10q10k10q10k.net

What changed in Presidio Property Trust, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Presidio Property Trust, Inc.'s 2023 and 2024 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 2024 report.

+327 added−359 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-16)

Top changes in Presidio Property Trust, Inc.'s 2024 10-K

327 paragraphs added · 359 removed · 210 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

36 edited+9 added−11 removed60 unchanged
Biggest changeIn 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.
Biggest changeWe plan to refinance a significant portion of the mortgage notes payable or sell the model home properties to repay the mortgage notes payable. We have $30.5 million of principal payments on mortgage notes payable relating to commercial properties in 2025, four of which are maturing in 2025.
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.
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 Model Homes, Inc. and Dubose Advisors manages DMHI #202, DMHI #203, DMHI #204, DMHI #205, DMHI #206, and DMHI #207.
ITEM 1. OVERVIEW AND CORPORATE STRUCTURE Presidio Property Trust, Inc. (“we”, “our”, “us” or the “Company”) is an internally-managed real estate investment trust (“REIT”). We were incorporated in the State of California on September 28, 1999, and in August 2010, we reincorporated as a Maryland corporation.
ITEM 1. BUSINESS OVERVIEW AND CORPORATE STRUCTURE Presidio Property Trust, Inc. (“we”, “our”, “us” or the “Company”) is an internally-managed real estate investment trust (“REIT”). We were incorporated in the State of California on September 28, 1999, and in August 2010, we reincorporated as a Maryland corporation.
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.
This partnership continues to raise capital through the sale of additional limited partnership units. • 3.5% 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.
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.
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 Advisors; • Ed Bentzen, Chief Financial Officer of the Company; • Gary M.
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.
Should warrant holders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a 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.
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.
We qualified as a REIT for the fiscal year ended December 31, 2024. 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, 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.
As of December 31, 2024 , 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.
The Company is a limited partner in five partnerships and sole shareholder in one corporation, which entities purchase and leaseback model homes to and from homebuilders. MARKET AND BUSINESS STRATEGY The Company invests in a diverse multi-tenant portfolio of real estate assets.
The Company is a limited partner in five partnerships and sole shareholder in one corporation, which entities purchase and lease model homes to and from homebuilders. MARKET AND BUSINESS STRATEGY The Company invests in a diverse multi-tenant portfolio of real estate assets.
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.
Our human capital management strategy, which we refer to as our people strategy, is tightly aligned with our business needs. During 2024, 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.
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.
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.
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.
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 expired in November 2024.
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.
Our model home business (“ PPT Model Homes ”) is engaged in the business of acquiring model homes from third party homebuilders in sale-lease transactions whereby a homebuilder sells the Model Home to PPT Model Homes and leases back the Model Home under a triple net lease ( “ NNN ” ) for use in marketing its residential development.
Typically, these loans are for terms ranging from five to ten years. Currently, the majority of our mortgage loans are structured as non-recourse to us with limited exceptions that would cause a recourse event only upon occurrence of certain fraud, misconduct, environmental, or bankruptcy events.
Typically, these loans are for terms ranging from five to ten years. Currently, seven of our 12 of our commercial mortgage loans are structured as non-recourse to us with limited exceptions that would cause a recourse event only upon occurrence of certain fraud, misconduct, environmental, or bankruptcy events.
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 ”).
We currently operate six limited partnerships in connection with PPT Model Homes: 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 ”).
They are also available for printing by any stockholder upon request. Our office is located at 4995 Murphy Canyon Road, Suite 300, San Diego, CA 92123. Our telephone number is 866-781-7721. Our e-mail address is info@presidiopt.com or you may visit our website at www.presidiopt.com. 9 Table of Contents
They are also available for printing by any stockholder upon request. Our office is located at 4995 Murphy Canyon Road, Suite 300, San Diego, CA 92123. Our telephone number is (760) 471-8536. Our e-mail address is info@presidiopt.com or you may visit our website at www.presidiopt.com. 9 Table of Contents
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.
The purchase price consisted of cash payments of $6.6 million and mortgage notes of $15.3 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, 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 the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock.
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.
RECENT DEVELOPMENTS Significant Transactions in 2024 and 2023 Acquisitions during the year ended December 31, 2024: • We acquired 19 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2024. The purchase price for these properties was $9.7 million.
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.
Katz, Chief Investment Officer of the Company; and • Steve Hightower, President of PPT Model Homes 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. Bentzen oversees financial matters, including financi al reporting, budgeting, forecasting, funding activities, tax and insurance. 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.
Among other things, our Board of Directors must approve each real property acquisition our Management proposes. As of December 31, 2024, there were seven directors comprising our Board of Directors, five of whom are independent directors (“Independent Directors”). Two of our directors, Mr. Heilbron and Mr. Hightower, are not independent.
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.
At December 31, 2024, $22.7 million of our total debt contained recourse to the Company, of which $5.0 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.
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 purchase price consisted of cash payments of $3.0 million and mortgage notes of $6.7 million. 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 the properties was $21.9 million.
Beginning in 2015, we began to focus our commercial portfolio primarily on office and industrial properties (“Office/Industrial Properties”) and model homes (“Model Home Properties”), and have been managing the portfolio to transition out of retail properties. Our commercial properties are currently located in Colorado, North Dakota, California, Maryland and Texas.
Beginning in 2015, we began to focus our commercial portfolio primarily on office and industrial properties (“Office/Industrial Properties”) and model homes (“Model Home Properties”). Our commercial properties are currently located in Colorado, North Dakota, California, Maryland and Texas.
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.
As a result, the Company owned approximately 6.5% of Conduit’s common stock immediately following the business combination and currently own less than 1% of Conduit’s common stock.
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.
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. Model Home Properties Our Model Home Properties are located in three states throughout the United States.
We use a variety of human capital measures in managing our business, including: workforce demographics; diversity metrics with respect to representation, attrition, hiring, promotions and leadership; and talent management metrics including retention rates of top talent and hiring metrics. OFFICE AND EMPLOYEES Our office is approximately 9,224 square feet and is located in San Diego, California.
We use a variety of human capital measures in managing our business, including: workforce demographics; diversity metrics with respect to representation, attrition, hiring, promotions and leadership; and talent management metrics including retention rates of top talent and hiring metrics. OFFICE AND EMPLOYEES During September 2024, we reduced our office space from approximately 9,224 square feet to 6,570 square feet.
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.
Our commercial property tenant base is highly diversified and consists of approximately 157 individual commercial tenants with an average remaining lease term of approximately 3.2 years as of December 31, 2024. As of December 31, 2024, one commercial tenant represented 6.07% of our annualized based rent, while our ten largest tenants represented approximately 32.60% of our annualized base rent.
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.
Overall the commercial properties and Model Homes adequately covered their debt servicing needs during the year ended December 31, 2024, and management expect this to continue during the next twelve months.
During the year ended December 31, 2022, the Company repurchased 196,631 shares of our Series A Common Stock at an average price of approximately $1.59 per share, including a commission of $0.035 per share, and 6,013 shares of our Series D Preferred Stock at an average price of approximately $20.31 per share, including a commission of $0.035 per share, for a total cost of $313,578 for the Series A Common Stock and $122,141 for the Series D Preferred Stock.
During the year ended December 31, 2024, the Company repurchased 2,918 shares of our Series D Preferred Stock at an average price of approximately $14.02 per share, including a commission of $0.035 per share, for a total cost of $40,910 for the Series D Preferred Stock.
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.
Dispositions during the year ended December 31, 2024: During year ended December 31, 2024, we disposed of the following properties: • 51 model homes for approximately $24.8 million and the Company recognized a gain of approximately $3.4 million.
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.
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. Our short-term liquidity needs include satisfying the debt service requirements of our existing mortgages.
As of December 31, 2023, we had a total of 15 full-time employees.
The office is located in San Diego, California. As of December 31, 2024, we had a total of 15 full-time employees.
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.
In December 2024, 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 December 2025.
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.
Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost. 4 Table of Contents 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.
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 .
Of the 78 model homes in our portfolio, 55 of them are wholly owned through NetREIT Model Homes, Inc. and make up approximately 70.7% of the total rental income from our model home portfolio. 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 .
Removed
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.
Added
Our Model Home Properties are leased back, on a triple-net basis, to homebuilders. The Model Home Properties are held by five affiliated limited partnerships and one wholly-owned corporation, all of which we control. As of December 31, 2024, our Model Home Properties are located in three states, Texas, Florida and Arizona. For more information, see Part II - Item 7.
Removed
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 .
Added
As of December 31, 2024, we owned 78 model homes with a net book value of approximately $37.4 million.
Removed
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.
Added
During the year ended December 31, 2024, we repurchased 190,640 shares of our Series A Common Stock, for a total cost of $140,416, with an average price of approximately $1.10 per share, including a commission of $0.025 per share.
Removed
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.
Added
On June 20, 2024, the Company entered into an underwriting agreement with The Benchmark Company, LLC, pursuant to which the Company issued and sold in an underwritten public offering 109,054 shares of the Company’s Series D Preferred Stock. The shares of Series D Preferred Stock were sold to the public at a price of $16.00 per share.
Removed
Model Home Properties Our Model Home properties are located in five states throughout the United St ates.
Added
The Company agreed to an underwriting discount of 7% of the public offering price of the shares of Series D Preferred Stock sold in the offering. The offering closed on June 24, 2024, generating gross proceeds of approximately $1.74 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
Removed
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.
Added
The Company intends to use the net proceeds from the offering for general corporate and working capital purposes, including to potentially acquire additional properties.
Removed
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.
Added
As of December 31, 2024, none of our mortgage loans included variable interest rate provisions. In 2025, we have $8.3 million of principal payments on mortgage notes payable related to the Model Home Properties, including $7.7 million payments related to mortgage notes payable that mature in 2025.
Removed
The Manager may also sell the common stock in privately negotiated transactions, subject to our prior approval. The price per share will be at prevailing market prices. The Company will pay the Manager a commission equal to 3.5% of the gross proceeds from the sale of the Series A Common Stock pursuant to the Sales Agreement.
Added
The loans for Union Town Center ("UTC") and Research Parkway were paid in full, when the properties were sold in February 2025. The loan on Dakota Center matured in July 2024 and management has been working with the lender and their special servicer of the loan to sell the property and settle the debt.
Removed
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%.
Added
The lender has agreed to the Company selling the property on the open market with the use of a broker. We have also begun the process to refinance the remaining two loans.
Removed
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
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

