PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=6&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for Presidio Property Trust, Inc. and its subsidiaries, including balance sheets, statements of operations, changes in equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, recent transactions, asset composition, debt structure, equity, and segment performance for the periods ended June 30, 2024, and December 31, 2023 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202024%20(unaudited)%20and%20December%2031%2C%202023) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 (Unaudited) | December 31, 2023 | | :------------------------------------------ | :-------------------------- | :------------------ | | **ASSETS** | | | | Real estate assets, net | $130,892,231 | $144,155,784 | | Cash, cash equivalents and restricted cash | $8,534,881 | $6,510,428 | | Investment in Conduit Pharmaceuticals marketable securities | $4,413,989 | $18,318,521 | | Total Assets | $150,538,283 | $175,962,638 | | **LIABILITIES** | | | | Mortgage notes payable, total net | $101,125,386 | $107,713,273 | | Total Liabilities | $105,931,108 | $114,640,568 | | **EQUITY** | | | | Total equity | $44,607,175 | $61,322,070 | - Total assets decreased by approximately **$25.4 million** from December 31, 2023, to June 30, 2024, primarily due to a decrease in real estate assets and a significant reduction in the value of investment in Conduit Pharmaceuticals marketable securities[13](index=13&type=chunk) - Total liabilities decreased by approximately **$8.7 million**, mainly driven by a reduction in mortgage notes payable[13](index=13&type=chunk) - Total equity decreased by approximately **$16.7 million**, reflecting the overall reduction in assets not offset by a proportional decrease in liabilities[13](index=13&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023%20(unaudited)) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------------------------- | :----------- | :----------- | | Total revenue | $4,586,541 | $4,543,872 | | Total costs and expenses | $5,148,026 | $4,581,172 | | Interest expense - mortgage notes | $(1,525,845) | $(1,336,415) | | Gain on sales of real estate, net | $811,903 | $1,119,952 | | Net change in Conduit Pharmaceuticals marketable securities | $(10,027,433) | $0 | | Net loss attributable to Presidio Property Trust, Inc. stockholders | $(11,848,040) | $(1,299,604) | | Net loss per share (Basic & Diluted) | $(1.00) | $(0.15) | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------------------------- | :----------- | :----------- | | Total revenue | $9,376,603 | $8,665,364 | | Total costs and expenses | $10,242,619 | $9,454,356 | | Interest expense - mortgage notes | $(3,041,051) | $(2,204,182) | | Gain on sales of real estate, net | $2,829,998 | $1,537,289 | | Net change in Conduit Pharmaceuticals marketable securities | $(13,888,667) | $0 | | Net loss attributable to Presidio Property Trust, Inc. stockholders | $(17,089,703) | $(2,295,144) | | Net loss per share (Basic & Diluted) | $(1.47) | $(0.28) | - The company experienced a significant increase in net loss for both the three and six months ended June 30, 2024, primarily due to a substantial net change in Conduit Pharmaceuticals marketable securities, which resulted in a loss of **$10.0 million** for the quarter and **$13.9 million** for the six-month period[15](index=15&type=chunk) - Total revenue increased for both periods, with a **0.9% increase** for the three months and an **8.2% increase** for the six months, driven by rental income and fees[15](index=15&type=chunk) - Interest expense on mortgage notes increased significantly, by **14.2%** for the quarter and **38.0%** for the six months, reflecting higher interest rates[15](index=15&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023%20(unaudited)) This section details the changes in the company's equity over time, reflecting net income/loss, dividends, and stock transactions Condensed Consolidated Statements of Changes in Equity (June 30, 2024 vs. December 31, 2023) | Metric | December 31, 2023 | June 30, 2024 | | :-------------------------------- | :------------------ | :------------------ | | Total Equity (beginning of period) | $61,322,070 | $61,322,070 | | Net (loss) income | $(5,241,663) (Q1 2024) | $(11,848,040) (Q2 2024) | | Dividends to Series D preferred stockholders | $(522,032) (Q1 2024) | $(543,331) (Q2 2024) | | Issuance of preferred stock Series D, net | $0 | $1,195,855 | | Repurchase of Series A Common Stock | $0 | $(7,613) | | Total Equity (end of period) | $56,000,807 (March 31, 2024) | $44,607,175 (June 30, 2024) | - Total equity decreased from **$61.3 million** at December 31, 2023, to **$44.6 million** at June 30, 2024, primarily due to net losses and distributions[17](index=17&type=chunk) - The company issued **109,054 shares** of Series D Preferred Stock, generating **$1.2 million** in net proceeds during the six months ended June 30, 2024[17](index=17&type=chunk) - Repurchased **10,446 shares** of Series A Common Stock at a cost of **$7,613** during the six months ended June 30, 2024[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023%20(unaudited)) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2024 | 2023 | | :------------------------------------------ | :----------- | :----------- | | Net cash used in operating activities | $(1,863,486) | $(1,603,709) | | Net cash provided by investing activities | $13,168,408 | $105,255,550 | | Net cash used in financing activities | $(9,280,469) | $(111,467,775) | | Net change in cash, cash equivalents and restricted cash | $2,024,453 | $(7,815,934) | | Cash, cash equivalents and restricted cash - end of period | $8,534,881 | $8,700,791 | - Net cash used in operating activities increased to **$1.9 million** in 2024 from **$1.6 million** in 2023[20](index=20&type=chunk) - Net cash provided by investing activities significantly decreased from **$105.3 million** in 2023 to **$13.2 million** in 2024, primarily due to the absence of large SPAC redemptions seen in the prior year[20](index=20&type=chunk) - Net cash used in financing activities decreased substantially from **$111.5 million** in 2023 to **$9.3 million** in 2024, also largely influenced by the SPAC redemption activities in 2023[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. Organization and Liquidity](index=12&type=section&id=1.%20ORGANIZATION) This note describes the company's structure, operations, and its strategies for managing short-term and long-term cash needs - Presidio Property Trust, Inc. is an internally-managed REIT with holdings in office, industrial, retail, and model home properties, operating through various subsidiaries and partnerships[22](index=22&type=chunk) - The company maintains REIT qualification by distributing at least **90%** of its taxable income and is subject to federal and state income taxes on its taxable REIT subsidiaries (TRSs)[24](index=24&type=chunk)[25](index=25&type=chunk) - Anticipated future liquidity sources include existing cash, cash flows from operations, refinancing, real estate sales, new borrowings, and equity/debt sales. Short-term needs include operating costs, debt service, tenant improvements, and dividends[26](index=26&type=chunk)[28](index=28&type=chunk) - Future principal payments on mortgage notes payable for the next two quarters of 2024 total approximately **$12.5 million**, with management expecting to sell model homes or refinance other mortgage notes[28](index=28&type=chunk) [Note 2. Significant Accounting Policies](index=13&type=section&id=2.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim reporting, with certain information condensed or excluded per SEC rules[32](index=32&type=chunk) - The company consolidates its subsidiaries and partnerships, including NetREIT Advisors, LLC, Dubose Advisors LLC, NetREIT Dubose Model Home REIT, Inc., NetREIT Partnerships, and Model Home Partnerships[33](index=33&type=chunk) - Impairment charges of approximately **$0.1 million** and **$0.2 million** were recognized for model homes during the three and six months ended June 30, 2024, respectively, due to shorter-than-expected hold periods and builder product style changes[48](index=48&type=chunk)[49](index=49&type=chunk) - The company's investment in Conduit Pharmaceuticals marketable securities, including Private CDT Warrants, totaled **$4.4 million** as of June 30, 2024, measured using Level 1 and Level 3 fair value measurements[52](index=52&type=chunk) - An immaterial error correction was made in Q2 2024 to reclassify restricted compensation expense from a liability to additional paid-in capital, affecting prior period balance sheets and equity statements but not net income or cash flows[61](index=61&type=chunk)[62](index=62&type=chunk) [Note 3. Recent Real Estate Transactions](index=19&type=section&id=3.%20RECENT%20REAL%20ESTATE%20TRANSACTIONS) This note details the company's recent acquisitions and dispositions of real estate properties Real Estate Acquisitions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes acquired | 12 | 23 | | Acquisition cost | ~$5.7 million | ~$12.9 million | | Cash payments | ~$1.7 million | ~$3.9 million | | Mortgage notes | ~$4.0 million | ~$9.0 million | Real Estate Dispositions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes sold | 42 | 10 | | Sales proceeds | ~$20.1 million | ~$4.6 million | | Recognized gain | ~$2.8 million | ~$1.5 million | [Note 4. Real Estate Assets](index=20&type=section&id=4.%20REAL%20ESTATE%20ASSETS) This note provides a breakdown of the company's real estate portfolio, including property types and net values - As of June 30, 2024, the company owned **12 commercial properties** (8 office, 1 industrial, 3 retail) totaling approximately **823,417 rentable square feet**, and **80 model home residential properties** totaling approximately **241,309 square feet**[74](index=74&type=chunk)[76](index=76&type=chunk) Real Estate Assets, Net (June 30, 2024 vs. December 31, 2023) | Property Type | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :-------------- | :------------------ | | Presidio Property Trust, Inc. properties | $92,638,454 | $93,365,637 | | Model Home properties | $38,253,777 | $50,790,147 | | Total real estate assets and lease intangibles, net | $130,892,231 | $144,155,784 | - Model home properties' net value decreased significantly from **$50.8 million** to **$38.3 million**, reflecting recent dispositions and impairment charges[75](index=75&type=chunk)[79](index=79&type=chunk) [Note 5. Lease Intangibles](index=21&type=section&id=5.%20LEASE%20INTANGIBLES) This note details the net value and amortization schedule of the company's lease-related intangible assets Net Value of Lease Intangibles (June 30, 2024 vs. December 31, 2023) | Lease Intangibles | June 30, 2024 (Net) | December 31, 2023 (Net) | | :------------------ | :------------------ | :---------------------- | | In-place leases | $15,356 | $20,248 | | Leasing costs | $13,183 | $17,055 | | Above-market leases | $0 | $0 | | Total | $28,539 | $37,303 | - The net value of lease intangibles decreased from **$37,303** at December 31, 2023, to **$28,539** at June 30, 2024[78](index=78&type=chunk) Future Aggregate Amortization Expense for Lease Intangible Assets | Year | Amortization Expense | | :--- | :------------------- | | 2024 | $8,763 | | 2025 | $15,669 | | 2026 | $4,107 | | Total | $28,539 | [Note 6. Other Assets](index=22&type=section&id=6.%20OTHER%20ASSETS) This note provides a breakdown of other non-real estate assets held by the company Other Assets (June 30, 2024 vs. December 31, 2023) | Other Assets | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :------------------ | | Deferred rent receivable | $2,069,489 | $1,973,887 | | Prepaid expenses, deposits and other | $513,373 | $349,160 | | Notes receivable | $316,374 | $316,374 | | Accounts receivable, net | $312,015 | $694,869 | | Deferred offering costs | $0 | $5,000 | | Right-of-use assets, net | $0 | $15,649 | | Investment in marketable securities (not including Conduit) | $0 | $45,149 | | Total other assets | $3,211,251 | $3,400,088 | - Total other assets decreased from **$3.4 million** at December 31, 2023, to **$3.2 million** at June 30, 2024, primarily due to the sale of marketable securities (excluding Conduit) and a reduction in accounts receivable[82](index=82&type=chunk)[83](index=83&type=chunk) [Note 7. Mortgage Notes Payable](index=23&type=section&id=7.%20MORTGAGE%20NOTES%20PAYABLE) This note details the company's mortgage debt, including balances, interest rates, and payment schedules Mortgage Notes Payable (June 30, 2024 vs. December 31, 2023) | Category | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :------------------ | | Presidio Property Trust, Inc. Properties | $75,744,998 | $73,651,207 | | Model Home mortgage notes | $26,274,481 | $34,815,699 | | Total Mortgage Notes Payable | $102,019,479 | $108,466,906 | | Unamortized loan costs | $(894,093) | $(753,633) | | Mortgage Notes Payable, net | $101,125,386 | $107,713,273 | - Total mortgage notes payable, net, decreased by approximately **$6.6 million** from December 31, 2023, to June 30, 2024[85](index=85&type=chunk) - The loan on Dakota Center matured on July 6, 2024, and management is negotiating with the special servicer for modification, extension, or sale[86](index=86&type=chunk) - The company refinanced the West Fargo Industrial properties mortgage loan for **$5.75 million** at a **7.14% interest rate**, maturing in July 2029[88](index=88&type=chunk) Scheduled Principal Payments of Mortgage Notes Payable (as of June 30, 2024) | Year | Presidio Property Trust, Inc. Notes Payable | Model Homes Notes Payable | Total Principal Payments | | :------------------------ | :---------------------------------------- | :------------------------ | :----------------------- | | 2024 | $9,635,272 | $2,898,031 | $12,533,303 | | 2025 | $28,645,113 | $9,525,273 | $38,170,386 | | 2026 | $16,521,064 | $932,102 | $17,453,166 | | 2027 | $157,739 | $465,084 | $622,823 | | 2028 | $168,907 | $9,110,909 | $9,279,816 | | Thereafter | $20,616,903 | $3,343,082 | $23,959,985 | | Total | $75,744,998 | $26,274,481 | $102,019,479 | [Note 8. Notes Payable](index=24&type=section&id=8.%20NOTES%20PAYABLE) This note describes other outstanding promissory notes and loans held by the company - The company holds an Economic Injury Disaster Loan (EIDL) of **$150,000** from the SBA, received in August 2020, with principal and interest deferred for twelve months and a **3.75% annual interest rate**, maturing in August 2050[90](index=90&type=chunk) - A promissory note of approximately **$0.3 million** was issued to a majority-owned subsidiary for refinancing a model home property, with a **5.55% interest rate** and maturity date of August 15, 2024; this note is eliminated through consolidation[91](index=91&type=chunk) [Note 9. Investment in Conduit Pharmaceuticals](index=24&type=section&id=9.