Cautionary Language Regarding Forward-Looking Statements This section warns readers that the report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially - This section warns readers that the report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially; it lists various factors, including inherent risks associated with real estate investments, significant competition, economic conditions, debt obligations, adverse changes in financing markets, and the ability to qualify as a REIT1113 Part I — Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including the Balance Sheets, Statements of Operations, Statements of Changes in Equity, and Statements of Cash Flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity as of September 30, 2024, and December 31, 2023 Consolidated Balance Sheet Highlights (September 30, 2024 vs. December 31, 2023) | Metric | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :--------------------------------------- | :----------------------- | :------------- | | ASSETS | | | | Real estate assets, net | $131,415,210 | $144,155,784 | | Investment in Conduit Pharmaceuticals marketable securities | $481,219 | $18,318,521 | | Total Assets | $145,845,230 | $175,962,638 | | LIABILITIES | | | | Mortgage notes payable, total net | $102,319,219 | $107,713,273 | | Total Liabilities | $107,748,693 | $114,640,568 | | EQUITY | | | | Total equity | $38,096,537 | $61,322,070 | | TOTAL LIABILITIES AND EQUITY | $145,845,230 | $175,962,638 | Consolidated Statements of Operations Details the company's revenues, expenses, and net income (loss) for the three and nine months ended September 30, 2024, and 2023 Consolidated Statements of Operations Highlights (Three and Nine Months Ended Sep 30, 2024 vs. 2023) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenue | $4,723,374 | $4,484,174 | $14,099,976 | $13,149,538 | | Total costs and expenses | $5,380,962 | $4,465,794 | $15,623,582 | $13,920,150 | | Net income (loss) | $(5,704,383) | $22,159,661 | $(20,820,853) | $21,346,450 | | Net income (loss) attributable to common stockholders | $(6,645,466) | $20,958,509 | $(24,800,532) | $17,595,632 | | Basic & Diluted EPS | $(0.53) | $1.77 | $(2.00) | $1.49 | Consolidated Statements of Changes in Equity Outlines the changes in the company's equity components, including total stockholders' equity and noncontrolling interest, for the nine months ended September 30, 2024, and 2023 Consolidated Statements of Changes in Equity Highlights (Nine Months Ended Sep 30, 2024 vs. 2023) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Total Stockholders' Equity | $29,536,742 | $50,954,183 | | Noncontrolling Interest | $8,559,795 | $10,367,887 | | Total Equity | $38,096,537 | $61,322,070 | - Net loss for the nine months ended September 30, 2024, was $(20,820,853), a significant decrease from net income of $21,346,450 for the same period in 2023, leading to a substantial reduction in total equity19 - The company issued 109,054 shares of Series D Preferred Stock, net of issuance costs, for $1,195,855 during the nine months ended September 30, 202419 Consolidated Statements of Cash Flows Provides a breakdown of cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2024, and 2023 Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30, 2024 vs. 2023) | Cash Flow Activity | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Net cash (used in) provided by operating activities | $(1,040,830) | $(356,973) | | Net cash provided by investing activities | $10,664,729 | $129,013,895 | | Net cash used in financing activities | $(8,934,879) | $(137,394,883) | | Net change in cash, cash equivalents and restricted cash | $689,020 | $(8,737,961) | | Cash, cash equivalents and restricted cash - end of period | $7,199,448 | $7,778,764 | - Investing activities saw a significant decrease in cash provided, from $129.0 million in 2023 to $10.7 million in 2024, primarily due to the absence of SPAC redemptions in 2024205 - Financing activities shifted from a large cash outflow of $137.4 million in 2023 (due to SPAC redemptions) to a smaller outflow of $8.9 million in 2024, driven by mortgage note repayments and distributions207211 Notes to Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, specific transactions, and financial instrument details 1. Organization Presidio Property Trust, Inc. is an internally-managed REIT focused on office, industrial, retail, and model home properties, maintaining REIT