50 edited+24 added−36 removed314 unchanged
Biggest changeWe 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.
Biggest changeIf 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. 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.
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 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 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 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.
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.
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 or public health crisis: ● 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 a resurgence in the COVID-19 pandemic or another public health crisis 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.
We 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.
We 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 achieve compliance 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.
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.
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 Act.
In addition, our properties are subject to the effects of adverse acts of nature, such as winter storms, hurricanes, hailstorms, strong winds, earthquakes and tornadoes, which may cause damage, such as flooding, to our properties.
In addition, our properties are subject to the effects of adverse acts of nature, such as winter storms, hurricanes, hailstorms, strong winds, wildfires, earthquakes and tornadoes, which may cause damage, such as flooding, to our properties.
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. Our stockholders may from time to time engage in proxy solicitations, advance shareholder proposals or otherwise attempt to affect changes or acquire control over the Company.
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. Our stockholders may from time to time engage in proxy solicitations, advance stockholder proposals or otherwise attempt to affect changes or acquire control over the Company.
If we are unable to maintain compliance with the continued listing requirements of Nasdaq, our common stock could be delisted, making it more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our securities could suffer a material decline. Delisting could also impair our ability to raise capital.
If we are unable to regain compliance with the continued listing requirements of Nasdaq, our common stock could be delisted, making it more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our securities could suffer a material decline. Delisting could also impair our ability to raise capital.
A security breach or other significant disruption involving our IT networks and related systems could result in unauthorized access to proprietary, confidential, sensitive or otherwise valuable information, significantly disrupt our business operations, cause damage to our reputation and subject us to a dditional unforeseen costs and require significant time and resources to remedy.
A security breach or other significant disruption involving our IT networks and related systems could result in unauthorized access to proprietary, confidential, sensitive or otherwise valuable information, significantly disrupt our business operations, cause damage to our reputation and subject us to additional unforeseen costs and require significant time and resources to remedy.
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.
The economic and geopolitical ramifications of the military conflicts in the Middle East and Ukraine, including sanctions, retaliatory sanctions, nationalism, supply chain disruptions, cyber-attacks 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.
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.
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 if potential interest rate decreases in 2025 do not materialize, 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.
Competition for skilled and experienced professionals has intensified, and we cannot assure our stockholders that we will be successful in attracting and retaining such personnel. We rely on third-party property managers to manage most of our properties and brokers or agents to lease our properties.
Competition for skilled and experienced professionals has intensified, and we cannot assure our stockholders that we will be successful in attracting and retaining such personnel. We rely on third-party property managers to manage some of our properties and brokers or agents to lease our properties.
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.
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, which has affected construction and renovation costs in our industry.
These events could cause us to reduce the amount of distributions to our stockholders. 16 Table of Contents A property that becomes vacant could be difficult to sell or re-lease and could have a material adverse effect on our operations. We expect portions of our properties to periodically become vacant by reason of lease expirations, terminations, or tenant defaults.
These events could cause us to reduce the amount of distributions to our stockholders. A property that becomes vacant could be difficult to sell or re-lease and could have a material adverse effect on our operations. We expect portions of our properties to periodically become vacant by reason of lease expirations, terminations, or tenant defaults.
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.
Compliance with the Investment Company Act, 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.
For example, on March 13, 2024, a stockholder announced that it intends to file a preliminary proxy statement and accompanying WHITE universal proxy card with the Securities and Exchange Commission to be used to solicit votes for the election of director nominees at our next annual meeting of stockholders.
For example, on March 13, 2024, a stockholder announced that it intended to file a preliminary proxy statement and accompanying WHITE universal proxy card with the Securities and Exchange Commission to be used to solicit votes for the election of director nominees at our 2024 annual meeting of stockholders.
In addition, because a property’s market value depends principally upon the value of the leases associated with that property, the resale value of a property with high or prolonged vacancies could suffer, which could further reduce our returns. We may incur substantial costs in improving our properties.
In addition, because a property’s market value depends principally upon the value of the leases associated with that property, the resale value of a property with high or prolonged vacancies could suffer, which could further reduce our returns. 16 Table of Contents We may incur substantial costs in improving our properties.
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.
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; • 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.
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.
We may be adversely affected by trends in office real estate. In 2024, approximately 65% of our net operating income was from our office properties, and approximately 54% in 2023. 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 outstanding indebtedness, and the limitations imposed on us by the agreements that govern our outstanding indebtedness, could have significant adverse consequences, including the following: • make it more difficult for us to satisfy our obligations; • limit our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements, or to carry out other aspects of our business plan; • limit our ability to refinance our indebtedness at maturity or impose refinancing terms that may be less favorable than the terms of the original indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on obligations under our outstanding indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures and other general corporate requirements, or adversely affect our ability to meet REIT distribution requirements imposed by the Code; • cause us to violate restrictive covenants in the documents that govern our indebtedness, which would entitle our lenders to charge default rates of interest and/or accelerate our debt obligations; • cause us to default on our obligations, causing lenders or mortgagees to foreclose on properties that secure our loans and receive an assignment of our rents and leases; • force us to dispose of one or more of our properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; • limit our ability to make material acquisitions or take advantage of business opportunities that may arise and limit our flexibility in planning for, or reacting to, changes in our business and industry, thereby limiting our ability to compete effectively or operate successfully; and • cause us to not have sufficient cash flow to pay dividends to our stockholders or place restrictions on the payment of dividends to our stockholders. 25 Table of Contents If any one of these events was to occur, our business, results of operations and financial condition would be materially adversely affected.
Our outstanding indebtedness, and the limitations imposed on us by the agreements that govern our outstanding indebtedness, could have significant adverse consequences, including the following: • make it more difficult for us to satisfy our obligations; • limit our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements, or to carry out other aspects of our business plan; • limit our ability to refinance our indebtedness at maturity or impose refinancing terms that may be less favorable than the terms of the original indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on obligations under our outstanding indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures and other general corporate requirements, or adversely affect our ability to meet REIT distribution requirements imposed by the Code; • cause us to violate restrictive covenants in the documents that govern our indebtedness, which would entitle our lenders to charge default rates of interest and/or accelerate our debt obligations; • cause us to default on our obligations, causing lenders or mortgagees to foreclose on properties that secure our loans and receive an assignment of our rents and leases; • force us to dispose of one or more of our properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; • limit our ability to make material acquisitions or take advantage of business opportunities that may arise and limit our flexibility in planning for, or reacting to, changes in our business and industry, thereby limiting our ability to compete effectively or operate successfully; and • cause us to not have sufficient cash flow to pay dividends to our stockholders or place restrictions on the payment of dividends to our stockholders.
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.
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 may adversely impact our cash flows.
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.
Our total gross indebtedness as of December 31, 2024 was approximately $102.8 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.
In addition, the COVID-19 pandemic, geopolitical instability and rising inflation have and may conti nue to adversely affect the financial markets. Each of these events may cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost.
In addition, macroeconomic factors, geopolitical instability and rising inflation have and may continue to adversely affect the financial markets. Each of these events may cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost.
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.
Our model home portfolio consists of properties currently lo cated in three states, although a signif icant concentration of our model homes is located in Texas. As of December 31, 2024 , approximately 94% of our model homes were located in Texas.
From time to time, including recently, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and industrial properties. If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our properties in California.
From time to time, including recently, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and industrial properties. If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our properties in California. Changes in U.S. accounting standards may adversely impact us.
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.
Concerns over economic recession, the possibility of new COVID-19 strains or other pandemics or health crises, interest rate increases, policy priorities of the U.S. presidential administration, trade wars, tariffs, 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.
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.
While these restrictions have been lifted, new variants of the coronavirus and/or the spread of another highly infectious or contagious virus or disease could cause government authorities to extend, reinstitute and/or adopt new restrictions.
Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-current market price.
Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-current market price. 22 Table of Contents Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Rising inflation and elevated U.S. budget deficits and overall debt levels, including as a result of federal pandemic relief and stimulus legislation and/or economic or market and supply chain conditions, can put upward pressure on interest rates and could be among the factors that could lead to higher interest rates in the future.
Rising inflation and elevated U.S. budget deficits and overall debt levels, including as a result of federal spending, tariffs and/or economic or market and supply chain conditions, can put upward pressure on interest rates and could be among the factors that could lead to higher interest rates in the future. During inflationary periods, interest rates have historically increased.