%20INVESTMENT%20IN%20CONDUIT%20PHARMACEUTICALS) This note details the company's investment in Conduit Pharmaceuticals, including its valuation and related transactions - The company sponsored a SPAC, Murphy Canyon Acquisition Corp., which completed its business combination with Conduit Pharma on September 22, 2023, resulting in the company owning approximately **6.3%** of Conduit's common stock[92](index=92&type=chunk)[99](index=99&type=chunk) - Upon deconsolidation of Conduit on September 22, 2023, the company recognized a gain of approximately **$40.3 million**, including **$34.1 million** from remeasurement of retained investment and **$6.2 million** from deconsolidation of assets and liabilities[100](index=100&type=chunk) - As of June 30, 2024, the investment in Conduit's common stock, public warrants, and Private CDT Warrants totaled approximately **$4.4 million**, measured at fair value, with a cost basis of approximately **$7.5 million**[102](index=102&type=chunk) - On April 22, 2024, the company entered a lockup agreement for **2.7 million Conduit shares** and received Private CDT Warrants to purchase **540,000 shares**, valued at **$156,600** as of June 30, 2024[103](index=103&type=chunk) [Note 10. Commitments and Contingencies](index=27&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's future obligations, potential liabilities, and ongoing legal or environmental matters - Approximately **$1.0 million** is estimated for capital expenditures on existing properties, net of construction financing, for the remainder of 2024[104](index=104&type=chunk) - The company resolved a stockholder activist proxy contest by appointing Elena Piliptchak to its board of directors on May 9, 2024, with the activist group agreeing to standstill provisions[105](index=105&type=chunk) - No material litigation or environmental liabilities are currently known, but the company monitors economic and geopolitical factors that could impact its real estate portfolio[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Note 11. Stockholders' Equity](index=28&type=section&id=11.%20STOCKHOLDERS'%20EQUITY) This note details changes in the company's equity, including stock issuances, repurchases, and dividend policies - On June 20, 2024, the company issued **109,054 shares** of Series D Preferred Stock in an underwritten public offering at **$16.00 per share**, generating approximately **$1.74 million** in gross proceeds for general corporate and working capital purposes[111](index=111&type=chunk) - Holders of Series D Preferred Stock are entitled to cumulative cash dividends at **9.375% per annum** (**$2.34375 per share annually**) and have limited voting rights, primarily if dividends are unpaid for 18 or more months[112](index=112&type=chunk)[113](index=113&type=chunk) - In the event of liquidation, Series D Preferred Stockholders have a liquidation preference of **$25.00 per share** plus accumulated unpaid dividends[115](index=115&type=chunk) - The Board authorized a stock repurchase program in November 2023 for up to **$6.0 million** of Series A Common Stock and **$4.0 million** of Series D Preferred Stock, expiring in November 2024. During the six months ended June 30, 2024, **10,446 shares** of Series A Common Stock were repurchased for **$7,613**[122](index=122&type=chunk) Cash Dividends Declared Per Share | Stock Type | Period | 2024 | 2023 | | :------------------ | :---------------- | :--- | :--- | | Series A Common Stock | Six Months Ended June 30 | $0 | $0.045 | | Series D Preferred Stock | Six Months Ended June 30 | $1.17186 | $1.17186 | [Note 12. Share-Based Incentive Plan](index=31&type=section&id=12.%20SHARE-BASED%20INCENTIVE%20PLAN) This note describes the company's equity compensation plans and related share activity - The 2017 Incentive Award Plan was amended in June 2023 to increase available shares for issuance from **2.5 million** to **3.5 million** and include an evergreen provision to automatically increase shares to **15%** of outstanding common stock semi-annually[125](index=125&type=chunk) Restricted Stock Activity (December 31, 2023 to June 30, 2024) | Activity | Common Shares | | :------------------------ | :-------------- | | Balance at December 31, 2023 | 760,995 | | Granted | 1,437,746 | | Vested | (164,078) | | Balance at June 30, 2024 | 2,034,663 | - Share-based compensation expense was approximately **$0.9 million** for the six months ended June 30, 2024, compared to **$0.5 million** for the same period in 2023[127](index=127&type=chunk) [Note 13. Segments](index=31&type=section&id=13.%20SEGMENTS) This note provides financial information broken down by the company's operating segments, including NOI and assets - The company operates in three reportable segments: Office/Industrial Properties, Model Home Properties, and Retail Properties, with performance evaluated based on Net Operating Income (NOI)[128](index=128&type=chunk)[129](index=129&type=chunk) Net Operating Income (NOI) by Segment (Six Months Ended June 30) | Segment | 2024 | 2023 | | :------------------------ | :----------- | :----------- | | Office/Industrial Properties | $3,246,450 | $3,219,132 | | Model Home Properties | $2,144,641 | $1,799,364 | | Retail Properties | $732,647 | $672,719 | | Total NOI | $6,123,738 | $5,691,215 | Assets by Reportable Segment (June 30, 2024 vs. December 31, 2023) | Segment | June 30, 2024 | December 31, 2023 | | :------------------------ | :-------------- | :------------------ | | Office/Industrial Properties | $77,076,636 | $78,140,372 | | Model Home Properties | $39,538,041 | $51,456,292 | | Retail Properties | $16,541,354 | $16,539,399 | | Total assets for reportable segments | $133,156,031 | $146,136,063 | Capital Expenditures by Reportable Segment (Six Months Ended June 30) | Category | 2024 | 2023 | | :------------------------------------ | :----------- | :----------- | | Acquisition of operating properties, model home | $5,740,918 | $12,932,128 | | Capital expenditures and tenant improvements | $1,213,936 | $1,001,836 | | Total real estate investments | $6,954,854 | $13,933,964 | [Note 14. Income Tax Provision](index=33&type=section&id=14.%20INCOME%20TAX%20PROVISION) This note details the company's income tax expenses, REIT status, and taxable REIT subsidiary activities - The company maintains its REIT status, requiring annual distribution of at least **90%** of REIT taxable income, and its taxable REIT subsidiaries (TRSs) are subject to federal, state, and local income taxes[134](index=134&type=chunk) - A current income tax provision of **$160,586** was recorded for TRS activities during the six months ended June 30, 2024, compared to **$497,527** in the prior year[135](index=135&type=chunk) - The company is evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, but does not expect a material impact[137](index=137&type=chunk) [Note 15. Related Party Transactions](index=34&type=section&id=15.%20RELATED%20PARTY) This note describes transactions between the company and its related entities or individuals - The company leased portions of its corporate headquarters to Puppy Toes, Inc. and Centurion Counsel, Inc. (owned by Puppy Toes, Inc., which is owned by the CEO and his wife), billing **$5,376** in rent for the six months ended June 30, 2024 and 2023[138](index=138&type=chunk) - Full payroll reimbursement for employee services provided to these related entities totaled approximately **$75,715** for the six months ended June 30, 2024, and **$77,349** for the same period in 2023[139](index=139&type=chunk) [Note 16. Subsequent Events](index=34&type=section&id=16.%20SUBSEQUENT%20EVENTS) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - The loan on the Dakota Center matured on July 6, 2024, and management is in negotiations with the special servicer for modification, extension, or sale of the building[141](index=141&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting key operational results, significant transactions, and liquidity management strategies for the three and six months ended June 30, 2024 and 2023. It also discusses the company's real estate portfolio, strategic alternatives, and outlook on capital resources and market conditions [Overview](index=35&type=section&id=OVERVIEW) This section provides a general description of the company's business, real estate portfolio, and strategic initiatives - Presidio Property Trust, Inc. operates as an internally managed, diversified REIT, holding office, industrial, retail, and triple-net leased model home properties across multiple states[145](index=145&type=chunk)[146](index=146&type=chunk) - As of June 30, 2024, the portfolio included **8 office buildings**, **1 industrial property** (**758,175 sq ft**), **3 retail shopping centers** (**65,242 sq ft**), and **80 model home residential properties** (**241,309 sq ft**)[145](index=145&type=chunk) - A Special Committee was established in September 2023 to explore strategic alternatives to maximize stockholder value, including business combinations, asset sales, or joint ventures[149](index=149&type=chunk) [Significant Transactions](index=36&type=section&id=SIGNIFICANT%20TRANSACTIONS%20IN%202024%20AND%202023) This section highlights major real estate acquisitions and dispositions that impacted the company's financial position Real Estate Acquisitions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes acquired | 12 | 23 | | Acquisition cost | ~$5.7 million | ~$12.9 million | | Cash payments | ~$1.7 million | ~$3.9 million | | Mortgage notes | ~$4.0 million | ~$9.0 million | Real Estate Dispositions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes sold | 42 | 10 | | Sales proceeds | ~$20.1 million | ~$4.6 million | | Recognized gain | ~$2.8 million | ~$1.5 million | [Results of Operations (Three Months Ended June 30, 2024 and 2023)](index=37&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030%2C%202024%20AND%202023) This section analyzes the company's financial performance for the three-month periods, detailing revenue, expenses, and key drivers Key Financials (Three Months Ended June 30) | Metric | 2024 | 2023 | Change (%) | | :------------------------------------------ | :----------- | :----------- | :--------- | | Total revenues | $4,586,541 | $4,543,872 | 0.9% | | Rental operating costs | $1,492,495 | $1,399,159 | 6.7% | | General and administrative expenses | $2,202,916 | $1,813,184 | 21.5% | | Depreciation and amortization | $1,351,370 | $1,368,829 | -1.3% | | Asset impairment charges | $101,245 | $0 | N/A | | Interest expense - mortgage notes | $1,525,845 | $1,336,415 | 14.2% | | Gain on sale of real estate, net | $811,903 | $1,119,952 | -27.5% | | Loss on Conduit remeasurement | $10,027,433 | $0 | N/A | - Total revenues increased slightly by **0.9%** to **$4.6 million**, while rental operating costs increased by **6.7%** to **$1.5 million**[158](index=158&type=chunk)[159](index=159&type=chunk) - General and administrative expenses rose by **21.5%** to **$2.2 million**, mainly due to costs related to the 2024 annual meeting and settlement with Zuma Capital[160](index=160&type=chunk) - A significant loss of **$10.0 million** was recorded on Conduit Pharmaceuticals marketable securities due to fair value adjustments[166](index=166&type=chunk) [Results of Operations (Six Months Ended June 30, 2024 and 2023)](index=38&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202024%20AND%202023) This section analyzes the company's financial performance for the six-month periods, detailing revenue, expenses, and key drivers Key Financials (Six Months Ended June 30) | Metric | 2024 | 2023 | Change (%) | | :------------------------------------------ | :----------- | :----------- | :--------- | | Total revenues | $9,376,603 | $8,665,364 | 8.2% | | Rental operating costs | $3,056,072 | $2,974,149 | 2.8% | | General and administrative expenses | $4,287,366 | $3,777,804 | 13.5% | | Depreciation and amortization | $2,702,388 | $2,702,403 | 0.0% | | Asset impairment charges | $196,793 | $0 | N/A | | Interest expense - mortgage notes | $3,041,051 | $2,204,182 | 38.0% | | Gain on sale of real estate, net | $2,829,998 | $1,537,289 | 84.1% | | Loss on Conduit remeasurement | $13,888,667 | $0 | N/A | - Total revenues increased by **8.2%** to **$9.4 million**, with model home gross revenue representing **25.9%** of total revenue in 2024, up from **21.6%** in 2023[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - General and administrative expenses increased by **13.5%** to **$4.3 million**, primarily due to higher consulting, proxy solicitation, legal fees, and De-SPAC success bonuses[170](index=170&type=chunk) - Interest expense on mortgage notes surged by **38.0%** to **$3.0 million**, with the weighted average interest rate increasing to **5.38%** from **4.83%**[173](index=173&type=chunk) - A net loss of **$13.9 million** was recorded on Conduit Pharmaceuticals marketable securities due to fair value adjustments[176](index=176&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's ability to meet its financial obligations and fund operations, including cash position and debt structure - Cash and restricted cash totaled approximately **$8.5 million** at June 30, 2024[178](index=178&type=chunk) - Short-term liquidity needs include **$12.5 million** in principal payments on mortgage notes payable in 2024, with **$25.8 million** in commercial property loans maturing within the next 12 months[179](index=179&type=chunk) - The Board authorized a stock repurchase program in November 2023 for up to **$6.0 million** of Series A Common Stock and **$4.0 million** of Series D Preferred Stock, expiring in November 2024[181](index=181&type=chunk) - Net cash used in operating activities was **$1.9 million** for the six months ended June 30, 2024, while net cash provided by investing activities was **$13.2 million**, and net cash used in financing activities was **$9.3 million**[191](index=191&type=chunk)[192](index=192&type=chunk)[194](index=194&type=chunk) - As of June 30, 2024, commercial properties had **$75.7 million** in fixed-rate mortgage notes (weighted-average interest rate of **4.97%**), and model homes had **$26.3 million** (weighted-average interest rate of **6.58%**)[189](index=189&type=chunk)[190](index=190&type=chunk) [Inflation](index=45&type=section&id=Inflation) This section addresses the potential impact of inflation on the company's operations, revenues, and expenses - Leases generally include provisions for limited rent increases (fixed, CPI-linked, or sales-volume based), which are expected to result in rent increases over time[201](index=201&type=chunk) - The use of triple-net lease agreements helps mitigate exposure to rising property expenses due to inflation, as tenants are responsible for these costs[202](index=202&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Presidio Property Trust, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[203](index=203&type=chunk) [ITEM 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures, identifying a material weakness in internal control over financial reporting related to the annual income tax provision and monitoring controls. Remediation efforts are underway, but the weakness has not been fully remediated as of the filing date - A material weakness was identified in internal control over financial reporting, specifically concerning the formal review and approval process for the annual income tax provision (REIT and non-REIT subsidiaries, and Conduit shares)[205](index=205&type=chunk) - The company lacked adequate internal controls under an appropriate financial reporting framework, including monitoring and entity-level controls for income tax provision[205](index=205&type=chunk) - Remediation measures are being implemented, including adding controls around income tax provision calculation and engaging third-party experts, but the material weakness is not yet fully remediated[206](index=206&type=chunk)[208](index=208&type=chunk) PART II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) There are no material legal proceedings to report for the period - The company is not currently subject to any material litigation or threatened litigation[209](index=209&type=chunk) [ITEM 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) No new material risk factors have been identified for this reporting period - No new risk factors are reported in this quarterly filing[210](index=210&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company continued its stock repurchase program, buying back Series A Common Stock during the six months ended June 30, 2024, as part of its strategy to return capital to stockholders - The Board of Directors authorized a stock repurchase program in November 2023 for up to **$6.0 million** of Series A Common Stock and **$4.0 million** of Series D Preferred Stock, expiring in November 2024[211](index=211&type=chunk) Series A Common Stock Repurchases (Six Months Ended June 30, 2024) | Month | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------ | :------------------------------- | :--------------------------- | | January 2024 | — | — | | February 2024 | — | — | | March 2024 | — | — | | April 2024 | — | — | | May 2024 | — | — | | June 2024 | 10,446 | $0.73 | | Total | 10,446 | $0.73 | - As of June 30, 2024, approximately **$5,992,387** remained available for repurchases under the Series A Common Stock program[213](index=213&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[214](index=214&type=chunk) [ITEM 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures are applicable or required for the company - No mine safety disclosures are applicable[215](index=215&type=chunk) [ITEM 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No other material information is reported in this section - No other information is reported[216](index=216&type=chunk) [ITEM 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including articles supplementary, cooperation agreements, underwriting agreements, and certifications from the CEO and CFO - Key exhibits include Articles Supplementary for Series D Preferred Stock, a Cooperation Agreement with Zuma Capital Management, LLC, and an Underwriting Agreement with The Benchmark Company, LLC[217](index=217&type=chunk) - Certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) are included[217](index=217&type=chunk) [SIGNATURES](index=49&type=section&id=SIGNATURES) The report is duly signed on behalf of Presidio Property Trust, Inc. by its Chief Executive Officer, Jack K. Heilbron, and Chief Financial Officer, Ed Bentzen, on August 14, 2024 - The report was signed by Jack K. Heilbron, Chief Executive Officer, and Ed Bentzen, Chief Financial Officer, on August 14, 2024[220](index=220&type=chunk)

