.2 million , or 4% . The increase in mortgage interest expense relates to the increase mortgage debt on our commercial properties and model homes.
Interest expense, including amortization of deferred finance charges was approximately $5.0 million for the year ended December 31, 2023 compared to approximately $4.7 million for the same period in 2022, an increase of approximately $0.3 million, or 6%. The increase in mortgage interest expense relates to the increase mortgage debt on our commercial properties and model homes.
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.
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.
For the year ended December 31, 2022 , the Company recorded an expense of approximately $1.2 million related to estimated refunds from federal and state taxes for capital gains from the sale of model homes held by the taxable REIT subsidiary compared to a recorded an income tax credit of approximately $47,620, for the year ended December 31, 2021 .
For the year ended December 31, 2023, the Company recorded an expense of approximately ($0.3)million related to estimated refunds from federal and state taxes for capital gains from the sale of model homes held by the taxable REIT subsidiary compared to a recorded an income tax credit of approximately $1.2 million, for the year ended December 31, 2022.
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 and sponsorship of Murphy Canyon Acquisition Corp.
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.
Management will continue to evaluate potential acquisitions in an effort to increase our portfolio of commercial real estate.
Management will continue to evaluate potential acquisitions in an effort to increase our portfolio of commercial real estate and model homes.
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. 52 Table of Contents Our results of operations for the years ended December 31, 2022 and 2021 are not indicative of those expected in future periods.
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. 53 Table of Contents Our results of operations for the years ended December 31, 2023 and 2022 may not be indicative of those expected in future periods.
Secured Debt As of December 31, 2022 , all our commercial properties, except 300 NP which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $73.0 million , collateralized by a total of 11 commercial properties with loan terms at issuance ranging from 7 to 22 years.
Secured Debt As of December 31, 2023 , all our commercial properties, except 300 NP which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $73.7 million , collater alized by a total of 11 commercial properties with loan terms at issuance ranging from 7 to 10 years.
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 2023, total appr oximately $8.3 million , of which $6.8 million is related to model home propertie s.
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 appr oximately $23.5 million , of which $13.1 million is related to model home propertie s.
As of December 31, 2022, including properties held for sale, the Company owned or had an equity interest in: • Eight office buildings and one industrial building (“Office/Industrial Properties”) which total approximately 756,265 rentable square feet, • Three retail shopping centers (“Retail Properties”) which total approximately 65,242 rentable square feet, and • 92 model homes owned by five affiliated limited partnerships and one corporation (“Model Home Properties”).
As of December 31, 2023, including properties held for sale, the Company owned or had an equity interest in: • Eight office buildings and one industrial building (“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 • 110 model homes owned by six affiliated limited partnerships and one corporation (“Model Home Properties”).
SIGNIFICANT TRANSACTIONS IN 2022 and 2021 Acquisitions during the year ended December 31, 2022: • We acquired 31 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2022. The purchase price for these properties was $15.6 million.
Significant Transactions in 2023 and 2022 Acquisitions during the year ended December 31, 2023: • We acquired 40 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2023. The purchase price for these properties was $21.9 million.
As a percentage of total revenue, our general and administrative costs was approximately 34.7% and 32.4% for the years ended December 31, 2022 and 2021 , respectively.
As a percentage of total revenue, our general and administrative costs was approximately 38.5% and 34.7% for the years ended December 31, 2023 and 2022, respectively.
We also are actively seeking investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders, and may seek a revolving line of credit to provide short-term liquidity. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.
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.
Revenues. Total revenue was approximately $17.8 million for the year ended December 31, 2022 , compared to approximately $19.2 million for the same period in 2021 , a decrease of approximately $1.4 million or 7% .
Revenues. Total revenue was approximately $17.6 million for the year ended December 31, 2023, compared to approximately $17.8 million for the same period in 2022, a decrease of approximately $0.2 million or 1%.
The weighted-average interest rate on these mortgage notes payable as of December 31, 2022 was approximately 4.53% , and our debt to estimated market value for our commercial properties was approximately 54.3%.
The weighted-average interest rate on these mortgage notes payable as of December 31, 2023 was approximately 4.87%, and our debt to estimated market value for our commercial properties was approximately 60.6%.
Income allocated to non-controlling interests. Income allocated to non-controlling interests for the years ended December 31, 2022 and 2021 totaled approximately $3.6 million , and $2.2 million , and was directly impacted by the sale of 19 and 34 model homes during the years ended December 31, 2022 and 2021 , respectively, held by our Model Home Partnerships.