Our charter currently authorizes the issuance of up to 1,000,000 shares of preferred stock in one or more classes or series.
Our charter currently authorizes the issuance of up to 1,000,000 shares of preferred stock in one or more classes or series, all of which are currently classified as shares of Series D Preferred Stock.
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.
From time to time, we maintain a portfolio of marketable securities. As of December 31, 2024, we did not own any common shares of publicly traded REITs and owned no written covered call options in any of those same REITs. The fair market value on our publicly traded REIT securities was $0, based on the December 31, 2024 closing prices.
Under various federal, state and local environmental laws, ordinances and regulations, an owner or operator of real property is responsible for the cost of removal or remediation of hazardous or toxic substances on its property. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated.
Under various federal, state and local environmental laws, ordinances and regulations, an owner or operator of real property is responsible for the cost of removal or remediation of hazardous or toxic substances on its property.
Risks Related to our Common Stock, Preferred Stock and Series A Warrants If we are unable to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise capital.
Therefore, tax-exempt stockholders are not assured all dividends received will be tax-free. 29 Table of Contents Risks Related to our Common Stock, Preferred Stock and Series A Warrants If we are unable to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise capital.
Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows. Current legislative uncertainty and discourse could cause significant economic impact on markets, including the availability and access to capital markets and other funding sources, adverse changes in real estate values and increased interest rates.
Current legislative uncertainty and discourse could cause significant economic impact on markets, including the availability and access to capital markets and other funding sources, adverse changes in real estate values and increased interest rates. Such impacts could have a material adverse effect on our business, financial condition, results from operation and growth prospects.
There can be no assurance that we will be able to maintain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.
At that time, the Company may appeal the determination to a Hearings Panel. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.
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.
Any material expenditures, penalties, or decrease in property value would adversely affect our operating income and our ability to pay dividends to our stockholders. 37 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.
Additionally, we could be subject to liability in the form of fines, penalties or damages for noncompliance, and any enforcement actions could reduce the value of a property. Any material expenditures, penalties, or decrease in property value would adversely affect our operating income and our ability to pay dividends to our stockholders.
Additionally, we could be subject to liability in the form of fines, penalties or damages for noncompliance, and any enforcement actions could reduce the value of a property.
For instance, federal regulations require us to identify and warn, via signs and labels, of potential hazards posed by workplace exposure to installed asbestos-containing materials (“ACMs”), and potential ACMs on our properties.
Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated. 38 Table of Contents For instance, federal regulations require us to identify and warn, via signs and labels, of potential hazards posed by workplace exposure to installed asbestos-containing materials (“ACMs”), and potential ACMs on our properties.
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.
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.
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.
As a result, the possibility remains that the COVID-19 pandemic or another public health crisis may negatively impact almost every industry, both inside and outside these metro regions, directly or indirectly and has created business continuity issues.
An increase in the federal funds effective rate could cause an increase in rates related to lending for commercial real estate, which could have a material adverse effect on our business, including our ability to pay distributions. Further, the outcome of congressional and other elections creates uncertainty with respect to legal, tax and regulatory regimes in which we operate.
Federal Reserve will be reducing the federal funds rate in 2025, these expectations might not materialize. An increase in the federal funds effective rate could cause an increase in rates related to lending for commercial real estate, which could have a material adverse effect on our business, including our ability to pay distributions.
Impairment indicators include real estate markets, leasing rates, occupancy levels, mortgage loan status, and other factors which affect the value of a particular property. For example, a tenant’s default under a lease, the upcoming termination of a long-term lease, the pending maturity of a mortgage loan secured by a property, and the unavailability of replacement financing are all impairment indicators.
Impairment indicators may include changes in real estate markets, leasing rates, occupancy levels, mortgage loan status, and other factors which affect the value of a particular property.
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.
The full extent of the impacts on our business over the long term are dependent on a number of factors beyond our control.
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 payment of distributions to a tax-exempt stockholder will constitute UBTI, however, if the tax-exempt stockholder has incurred debt to acquire its shares.
The presence of any of these indicators may require us to make a material impairment charge against the property so affected.
For example, a tenant’s default under a lease, the upcoming termination of a long-term lease, the pending maturity of a mortgage loan secured by a property, and the unavailability of replacement financing are all impairment indicators. The presence of any of these indicators may require us to make a material impairment charge against the property so affected.
Mortgage indebtedness and other borrowings increase our operational risks. Loans obtained to fund property acquisitions will generally be secured by mortgages on our properties. The more we borrow, the higher our fixed debt payment obligations will be and the greater the risk that we will not be able to timely meet these payment obligations.
The more we borrow, the higher our fixed debt payment obligations will be and the greater the risk that we will not be able to timely meet these payment obligations. At December 31, 2024, excluding our Model Home Properties, we had a total of approximately $76.8 million of secured financing on our properties.
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.
The outbreak of any highly infectious or contagious disease could significantly and adversely impact our business, financial condition, results of operations and cash flows. 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.
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.
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.
A failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our common stock.
Any difficulties in the implementation of changes in accounting principles, including the ability to modify our accounting systems and to update our policies, procedures, information systems, and internal control over financial reporting, could result in materially inaccurate financial statements, which in turn could harm our operating results or cause us to fail to meet our reporting obligations.
Removed
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.
Added
For instance, to control the rate of inflation, the Board of Governors of the Federal Reserve System (the “U.S. Federal Reserve”) raised its benchmark federal funds rate from nearly zero in March 2022 to a range between 4.25% and 4.50% as of December 31, 2024. Although there are expectations that the U.S.
Removed
Our Board of Directors may approve the issuance of stock, including preferred stock, with terms that may discourage a third party from acquiring us. Other than as set forth therein, our charter permits our Board of Directors, without any action by our stockholders, to authorize the issuance of stock in one or more classes or series.
Added
Federal Reserve will be reducing the federal funds rate in 2025, these expectations might not materialize.
Removed
Our Board of Directors may also classify or reclassify any unissued preferred stock and set or change the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of any such stock, which rights may be superior to those of our common stock.
Added
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 had implemented rent freezes, eviction freezes, or other similar restrictions.
Removed
Thus, our Board of Directors could authorize the issuance of shares of a class or series of stock with terms and conditions which could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of our outstanding common stock might receive a premium for their shares over the then current market price of our common stock. 22 Table of Contents Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Added
On March 18, 2024, the Company filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland relating to the Company’s election to be subject to the classified board provisions of Section 3-803 of the MGCL.
Removed
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.
Added
Accordingly, the Board of Directors is currently classified into three classes with directors serving three-year staggered terms and until their successors are elected and qualified.
Removed
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.
Added
Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows. Our failure to adopt, or use of advancements in information technology presents risks and challenges that may put us at a competitive disadvantage and adversely impact our business, reputation, results of operations, and financial condition.
Removed
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.
Added
Our inability to adopt new technological capabilities and enhancements, including artificial intelligence and machine learning, may put us at a competitive disadvantage or cause us to miss opportunities to innovate and achieve efficiencies in our operations which could adversely impact our business, reputation, results of operations, and financial condition.
Removed
Following the SPAC’s business combination with Conduit Pharma, we currently own approximately 6.3% of Conduit’s outstanding shares.
Added
Conversely, the use of emerging technologies entails risks, including risks relating to the possibility of intellectual property infringement or misappropriation, data privacy, new or enhanced governmental or regulatory scrutiny and compliance costs, litigation, or other liability, ethical concerns, negative perceptions as to automation and artificial intelligence, or other complications or liabilities that could adversely affect our business, reputation, results of operations, or financial results.
Removed
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.
Added
To control the rate of inflation, the Board of Governors of the U.S. Federal Reserve raised its benchmark federal funds rate from nearly zero in March 2022 to a range between 4.25% and 4.50% as of December 31, 2024. Although there are expectations that the U.S.
Removed
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.
Added
Further, the outcome of congressional and other elections creates uncertainty with respect to legal, tax and regulatory regimes in which we operate. These changes could result in sweeping reform in many laws and regulations, including without limitation, those relating to taxes and small business aid.
Removed
At December 31, 2023, excluding our model home properties, we had a total of approximately $73.7 million of secured financing on our properties.
Added
We may need to coordinate and diversify banking relationships in order to have business continuity.
Removed
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.
Added
If any one of these events was to occur, our business, results of operations and financial condition would be materially adversely affected. 25 Table of Contents Mortgage indebtedness and other borrowings increase our operational risks. Loans obtained to fund property acquisitions will generally be secured by mortgages on our properties.
Removed
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.
Added
We have $30.5 million of principal payments on mortgage notes payable relating to commercial properties in 2025, four of which are maturing in 2025, and one matured in July 2024. The loans for UTC and Research Parkway were paid in full, when the properties were sold in February 2025.
Removed
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.
Added
The loan on Dakota Center matured in July 2024 and management has been working with the lender and their special servicer of the loan to sell the property and settle the debt. The lender has agreed to the Company selling the property on the open market with the use of a broker.
Removed
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.
Added
We have also begun the process to refinance the remaining two loans that are due in September 2025. 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.