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section provides key filing details for the Q1 2024 Form 10-Q report - The report is a Quarterly Report on Form 10-Q for the period ended **March 31, 2024**[2](index=2&type=chunk) - The registrant is **PRESIDIO PROPERTY TRUST, INC.**, incorporated in Maryland[3](index=3&type=chunk) - As of May 13, 2024, **14,463,802 shares** of Series A Common Stock were issued and outstanding[6](index=6&type=chunk) - The registrant is a **non-accelerated filer** and not a shell company[4](index=4&type=chunk)[6](index=6&type=chunk) [Cautionary Language Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20LANGUAGE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines the inherent risks and uncertainties associated with the report's forward-looking statements - The report contains forward-looking statements subject to risks and uncertainties beyond the company's control, which could cause actual results to differ materially[10](index=10&type=chunk) - Key risk factors include inherent risks of real estate investments, significant competition, decreased demand for commercial space, tenant payment failures, challenging economic conditions, and inability to service or raise debt/capital[10](index=10&type=chunk) - Additional risks involve adverse changes in real estate financing markets, potential losses not covered by insurance, inability to complete acquisitions or dispositions, reliance on third-party managers, and failure to maintain REIT qualification[10](index=10&type=chunk)[12](index=12&type=chunk) [Part I. Financial Information](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited financial statements and management's analysis for the first quarter of 2024 [Item 1. Financial Statements](index=10&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement details the company's assets, liabilities, and equity as of March 31, 2024 Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2024 | December 31, 2023 | Change ($) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total Assets | $163,478,333 | $175,962,638 | $(12,484,305) | -7.1% | | Real estate assets, net | $135,261,518 | $144,155,784 | $(8,894,266) | -6.2% | | Total Liabilities | $107,815,792 | $114,661,757 | $(6,845,965) | -6.0% | | Total Equity | $55,662,541 | $61,300,881 | $(5,638,340) | -9.2% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement summarizes revenues, expenses, and net loss for the three months ended March 31, 2024 Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total Revenue | $4,790,061 | $4,121,491 | $668,570 | 16.2% | | Total Costs and Expenses | $5,094,593 | $4,873,184 | $221,409 | 4.5% | | Interest Expense - Mortgage Notes | $(1,515,206) | $(867,767) | $(647,439) | 74.6% | | Gain on sales of real estate, net | $2,018,095 | $417,337 | $1,600,758 | 383.6% | | Loss on Conduit Pharmaceuticals marketable securities | $(3,861,233) | $0 | $(3,861,233) | N/A | | Net loss attributable to common stockholders | $(5,763,695) | $(1,530,988) | $(4,232,707) | 276.5% | | Net loss per share (Basic & Diluted) | $(0.47) | $(0.13) | $(0.34) | 261.5% | [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This statement details the changes in stockholders' equity during the first quarter of 2024 Condensed Consolidated Statements of Changes in Equity Highlights | Metric | March 31, 2024 | December 31, 2023 | Change ($) | | :--------------------------------------------------- | :------------- | :---------------- | :--------- | | Total Equity | $55,662,541 | $61,300,881 | $(5,638,340) | | Net (loss) income attributable to stockholders (Q1) | $(5,241,663) | $(995,540) | $(4,246,123) | | Dividends to Series D preferred stockholders (Q1) | $(522,032) | $(535,448) | $13,416 | | Vesting of Common Stock (Q1) | $224,844 | $28,740 | $196,104 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement presents the sources and uses of cash from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :------------------------------------------ | :----------- | :------------ | :--------- | :--------- | | Net cash used in operating activities | $(1,134,195) | $(1,628,129) | $493,934 | -30.3% | | Net cash provided by investing activities | $9,417,858 | $109,551,682 | $(100,133,824) | -91.4% | | Net cash used in financing activities | $(7,634,659) | $(112,548,348) | $104,913,689 | -93.2% | | Cash, cash equivalents and restricted cash - end of period | $7,159,432 | $11,891,930 | $(4,732,498) | -39.8% | - The significant decrease in cash provided by investing activities and cash used in financing activities in Q1 2024 compared to Q1 2023 was primarily due to the **absence of SPAC redemptions**, which occurred in Q1 2023[178](index=178&type=chunk)[181](index=181&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and supplementary information for the financial statements [1. Organization](index=11&type=section&id=1.%20ORGANIZATION) This note describes the company's structure, business operations, and sources of liquidity - Presidio Property Trust, Inc. is an internally-managed REIT with holdings in **office, industrial, retail, and model home properties**, operating through various subsidiaries and partnerships[23](index=23&type=chunk)[28](index=28&type=chunk) - The company maintains REIT qualification by distributing **at least 90% of its taxable income** and utilizes Taxable REIT Subsidiaries (TRSs) for certain activities[25](index=25&type=chunk)[26](index=26&type=chunk) - Anticipated liquidity sources include existing cash, cash flows from operations, refinancing, real estate sales, new borrowings, and equity/debt sales, with short-term needs covering operating costs, debt service, and dividends[27](index=27&type=chunk)[29](index=29&type=chunk) - Murphy Canyon Acquisition Corp. (SPAC) completed its business combination with Conduit Pharmaceuticals Limited on **September 22, 2023**, leading to its deconsolidation from the Company's financial statements[31](index=31&type=chunk) [2. Significant Accounting Policies](index=12&type=section&id=2.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods used in preparing the financial statements - The condensed consolidated financial statements are prepared in accordance with GAAP for interim statements and SEC regulations, with **no significant changes to accounting policies** since the 2024 Annual Report[32](index=32&type=chunk)[33](index=33&type=chunk) - The company consolidates its subsidiaries and partnerships, and previously consolidated Murphy Canyon (SPAC) until its **deconsolidation on September 22, 2023**[34](index=34&type=chunk)[35](index=35&type=chunk)[102](index=102&type=chunk) - Real estate assets are recorded at cost, with purchase price allocated to tangible and intangible assets/liabilities based on fair values, and impairment is recognized when expected undiscounted cash flows are less than the carrying amount[38](index=38&type=chunk)[48](index=48&type=chunk) - Investments in Conduit's common stock and warrants are measured at **fair value using Level 1 market prices**, following the adoption of ASU 2022-03[52](index=52&type=chunk)[63](index=63&type=chunk) [3. Recent Real Estate Transactions](index=17&type=section&id=3.%20RECENT%20REAL%20ESTATE%20TRANSACTIONS) This note details the company's property acquisitions and dispositions during the first quarter Real Estate Acquisitions (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model Homes Acquired (Number) | 5 | 9 | | Total Acquisition Cost | $2.2 million | $5.0 million | | Cash Payments | $0.6 million | $1.5 million | | Mortgage Notes | $1.6 million | $3.5 million | Real Estate Dispositions (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model Homes Sold (Number) | 27 | 3 | | Total Sales Proceeds | $12.6 million | $1.6 million | | Recognized Gain | $2.0 million | $0.4 million | [4. Real Estate Assets](index=18&type=section&id=4.%20REAL%20ESTATE%20ASSETS) This note provides a breakdown of the company's real estate portfolio by property type - As of March 31, 2024, the company's portfolio includes **eight office buildings, one industrial property, three retail shopping centers, and 88 model home residential properties**[73](index=73&type=chunk) Real Estate Assets and Lease Intangibles, Net | Metric | March 31, 2024 | December 31, 2023 | Change ($) | Change (%) | | :------------------------------------------ | :------------- | :---------------- | :--------- | :--------- | | Total real estate assets and lease intangibles, net | $135,261,518 | $144,155,784 | $(8,894,266) | -6.2% | | Model Home properties, net | $41,813,015 | $50,790,147 | $(8,977,132) | -17.7% | - A non-cash **impairment charge of approximately $0.1 million** was recognized in Q1 2024 for four model homes due to an abnormally short hold period and changes in builder product style[49](index=49&type=chunk)[50](index=50&type=chunk)[76](index=76&type=chunk) [5. Lease Intangibles](index=19&type=section&id=5.%20LEASE%20INTANGIBLES) This note details the value and amortization schedule of the company's lease-related intangible assets Net Value of Lease Intangibles | Lease Intangibles | March 31, 2024 | December 31, 2023 | Change ($) | | :------------------ | :------------- | :---------------- | :--------- | | In-place leases | $17,802 | $20,248 | $(2,446) | | Leasing costs | $15,119 | $17,055 | $(1,936) | | Above-market leases | $0 | $0 | $0 | | Total, net | $32,921 | $37,303 | $(4,382) | - Amortization of above and below-market rents resulted in a net increase in rental income of approximately **$1,200** for both Q1 2024 and Q1 2023[41](index=41&type=chunk) Future Aggregate Amortization Expense for Lease Intangible Assets | Year | Amount | | :--- | :----- | | 2024 | $13,145 | | 2025 | $15,669 | | 2026 | $4,107 | | Total| $32,921 | [6. Other Assets](index=20&type=section&id=6.%20OTHER%20ASSETS) This note provides a breakdown of other current and non-current assets on the balance sheet Other Assets | Asset Category | March 31, 2024 | December 31, 2023 | Change ($) | | :------------------------------------------ | :------------- | :---------------- | :--------- | | Deferred rent receivable | $2,065,691 | $1,973,887 | $91,804 | | Prepaid expenses, deposits and other | $444,085 | $349,160 | $94,925 | | Accounts receivable, net | $260,015 | $694,869 | $(434,854) | | Deferred offering costs | $21,745 | $5,000 | $16,745 | | Investment in marketable securities (not including Conduit) | $0 | $45,149 | $(45,149) | | Total other assets | $3,115,782 | $3,400,088 | $(284,306) | - The company held **no marketable securities** (excluding Conduit) as of March 31, 2024, a decrease from approximately $45,149 at December 31, 2023[79](index=79&type=chunk) [7. Mortgage Notes Payable](index=21&type=section&id=7.%20MORTGAGE%20NOTES%20PAYABLE) This note details the company's mortgage debt, including interest rates and maturity schedules Mortgage Notes Payable, Net | Metric | March 31, 2024 | December 31, 2023 | Change ($) | Change (%) | | :-------------------------- | :------------- | :---------------- | :--------- | :--------- | | Mortgage Notes Payable, net | $102,292,697 | $107,713,273 | $(5,420,576) | -5.0% | Mortgage Notes Payable by Property Type (Principal) | Property Type | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Presidio Property Trust, Inc. Properties | $74,104,963 | $73,651,207 | | Model Home mortgage notes | $28,869,418 | $34,815,699 | - The weighted average interest rate on commercial property mortgage notes was approximately **4.89%** as of March 31, 2024, and for model home mortgage notes was approximately **6.12%**[175](index=175&type=chunk)[176](index=176&type=chunk) - Approximately **$17.0 million in principal payments** are due on mortgage notes in the next three quarters of 2024, including $7.0 million for model homes; four commercial property loans totaling **$25.9 million mature within the next 12 months**[29](index=29&type=chunk)[85](index=85&type=chunk)[167](index=167&type=chunk) - Management is reviewing options for maturing loans, including **refinancing, restructuring, or selling properties**, and expects to pay off model home mortgages with sales proceeds or refinance them[29](index=29&type=chunk)[84](index=84&type=chunk)[167](index=167&type=chunk) [8. Notes Payable](index=22&type=section&id=8.%20NOTES%20PAYABLE) This note describes other non-mortgage debt obligations of the company - The company received a **$150,000 Economic Injury Disaster Loan (EIDL)** in August 2020, accruing interest at 3.75% per year and maturing in August 2050, used for general corporate purposes[86](index=86&type=chunk) - A **$0.3 million promissory note** was issued to a majority-owned subsidiary for refinancing a model home, with a 5.55% interest rate and August 2024 maturity, which is eliminated through consolidation[87](index=87&type=chunk) [9. Commitments and Contingencies](index=22&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses potential future obligations, legal matters, and other contingent liabilities - Approximately **$1.0 million** is estimated for capital expenditures on existing properties for the remainder of 2024[88](index=88&type=chunk) - On May 9, 2024, the company entered into a **cooperation agreement with an activist stockholder group**, appointing Elena Piliptchak to the board and increasing its size to seven directors, with the group withdrawing nominations and agreeing to standstill provisions[89](index=89&type=chunk)[139](index=139&type=chunk) - The company is **not currently subject to any material litigation** or environmental liabilities[90](index=90&type=chunk)[91](index=91&type=chunk) - Murphy Canyon (SPAC) completed its business combination with Conduit Pharma on September 22, 2023, resulting in the company owning approximately **6.5% of Conduit** and recording a gain of approximately **$40.3 million on deconsolidation**[101](index=101&type=chunk)[102](index=102&type=chunk) - As of March 31, 2024, the company's investment in Conduit's common stock and warrants was valued at approximately **$14.5 million** (cost basis $7.5 million), measured at fair value[103](index=103&type=chunk) - On April 22, 2024, the company entered a new lockup agreement for 2,700,000 Conduit shares for one year, receiving a warrant to purchase 540,000 shares at an exercise price of $3.12 per share[138](index=138&type=chunk) [10. Stockholders' Equity](index=25&type=section&id=10.