Income allocated to non-controlling interests for the years ended December 31, 2023 and 2022 totaled approximately $3.0 million, and $3.6 million, and was directly impacted by the sale of 13 and 19 model homes during the years ended December 31, 2023 and 2022, respectively, held by our Model Home Partnerships. Gain on deconsolidation of SPAC and remeasurement.
However, elevated real estate prices in both commercial and residential real estate and compressing capitalization rates have made it challenging to acquire properties that fit our portfolio needs. As a result, we did not find any suitable commercial properties to acquire during 2022, but we were able to acquired 31 Model Home Properties.
During 2023, elevated real estate prices in commercial real estate, increasing interest rates on lending, and compressing capitalization rates have made it challenging to acquire properties that fit our portfolio needs. As a result, we did not find any suitable commercial properties to acquire during 2023, but we were able to acquire 40 model home properties.
The G&A expense for the years ended December 31, 2022 was affected by a reduction in payroll costs totaling approximately $878,000, including stock compensation, off set by the increase in D&O insurance for the SPAC totaling approximately $465,000 and higher accounting and consulting fees of approximately $412,000. Depreciation and Amortization .
The G&A expense for the years ended December 31, 2022 was affected by a reduction in payroll costs totaling approximately $878,000, which included employee retention credits ("ERC") and decreased stock compensation, offset by the increase in D&O insurance for the SPAC totaling approximately $465,000 and higher accounting and consulting fees of approximately $412,000.
Following redemptions made in connection with the special meeting, we owned approximately 65% of the issued and outstanding equity of the SPAC. On March 3, 2023 we loaned Murphy Canyon $300,000 to fund its trust account and for operating expenses, and may lend up to $1.5 million in total.
Following redemptions made in connection with the special meeting, we owned approximately 65% of the issued and outstanding equity of the SPAC. Throughout 2023, we loaned Murphy Canyon $1.0 million to fund its trust account and for operating expenses.
Cash Flows for the years ended December 31, 2022 and December 31, 2021 Operating Activities: Net cash provided by operating activities for the years ended December 31, 2022 and 2021 decreased by $1.4 million to approximately $0.9 million from $2.4 million .
Cash Flows for the years ended December 31, 2023 and December 31, 2022 Operating Activities: Net cash provided by operating activities for the years ended December 31, 2023 and 2022 increased by $0.6 million to approximately $1.5 million from $0.9 million.
Quarter Ended 2022 2021 Distributions Declared Distributions Declared March 31 $ 0.105 $ 0.101 June 30 0.106 0.102 September 30 0.020 0.103 December 31 0.021 0.104 Total $ 0.252 $ 0.410 Month 2022 2021 Distributions Declared Distributions Declared January $ 0.19531 $ — February 0.19531 — March 0.19531 — April 0.19531 — May 0.19531 — June 0.19531 0.10417 July 0.19531 0.19531 August 0.19531 0.19531 September 0.19531 0.19531 October 0.19531 0.19531 November 0.19531 0.19531 December 31 0.19531 0.19531 Total $ 2.34372 $ 1.27603 59 Table of Contents Cash, Cash Equivalents and Restricted Cash At December 31, 2022 and December 31, 2021, we had approximately $16.5 million and $14.7 million in cash equivalents, respectively, including $4.4 million and $4.7 million of restricted cash, respectively.
Quarter Ended 2023 2022 Distributions Declared Distributions Declared March 31 $ 0.022 $ 0.105 June 30 0.023 0.106 September 30 0.023 0.020 December 31 0.023 0.021 Total $ 0.091 $ 0.252 Month 2023 2022 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 October 0.19531 0.19531 November 0.19531 0.19531 December 31 0.19531 0.19531 Total $ 2.34372 $ 2.34372 61 Table of Contents Cash, Cash Equivalents and Restricted Cash At December 31, 2023 and December 31, 2022 , we had approximately $6.5 million and $16.5 million in cash equivalents, respectively, including $3.7 million and $4.4 million of restricted cash, respectively.
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. 60 Table of Contents Financing Activities: Net cash provided by financing activities during the year ended December 31, 2022 was $127.3 million compared to $23.4 million used in financing activities for the same period in 2021 and was primarily due to the following activities for the year ended December 31, 2022 : • Proceeds of approximately $132.3 million from public issuance for Murphy Canyon common stock during the year ended December 31, 2022 . • Net decrease in repayment of mortgage notes payable and notes payable totaling approximately $38.8 million. • Net increase in proceeds from mortgage notes payable totaling approximately $8.6 million. • A net decrease of dividends paid to Series A Common stockholders of approximately $1.4 million. • A net decrease of distributions to noncontrolling interest of approximately $3.2 million.