… 30 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+1 added−0 removed2 unchanged
Biggest changeThese policies go through an annual internal review process and are approved by appropriate members of management. Presidio Property Trust uses a third-party consultant to assess the Company’s compliance with Sarbanes Oxley. Presidio Property Trust faces risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation.
Biggest changePresidio Property Trust faces risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation.
In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with the use of third-party service providers. The internal business owners of the hosted applications are required to document quarterly user access reviews and obtain a System and Organization Controls (SOC) 1 or SOC 2 report from our SaaS vendors.
In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with the use of third -party service providers. The internal business owners of the hosted applications are required to document quarterly user access reviews and obtain a System and Organization Controls (SOC) 1 and/or SOC 2 report from our SaaS vendors.
With assistance from an external consultant, management conducts an annual review of third-party SOC reports with a specific focus on their data protection procedures. If a third-party vendor is not able to provide a SOC 1 report, management takes additional steps to assess their cybersecurity preparedness and assess our relationship with them on that basis.
With assistance from an external consultant, management conducts an annual review of third -party SOC reports with a specific focus on their data protection procedures. If a third -party vendor is not able to provide a SOC report, management takes additional steps to assess their cybersecurity preparedness and assess our relationship with them on that basis.
ITEM 1C. CYBERSECURITY Presidio Property Trust has a cross-departmental approach to addressing cybersecurity risk, including input from senior management, employees, external consultants, and our Board of Directors (the "Board").
ITEM 1C. CYBERSECURITY Presidio Property Trust uses a cross-departmental approach to addressing cybersecurity risk, including input from senior management, employees, external consultants, and our Board of Directors (the "Board").
Senior management devote significant resources to cybersecurity and risk management processes to adapt to the changing cybersecurity landscape and respond to emerging threats in a timely and effective manner, including providing periodic training to staff and periodic review of the Company’s current posture to protect against threats.
Senior management devote significant resources to cybersecurity and risk management processes to adapt to the changing cybersecurity landscape and respond to emerging threats in a timely and effective manner, including providing periodic training to staff and an annual third-party review of the Company’s current posture to protect against threats.
For more information about the cybersecurity risks we face, see the risk factor entitled “Risks related to cyber-attacks, cyber intrusions and other security breaches” in Item 1A- Risk Factors.
For more information about the cybersecurity risks we face, see the risk factor entitled “Risks related to cyber-attacks, cyber intrusions and other security breaches” in Item 1A- Risk Factors. 39 Table of Contents
The Audit Committee of the Board of Directors oversees the steps taken by Presidio Property Trust’s management to monitor and mitigate cybersecurity risks. Senior management briefs the Audit Committee and the Board of Directors on cybersecurity matters as necessary. The Company operates almost exclusively in a Software-as-a-Service (SaaS) IT environment.
The Audit Committee of the Board of Directors oversees the steps taken by Presidio Property Trust’s management to monitor and mitigate cybersecurity risks. Senior management briefs the Audit Committee and the Board of Directors on cybersecurity matters on at least an annual basis. The Company operates almost exclusively in a Software-as-a-Service (SaaS) IT environment.
Presidio Property Trust has robust business continuity and disaster recovery procedures in place, and an insurance policy that provides for network security liability, event response and recovery, direct business interruption, contingent business interruption, cyber extortion, social engineering, and computer fraud should an incident occur. 39 Table of Contents In addition, we have Company-wide policies and procedures concerning cybersecurity matters, including access security, system change management, development lifecycle, incident management and business continuity/disaster recovery policies.
Presidio Property Trust has robust business continuity and disaster recovery procedures in place, and an insurance policy that provides for network security liability, event response and recovery, direct business interruption, contingent business interruption, cyber extortion, social engineering, and computer fraud should an incident occur.
Added
In addition, we have Company-wide policies and procedures concerning cybersecurity matters, including access security, system change management, development lifecycle, incident management and business continuity/disaster recovery policies. These policies go through an annual internal review process and are approved by appropriate members of management. Presidio Property Trust uses a third -party consultant to assess the Company’s compliance with Sarbanes Oxley requirements.