%20STOCKHOLDERS'%20EQUITY) This note provides details on the company's common and preferred stock, warrants, and dividend policies - The Series D Preferred Stock has **890,946 shares issued and outstanding**, with cumulative cash dividends of **9.375% per annum** ($2.34375 per share annually) payable monthly, and a liquidation preference of $25.00 per share[14](index=14&type=chunk)[106](index=106&type=chunk)[109](index=109&type=chunk) - The Series D Preferred Stock is redeemable at the company's option on or after June 15, 2026, or upon a Change of Control, at **$25.00 per share**[111](index=111&type=chunk) - The Series A Common Stock has **12,429,139 shares issued and outstanding** as of March 31, 2024, with one vote per share and an ownership restriction of 9.8%[14](index=14&type=chunk)[113](index=113&type=chunk) - **No cash dividend was declared** for Series A Common Stock for Q1 2024, compared to $0.022 per share in Q1 2023[118](index=118&type=chunk)[119](index=119&type=chunk) - A stock repurchase program authorized in November 2023 allows for repurchases of up to **$6.0 million of Series A Common Stock** and **$4.0 million of Series D Preferred Stock**, expiring November 2024; no repurchases occurred in Q1 2024[117](index=117&type=chunk) - Outstanding warrants include Common Stock Warrants (2,000,000 shares, $5.50 exercise), Placement Agent Warrants (80,000 shares, $6.25 exercise), and Series A Warrants (14,450,069 shares, $7.00 exercise), **none of which have been exercised** as of March 31, 2024[56](index=56&type=chunk)[116](index=116&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[187](index=187&type=chunk) [11. Share-Based Incentive Plan](index=28&type=section&id=11.%20SHARE-BASED%20INCENTIVE%20PLAN) This note describes the company's equity compensation plan for employees and directors - The company maintains a restricted stock incentive plan to attract and retain personnel, with awards generally vesting over **three to ten years** and non-vested shares having voting rights and dividend eligibility[121](index=121&type=chunk) Share-Based Compensation Expense (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------- | :----------- | :----------- | | Share-based compensation expense | $0.5 million | $0.3 million | - As of March 31, 2024, there were **2,034,663 non-vested restricted shares** outstanding, with future unrecognized stock compensation totaling approximately **$2.5 million**[123](index=123&type=chunk)[124](index=124&type=chunk) - The 2017 Incentive Award Plan was amended in June 2023 to increase available shares to **3.5 million** and include an evergreen provision to automatically increase to 15% of outstanding common stock semi-annually[122](index=122&type=chunk) [12. Segments](index=29&type=section&id=12.%20SEGMENTS) This note presents financial data broken down by the company's operating segments - The company's reportable segments are **Office/Industrial Properties, Model Home Properties, and Retail Properties**, with performance evaluated based on Net Operating Income (NOI)[125](index=125&type=chunk)[126](index=126&type=chunk) Net Operating Income (NOI) by Segment (Three Months Ended March 31) | Segment | 2024 | 2023 | | :-------------------- | :----------- | :----------- | | Office/Industrial Properties | $1,585,327 | $1,401,308 | | Model Home Properties | $1,132,175 | $824,124 | | Retail Properties | $413,434 | $321,069 | | Total Net Operating Income | $3,130,936 | $2,546,501 | Total Assets by Reportable Segment | Segment | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Office/Industrial Properties | $77,409,048 | $78,140,372 | | Model Home Properties | $43,872,416 | $51,456,292 | | Retail Properties | $16,624,792 | $16,539,399 | | Total assets for reportable segments | $137,906,256 | $146,136,063 | Capital Expenditures by Reportable Segment (Three Months Ended March 31) | Segment | 2024 | 2023 | | :------------------------------------------ | :----------- | :----------- | | Office/Industrial Capital expenditures and tenant improvements | $884,363 | $597,873 | | Model Home Acquisition of operating properties | $2,238,497 | $5,039,455 | | Retail Capital expenditures and tenant improvements | $148,084 | $0 | | Total real estate investments | $3,270,944 | $5,637,328 | [13. Income Tax Provision](index=30&type=section&id=13.%20INCOME%20TAX%20PROVISION) This note explains the company's income tax status as a REIT and related tax provisions - As a REIT, the company is generally required to distribute **at least 90% of its REIT taxable income** annually and is subject to federal, state, and local income taxes on its domestic taxable REIT subsidiaries (TRSs)[131](index=131&type=chunk) Current Income Tax Provision (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------- | :----------- | :----------- | | Current income tax provision | $79,565 | $148,453 | - A deferred tax asset of **$346,762** was related to the operating activities of TRSs as of March 31, 2024, and December 31, 2023[132](index=132&type=chunk) - The company is currently assessing the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' but **does not expect a material impact** on its consolidated financial statements[134](index=134&type=chunk) [14. Related Party](index=31&type=section&id=14.%20RELATED%20PARTY) This note discloses transactions and balances with entities related to the company's management - Rent billed to related parties (entities owned by the CEO and his wife) totaled **$2,688** for both Q1 2024 and Q1 2023[135](index=135&type=chunk) Payroll Reimbursements from Related Parties (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------- | :----------- | :----------- | | Payroll reimbursements | $35,916 | $40,304 | - Reimbursement receivable balances were approximately **$21,667** as of March 31, 2024, and **$52,879** as of December 31, 2023, both subsequently paid in full[136](index=136&type=chunk) [15. Subsequent Events](index=31&type=section&id=15.%20SUBSEQUENT%20EVENTS) This note describes significant events that occurred after the balance sheet date but before the report filing - On April 22, 2024, the company entered into a **lockup agreement with Conduit**, agreeing not to transfer 2,700,000 shares of Conduit common stock for one year, in exchange for a warrant to purchase 540,000 shares at $3.12 per share[138](index=138&type=chunk) - On May 9, 2024, a **cooperation agreement was signed with a stockholder group**, leading to the appointment of Elena Piliptchak to the board of directors, increasing the board to seven members, and the withdrawal of director nominations by the stockholder group[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, discussing overall business operations, significant transactions, critical accounting policies, and detailed analysis of revenues, expenses, and liquidity [Overview](index=32&type=section&id=OVERVIEW) This section provides a high-level summary of the company's business, portfolio, and strategic initiatives - The company operates as an internally managed, diversified REIT, with a portfolio of **office, industrial, retail, and triple-net leased model home properties** across multiple states[143](index=143&type=chunk)[144](index=144&type=chunk) - As of March 31, 2024, the portfolio included **8 office/industrial properties** (758,175 sq ft), **3 retail properties** (65,242 sq ft), and **88 model home properties** (268,644 sq ft)[143](index=143&type=chunk) - A **Special Committee** was established in September 2023 to explore strategic alternatives, including business combinations, asset sales, and joint ventures, to maximize stockholder value[147](index=147&type=chunk) - Management is actively working to **increase the model home portfolio** through new acquisitions, joint ventures, and equity raising, given elevated commercial property prices[147](index=147&type=chunk) [Significant Transactions in 2024 and 2023](index=33&type=section&id=SIGNIFICANT%20TRANSACTIONS%20IN%202024%20AND%202023) This section highlights key real estate acquisitions and dispositions in the current and prior year periods Real Estate Acquisitions (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model Homes Acquired (Number) | 5 | 9 | | Total Acquisition Cost | $2.2 million | $5.0 million | | Cash Payments | $0.6 million | $1.5 million | | Mortgage Notes | $1.6 million | $3.5 million | Real Estate Dispositions (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model Homes Sold (Number) | 27 | 3 | | Total Sales Proceeds | $12.6 million | $1.6 million | | Recognized Gain | $2.0 million | $0.4 million | [Critical Accounting Policies](index=34&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section confirms that no material changes have occurred in the company's critical accounting policies - There have been **no material changes** to the company's critical accounting policies as previously disclosed in its 2024 Annual Report[153](index=153&type=chunk) [Management Evaluation of Results of Operations](index=34&type=section&id=MANAGEMENT%20EVALUATION%20OF%20RESULTS%20OF%20OPERATIONS) This section explains how management assesses the company's operational performance and asset value - Management evaluates operating results by assessing **cash flow generation** for expenses, debt service, and distributions, placing less emphasis on non-cash charges like depreciation and impairment[154](index=154&type=chunk) - The primary focus is on **increasing and enhancing the value, quality, and quantity of properties** through re-leasing efforts, including lease renewals and rental rate negotiations[155](index=155&type=chunk) - **Underperforming assets are regularly evaluated and sold**, with equity reinvested in new acquisitions or allocated to maximize stockholder value[155](index=155&type=chunk) [Results of Operations for the Three Months Ended March 31, 2024 and 2023](index=34&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20MARCH%2031,%202024%20AND%202023) This section provides a detailed comparison of operating results for the first quarters of 2024 and 2023 Revenue and Expense Highlights (Three Months Ended March 31) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------------------------------- | :----------- | :----------- | :--------- | :--------- | | Total Revenues | $4.8 million | $4.1 million | $0.7 million | 16.2% | | Rental Operating Costs | $1.6 million | $1.6 million | $0 | 0.0% | | Rental Operating Costs (% of total revenue) | 32.6% | 38.2% | -5.6% | -14.7% | | General and Administrative (G&A) Expenses | $2.1 million | $2.0 million | $0.1 million | 5.0% | | G&A Expenses (% of total revenue) | 43.5% | 47.7% | -4.2% | -8.8% | | Depreciation and Amortization | $1.4 million | $1.3 million | $0.1 million | 7.7% | | Asset Impairments | $0.1 million | $0 | $0.1 million | N/A | | Interest Expense - Mortgage Notes | $1.5 million | $0.9 million | $0.6 million | 66.7% | | Loss on Conduit remeasurement | $(3.9) million | $0 | $(3.9) million | N/A | | Gain on Sale of Real Estate Assets, net | $2.0 million | $0.4 million | $1.6 million | 400.0% | | Income allocated to non-controlling interests | $(1.5) million | $(0.4) million | $(1.1) million | 275.0% | - The increase in total revenues was driven by the average real estate assets held, new commercial real estate leases, and model home transaction fees[156](index=156&type=chunk) - G&A expenses decreased due to the **absence of SPAC G&A expenses in 2024**, offset by increases in stock compensation, consulting fees, and audit/tax-related costs[159](index=159&type=chunk) - Interest expense increased significantly due to a **higher weighted average interest rate** (5.23% in Q1 2024 vs. 4.66% in Q1 2023) and higher mortgage notes payable[162](index=162&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's sources of cash, debt obligations, and capital management strategies - Anticipated liquidity sources include existing cash and cash equivalents (**$7.2 million** as of March 31, 2024), cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings, and the sale of equity or debt securities[166](index=166&type=chunk) - Short-term liquidity needs include operating costs, debt service, tenant improvements, leasing commissions, and funding dividends to stockholders[167](index=167&type=chunk) - Approximately **$17.0 million in principal payments** are due on mortgage notes in 2024, including $7.0 million for model homes, and four commercial property loans totaling **$25.9 million mature within the next 12 months**[167](index=167&type=chunk) - Management is actively pursuing **refinancing, restructuring, or potential sales** for maturing commercial property loans and expects to fund model home mortgage payoffs through sales proceeds or refinancing[167](index=167&type=chunk) - A stock repurchase program for up to **$6.0 million of Series A Common Stock** and **$4.0 million of Series D Preferred Stock** was authorized in November 2023, expiring November 2024; no repurchases occurred in Q1 2024[168](index=168&type=chunk) - **No cash dividend was declared for common stock in Q1 2024**, but the company intends to continue quarterly common stock dividends and monthly Series D Preferred Stock dividends, though not guaranteed[171](index=171&type=chunk) Secured Debt as of March 31, 2024 | Property Type | Aggregate Principal Amount | Weighted-Average Interest Rate | Debt to Estimated Market Value | | :-------------------- | :------------------------- | :----------------------------- | :----------------------------- | | Commercial Properties | $74.1 million | 4.89% | 61.0% | | Model Homes | $28.9 million | 6.12% | 61.5% | [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses potential future proceeds from the exercise of outstanding warrants Potential Proceeds from Warrant Exercises (as of March 31, 2024) | Warrant Type | Shares Outstanding | Exercise Price | Potential Gross Proceeds | | :-------------------- | :----------------- | :------------- | :----------------------- | | Common Stock Warrants | 2,000,000 | $5.00 | $10.0 million | | Placement Agent Warrants | 80,000 | $6.25 | $0.5 million | | Series A Warrants | 14,450,069 | $7.00 | $101.2 million | [Inflation](index=40&type=section&id=Inflation) This section discusses the potential impact of inflation on the company's revenues and expenses - Leases generally include provisions for limited rent increases (fixed, CPI-linked, or sales-volume based), which are expected to result in rent increases over time[188](index=188&type=chunk) - During periods of high inflation, **rent increases may not keep pace with the rate of inflation**, potentially impacting revenue[188](index=188&type=chunk) - The use of **net lease agreements** helps mitigate exposure to rising property expenses due to inflation, as tenants are responsible for these costs[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide disclosures regarding quantitative and qualitative market risk - The company is **not required to provide disclosure** for this item as it is a smaller reporting company[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section discusses the company's disclosure controls and procedures, identifies a material weakness in internal control over financial reporting related to income tax provision, and outlines remediation efforts - The company maintains disclosure controls and procedures designed to ensure timely and accurate reporting, providing **reasonable assurance** of achieving control objectives[191](index=191&type=chunk) - A **material weakness was identified** in internal control over financial reporting, primarily related to the lack of a formal review and approval process for the annual income tax provision and