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. 62 Table of Contents Financing Activities: Net cash used in financing activities during the year ended December 31, 2023 was $131.8 million compared to $127.3 million provided by financing activities for the same period in 2022 and was primarily due to the following activities for the year ended December 31, 2023: • Payments on redemptions of approximately $137.2 million for Murphy Canyon common stock during the year ended December 31, 2023. • The payment of Series A Common Stock and Series D Preferred Stock dividends totaling approximately $1.2 million and $2.1 million, respectively during the year ended December 31, 2023. • Net repayment of mortgage notes payable and notes payable totaling approximately $10.1 million during the year ended December 31, 2023. • Distributions to noncontrolling interest of approximately $1.7 million. • The repurchase of Series D Preferred Stock totaling approximately $0.4 million.
Additionally, proceeds from sale of real estate, net, were down approximately $23.8 million in 2022, as compared to 2021, and proceeds used for real estate acquisition and building improvements were down approximately $6.0 million.
Additionally, proceeds from sale of real estate, net, were down approximately $15 million in 2023, as compared to 2022, and proceeds used for real estate acquisition and building improvements were up approximately $10.5 million.
Investing Activities: Net cash used in investing activities for the year ended December 31, 2022 was approximately $126.4 million compared to approximately $24.2 million provided by investing activities during the same period in 2021. The change from each period was primarily related to the gross cash invested into the trust account for Murphy Canyon totaling approximately $134.9 million.
Investing Activities: Net cash from investing activities for the year ended December 31, 2023 was approximately $120.3 million compared to cash used in investing activities of approximately $126.4 million during the same period in 2022. The change from each period was primarily related to the gross cash distributed from the Trust Account for Murphy Canyon totaling approximately $137 million.
General and administrative (“G&A”) expenses were approximately $6.2 million for the year ended December 31, 2022 , compared to approximately $6.2 million for the same period in 2021 , representing a decrease of approximately $62,000 or 1%.
General and administrative (“G&A”) expenses were approximately $6.8 million for the year ended December 31, 2023, compared to approximately $6.2 million for the same period in 2022, representing an increase of approximately $0.6 million or 10%.
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.
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 December 31, 2022 and December 31, 2021, our marketable securities presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $0.8 million and $1.5 million, respectively, with a cost basis of approximately $0.9 million and $1.6 million, respectively.
As of December 31, 2023 and December 31, 2022, our marketable securities (excluding our investments in Conduit's common stock and common stock warrants), held at a third party broker, presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $45,149 and $0.8 million, respectively, with a cost basis of approximately $40,315 and $0.9 million, respectively.
Dispositions during the year ended December 31, 2022: We review our portfolio of investment properties for value appreciation potential on an ongoing basis, and dispose of any properties that no longer satisfy our requirements in this regard, taking into account tax and other considerations.
The purchase price consisted of cash payments of $4.8 million and mortgage notes of $10.8 million. We review our portfolio of investment properties for value appreciation potential on an ongoing basis, and dispose of any properties that no longer satisfy our requirements in this regard, taking into account tax and other considerations.
MANAGEMENT EVALUATION OF RESULTS OF OPERATIONS Management’s evaluation of operating results includes an assessment of our ability to generate cash flow necessary to pay operating expenses, general and administrative expenses, debt service and to fund distributions to our stockholders.
Cap rates can have a wider range as there is a large bifurcation between A & B assets. MANAGEMENT EVALUATION OF RESULTS OF OPERATIONS Management’s evaluation of operating results includes an assessment of our ability to generate cash flow necessary to pay operating expenses, general and administrative expenses, debt service and to fund distributions to our stockholders.
During the year ended December 31, 2021, the Company repurchased 29,721 shares of our Series A Common Stock at an average price of approximately $3.7223 per share, including a commission of $0.035 per share, for a total cost of $110,631.
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 $ 15.97 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.2 million for the Series D Preferred Stock.
This impairment charges reflect management’s revised estimate of the fair market value based on sales comparable of like property in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement. The Company did not recognize a non-cash impairment during the year ended December 31, 2022 . Interest Expense-mortgage notes.
This impairment charge for One Park Center reflects management’s revised estimate of the fair market value based on sales comparable of like property in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement.
Rental operating costs were approximately $5.8 million for the year ended December 31, 2022 compared to approximately $6.2 million for the same period in 2021 , a decrease of approximately $0.3 million or 5% . Rental operating costs as a percentage of total revenue was 32.9% and 32.2% for the years ended December 31, 2022 and 2021 , respectively.