Item 2. Properties

Properties — owned and leased real estate

13 edited+16 added−12 removed1 unchanged
Biggest changeOffice/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.
Biggest changeOffice/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 % $ 1,542,066 12.9 % Colorado 5 324,245 39.4 % 5,766,166 48.2 % Maryland 1 31,752 3.9 % 724,453 6.1 % North Dakota 4 399,113 48.4 % 3,565,621 29.9 % Texas 1 10,500 1.3 % 342,692 2.9 % Total 12 823,417 100.0 % $ 11,940,998 100.0 % Model Home Properties: State No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent Arizona 2 6,822 2.9 % $ 149,196 4.4 % Florida 3 8,199 3.4 % 136,812 4.1 % Texas 73 221,934 93.7 % 3,086,580 91.5 % Total 78 236,955 100.0 % $ 3,372,588 100.0 % The following table summarizes information relating to our properties (excluding model homes) at December 31, 2024: Property Summary 40 Table of Contents ($ in000's) Property Location Sq., Ft.
(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.
(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 that commenced on February 28, 2024.
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.
As of December 31, 2024, 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.
(2) 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.
(7) A portion of the proceeds from the sale of Highland Court were used in like-kind exchange transactions pursued under Section 1031 of the Code for the acquisition of our Mandolin property.
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.
Geographic Diversification Table The following table shows a list of properties we owned as of December 31, 2024, grouped by the state where each of our investments is located.
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.
Date Acquired Year Property Constructed Purchase Price Occupancy Percent Ownership Mortgage On property Office/Industrial Properties: Genesis Plaza, San Diego, CA (1) 57,807 08/10 1989 $ 10,000 95.6 % 92.0 % $ 5,937 Dakota Center, Fargo, ND (2) 119,554 05/11 1982 9,575 46.1 % 100.0 % 9,197 Grand Pacific Center, Bismarck, ND (3) 94,943 03/14 1976 5,350 88.6 % 100.0 % 5,471 Arapahoe Center, Colorado Springs, CO 79,023 12/14 2000 11,850 100.0 % 100.0 % 7,426 West Fargo Industrial, West Fargo, ND 150,099 08/15 1998/2005 7,900 97.2 % 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 (5) 69,174 08/15 1983 9,150 85.7 % 100.0 % 6,044 Shea Center II, Highlands Ranch, CO (6) 121,306 12/15 2000 25,325 68.9 % 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 (4) 44,042 12/14 2003 11,212 100.0 % 100.0 % 7,870 Research Parkway, Colorado Springs, CO (4) 10,700 08/15 2003 2,850 88.8 % 100.0 % 1,589 Mandolin, Houston, TX (7) 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) Genesis Plaza is owned by two tenants-in-common, NetREIT Genesis and NetREIT Genessis II, each of which own 57% and 43%, respectively, and we beneficially own an aggregate of 92.0%, based on our ownership of each entity.
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.
We directly manage the operations and leasing of our properties. 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, 2024 contain contractual rent increases that provide for increases in the base rental payments.
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.
Our tenants consist of local, regional and national businesses. Our properties generally attract a mix of diversified tenants creating lower risk in periods of economic fluctuations. Our largest tenant represented approximately 6.07% of total revenues for the year ended December 31, 2024.
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.
Lease Expirations Tables The following table sets forth lease expirations for our properties as of December 31, 2024, assuming that none of the tenants exercise their renewal options.
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
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. 41 Table of Contents For the years ended December 31, 2024 and 2023, depreciation and amortization expense totaled approximately $5.5 million and $5.4 million, respectively.
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.
In addition, through our Model Home subsidiary and our investments in six limited partnerships and one corporation, we own a total of 78 Model Home Properties located in three states, totaling approximately 236,955 square feet. Of the 78 Model Home Properties in our portfolio, 55 of them are wholly owned by the Company through NetREIT Model Homes, Inc .
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.
The remaining leases are mainly for month to month storage, parking and other miscellaneous space. 42 Table of Contents Model Home Properties: Expiration Year (1) Number of Leases Expiring Square Footage Annual Rental From Lease Percent of Total 2024 (2) 5 12,164 $ 157,440 4.6 % 2025 56 169,824 2,393,688 71.0 % 2026 17 54,967 821,460 24.4 % 78 236,955 $ 3,372,588 100.0 % (1) These leases are subject to extensions by the home builder depending on sales of the total development.
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.
Office/Industrial and Retail Properties: Expiration Year Number of Leases Expiring Square Footage Annual Rental From Lease Percent of Total 2024 (1) 18 8,835 $ 61,578 0.5 % 2025 34 113,028 1,922,087 16.1 % 2026 36 219,532 3,397,567 28.5 % 2027 21 69,488 1,237,116 10.4 % 2028 21 82,363 1,717,719 14.4 % 2029 14 50,770 1,065,589 8.9 % Thereafter 13 130,794 2,539,342 21.2 % Totals 157 674,810 $ 11,940,998 100.0 % (1) Two of these leases expired on December 31, 2024 and were located in our One Park Centre property, and accounted for approximately 3% of One Park Centre's annual rent and totaled approximately 2,045 square feet.
Removed
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.
Added
We have 100% ownership of NetREIT Genesis and 81.5% ownership of NetREIT Genesis II, and we have control of both entities. During July 2024, the Company completed a minority ownership conversion option as result of a death in a noncontrolling trust within NetREIT Genesis II.
Removed
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.
Added
The Company issued the trust 86,232 shares of SQFT Series A Common Stock in exchange for their 36.4% ownership in NetREIT Genesis II, as per the original exchange agreement. (2) The non-recourse loan on the Dakota Center property matured on July 6, 2024.
Removed
(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.
Added
During October 2024, management has agreed with the lender to sell the property to settle the loan balance. Due to the uncertainties in the Fargo market, we have impaired the property’s book value and recorded an impairment charge of approximately $0.7 million as of September 30, 2024.
Removed
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.
Added
During December 2024, the lender had agreed on the broker the Company would use to sell the property to settle the non-recourse debt. As of December 31, 2024, the property was included in the real estate assets held for sale, net on the consolidated balance sheet. Any purchase offers will be subject to lender approval.
Removed
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.
Added
(4) As of September 30, 2024, Union Town Center and Research Parkway have been listed for sale, and included in the real estate assets held for sale, net on the consolidated balance sheet as of December 31, 2024.
Removed
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.
Added
The sale of UTC and Research Parkway took place in February 2025, to a single buyer for a combined sales price of $16.95 million, and the Company recorded a combined gain of approximately $4.0 million.
Removed
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.
Added
(5) During the year ended December 31, 2023, we recorded a $2.0 million impairment charge for One Park Center that reflects management’s revised estimate of the fair market value based on sales comparable of like properties in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement.
Removed
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.
Added
No additional impairment was deemed necessary during the year ended December 31, 2024. (6) On December 31, 2022, the lease for our largest tenant, Halliburton, expired. Halliburton was located in our Shea Center II property in Colorado, and made up approximately $536,080 of our annual base rent.
Removed
Annualized 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.
Added
Halliburton 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, none of which has been used as of December 31, 2023.
Removed
(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.
Added
Our management team is working to fill the 45,535 square foot space and has leased approximately 54% of the space as of February 2025 and has reviewed various proposals for the remaining 46%.
Removed
(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.
Added
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.
Removed
(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.
Added
As of December 31, 2024 Tenant Number of Leases Annualized Base Rent % of Total Annualized Base Rent John Hopkins University 1 724,453 6.07 % Finastra USA Corporation 1 543,600 4.55 % KLJ Engineering LLC 1 536,080 4.49 % MasTec North America, Inc. 1 371,106 3.11 % L&T Care LLC 1 342,692 2.87 % Wells Fargo Bank, NA 1 300,838 2.52 % Republic Indemnity of America 1 278,831 2.34 % Nova Financial & Investment Corporation (1) 1 275,071 2.30 % Meissner Commercial Real Estate Services (2) 1 270,015 2.26 % Fredrikson & Byron P.A. 1 249,270 2.09 % $ 3,891,956 32.60 % (1) Nova Financial & Investment Corporation was subleasing to OnPoint Medical Group Holdings, LLC (“OnPoint”), until their lease expired in January 2025.
Added
Since October 2024, OnPoint had also been directly leasing a 2,543 square foot space in our Shea Center building. In January 2025, OnPoint took over 11,831 square foot space from Nova Financial & Investment Corporation, signing an additional 3-year lease for that space. (2) Genesis Plaza's occupancy at December 31, 2024 was at 95.6%.
Added
During the year, the Company invested approximately $74 thousand in building and tenant improvements for the property, expanded the space for Meissner and extended the term of their lease to 2035, and reduced the space used by the Company. On January 1, 2025, Meissner took possession of the expanded space and Genesis Plaza was 100% leased.
Added
All model homes are sold at the end of the lease period. (2) These properties came off lease during 2024 and are listed as held for sale as of December 31, 2024.
Added
As of December 31, 2024 we had nine model homes listed for sale, and included in the real estate assets held for sale, net on the consolidated balance sheet as of December 31, 2024. 43 Table of Contents

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
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.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 44 Part II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER 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 64 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