inadequate internal controls for income tax provision[192](index=192&type=chunk) - **Remediation efforts are underway**, including adding controls, engaging third-party experts, and continually monitoring the taxable status of subsidiaries, though full remediation is not yet complete[193](index=193&type=chunk)[195](index=195&type=chunk) - No other material changes in internal control over financial reporting occurred during Q1 2024, and controls have not been impacted by COVID-19 related circumstances[195](index=195&type=chunk) [Part II. Other Information](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part contains other required disclosures, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently subject to any material litigation or threatened legal proceedings - Neither the company nor its properties are presently subject to any **material litigation** or threatened litigation[197](index=197&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company states that there are no new material risk factors to report for the current period - **No new material risk factors** are reported for the current period[198](index=198&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports that there were no unregistered sales of equity securities or use of proceeds to disclose for the period - **No unregistered sales** of equity securities or use of proceeds to report[199](index=199&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports that there were no defaults upon senior securities during the period - **No defaults upon senior securities** to report[200](index=200&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company states that there are no mine safety disclosures required for the period - **No mine safety disclosures** to report[201](index=201&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) The company reports that there is no other information to disclose for the period - **No other information** to report[202](index=202&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and various XBRL-related documents - Exhibits include **certifications from the CEO and CFO** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[203](index=203&type=chunk) - The filing also includes **Inline XBRL Instance Document** and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[203](index=203&type=chunk)[205](index=205&type=chunk) [Signatures](index=43&type=section&id=SIGNATURES) This section contains the official signatures of the company's certifying officers - The report was signed on **May 14, 2024**, by Jack K. Heilbron, Chief Executive Officer, and Ed Bentzen, Chief Financial Officer[207](index=207&type=chunk)

[Cautionary Language Regarding Forward-Looking Statements, Risk Factors and Industry Data](index=6&type=section&id=Cautionary%20Language%20Regarding%20Forward-Looking%20Statements%2C%20Risk%20Factors%20and%20Industry%20Data) This section outlines forward-looking statements and inherent risks in real estate investment, competition, economic challenges, and regulatory compliance - This 10-K report contains forward-looking statements involving uncertainties such as inherent risks in real estate investment, intense competition, declining demand for commercial space, major tenant defaults, economic challenges, insufficient cash flow for dividends or debt service, financing difficulties, unfavorable changes in real estate financing markets, potential uninsured losses, failed acquisitions or dispositions, reliance on third-party property managers, changes in single-family home supply and demand, failure to maintain REIT qualification, legal proceedings, changes in laws and regulations, Nasdaq delisting risk, bank deposit losses, inflation, and activist shareholder actions[14](index=14&type=chunk)[16](index=16&type=chunk) [Part I](index=5&type=section&id=Part%20I) [Business Overview](index=8&type=section&id=ITEM%201.%20BUSINESS) Presidio Property Trust, Inc. is an internally managed REIT investing in a diversified portfolio of multi-tenant commercial properties and model homes, aiming to maximize shareholder value through active management and strategic acquisitions [Company Profile and Corporate Structure](index=8&type=section&id=OVERVIEW%20AND%20CORPORATE%20STRUCTURE) Presidio Property Trust, Inc. is an internally managed Maryland REIT, owning and having interests in commercial properties and model homes through various entities - Presidio Property Trust, Inc. is an internally managed real estate investment trust (REIT), incorporated in California on September 28, 1999, reorganized as a Maryland corporation in August 2010, and renamed Presidio Property Trust, Inc. in October 2017[18](index=18&type=chunk) - The company owns fee simple interests in 12 commercial properties through itself, its subsidiaries, and partnerships, and holds partial interests in two commercial properties through its affiliates acting as general partners, members, and/or managers[18](index=18&type=chunk) - The company is a limited partner in five partnerships and owns all shares of one company, with these entities primarily engaged in purchasing and leasing back model homes to homebuilders[18](index=18&type=chunk) [Market and Business Strategy](index=8&type=section&id=MARKET%20AND%20BUSINESS%20STRATEGY) The company invests in a diversified portfolio of multi-tenant real estate assets, primarily focusing on office, industrial properties, and model homes across several states - The company invests in a diversified portfolio of multi-tenant real estate assets, primarily focusing on office and industrial properties and model homes since 2015, gradually exiting retail properties[19](index=19&type=chunk) - Commercial properties are currently located in Colorado, North Dakota, California, Maryland, and Texas, with approximately 155 commercial tenants and an average remaining lease term of approximately **3.1 years** as of December 31, 2023[19](index=19&type=chunk) - The company's primary goal is to maximize long-term shareholder value through managing, leasing, and selectively redeveloping its existing commercial property portfolio, as well as selectively acquiring future properties with value-add potential[20](index=20&type=chunk) [Recent Developments](index=9&type=section&id=RECENT%20DEVELOPMENTS) The company engaged in significant acquisitions and dispositions of model homes in 2023 and 2022, implemented stock repurchase programs, and completed a SPAC business combination Significant Transactions in 2023 and 2022 | Transaction Type | 2023 | 2022 | | :--- | :--- | :--- | | **Acquisitions** | | | | Number of Model Homes | 40 units | 31 units | | Purchase Price | $21.9 million | $15.6 million | | Cash Paid | $6.6 million | $4.8 million | | Mortgages | $15.3 million | $10.8 million | | **Dispositions** | | | | Number of Model Homes | 22 units | 31 units | | Sales Proceeds | $11.7 million | $17.5 million | | Gain on Dispositions | $3.2 million | $5.4 million | | World Plaza Sale | Not applicable | $10.0 million | | World Plaza Loss on Disposition | Not applicable | $0.3 million | - As of December 31, 2023, the company owned **110 model homes** with a net book value of approximately **$50.8 million**, primarily located in five U.S. states[24](index=24&type=chunk) - The company provides management services to its limited partnerships through its wholly-owned subsidiaries, NetREIT Advisors, LLC and Dubose Advisors LLC, and collects management fees, acquisition fees, and other fees[28](index=28&type=chunk) Stock Repurchase Program | Stock Type | Repurchase Year | Number of Shares Repurchased | Average Price (per share) | Total Cost | | :--- | :--- | :--- | :--- | :--- | | Series A Common Stock | 2022 | 196,631 shares | ~$1.59 | $313,578 | | Series D Preferred Stock | 2022 | 6,013 shares | ~$20.31 | $122,141 | | Series A Common Stock | 2023 | 0 shares | — | $0 | | Series D Preferred Stock | 2023 | 23,041 shares | ~$15.97 | $0.2 million | | **Current Authorization (Authorized Nov 2023, Expires Nov 2024)** | | | | | | Series A Common Stock | | | | Up to $6.0 million | | Series D Preferred Stock | | | | Up to $4.0 million | - The company entered into an At-The-Market Offering Agreement with The Benchmark Company, LLC on November 8, 2021, to offer and sell up to **$4,399,000** of Series A common stock, but no sales were made as of December 31, 2023[31](index=31&type=chunk) - The company was a sponsor of Murphy Canyon Acquisition Corp., a special purpose acquisition company (SPAC), which completed its business combination with Conduit Pharmaceuticals Limited on September 22, 2023, resulting in the company holding approximately **6.3%** of Conduit Pharmaceuticals Inc.'s common stock post-merger[32](index=32&type=chunk) - On January 2022, the company distributed Series A warrants to Series A common stockholders, granting the right to purchase one share of Series A common stock at **$7.00 per share** for five years, with unexercised warrants automatically converting to 1/10th of a Series A common share upon expiration[33](index=33&type=chunk) - The company completed the issuance of **920,000 shares** of 9.375% Series D Cumulative Redeemable Perpetual Preferred Stock on June 15, 2021, generating net proceeds of approximately **$20.5 million**, with dividends paid at a fixed annual rate of **9.375%** and having liquidation preference and limited voting rights[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Use of Leverage](index=13&type=section&id=Use%20of%20Leverage) The company utilizes mortgage financing, primarily non-recourse and fixed-rate, to maximize shareholder returns while managing debt obligations and maturities - The company uses mortgage financing to maximize shareholder returns, with loan terms typically five to ten years, and most loans being non-recourse to limit company risk[38](index=38&type=chunk) - As of December 31, 2023, approximately **$11.2 million** of the company's total debt was recourse debt, with **$5.9 million** related to model home properties[38](index=38&type=chunk) - The company prefers fixed-rate mortgage loans for cost predictability, and as of December 31, 2023, all mortgage loans had no floating rate terms[39](index=39&type=chunk) - In 2024, the company faces **$13.1 million** in model home mortgage principal payments, of which **$12.5 million** are maturing loans, and **$10.4 million** in commercial property mortgage principal payments, including one Dakota Center loan maturing in July 2024[40](index=40&type=chunk) [Property Management](index=13&type=section&id=PROPERTY%20MANAGEMENT) The company primarily manages its properties through a wholly-owned subsidiary, supplementing with third-party services in specific regions and internal management elsewhere - The company primarily manages all properties through its wholly-owned subsidiary, NTR Property Management, Inc., while subcontracting third-party property management companies for on-site services in California and North Dakota, and managing properties in Colorado, Maryland, and Texas internally[42](index=42&type=chunk) [Competition](index=13&type=section&id=COMPETITION) The company faces intense competition from various real estate investors, with its commercial properties' geographic concentration increasing local market condition susceptibility - The company faces intense competition from other real estate investors, including REITs, pension funds, insurance companies, and investment funds, many of which have greater financial resources and can assume higher risks or invest at lower costs[43](index=43&type=chunk) - The geographic concentration of commercial properties in Colorado and North Dakota makes the company vulnerable to local market conditions in these areas[43](index=43&type=chunk) [Regulation](index=14&type=section&id=REGULATION) The company continuously reviews investment activities to avoid being deemed an investment company and adheres to environmental laws and regulations, conducting pre-acquisition environmental assessments - The company continuously reviews its investment activities to avoid being deemed an investment company under the Investment Company Act of 1940 and complies with various environmental laws and regulations, including those related to asbestos, lead-based paint, and waste management[45](index=45&type=chunk) - The company conducts environmental assessments prior to acquisitions to minimize environmental risks and has not identified any environmental hazards that would materially adversely affect its operations or financial condition to date[46](index=46&type=chunk)[47](index=47&type=chunk) [Management of the Company](index=14&type=section&id=MANAGEMENT%20OF%20THE%20COMPANY) The company's management team includes key executives and a six-member board of directors, with a majority of independent directors - The company's management includes Jack K. Heilbron as Chairman and CEO, Ed Bentzen as CFO, Gary M. Katz as CIO, and Steven Hightower as President of NetREIT Dubose[48](index=48&type=chunk) - As of December 31, 2023, the company's board of directors consisted of six directors, four of whom were independent[50](index=50&type=chunk) [Our REIT Status](index=15&type=section&id=OUR%20REIT%20STATUS) The company has maintained its REIT qualification since fiscal year 2000, requiring adherence to organizational and operational requirements, including annual income distribution - The company elected to be taxed as a REIT for federal income tax purposes starting from the fiscal year 2000 and has maintained its REIT qualification for the fiscal year 2023[51](index=51&type=chunk) - To maintain REIT qualification, the company must satisfy various organizational and operational requirements, including distributing at least **90%** of its REIT taxable income to shareholders annually[51](index=51&type=chunk) [Human Capital Resources](index=15&type=section&id=HUMAN%20CAPITAL%20RESOURCES) The company's human capital management strategy focuses on retaining top talent and enhancing business agility, aligning with its operational needs - The company's human capital management strategy is closely aligned with its business needs, with a primary focus in 2023 on retaining top talent and improving business agility[52](index=52&type=chunk) [Office and Employees](index=15&type=section&id=OFFICE%20AND%20EMPLOYEES) The company operates from a 9,224 square foot office in San Diego, California, with a total of 15 full-time employees as of December 31, 2023 - The company's office is located in San Diego, California, covering approximately **9,224 square feet**[53](index=53&type=chunk) - As of December 31, 2023, the company had a total of **15 full-time employees**[54](index=54&type=chunk) [Available Information](index=15&type=section&id=AVAILABLE%20INFORMATION) The company's annual, quarterly, and other SEC filings are accessible on the SEC website and the company's corporate website - The company's annual reports, quarterly reports, and other SEC filings are available on www.sec.gov or the company's website at www.presidiopt.com[55](index=55&type=chunk) [Risk Factors](index=16&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces diverse risks including real estate market volatility, financial market disruptions, operational challenges, regulatory compliance, and potential impacts on its REIT status and equity securities [Summary of Risk Factors](index=16&type=section&id=Summary%20of%20Risk%20Factors) Key risks encompass real estate industry inherent challenges, financial market instability, property value impairment, reliance on key personnel, and potential loss of REIT status - Major risks include real estate industry risks, financial market disruptions, impairment of real estate investment values, difficulty selling properties, limited control in joint ventures, dependence on the model home business, geographic concentration of properties, reliance on internal cash flow, loss of key personnel, changes in investment