Rental operating costs were approximately $6.0 million for the year ended December 31, 2023 compared to approximately $5.8 million for the same period in 2022, an increase of approximately $121,522 or 2%.
As of December 31, 2022 , the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $24.8 million , excluding loans eliminated through consolidation, collateralized by a total of 86 Model Homes and five intercompany loans from the Company to our Model Home entities, Dubose Model Home Investors #202, LP and Dubose Model Home Investors #204, LP.
As of December 31, 2023 , the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $34.8 million, excluding loans eliminated through consolidation, collateralized by a total of 108 Model Homes. These loans generally have a term at issuance of three to five years.
Geographic Diversification Tables The following table shows a list of commercial properties owned by the Company grouped by state and geographic region as of December 31, 2022: 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 % $ 1,217,582 11.0 % Colorado (1) 5 324,245 39.4 % 5,476,502 49.7 % Maryland 1 31,752 3.9 % 696,321 6.3 % North Dakota 4 397,203 48.4 % 3,303,274 30.0 % Texas 1 10,500 1.3 % 329,385 3.0 % Total 12 821,507 100.0 % $ 11,023,064 100.0 % 57 Table of Contents The following table shows a list of our Model Home properties by geographic region as of December 31, 2022: Geographic Region No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent Midwest 2 6,153 2.2 % $ 80,844 2.7 % Southeast 2 3,978 1.4 % 78,492 2.6 % Southwest 88 268,749 96.4 % 2,824,404 94.7 % Total 92 278,880 100.0 % $ 2,983,740 100.0 % LIQUIDITY AND CAPITAL RESOURCES Overview Our anticipated fut ure 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, and the sale of equity or debt securities.
Geographic Diversification Tables The following table shows a list of commercial properties owned by the Company grouped by state and geographic region as of December 31, 2023: 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 % $ 1,425,269 12.9 % Colorado 5 324,245 39.4 % 4,883,335 44.2 % Maryland 1 31,752 3.9 % 710,248 6.4 % North Dakota (1) 4 399,113 48.4 % 3,687,043 33.5 % Texas 1 10,500 1.3 % 335,973 3.0 % Total 12 823,417 100.0 % $ 11,041,868 100.0 % 59 Table of Contents The following table shows a list of our Model Home properties by geographic region as of December 31, 2023: Geographic Region No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent Midwest 4 12,307 3.7 % $ 182,748 4.3 % Southeast 4 9,875 2.9 % 172,428 4.0 % Southwest 102 312,174 93.4 % 3,926,124 91.7 % Total 110 334,356 100.0 % $ 4,281,300 100.0 % LIQUIDITY AND CAPITAL RESOURCES Overview Our anticipated fut ure 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.
On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired. Halliburton Energy Services, Inc. was located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base as of December 31, 2022 .
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.
During year ended December 31, 2022, we disposed of the following properties: • World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million. • 31 model homes for approximately $17.5 million and the Company recognized a gain of approximately $5.4 million. 49 Table of Contents Dispositions during the year ended December 31, 2021: During year ended December 31, 2021, we disposed of the following properties: • Waterman Plaza, which was sold on January 28, 2021, for approximately $3.5 million and the Company recognized a loss of approximately $0.2 million. • Garden Gateway, which was sold on February 19, 2021, for approximately $11.2 million and the Company recognized a loss of approximately $1.4 million. • Highland Court, which was sold on May 20, 2021, for approximately $10.2 million and the Company recognized a loss of approximately $1.6 million. • Executive Office Park, which was sold on May 21, 2021, for approximately $8.1 million and the Company recognized a gain of approximately $2.5 million. • 44 model homes for approximately $20.7 million and the Company recognized a gain of approximately $3.2 million.
Dispositions during the year ended December 31, 2022: During year ended December 31, 2022, we disposed of the following properties: • World Plaza, which was sold on March 11, 2022, for approximately $10.0 million and the Company recognized a loss of approximately $0.3 million. • 31 model homes for approximately $17.5 million and the Company recognized a gain of approximately $5.4 million. 50 Table of Contents 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.
Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. 58 Table of Contents 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.
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. 60 Table of Contents 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.
Depreciation and amortization expenses were approximately $5.5 million for the year ended December 31, 2022 , compared to approximately $5.4 million for the same period in 2021. 56 Table of Contents Asset Impairments .
Depreciation and amortization expenses were approximately $5.4 million for the year ended December 31, 2023, compared to approximately $5.5 million for the same period in 2022. Asset Impairments . We review the carrying value of goodwill and each of our real estate properties annually to determine if circumstances indicate an impairment in the carrying value of these investments exists.