13 edited+1 added−5 removed5 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 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.
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 2024 — $ — — $ 6,000,000 February 2024 — — — 6,000,000 March 2024 — — — 6,000,000 April 2024 — — — 6,000,000 May 2024 — — — 6,000,000 June 2024 10,446 0.729 10,446 5,992,387 July 2024 — — — 5,992,387 August 2024 44,190 0.679 44,190 5,962,369 September 2024 83,073 0.719 83,073 5,902,606 October 2024 — — — 5,717,340 November 2024 — — — 5,717,340 December 2024 (1) 52,931 0.81 52,931 5,956,977 Total 190,640 $ 0.74 190,640 $ 5,956,977 (1) On December 19, 2024, 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 December 2025. 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 2024 — $ — — $ 4,000,000 February 2024 — — — 4,000,000 March 2024 — — — 4,000,000 April 2024 — — — 4,000,000 May 2024 — — — 4,000,000 June 2024 — — — 4,000,000 July 2024 — — — 4,000,000 August 2024 — — — 4,000,000 September 2024 — — — 4,000,000 October 2024 — — — 4,000,000 November 2024 — — — 4,000,000 December 2024 (1) 2,918 $ 14.02 2,918 3,959,090 Total 2,918 $ 14.02 2,918 $ 3,959,090 (1) On December 19, 2024, 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 December 2025.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES Market Information Our Series A Common Stock has been listed on the Nasdaq Capital Market under the symbol "SQFT" since October 7, 2020. Our Series D Preferred Stock has been listed on the Nasdaq Capital Market under the symbol “SQFTP” since June 11, 2021.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Series A Common Stock has been listed on the Nasdaq Capital Market under the symbol "SQFT" since October 7, 2020. Our Series D Preferred Stock has been listed on the Nasdaq Capital Market under the symbol “SQFTP” since June 11, 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.
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, 2024 and 2023.
In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which shall expire in November 2024.
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 expired in November 2024.
During the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $ 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 the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock.
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.
Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost. The following tables contain information for shares of Series A Common Stock and Series D Preferred Stock repurchased during the year ended December 31, 2024.
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.
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 28, 2025, there were approximately 4,600 holders of our Series A Common Stock.
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 2023, we paid dividends to our holders of Series A Common Stock of approximately $1.2 million. 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, 2022, the Company repurchased 196,631 shares of our Series A Common Stock at an average price of approximately $1.59 per share, including a commission of $0.035 per share, and 6,013 shares of our Series D Preferred Stock at an average price of approximately $20.31 per share, including a commission of $0.035 per share, for a total cost of $313,578 for the Series A Common Stock and $122,141 for the Series D Preferred Stock.
During the year ended December 31, 2024, the Company repurchased 2,918 shares of our Series D Preferred Stock at an average price of approximately $14.02 per share, including a commission of $0.035 per share, for a total cost of $40,910 for the Series D Preferred Stock.
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.
We intend to continue to declare dividends, however, we cannot provide any assurance as to the amount or timing of future dividends. Our goal is to make cash dividend distributions out of our operating cash flow and proceeds from the sale of properties. During 2024, we did not paid dividends to holders of our Series A Common Stock.
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.
Series A Common Stock Quarter Ended 2024 2023 Distributions Declared Distributions Declared March 31 $ — $ 0.022 June 30 — 0.023 September 30 — 0.023 December 31 — 0.023 Total $ — $ 0.091 44 Table of Contents Series D Preferred Stock Month 2024 2023 Distributions Declared Distributions Declared January $ 0.19531 $ 0.19531 February 0.19531 0.19531 March 0.19531 0.19531 April 0.19531 0.19531 May 0.19531 0.19531 June 0.19531 0.19531 July 0.19531 0.19531 August 0.19531 0.19531 September 0.19531 0.19531 October 0.19531 0.19531 November 0.19531 0.19531 December 0.19531 0.19531 Total $ 2.34372 $ 2.34372 Dividend Policy We plan to pay at least 90% of our annual REIT taxable income to our stockholders in order to maintain our status as a REIT.
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.
During the years ended December 31, 2024 and December 31, 2023, 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 Recent Sales of Unregistered Securities None.
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.
In December 2024, 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 December 2025.
Removed
The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022.
Added
During the year ended December 31, 2024, we repurchased 190,640 shares of our Series A Common Stock, for a total cost of $140,416, with an average price of approximately $1.10 per share, including a commission of $0.025 per share.
Removed
The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022.
Removed
The Series A Warrants give the holder the right to purchase one share of common stock at $7.00 per share, for a period of five years.
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 common share at expiration, rounded down to the nearest number of whole shares.
Removed
Dividend Policy We plan to pay at least 90% of our annual REIT taxable income to our stockholders in order to maintain our status as a REIT. We intend to continue to declare dividends, however, we cannot provide any assurance as to the amount or timing of future dividends.