policies, Maryland law restrictions on acquisitions, management conflicts of interest, high indebtedness, loss of REIT qualification, tax liabilities, prohibited transaction taxes, COVID-19 pandemic impacts, insufficient dividend payments, stock dilution, decline in Conduit equity investment value, Nasdaq delisting, bank deposit losses, inflation, and activist shareholder actions[58](index=58&type=chunk)[60](index=60&type=chunk) [Risks Related to our Business, Properties and Operations](index=18&type=section&id=Risks%20Related%20to%20our%20Business%2C%20Properties%20and%20Operations) Risks include economic downturns, inflation, financial market disruptions, COVID-19 impacts, competition, illiquidity of real estate, tenant defaults, and reliance on key personnel - Real estate industry risks include changes in economic conditions, interest rate fluctuations, tenant payment ability, competition, increased operating costs, weather conditions, oversupply of commercial space, changes in laws and regulations, and natural disasters[61](index=61&type=chunk)[64](index=64&type=chunk) - Inflation may lead to increased property operating and management expenses that outpace rent growth and could affect tenants' ability to pay rent and renew leases[63](index=63&type=chunk) - Financial market conditions may affect the company's ability to obtain financing, leading to higher borrowing costs, reduced returns on real estate investments, and potential impacts on property values and refinancing capabilities[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - The COVID-19 pandemic and its potential resurgence could lead to decreased rental income, property closures, reduced demand for commercial space, default or bankruptcy of major tenants, inability to reduce fixed expenses, limited capacity of third-party service providers, disruption of builder operations, financing difficulties, breach of financial covenants, asset impairment, and increased cybersecurity risks[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk)[76](index=76&type=chunk) - The company's portfolio of marketable securities faces market, interest rate, and credit risks, which could lead to a decline in their value and impact the company's earnings[75](index=75&type=chunk) - Adverse economic changes in the geographic areas where properties are located could negatively impact the value of the real estate portfolio[77](index=77&type=chunk) - Intense competition in the property acquisition market may limit investment opportunities and increase acquisition costs, affecting the company's growth prospects and profitability[78](index=78&type=chunk) - Real estate investments are relatively illiquid, and the company may be unable to sell properties at desired times and conditions, limiting its ability to realize investment gains and pay dividends[79](index=79&type=chunk) - Default or termination of leases by major tenants could result in lost income and potentially incur high re-leasing costs or lead to a decrease in property value[80](index=80&type=chunk)[81](index=81&type=chunk) - Property improvements may require substantial costs, and construction delays could affect income and debt service ability[82](index=82&type=chunk) - Insurance may not fully cover certain catastrophic losses, leading the company to bear uninsured or underinsured losses[83](index=83&type=chunk) - The company does not maintain permanent cash reserves and may face funding difficulties during increased expenses or unexpected outlays[84](index=84&type=chunk) - The company may need to provide credit to property buyers, and buyer defaults could adversely affect the company's operations and dividend payments[85](index=85&type=chunk) - Trends in remote work and co-working spaces may erode demand for office space, putting downward pressure on occupancy rates, rents, and property valuations[86](index=86&type=chunk) - Holding properties through joint ventures, partnerships, or limited liability companies may limit the company's control and ability to liquidate assets[87](index=87&type=chunk) - As a general partner or member of DownREIT entities, the company may be liable for all liabilities of these entities beyond its initial investment[88](index=88&type=chunk) - Property operations may be subject to contractual restrictions, affecting their maximum value realization[89](index=89&type=chunk) - Acquiring properties "as is" increases the company's risk of having to remedy defects or bear costs without recourse[90](index=90&type=chunk) - The model home business is highly dependent on the supply and demand for single-family homes, and market changes could affect acquisition opportunities and rent payment ability[91](index=91&type=chunk)[92](index=92&type=chunk) - The limited number of model homes and intense competition may make it difficult for the company to acquire and manage more model homes at competitive prices[93](index=93&type=chunk)[94](index=94&type=chunk) - Geographic concentration of properties increases the company's exposure to adverse economic developments and extreme weather events in specific regions[95](index=95&type=chunk)[96](index=96&type=chunk) - Accounting standards may require impairment of one or more properties, which could have a significant adverse effect on the company's operating results and financial condition[97](index=97&type=chunk) - The discovery of toxic mold on properties could lead to costly remediation programs and liability claims from third parties[98](index=98&type=chunk) - The company's long-term growth may depend on obtaining additional equity capital, and inability to do so could affect asset growth and dividend payments[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - The availability and timing of dividend payments are subject to various factors, and there is no guarantee of future dividend payments, maintenance, or increases[102](index=102&type=chunk)[103](index=103&type=chunk) - The company relies on key personnel, and their loss could harm the company's ability to achieve its business objectives[104](index=104&type=chunk)[105](index=105&type=chunk) - The company relies on third-party property managers and brokers to lease properties, and issues with them could adversely affect property operations and profitability[106](index=106&type=chunk) - The board of directors may change investment and business policies without shareholder consent, potentially increasing operational risks[107](index=107&type=chunk) - If deemed an investment company under the Investment Company Act, the company may need to alter its business model and impair its ability to operate as a REIT[108](index=108&type=chunk) - Maryland law provisions may restrict third-party acquisitions of the company or affect changes in control, including "business combination" and "control share" provisions[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - The board may approve the issuance of stock, including preferred stock, with provisions that could deter third-party acquisitions[112](index=112&type=chunk) - The company's charter limits shareholders' rights to take action against directors and officers, potentially restricting shareholder recourse in the event of adverse conduct[114](index=114&type=chunk)[119](index=119&type=chunk) - Management may face conflicts of interest, affecting the implementation of business strategies and shareholder returns[115](index=115&type=chunk)[116](index=116&type=chunk) - The company relies on automated processes and the internet, facing system security risks and cyberattack risks that could lead to data breaches, business interruptions, and reputational damage[117](index=117&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) - Legislative uncertainty and political rhetoric could lead to market economic impacts, including capital market accessibility, real estate values, and rising interest rates[121](index=121&type=chunk) - Bank institution failures could result in losses of company deposits, reducing cash available for distribution or investment[122](index=122&type=chunk) - The value of the company's equity investment in Conduit may decline due to external factors, significantly adversely affecting future expansion, revenue, and profits[123](index=123&type=chunk)[124](index=124&type=chunk) [Risks Related to our Indebtedness](index=31&type=section&id=Risks%20Related%20to%20our%20Indebtedness) The company's substantial debt, including mortgage obligations, poses risks of default, liquidity constraints, and limitations on operational and dividend policies - As of December 31, 2023, the company's total debt was approximately **$108.5 million**, and it may face default risk if it cannot generate sufficient cash flow to service its debt, affecting liquidity, financing ability, and dividend payments[125](index=125&type=chunk)[126](index=126&type=chunk) - Mortgage loans and other borrowings increase operational risks, and failure to make timely debt payments could result in lenders charging default interest rates or foreclosing on properties[128](index=128&type=chunk) - Lenders typically require restrictive covenants, affecting the company's dividend and operating policies, borrowing capacity, and ability to resell properties[129](index=129&type=chunk) - Financing arrangements involving large, lump-sum repayment obligations may affect the company's ability to pay dividends, and it may be unable to refinance or sell properties on favorable terms when due[130](index=130&type=chunk)[131](index=131&type=chunk) [Risks Related to our Status as a REIT and Related Federal Income Tax Matters](index=32&type=section&id=Risks%20Related%20to%20our%20Status%20as%20a%20REIT%20and%20Related%20Federal%20Income%20Tax%20Matters) Failure to maintain REIT status could result in significant tax liabilities, while compliance requirements may force unfavorable financial decisions and expose the company to various tax penalties - Failure to maintain REIT qualification could result in the company being subject to federal income tax at regular corporate rates and potentially being unable to re-qualify as a REIT for four years, thereby reducing distributable cash[132](index=132&type=chunk) - Even if REIT qualification is maintained, the company may still face federal, state, and local tax burdens, including corporate income tax on undistributed income, a **4%** excise tax on undistributed income, the highest corporate income tax rate on foreclosure property sales income, a **100%** penalty tax on prohibited transactions, and federal corporate income tax on taxable REIT subsidiaries (TRS)[133](index=133&type=chunk)[135](index=135&type=chunk) - The company's holdings in TRS are restricted, and transactions with TRS that do not comply with arm's-length principles may incur a **100%** penalty tax[133](index=133&type=chunk)[134](index=134&type=chunk) - To meet REIT minimum distribution requirements or working capital needs, the company may be forced to borrow short-term, sell assets, or issue securities, even if market conditions are unfavorable[136](index=136&type=chunk)[137](index=137&type=chunk) - Tax restrictions on "prohibited transactions" for REITs may limit the company from engaging in certain transactions deemed sales and could result in a **100%** penalty tax[138](index=138&type=chunk) - Legislation or other actions affecting REITs could negatively impact investors and the company, including changes in tax laws[139](index=139&type=chunk) - REIT stock ownership limitations (no more than **50%** of value held by five or fewer individuals) and the company's charter's **9.8%** ownership limit may prevent potential acquisitions, thereby depriving shareholders of a premium opportunity[140](index=140&type=chunk) - Dividends paid by REITs are generally taxed at ordinary income rates, which may reduce shareholders' net cash income and adversely affect the company's ability to raise capital through common stock issuances in the future[141](index=141&type=chunk) - Tax-exempt shareholders may be subject to unrelated business taxable income (UBTI) tax on dividends distributed by the company[142](index=142&type=chunk) - The company has material weaknesses in internal controls, primarily due to a lack of formal review and approval processes for non-recurring significant transactions related to income tax provisions and insufficient internal controls design; failure to effectively remediate these could lead to material misstatements in financial statements, impacting investor confidence and financial performance[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) [Risks Related to our Common Stock, Preferred Stock and Series A Warrants](index=36&type=section&id=Risks%20Related%20to%20our%20Common%20Stock%2C%20Preferred%20Stock%20and%20Series%20A%20Warrants) Risks include potential delisting from Nasdaq, subordination of preferred stock, limited voting rights, dividend payment uncertainty, redemption risks, and market price volatility for all equity securities - Failure to comply with Nasdaq Capital Market's continued listing requirements could result in the delisting of the company's common stock, affecting market price, liquidity, and financing ability[148](index=148&type=chunk)[149](index=149&type=chunk) - Series D preferred stock is subordinate to existing and future debt and may be diluted by the issuance of additional preferred stock or other transactions[150](index=150&type=chunk) - Series D preferred stockholders have extremely limited voting rights, primarily restricted to adverse changes in preferred stock terms and the issuance of senior preferred stock[151](index=151&type=chunk) - The company's cash flow may be insufficient to pay expected dividends on Series D preferred stock, and it may need to borrow or sell assets to pay dividends, affecting operations[152](index=152&type=chunk) - Maryland law requirements may prevent the company from paying cash dividends on Series D preferred stock[153](index=153&type=chunk)[154](index=154&type=chunk) - The company may redeem Series D preferred stock, preventing holders from receiving expected dividends, and the preferred stock has no maturity date or mandatory redemption date[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Series D preferred stock is not convertible into common stock, so an increase in common stock price will not result in corresponding gains[158](index=158&type=chunk) - Change of control rights may make it more difficult for third parties to acquire the company or deter acquisitions[159](index=159&type=chunk) - The company's charter specifies exclusive forums for certain litigation, which may limit shareholders' ability to choose a favorable judicial forum[160](index=160&type=chunk) - Nasdaq listing does not guarantee an active market for Series D preferred stock, and its market price and trading volume may fluctuate significantly due to various factors[161](index=161&type=chunk)[162](index=162&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - The sale of a large number of shares in a short period could lead to a decrease in the market price of Series D preferred stock[173](index=173&type=chunk)[174](index=174&type=chunk) - Broad market fluctuations could negatively impact the market price of Series D preferred stock[176](index=176&type=chunk) - The company's cash distribution levels may adversely affect the market price of Series D preferred stock[177](index=177&type=chunk) - Future issuances of debt or preferred stock could adversely affect the market price of Series D preferred stock[178](index=178&type=chunk)[179](index=179&type=chunk) - Series A warrants may have no value, and their exercise price may not be related to the common stock market price[180](index=180&type=chunk)[181](index=181&type=chunk) - An active trading market for warrants may not be sustained[182](index=182&type=chunk) - Warrant holders do not have the rights of common stockholders until they exercise their warrants and receive common stock[183](index=183&type=chunk) - Maryland law requirements may prevent the company from paying cash dividends on Series A common stock[184](index=184&type=chunk) - Activist shareholder actions could result in significant costs for the company, divert management's attention and resources, and adversely affect the business[185](index=185&type=chunk) [Risks Related to Legal and Regulatory Requirements](index=43&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Requirements) Compliance with government regulations, environmental laws, and accessibility mandates may increase costs, reduce distributable cash, and expose the company to liabilities - The cost of complying with government laws and regulations may reduce the company's net income and distributable cash, including zoning, environmental, land use, disability access, and air and water quality regulations[186](index=186&type=chunk) - Property contamination or failure to properly remediate contamination could affect tenant operations, lead to third-party liability, and hinder property sales or leases[187](index=187&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Compliance with the Americans with Disabilities Act (ADA) may require unexpected expenditures, affecting operating performance[188](index=188&type=chunk)[189](index=189&type=chunk) - Property taxes may increase due to changes in tax rates, reassessments, or changes in tax laws, adversely affecting cash flow, particularly if California's Proposition 13 is repealed or modified[190](index=190&type=chunk) - The company is subject to California laws requiring board gender and diversity quotas and may face recruitment challenges, financial penalties, and reputational damage[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) [Unresolved Staff Comment](index=46&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENT) The company has no unresolved staff comments regarding its periodic or current reports - The company has no unresolved staff comments regarding its periodic or current reports[198](index=198&type=chunk) [Cybersecurity](index=46&type=section&id=ITEM%201C.