If the merger agreement is approved by the SPAC’s stockholders and the transactions under the merger agreement are consummated, the SPAC’s Cayman Island subsidiary will merge with and into Conduit, with Conduit surviving the merger as 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”).
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. 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.
We will continue to work on filling the space during 2024. 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.
The tenant did not renew the lease and we placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary. Our management team is working to fill the space as quickly as possible, and has filled approximately 20% of the space in the first quarter of 2023.
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 balance sheet.
The building is 100% occupied under a 5 year triple net lease to Johns Hopkins University’s Bloomberg School of Public Health and was purchased with all cash. • We acquired 18 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2021.
The purchase price consisted of cash payments of $6.6 million and mortgage notes of $15.3 million. Acquisitions during the year ended December 31, 2022: • We acquired 31 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2022. The purchase price for the properties was $15.6 million.
The Polar Note was paid in full during March 2021, and no similar expenses were recorded during the year ended December 31, 2022 . Gain on Sale of Real Estate Assets. For the year ended December 31, 2022 , the change in gain on sale relates to the mix and type of properties sold. See Item 7.
For the year ended December 31, 2023, the change in gain on sale relates to the mix and type of properties sold. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Significant Transactions in 2023 and 2022 above for further detail. Income Tax Expense / Credit.
The intercompany loans are fully eliminated in consolidation. These loans generally have a term at issuance of three to five years. As of December 31, 2022 , the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $288,000 and 4.69% , respectively.
As of December 31, 2023 , the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are ap proximately $322,368 and 5.81%, respectively. Our debt to estimated market value on all our model home properties is approximately 66.6%, excluding any loans eliminated through consolidation.
Sponsorship of Special Purpose Acquisition Company On January 7, 2022, we announced our sponsorship, through our wholly-owned subsidiary, Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering. The SPAC raised $132,250,000 in capital investment to acquire an operating business.
Murphy Canyon Acquisition Corp. (“Murphy Canyon” or the “SPAC”) raised $132,250,000 in capital investment to acquire an operating business.
As of December 31, 2022, we owned 92 model homes, the same number of homes as of December 31, 2021. The decrease in rental income was partially offset by the acquisition of our Mandolin and Baltimore properties during August and December 2021, respectively. Rental Operating Costs .
This was offset by the increase in model home income, as our model home portfolio grew from 92 at December 31, 2022 to 110 at December 31, 2023. Rental Operating Costs .
Removed
The purchase price consisted of cash payments of $4.8 million and mortgage notes of $10.8 million.
Added
Dispositions during the year ended December 31, 2023: During year ended December 31, 2023, we disposed of the following properties: • 22 model homes for approximately $11.7 million and the Company recognized a gain of approximately $3.2 million.
Removed
Acquisitions during the year ended December 31, 2021: • On August 17, 2021, the Company, through its 61.3% owned subsidiaries NetREIT Palm Self Storage, LP and NetREIT Highland LLC, acquired a single story newly constructed 10,500 square foot building in Houston, Texas for a purchase price of approximately $4.9 million, in connection with a like-kind exchange transaction pursued under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code").
Added
The loan was non-interest bearing, unsecured and was repaid in full on the date of Murphy Canyon’s business combination with Conduit Pharma. On September 22, 2023, Murphy Canyon completed its business combination with Conduit Pharma and changed its name to “Conduit Pharmaceuticals Inc.” Immediately prior to the business combination the Company owned approximately 65% of the SPAC’s outstanding common stock.
Removed
The building is 100% occupied under a 15-year triple net lease and was purchased with all cash. • On December 22, 2021, the Company purchased a 31,752 square foot building in Baltimore, Maryland for a purchase price of approximately $8.9 million.
Added
Upon consummation of the business combination, the SPAC’s shares of Class B common stock were converted into shares of its Class A common stock and the shares of Class A common stock were then reclassified as a single class of Conduit common stock.
Removed
The purchase price for the properties was $8.4 million. The purchase price consisted of cash payments of $2.7 million and mortgage notes of $5.7 million.
Added
As a result of the business combination, the Company was issued (i) 3,306,250 shares of Conduit’s common stock due to the conversion of the shares of the SPAC’s Class B common stock into shares of the SPAC’s Class A common stock and then reclassification into shares of Conduit common stock, (ii) 754,000 shares of Conduit common stock, which prior to the business combination were shares of the SPAC’s Class A common stock and (iii) private warrants to purchase 754,000 shares of Conduit common stock, which prior to the business combination were warrants to purchase 754,000 shares of the SPAC’s Class A common stock.

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