Item 7. Management's Discussion & Analysis

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

89 edited+66 added−85 removed56 unchanged
Biggest changeTenant 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.
Biggest changeFinancing Activities: Net cash used in financing activities during the year ended December 31, 2024 was $10.6 million compared to $132.1 million provided by financing activities for the same period in 2023 and was primarily due to the following activities for the year ended December 31, 2024: • Proceeds from mortgage notes payable, net of issuance costs totaled approximately $22.3 million. • Proceeds from the issuance of Series D Preferred Stock, net of offering costs, totaled approximately $1.2 million. • Repayment of mortgage notes payable totaled approximately $27.9 million during the year ended December 31, 2024. • Distributions to noncontrolling interest of approximately $3.4 million during the year ended December 31, 2024. • Dividends paid to Series D Preferred Stockholders of approximately $2.2 million during the year ended December 31, 2024. • Cash used to repurchase our Series A Common Stock and Series D Preferred Stock totaled approximately $0.2 million.
The Company entered into a lock-up agreement with Conduit regarding the common stock held by the Company, for 180 days from the closing of the business combination which ended March 20, 2024. There were no financial liabilities measured at fair value as of December 31, 2023 and December 31, 2022 .
The Company entered into a lock-up agreement with Conduit regarding the common stock held by the Company, for 180 days from the closing of the business combination which ended March 20, 2024. There were no financial liabilities measured at fair value as of December 31, 2024 and December 31, 2023 .
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.
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.
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”).
Placement Agent Warrants: If all the potential Placement Agent Warrants outstanding at December 31, 2024, were exercised at the price of $6.25 per share, gross proceeds to us would be approximately $0.5 million and we would as a result issue an additional 80,000 shares of common stock. 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”).
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.
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.
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.
Any repurchased shares are 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.
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.
Series A Warrants: If all the potential Series A Warrants outstanding at December 31, 2024, were exercised at the price of $7.00 per share, gross proceeds to us would be approximately $101.2 million and we would as a result issue an additional 14,450,069 shares of common stock.
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.
We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2025 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months.
OVERVIEW The Company operates as an internally managed diversified real estate investment trust, or REIT. The Company invests in a multi-tenant portfolio of commercial real estate assets comprised of office, industrial, and retail properties and model homes leased back to the homebuilder located primarily in the western United States.
OVERVIEW The Company operates as an internally managed diversified real estate investment trust, or REIT. The Company invests in a multi-tenant portfolio of commercial real estate assets comprised of office, industrial, and retail properties and model homes leased back to the homebuilder located primarily in the central United States.
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.
Common Stock Warrants: If all the potential Common Stock Warrants outstanding at December 31, 2024, 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.
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.
Approximately $1.7 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.
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.
These tenants are subjected to financial review and analysis prior to us entering into a sale-lease transaction. Our ownership of the underlying property provides a further means to avoiding significant credit losses.
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.
If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we plan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we may reduce or suspend the rate of dividends to our stockholders.
Off-Balance Sheet Arrange ments On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock.
Off-Balance Sheet Arrangements On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock.
Although rates increased in 2023, it does not necessarily indicate that we would be unable to refinance or obtain mortgages on new homes or commercial properties at the same rate we have historically when they come due, as rates vary by property and are dependent upon factors including property cash flows, occupancy rates and lender credit.
Although rates decreased in 2024, it does not necessarily indicate that we would be unable to refinance or obtain mortgages on new homes or commercial properties at the same rate we have historically when they come due, as rates vary by property and are dependent upon factors including property cash flows, occupancy rates and lender credit.
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.
Management expects certain model homes will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past. Additional principal payments will be made with cash flows from ongoing operations.
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 .
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, 2024 and 2023.
The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis for the Series D Preferred stockholders going forward, bu t 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 the Series D Preferred stockholders going forward, but there can be no guarantee the Board of Directors will approve any future dividends.
Inflation Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the clients’ sales volumes. We expect that inflation will cause these lease provisions to result in rent increases over time.
Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index, or increases in clients’ sales volumes. We expect that inflation will cause these lease provisions to result in rent increases over time.
Our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value using Level 1 market prices, which are currently held at Conduit's transfer agent, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , and totaled approximately $18.3 million as of December 31, 2023, with a cost basis of approximately $7.5 million.
Our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value using Level 1 market prices, which are currently held at Conduit's transfer agent, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , and totaled approximately $0.2 million as of December 31, 2024, with a cost basis of approximately $7.5 million.
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.
For the year ended December 31, 2024, 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 2024 and 2023 above for further detail. Income Tax Expense / Benefit.
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.
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 expired in November 2024.
Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.
Should warrant holders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.
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.
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, 2024 and 2023, we did not experience any loss or lack of access to our cash or cash equivalents.
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.
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. Our results of operations for the years ended December 31, 2024 and 2023 may not be indicative of those expected in future periods.
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.
The 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. Interest Expense-mortgage notes.
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.
The purchase price consisted of cash payments of $6.6 million and mortgage notes of $15.3 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.
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.
As of December 31, 2024 and December 31, 2023, our marketable securities (excluding our investments in Conduit's common stock and common stock warrants), held at a third party broker, presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately zero and $45,149, respectively, with a cost basis of approximately zero and $40,315, respectively.
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.
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 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 the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock.
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”).
As of December 31, 2024, 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 • 78 model homes owned totaling approximately 236,955 square feet, by four affiliated limited partnerships and one corporation (“Model Home Properties”).
Impairment is recognized only if the carrying amount of the intangible asset is considered to be unrecoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the estimated fair value of the asset. Sales of Real Estate Assets .
Impairment is recognized only if the carrying amount of the intangible asset is considered to be unrecoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the estimated fair value of the asset. Fair Value Measurements .
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.
Significant Transactions in 2024 and 2023 Acquisitions during the year ended December 31, 2024: • We acquired 19 Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2024. The purchase price for these properties was $9.7 million.
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.
As of December 31, 2024, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $26.1 million, excluding loans eliminated through consolidation, collateralized by a total of 78 Model Homes. These loans generally have a term at issuance of three to five years.
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.
Quarter Ended 2024 2023 Distributions Declared Distributions Declared March 31 $ — $ 0.022 June 30 — 0.023 September 30 — 0.023 December 31 — 0.023 Total $ — $ 0.091 Month 2024 2023 Distributions Declared Distributions Declared January $ 0.19531 $ 0.19531 February 0.19531 0.19531 March 0.19531 0.19531 April 0.19531 0.19531 May 0.19531 0.19531 June 0.19531 0.19531 July 0.19531 0.19531 August 0.19531 0.19531 September 0.19531 0.19531 October 0.19531 0.19531 November 0.19531 0.19531 December 0.19531 0.19531 Total $ 2.34372 $ 2.34372 61 Table of Contents Cash, Cash Equivalents and Restricted Cash At December 31, 2024 and December 31, 2023, we had approximately $8.0 million and $6.5 million in cash equivalents, respectively, including $5.0 million and $3.7 million of restricted cash, respectively.
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.
Our cash and restricted cash at December 31, 2024 was approximately $8.0 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders.
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 purchase price consisted of cash payments of $3.0 million and mortgage notes of $6.7 million. 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 the properties was $21.9 million.
Interest rates increased in 2023 compared to 2022 due to the Federal Reserve raising interest rates 100 basis points, or 1%, in hopes of slowing down inflation going from 4.5% in December 2022 to 5.5% in July 2023.
Interest rates decreased in 2024 compared to 2023 due to the Federal Reserve cutting interest rates 100 basis points, or 1%, in hopes of slowing down inflation going from 5.5% in July 2023 to 4.5% in December 2024.
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.
Secured Debt As of December 31, 2024, all our commercial properties, except 300 NP which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $76.8 million, collateralized by a total of 11 commercial properties with loan terms at issuance ranging from 5 to 10 years.
Rental operating costs as a percentage of total revenue was 33.8% and 32.9% for the years ended December 31, 2023 and 2022, respectively, as office property expenses continue to increase, specifically insurance costs.
Rental operating costs as a percentage of total revenue were 33.1% and 33.8% for the years ended December 31, 2024 and 2023, respectively, as office property expenses continue to increase, specifically insurance costs.
As of December 31, 2023 our model home assets made up 35% of our total real estate assets, which is up from 28% as of December 31, 2022, and our gross revenue from model home assets represented approximately 23% of our total revenue.
As of December 31, 2024 our model home assets made up 29% of our total real estate assets, which is down from 35% as of December 31, 2023, and our gross revenue from model home assets represented approximately 23.4% of our total revenue.
The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy: • Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; • Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and • Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy: • Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; • Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and • Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. 54 Table of Contents When available, we utilize quoted market prices from independent third-party sources to determine fair value and classify such items in Level 1 or Level 2 .
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.
Income allocated to non-controlling interests for the years ended December 31, 2024 and 2023 totaled approximately $2.5 million, and $3.0 million, and was directly impacted by the sale of 18 and 13 model homes, during the years ended December 31, 2024 and 2023, respectively, held by our Model Home Partnerships. 57 Table of Contents Gain on deconsolidation of SPAC and remeasurement.
During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation. However, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses.
During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation and other costs. Moreover, our strategic focus on the use of net lease agreements reduces our exposure to rising property expenses due to inflation because the client is responsible for property expenses.
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.
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 2025, total approximately $38.8 million, of which $8.3 million is related to model home properties.
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.
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. 49 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.
The Company entered into a lock-up agreement with Conduit regarding the common stock held by the Company, for 180 days from the closing of the business combination which ended on March 20, 2024.
The Company entered into a lock-up agreement with Conduit regarding the common stock held by the Company, for 180 days from the closing of the business combination which ended March 20, 2024. Due to the declining stock price of Conduit, the Company was unable to monetize our investment.