%20CYBERSECURITY) Presidio Property Trust employs a cross-functional approach to cybersecurity, involving management, external advisors, and the board, and has not experienced any material adverse cyber incidents to date - Presidio Property Trust employs a cross-functional approach to cybersecurity, involving senior management, employees, external advisors, and the board of directors[199](index=199&type=chunk) - The company operates in a SaaS IT environment and assesses cybersecurity risks of third-party service providers, requiring them to provide SOC 1 or SOC 2 reports[200](index=200&type=chunk) - The company has engaged third-party managed service providers for server, network, and email security, and maintains robust business continuity and disaster recovery procedures, along with cybersecurity insurance[201](index=201&type=chunk) - The company has developed company-wide cybersecurity policies and procedures and conducts annual internal reviews[202](index=202&type=chunk) - To date, the company has not experienced any cyber incidents that have had a material adverse effect on its business, financial condition, results of operations, or cash flows[203](index=203&type=chunk) [Properties](index=47&type=section&id=ITEM%202.%20PROPERTIES) The company invests in a diversified portfolio of multi-tenant real estate assets, primarily including office/industrial, retail, and model home properties, mainly located in the Western U.S [General Information](index=47&type=section&id=General%20Information) As of December 31, 2023, the company's portfolio comprises 9 office/industrial buildings, 3 retail centers, and 110 model homes, with its largest tenant contributing 6.43% of 2023 total revenue - As of December 31, 2023, the company owned or had interests in 9 office/industrial buildings (approximately **758,175 square feet**), 3 retail centers (approximately **65,242 square feet**), and **110 model homes**[204](index=204&type=chunk) - Property income primarily derives from base rents with lease terms of one to five years, and most leases include contractual rent escalation clauses[204](index=204&type=chunk) - The company's largest tenant accounted for **6.43%** of total revenue in 2023[204](index=204&type=chunk) [Geographic Diversification Table](index=47&type=section&id=Geographic%20Diversification%20Table) The company's office/industrial, retail, and model home properties are geographically diversified across several states, with significant concentrations in Colorado and North Dakota for commercial properties and the Southwest for model homes Office/Industrial and Retail Property Geographic Distribution (as of December 31, 2023) | State | Number of Properties | Total Square Feet | % of Total Square Feet | Current Annualized Base Rent | % of Total Annualized Base 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 | 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%** | Model Home Property Geographic Distribution (as of December 31, 2023) | Geographic Region | Number of Properties | Total Square Feet | % of Total Square Feet | Current Annualized Base Rent | % of Total Annualized Base 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%** | [Property Summary](index=48&type=section&id=Property%20Summary) The company's property portfolio, as of December 31, 2023, includes 12 commercial properties (office/industrial and retail) with an 81.5% occupancy rate and total mortgage debt of $73.651 million Property Portfolio Overview (as of December 31, 2023) | Property Type | Number of Properties | Total Square Feet | Purchase Price (in thousands USD) | Occupancy Rate | Mortgage Loans (in thousands USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Office/Industrial | 9 | 758,175 | $91,892 | 81.0% | $60,619 | | Retail | 3 | 65,242 | $18,954 | 86.2% | $13,032 | | **Total** | **12** | **823,417** | **$110,846** | **81.5%** | **$73,651** | [Top Ten Tenants Physical Occupancy Table](index=48&type=section&id=Top%20Ten%20Tenants%20Physical%20Occupancy%20Table) The top ten tenants collectively account for 34.48% of the company's total annualized base rent, with John Hopkins University being the largest at 6.43% Top Ten Tenant Information (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 | $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% | | **Total** | | **$3,808,017** | **34.48%** | [Lease Expirations Tables](index=49&type=section&id=Lease%20Expirations%20Tables) The company's lease expiration schedule for office/industrial, retail, and model home properties shows significant portions of leases expiring in 2024 and 2025 Office/Industrial and Retail Property Lease Expirations (as of December 31, 2023) | Expiration Year | Number of Leases Expiring | Leased Area (Square Feet) | Rental Revenue | % of Total Rent | | :--- | :--- | :--- | :--- | :--- | | 2023 | 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% | | **Total** | **155** | **657,988** | **$11,041,868** | **100.0%** | Model Home Property Lease Expirations (as of December 31, 2023) | Expiration Year | Number of Leases Expiring | Leased Area (Square Feet) | Rental Revenue | % of Total Rent | | :--- | :--- | :--- | :--- | :--- | | 2024 | 71 | 214,566 | $2,396,376 | 56.0% | | 2025 | 39 | 119,790 | $1,884,924 | 44.0% | | **Total** | **110** | **334,356** | **$4,281,300** | **100.0%** | [Physical Occupancy Table for Last 5 Years](index=50&type=section&id=Physical%20Occupancy%20Table%20for%20Last%205%20Years) Property occupancy rates have varied across the portfolio over the past five years, with some properties achieving 100% occupancy in 2023 while others experienced fluctuations Property Occupancy Rates (as of December 31) | Property Name | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | | Genesis Plaza | 78.5% | 74.7% | 85.6% | 96.2% | 100.0% | | Dakota Center | 86.0% | 86.0% | 73.5% | 71.8% | 58.1% | | Grand Pacific Center | 71.8% | 74.2% | 56.6% | 56.4% | 89.7% | | Arapahoe Center | 100.0% | 100.0% | 100.0% | 100.0% | 88.0% | | West Fargo Industrial | 77.1% | 82.0% | 90.8% | 94.3% | 100.0% | | 300 N.P. | 73.0% | 72.8% | 64.8% | 75.5% | 66.4% | | One Park Centre | 79.1% | 84.8% | 80.5% | 84.9% | 75.0% | | Shea Center II | 90.9% | 91.2% | 91.6% | 95.4% | 67.1% | | Baltimore | N/A | N/A | 100.0% | 100.0% | 100.0% | | Union Town Center | 100.0% | 100.0% | 87.4% | 72.9% | 79.5% | | Research Parkway | 100.0% | 100.0% | 100.0% | 88.8% | 100.0% | | Mandolin | N/A | N/A | 100.0% | 100.0% | 100.0% | [Annualized Base Rent Per Square Foot for Last 5 Years](index=51&type=section&id=Annualized%20Base%20Rent%20Per%20Square%20Foot%20for%20Last%205%20Years) Annualized base rent per square foot has shown varied trends across the company's properties over the last five years, reflecting market dynamics and lease renewals Annualized Base Rent Per Square Foot (as of December 31) | Property Name | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | | Genesis Plaza | $28.15 | $22.97 | $25.71 | $26.26 | $29.34 | | Dakota Center | $12.87 | $13.24 | $13.22 | $14.09 | $15.45 | | Grand Pacific Center | $13.97 | $13.71 | $13.79 | $13.90 | $14.57 | | Arapahoe Center | $14.69 | $15.18 | $11.87 | $13.75 | $14.43 | | West Fargo Industrial | $6.65 | $6.77 | $6.81 | $6.80 | $7.09 | | 300 N.P. | $13.67 | $14.86 | $14.89 | $16.72 | $15.32 | | One Park Centre | $19.51 | $21.85 | $23.42 | $20.35 | $23.81 | | Shea Center II | $18.47 | $19.24 | $20.37 | $19.40 | $19.17 | | Baltimore | N/A | N/A | $21.50 | $21.93 | $22.37 | | Union Town Center | $25.63 | $23.73 | $23.86 | $25.22 | $24.65 | | Research Parkway | $22.58 | $29.09 | $22.69 | $23.53 | $23.74 | | Mandolin | N/A | N/A | $30.75 | $31.37 | $32.00 | [Legal Proceedings](index=52&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any material legal proceedings nor has it received notice of any significant threatened litigation - The company is not currently involved in any material legal proceedings, nor has it received any notice of significant threatened litigation[226](index=226&type=chunk) [Mine Safety Disclosures](index=52&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Not applicable - Not applicable[227](index=227&type=chunk) [Part II](index=5&type=section&id=Part%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUERS%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's Series A common stock, Series D preferred stock, and Series A warrants are listed on Nasdaq, with regular dividend payments and an active stock repurchase program [Market Information](index=52&type=section&id=Market%20Information) The company's Series A common stock, Series D preferred stock, and Series A warrants are all listed and traded on the Nasdaq Capital Market - The company's Series A common stock (SQFT) has been listed on the Nasdaq Capital Market since October 7, 2020[228](index=228&type=chunk) - The company's Series D preferred stock (SQFTP) has been listed on the Nasdaq Capital Market since June 11, 2021[228](index=228&type=chunk) - The company's Series A warrants (SQFTW) have been listed on the Nasdaq Capital Market since January 24, 2022[228](index=228&type=chunk) [Number of Common Stockholders](index=52&type=section&id=Number%20of%20Common%20Stockholders) As of March 27, 2024, the company had approximately 6,000 holders of its Series A common stock - As of March 27, 2024, the company had approximately **6,000 holders** of its Series A common stock[230](index=230&type=chunk) [Dividend Payments](index=52&type=section&id=Dividend%20Payments) The company provides detailed dividend payment information for both Series A common stock and Series D preferred stock for 2022 and 2023 Series A Common Stock Dividends (per share) | Quarter End | 2023 Dividend | 2022 Dividend | | :--- | :--- | :--- | | 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** | Series D Preferred Stock Dividends (per share) | Month | 2023 Dividend | 2022 Dividend | | :--- | :--- | :--- | | 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](index=53&type=section&id=Warrant%20Dividend) Series A warrants, distributed in January 2022, grant holders the right to purchase common stock at $7.00 per share, with a five-year validity and automatic conversion upon expiration - The company distributed Series A warrants to Series A common stockholders in January 2022, granting the right to purchase one share of Series A common stock at **$7.00 per share** for five years, with unexercised warrants automatically converting to 1/10th of a Series A common share upon expiration[234](index=234&type=chunk) [Dividend Policy](index=53&type=section&id=Dividend%20Policy) The company plans to distribute at least 90% of its annual REIT taxable income to maintain REIT status and intends to continue quarterly common stock and monthly preferred stock dividends - The company plans to distribute at least **90%** of its annual REIT taxable income to shareholders to maintain REIT qualification and intends to continue paying quarterly dividends to common stockholders and monthly dividends to Series D preferred stockholders[235](index=235&type=chunk) Dividends Paid | Stock Type | 2023 | 2022 | | :--- | :--- | :--- | | Series A Common Stock | $1.2 million | $3.1 million | | Series D Preferred Stock | $2.1 million | $2.2 million | - In 2023 and 2022, all dividends paid to Series A common stockholders were treated as a return of capital for federal income tax purposes, thus being tax-exempt[237](index=237&type=chunk) [Issuer Purchases of Equity Securities](index=54&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) The board authorized a stock repurchase program in November 2023 for Series A common stock and Series D preferred stock, expiring in November 2024 - The company's board of directors authorized a stock repurchase program in November 2023 to repurchase up to **$6.0 million** of Series A common stock and up to **$4.0 million** of Series D preferred stock, which expires in November 2024[239](index=239&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) 2023 Stock Repurchase Activity | Stock Type | Number of Shares Repurchased | Average Price (per share) | Total Cost | | :--- | :--- | :--- | :--- | | Series A Common Stock | 0 shares | — | $0 | | Series D Preferred Stock | 23,041 shares | ~$15.97 | $0.2 million | [Reserved](index=55&type=section&id=ITEM%206.%20RESERVED) This item is reserved and not applicable - This item is reserved and not applicable[243](index=243&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial condition and operating results for 2023 and 2022, highlighting portfolio optimization, SPAC de-consolidation, and liquidity strategies amidst economic uncertainties [Overview](index=56&type=section&id=OVERVIEW) The company operates as an internally managed REIT, diversifying its portfolio across office, industrial, retail, and model home properties, primarily in the Western U.S - The company operates as an internally managed, diversified real estate investment trust (REIT), investing in office, industrial, retail properties, and model homes leased back to homebuilders, primarily located in the Western United States[246](index=246&type=chunk) - As of December 31, 2023, the company owned or had interests in 8 office buildings and 1 industrial building (approximately **758,175 square feet**), 3 retail shopping centers (approximately **65,242 square feet**), and **110 model homes**[247](index=247&type=chunk) - The company mitigates risk through diversification across commercial property segments, geographic markets, and tenants, and conducts credit reviews of its tenants[249](index=249&type=chunk) [Significant Transactions in 2023 and 2022](index=57&type=section&id=Significant%20Transactions%20in%202023%20and%202022) The company completed significant acquisitions and dispositions of model homes in 2023 and 2022, including the sale of World Plaza in 2022 Significant Transactions in 2023 and 2022 | Transaction Type | 2023 | 2022 | | :--- | :--- | :--- | | **Acquisitions** | | | | Number of Model Homes | 40 units | 31 units | | Purchase Price | $21.9 million | $15.6 million | | Cash Paid | $6.6 million | $4.8 million | | Mortgages | $15.3 million | $10.8 million | | **Dispositions** | | | | Number of Model Homes | 22 units | 31 units | | Sales Proceeds | $11.7 million | $17.5 million | | Gain on Dispositions | $3.2 million | $5.4 million | | World Plaza Sale | Not applicable | $10.0 million | | World Plaza Loss on Disposition | Not applicable | $0.3 million | [Sponsorship of Special Purpose Acquisition Company](index=58&type=section&id=Sponsorship%20of%20Special%20Purpose%20Acquisition%20Company) The company, as a sponsor of Murphy Canyon Acquisition Corp., completed a business combination with Conduit Pharmaceuticals Limited in September 2023, resulting in a 6.3% equity stake in Conduit Pharmaceuticals Inc - The company was a sponsor of Murphy Canyon Acquisition Corp., a special purpose acquisition company (SPAC), which completed its business combination with Conduit Pharmaceuticals Limited on September 22, 2023, and was renamed Conduit Pharmaceuticals Inc.[255](index=255&type=chunk)[257](index=257&type=chunk)[260](index=260&type=chunk) - Prior to the merger, the company held approximately **65%** of the SPAC's outstanding common stock; post-merger, the company received **3,306,250 shares** of Conduit common stock, **754,000 shares** of Conduit common stock, and private warrants to purchase **754,000 shares** of Conduit common stock[260](index=260&type=chunk) - Post-merger, the company transferred **45,000 shares** of Conduit common stock and warrants to purchase **45,000 shares** of Conduit common stock to the SPAC's independent directors as compensation, resulting in the company holding approximately **6.5%** of Conduit's common stock immediately after the merger, and currently holding approximately **6.3%**[260](index=260&type=chunk) [Economic Environment](index=59&type=section&id=ECONOMIC%20ENVIRONMENT) Economic uncertainty is expected to persist into 2024, with a notable divergence between REIT implied and private market capitalization rates, potentially leading to significant real estate value adjustments - According to Nareit's 2024 REIT Market Outlook, economic uncertainty will persist into 2024, with a significant divergence between REIT implied capitalization rates and transaction and appraisal capitalization rates, signaling potential substantial value write-downs in the private real estate market[261](index=261&type=chunk) - Nareit notes that REITs typically perform strongly after monetary policy tightening cycles, and valuation discrepancies may converge in 2024, with strong balance sheets providing acquisition and growth advantages[261](index=261&type=chunk)[263](index=263&type=chunk) [Credit Market Environment](index=59&type=section&id=CREDIT%20MARKET%20ENVIRONMENT) Interest rates rose in 2023 due to Federal Reserve actions, but stabilized by early 2024, with expectations for transaction market recovery and varied capitalization rates across property sectors - In February 2024, fixed-rate residential mortgage rates ranged between **6.15%** and **7.29%**, while commercial property 5-10 year fixed-rate loans ranged between **6.71%** and **6.84%**[262](index=262&type=chunk) - Interest rate increases in 2023 were due to Federal Reserve rate hikes to curb inflation, but the Federal Reserve did not raise rates in September, November, December 2023, or January 2024[262](index=262&type=chunk) - Colliers Securities anticipates a recovery in the transaction market in the second half of 2024 as interest rates stabilize or decline, providing acquisition opportunities for REITs[265](index=265&type=chunk) - Industrial property capitalization rates reached **6.24%** in January 2024 after fluctuating in 2023, with significant variations across cities; retail sector capitalization rates showed the most volatility, decreasing in January; office sector capitalization rates decreased to **6.03%** in January, with a significant divergence between Class A and Class B assets[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk) [Management Evaluation of Results of Operations](index=60&type=section&id=MANAGEMENT%20EVALUATION%20OF%20RESULTS%20OF%20OPERATIONS) Management prioritizes cash flow generation for operational expenses, debt service, and shareholder distributions, optimizing the portfolio through re-leasing, rent negotiations, and strategic asset sales - Management evaluates operating performance primarily by focusing on the ability to generate cash flow to cover operating expenses, general and administrative expenses, debt service, and distributions to shareholders, with less emphasis on non-cash expenses such as depreciation, amortization, and impairment losses[268](index=268&type=chunk) - Management optimizes the portfolio through re-leasing, negotiating rents, and selling underperforming assets, reinvesting proceeds into properties with higher value-add potential[269](index=269&type=chunk) - Operating results for 2023 and 2022 are not indicative of future performance, as the SPAC de-consolidation and post-de-consolidation investment in Conduit Pharmaceuticals will lead to significant changes in expenses and interest income in future periods[270](index=270&type=chunk) - In 2023, high commercial property prices, rising interest rates, and compressed capitalization rates made it challenging to acquire properties meeting the company's portfolio needs, but the company successfully acquired **40 model homes**[270](index=270&type=chunk) [Critical Accounting Policies](index=61&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Key accounting policies cover real estate assets, impairment, revenue recognition, income taxes, and fair value measurements, crucial for financial reporting and REIT compliance - Critical accounting policies include accounting for real estate assets and lease intangibles, classification of real estate held for sale and discontinued operations, impairment of real estate assets, goodwill and intangible assets, sales of real estate assets, revenue recognition, income taxes, and fair value measurements[271](index=271&type=chunk) - Real estate assets and lease intangibles are recorded at cost, with purchase price allocated among land, buildings, tenant improvements, and lease intangibles based on fair value[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) - Real estate held for sale is measured at the lower of its carrying value or estimated sales price less costs to sell, and operating results of discontinued operations are reported as such for all periods presented[277](index=277&type=chunk) - Impairment of real estate assets is recognized when estimated future undiscounted cash flows are less than the carrying value, and the carrying value is written down to the estimated fair value[278](index=278&type=chunk) - Goodwill and intangible assets are tested for impairment at least annually and more frequently if circumstances indicate a need[279](index=279&type=chunk)[280](index=280&type=chunk) - Sales of real estate are generally recognized as gains or losses when control is transferred to the buyer[281](index=281&type=chunk) - Revenue recognition includes recognizing minimum rents on a straight-line basis and determining the commencement of rental income based on ownership of tenant improvements[282](index=282&type=chunk)[286](index=286&type=chunk) - The company estimates the collectability of tenant receivables and establishes an allowance for doubtful accounts based on historical bad debts, customer creditworthiness, and economic trends[284](index=284&type=chunk) - The company elects to be taxed as a REIT for federal income tax purposes and treats certain subsidiaries as taxable REIT subsidiaries (TRS), which are subject to federal and state income taxes[287](index=287&type=chunk)[288](index=288&type=chunk) - Fair value measurements use a three-level input hierarchy, and as of December 31, 2023, the company's holdings of Conduit common stock and warrants were measured at Level 1 market prices, valued at approximately **$18.3 million** with a cost basis of approximately **$7.5 million**[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - Depreciation and amortization expenses are calculated using the straight-line method over the estimated useful lives of the assets[294](index=294&type=chunk) - Earnings per share (EPS) are calculated in accordance with FASB ASC Topic 260, using the two-class method for unvested restricted stock[296](index=296&type=chunk) [Results from Operations for the Years Ended December 31, 2023 and 2022](index=65&type=section&id=RESULTS%20FROM%20OPERATIONS%20FOR%20THE%20YEARS%20ENDED%20DECEMBER%2031%2C%202023%20AND%202022) Operating results for 2023 and 2022 are not indicative of future performance due to the SPAC de-consolidation and asset sales, with total revenue slightly decreasing in 2023 - Operating results for 2023 and 2022 are not indicative of future performance, as the SPAC de-consolidation and asset sales will lead to significant changes in income and expenses in future periods[298](index=298&type=chunk) Total Revenue | Metric | 2023 | 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $17.6 million | $17.8 million | -$0.2 million | -1% | | Reason for Change | Primarily due to non-renewal of Halliburton lease, partially offset by increased model home revenue | | | | Leasing Operating Costs | Metric | 2023 | 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Leasing Operating Costs | $6.0 million | $5.8 million | +$0.12 million | +2% | | % of Total Revenue | 33.8% | 32.9% | | | | Reason for Change | Increased office property expenses, particularly insurance costs | | | | Percentage of Total Revenue and Total Real Estate Assets by Segment | Segment | % of Total Revenue 2023 | % of Total Revenue 2022 | % of Total Real Estate Assets 2023 | % of Total Real Estate Assets 2022 | | :--- | :--- | :--- | :--- | :--- | | Office/Industrial | 65.9% | 71.2% | 53.5% | 60.3% | | Model Homes | 23.4% | 16.3% | 35.2% | 26.9% | | Retail | 10.7% | 12.5% | 11.3% | 12.8% | General and Administrative Expenses | Metric | 2023 | 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | General and Administrative Expenses | $6.8 million | $6.2 million | +$0.6 million | +10% | | % of Total Revenue | 38.5% | 34.7% | | | | Reason for Change | Decreased salary costs in 2022 (including employee retention credits and reduced stock compensation) were offset by increased D&O insurance and accounting consulting fees for the SPAC; no employee retention credits in 2023 | | | | Depreciation and Amortization | Metric | 2023 | 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Depreciation and Amortization Expense | $5.4 million | $5.5 million | -$0.1 million | -1.8% | | Reason for Change | Slight decrease | | | | Asset Impairment | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Goodwill and Real Estate Asset Impairment | $3.2 million | $0 | +$3.2 million | | Impairment Components | **$2.0 million** for One Park Center property, **$0.4 million** for 8 model homes, **$0.8 million** for goodwill | | | Mortgage Interest Expense | Metric | 2023 | 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Mortgage Interest Expense | $5.0 million | $4.7 million | +$0.3 million | +6% | | Reason for Change | Increased mortgage debt (from **$97.8 million** to **$108.5 million**) and higher weighted average interest rate (from **4.57%** to **5.18%**) | | | | Income Tax Expense/Credit | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Income Tax Expense/Credit | -$0.3 million (expense) | $1.2 million (credit) | -$1.5 million | | Reason for Change | Lower model home sales gains in 2023 and SPAC de-consolidation in September 2023 | | | Income Attributable to Non-Controlling Interests | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Income Attributable to Non-Controlling Interests | $3.0 million | $3.6 million | -$0.6 million | | Reason for Change | Primarily affected by changes in the number of model homes sold by model home partnerships | | | SPAC De-consolidation Gain | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | SPAC De-consolidation Gain | $40.3 million | $0 | +$40.3 million | | Components | Remeasurement of retained investment **$34.1 million**, de-consolidation of assets and liabilities **$6.2 million** | | | [Geographic Diversification Tables](index=67&type=section&id=Geographic%20Diversification%20Tables) The company's commercial and model home properties exhibit geographic diversification across various states, with detailed breakdowns of square footage and annual base rent contributions Commercial Property Geographic Distribution (as of December 31, 2023) | State | Number of Properties | Total Square Feet | % of Total Square Feet | Current Annualized Base Rent | % of Total Annualized Base 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 | 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%** | Model Home Property Geographic Distribution (as of December 31, 2023) | Geographic Region | Number of Properties | Total Square Feet | % of Total Square Feet | Current Annualized Base Rent | % of Total Annualized Base 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](index=68&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company plans to meet short-term and long-term liquidity needs through existing cash, operating cash flow, refinancing, property sales, and potential equity or debt issuances - The company's future liquidity sources include existing cash, operating cash flow, refinancing existing mortgages, future real estate sales, new borrowings under model home credit lines, sales of Conduit Pharma investments, and equity or debt securities issuances[313](index=313&type=chunk) - As of December 31, 2023, the company's cash and restricted cash totaled approximately **$6.5 million**[313](index=313&type=chunk) - Short-term liquidity needs include operating costs, debt service, tenant improvements, leasing commissions, and dividends; total mortgage principal payments for 2024 are approximately **$23.5 million**, with **$13.1 million** related to model home properties[314](index=314&type=chunk) - The company plans to meet operating costs, planned capital expenditures, and required dividends for the next 12 months through existing cash, operating cash flow, model home partnership distributions, and property sales in 2024[316](index=316&type=chunk) - Long-term liquidity needs include funds for growth and maintenance of the portfolio, and the company anticipates sufficient financing capital in the future[317](index=317&type=chunk) Series A Common Stock Dividends (per share) | Quarter End | 2023 Dividend | 2022 Dividend | | :--- | :--- | :--- | | 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** | Series D Preferred Stock Dividends (per share) | Month | 2023 Dividend | 2022 Dividend | | :--- | :--- | :--- | | 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** | Cash, Cash Equivalents, and Restricted Cash | Metric | December 31, 2023 | December 31, 2022 | | :--- | :--

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________ FORM 10-Q ___________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period from _____ to _____ 001-34049 (Commission f ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________ FORM 10-Q ___________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period from _____ to _____ 001-34049 (Commission file N ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________ FORM 10-Q ___________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period from _____ to _____ 001-34049 (Commission file ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________ FORM 10-K (mark one) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 000-53673 Presidio Property Trust, Inc. (Exact n ...