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.
As of December 31, 2024, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $334,113 and 6.78%, respectively. Our debt to estimated market value on all our Model Home Properties is approximately 62.0%, excluding any loans eliminated through consolidation.
The 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.
The following table presents as of December 31, 2024 the Company’s assets subject to measurement at fair value on a nonrecurring basis (in thousands): Fair Value Measurements as of December 31, 2024 Level 1 Level 2 Level 3 Total Impairment Loss Assets: Goodwill for Dubose Model Homes $ - $ - $ 1,123,000 $ 1,123,000 $ - Goodwill for NTR Property Management - - 266,000 266,000 185,000 Certain Real Estate assets - - 18,065,871 18,065,871 1,784,311 Total Assets $ - $ - $ 19,454,871 $ 19,454,871 $ 1,969,311 The 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 Impairment Loss Assets: Goodwill for Dubose Model Homes $ - $ - $ 1,123,000 $ 1,123,000 $ - Goodwill for NTR Property Management - - 451,000 451,000 849,000 Certain Real Estate assets - - 12,503,176 12,503,176 2,398,097 Total Assets $ - $ - $ 14,077,176 $ 14,077,176 $ 3,247,097 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.
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%.
The weighted-average interest rate on these mortgage notes payable as of December 31, 2024 was approximately 5.24%, and our debt to estimated market value for our commercial properties was approximately 67.2%.
CRITICAL ACCOUNTING POLICIES As a company primarily involved in owning income generating real estate assets, management considers the following accounting policies critical as they reflect our more significant judgments and estimates used in the preparation of our financial statements and because they are important for understanding and evaluating our reported financial results.
Management will continue to evaluate potential acquisitions in an effort to increase our portfolio of commercial real estate and model homes. 53 Table of Contents CRITICAL ACCOUNTING POLICIES As a company primarily involved in owning income generating real estate assets, management considers the following accounting policies critical as they reflect our more significant judgments and estimates used in the preparation of our financial statements and because they are important for understanding and evaluating our reported financial results.
A TRS is subject to federal and state income taxes. Fair Value Measurements . Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition.
Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition.
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%.
Rental operating costs were approximately $6.3 million for the year ended December 31, 2024 compared to approximately $6.0 million for the same period in 2023, an increase of approximately $0.3 million or 4.9%.
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.
Dispositions during the year ended December 31, 2024: During year ended December 31, 2024, we disposed of the following properties: • 51 model homes for approximately $24.8 million and the Company recognized a gain of approximately $3.4 million.
These notes payable and notes receivable, including interest expense and interest income related to these promissory notes, are eliminated through consolidation on our financial statements.
These notes payable and notes receivable, including interest expense and interest income related to these promissory notes, are eliminated through consolidation on our financial statements and were paid in full as of December 31, 2024.
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.
As a result, the Company owned approximately 6.5% of Conduit’s common stock immediately following the business combination and currently own less than 1% of Conduit’s common stock.
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.
For the year ended December 31, 2023, the Company recorded a benefit of approximately $335,780 related to estimated refunds from federal and state taxes for capital gains from the sale of model homes held by the taxable REIT subsidiary.
In connection with the deconsolidation we recorded a gain of approximately $40.3 million.
During the year ended December 31, 2023, and in connection with the deconsolidation we recorded a gain of approximately $40.3 million.
Since deconsolidating Conduit, on September 22, 2023, our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value using Level 1 market prices, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , and totaled approximately $18.3 million as of December 31, 2023, with a cost basis of approximately $7.5 million.
Since deconsolidating Conduit, on September 22, 2023, our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value totaled approximately $18.3 million as of December 31, 2023, with a cost basis of approximately $7.5 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.
Cash Flows for the years ended December 31, 2024 and December 31, 2023 Operating Activities: Net cash used / provided by operating activities for the years ended December 31, 2024 and 2023 decreased by $2.2 million to approximately $0.7 million used from $1.4 million provided by.
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 sale of our Dakota Center building will also reduce rental operating costs. General and Administrative . General and administrative (“G&A”) expenses were approximately $7.5 million for the year ended December 31, 2024, compared to approximately $6.8 million for the same period in 2023, representing an increase of approximately $0.7 million or 10.8%.
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.
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.
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%.
Revenues. Total revenue was approximately $18.9 million for the year ended December 31, 2024, compared to approximately $17.6 million for the same period in 2023, an increase of approximately $1.3 million or 7.3%.
Lease intangibles represents the allocation of a portion of the purchase price of a property acquisition representing the estimated value of in-place leases, unamortized lease origination costs, tenant relationships and land purchase options. Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. Indefinite-lived assets are not amortized.
Intangible assets, including goodwill and lease intangibles, are comprised of finite-lived and indefinite-lived assets. Lease intangibles represent the allocation of a portion of the purchase price of a property acquisition representing the estimated value of in-place leases, unamortized lease origination costs, tenant relationships and land purchase options.
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.
Interest expense, including amortization of deferred finance charges was approximately $6.1 million for the year ended December 31, 2024 compared to approximately $5.0 million for the same period in 2023, an increase of approximately $1.0 million, or 20.9%.
Additionally, management may consider selling these properties if we are unsuccessful in extending the maturity dates or are unable to raise additional funds to pay these non-recourse loans in full. Only the loan on Research Parkway, for $1.6 million has recourse to the Company.
Management has begun discussions with various lenders to either restructure, extend or refinance these loans. Additionally, management may consider selling these properties if we are unsuccessful in extending the maturity dates or are unable to raise additional funds to pay these non-recourse loans in full.
During the year ended December 31, 2022, the Company repurchased 196,631 shares of our Series A Common Stock at an average price of approximately $1.59 per share, including a commission of $0.035 per share, and 6,013 shares of our Series D Preferred Stock at an average price of approximately $20.31 per share, including a commission of $0.035 per share, for a total cost of $313,578 for the Series A Common Stock and $122,141 for the Series D Preferred Stock.
During the year ended December 31, 2024, the Company repurchased 2,918 shares of our Series D Preferred Stock at an average price of approximately $14.02 per share, including a commission of $0.035 per share, for a total cost of $40,910 for the Series D Preferred Stock.
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.
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, 2024: State No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent California 1 57,807 7.0 % $ 1,542,066 12.9 % Colorado 5 324,245 39.4 % 5,766,166 48.2 % Maryland 1 31,752 3.9 % 724,453 6.1 % North Dakota 4 399,113 48.4 % 3,565,621 29.9 % Texas 1 10,500 1.3 % 342,692 2.9 % Total 12 823,417 100.0 % $ 11,940,998 100.0 % 58 Table of Contents The following table shows a list of our Model Home Properties by geographic region as of December 31, 2024: State No. of Properties Aggregate Square Feet Approximate % of Square Feet Current Base Annual Rent Approximate % of Aggregate Annual Rent Arizona 2 6,822 2.9 % $ 149,196 4.4 % Florida 3 8,199 3.4 % 136,812 4.1 % Texas 73 221,934 93.7 % 3,086,580 91.5 % Total 78 236,955 100.0 % $ 3,372,588 100.0 % LIQUIDITY AND CAPITAL RESOURCES Overview Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, and the sale of our equity or issuance of debt securities or bonds.
We test for impairment of goodwill and other definite and indefinite lived assets at least annually, and more frequently as circumstances warrant.
Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. Indefinite-lived assets are not amortized. We test for impairment of goodwill and other definite and indefinite lived assets at least annually, and more frequently as circumstances warrant.
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. 51 Table of Contents ECONOMIC ENVIRONMENT According to Nareit's, the National Association of Real Estate Investment Trusts, 2024 REIT Market Outlook, published on its website in December 2023, economic uncertainty, which began in 2022 and created a difficult environment for REIT share prices, will likely be an ongoing theme in 2024.
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. 50 Table of Contents ECONOMIC ENVIRONMENT According to Nareit's, the National Association of Real Estate Investment Trusts, 2025 REIT Market Outlook, as discussed at the FTSE Nareit U.S.
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.
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. During the year ended December 31, 2024, we recognized a non-cash impairment charge of approximately $2.0 million on goodwill and our real estate assets.
The de-SPAC resulted in the Company having an investment in Conduit Pharmaceuticals which totaled approximately $18.3 million as of December 31, 2023, with a cost basis of approximately $7.5 million.
Management does not expect the level of administrative expenses related to the 2024 annual meeting and the switching external auditors will be repeated in 2025. Additionally the de-SPAC transaction in 2023 resulted in the Company having an investment in Conduit which totaled approximately $18.3 million as of December 31, 2023, with a cost basis of approximately $7.5 million.
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.
Proceeds from the sale of real estate assets total approximately $24.8 million, which is up from the same period in 2023, net of selling costs, while cash used in real estate acquisition and capital improvement totaled approximately $12.0 million, for the year ended December 31, 2024, which is down from the same period in 2023. 62 Table of Contents We currently project that we could spend up to $1.7 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.
CREDIT MARKET ENV IRONMENT Current market rates in February 2024 on fixed rate mortgages on homes range from 6.15% - 7.29%, depending on the term (1) . Current market rates for 5–10 year fixed rate loans for commercial properties range from 6.71% - 6.84%, depending on the type of building (retail/industrial/office) (2) .
(1) Source: https://www.reit.com/news/blog/market-commentary/reit-cre-outlook-evolution-2025 51 Table of Contents CREDIT MARKET ENVIRONMENT Current market rates in February 2025 on fixed rate mortgages on homes ranged from 6.15% - 6.98%, depending on the term (2) . Current market rates for 5–10 year fixed rate loans for commercial properties ranged from 5.55% - 6.88%, depending on the type of building (retail/industrial/office) (3) .
During the year ended December 31, 2023, we recognized a non-cash impairment charge of approximately $3.2 million on goodwill and our real estate assets.
The impairment to goodwill was related to NTR Property Management and the fair market value adjustment based on future expected cash flows. During the year ended December 31, 2023, we recognized a non-cash impairment charge of approximately $3.2 million related to goodwill and model homes.
During the next 12 months our four commercial property loans, Dakota Center, Research Parkway, Arapahoe Service Center and Union Town Center, have mortgage loans with maturity dates, totaling approximately $26.1 million. Management has begun discussions with various lenders to either restructure, extend or refinance these loans.
As noted above, during the next 12 months our four commercial property loans, Dakota Center, Research Parkway, Union Town Center, Genesis Plaza and Shea Center II, have mortgage loans with maturity dates, totaling approximately $30.1 million.
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.
In December 2024, 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 December 2025.
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.
As of December 31, 2024, the investment in Conduit was valued at approximately $0.2 million. 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 during 2024 that fit our portfolio needs.
The change in net cash provided in operating activities is mainly due to changes in net income, including operating activities of the SPAC, which fluctuates based on timing of receipt and payment, as well as an increase in non-cash addbacks such as straight-line rent.
The change in net cash used in operating activities is mainly due to changes in net income, which fluctuates due to new leases, leasing renewals, tenant move outs and model home sales and acquisitions, as well as changes in non-cash addbacks or subtractions such as straight-line rent.
During the year ended December 31, 2023, the material impact to office property expense was an impairment as noted below. 57 Table of Contents % of Gross Revenue for the year ended Segment 12/31/2023 12/31/2022 Office/Industrial 65.9 % 71.2 % Model Home 23.4 % 16.3 % Retail 10.7 % 12.5 % % of Total Real Estate Assets as of Segment 12/31/2023 12/31/2022 Office/Industrial 53.5 % 60.3 % Model Home 35.2 % 26.9 % Retail 11.3 % 12.8 % General and Administrative .
Below is additional revenue and asset information for real estate segments as of December 31, 2024 and December 31, 2023. % of Gross Revenue for the year ended Segment 12/31/2024 12/31/2023 Office/Industrial 65.2 % 65.6 % Model Home 23.4 % 23.4 % Retail 11.2 % 10.7 % % of Total Real Estate Assets as of Segment 12/31/2024 12/31/2023 Office/Industrial 58.3 % 53.7 % Model Home 29.3 % 35.2 % Retail 12.3 % 11.0 % Rental Operating Costs .

… 160 more changes not shown on this page.

Other SQFTW 10-K year-over-year comparisons