qualification by distributing at least 90% of its taxable income and utilizing Taxable REIT Subsidiaries (TRSs) for certain activities - The Company operates as an internally-managed REIT, owning 12 commercial properties and 83 model home properties2585 - To maintain REIT status, the Company must distribute at least 90% of its REIT taxable income27 - Future capital needs include paying down existing borrowings, maintaining properties, funding tenant improvements, and paying dividends29 - Future principal payments on mortgage notes payable are approximately $11.7 million in 2024 and $37.5 million in 202531 2. Significant Accounting Policies This section details the company's accounting principles, including GAAP conformity for interim statements, consolidation policies for subsidiaries and partnerships, and the use of estimates in financial reporting Basis of Presentation and Principles of Consolidation Explains the preparation of consolidated financial statements in accordance with GAAP and the inclusion of subsidiaries and partnerships - Consolidated financial statements are prepared in accordance with GAAP for interim statements and include Presidio Property Trust, Inc., its subsidiaries, and partnerships3536 - Murphy Canyon Acquisition Corp. (SPAC) was consolidated until its business combination on September 22, 2023, when control was lost37 Key Accounting Estimates and Asset Valuation Discusses significant accounting estimates and valuation methodologies applied to assets like real estate, lease intangibles, and allowances for doubtful accounts - Significant estimates include private warrants, allocation of property purchase price, valuation of long-lived assets, and allowance for doubtful accounts39 - Real estate assets are recorded at cost, with purchase price allocated to tangible and intangible assets (e.g., land, buildings, in-place leases, above/below-market leases)404143 - Deferred leasing costs are capitalized and amortized over the lease terms, with net deferred leasing costs of approximately $1.6 million at September 30, 202446 Cash, Restricted Cash, and Real Estate Held for Sale Provides details on the company's cash and restricted cash balances, along with properties classified as held for sale Cash, Cash Equivalents and Restricted Cash | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | Cash, cash equivalents and restricted cash | $7.2 million | $6.5 million | | Restricted cash | $3.5 million | $3.7 million | - As of September 30, 2024, two commercial properties (Union Town Center and Research Parkway) and five model homes were classified as 'held for sale'48 Impairments and Fair Value Measurements Addresses the company's policies and charges related to asset impairments and the fair value measurement of investments Non-Cash Impairment Charges (Three and Nine Months Ended Sep 30, 2024) | Period | Impairment Charge | | :--------------------------------------- | :------------------ | | Three months ended Sep 30, 2024 | ~$0.7 million | | Nine months ended Sep 30, 2024 | ~$0.9 million | - Impairment charges for model homes (approx. $41,656 for 3 months, $238,449 for 9 months) were due to abnormally short hold periods and builder style changes in Texas52 - A $0.7 million impairment on Dakota Center was recognized due to the loan maturity and inability to agree on modification/extension, leading to a sale agreement with the lender53 - Investments in Conduit Pharmaceuticals marketable securities were valued at approximately $0.5 million as of September 30, 2024, down from $18.3 million at December 31, 2023, due to fair value adjustments56 Earnings Per Share and Variable Interest Entities Explains the calculation of earnings per share and the company's involvement with variable interest entities - EPS is computed using the two-class method due to unvested restricted stock with non-forfeitable dividends59 Potentially Dilutive Shares Excluded from EPS Calculation (Sep 30, 2024 vs. 2023) | Security Type | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Common Stock Warrants | 2,000,000 | 2,000,000 | 2,000,000 | 2,000,000 | | Placement Agent Warrants | 80,000 | 80,000 | 80,000 | 80,000 | | Series A Warrants | 14,450,069 | 14,450,069 | 14,450,069 | 14,450,069 | | Unvested Restricted Common Stock Grants | 2,034,663 | 1,292,238 | 2,034,663 | 1,292,238 | | Total potentially dilutive shares | 18,564,732 | 17,822,307 | 18,564,732 | 17,822,307 | - Murphy Canyon (SPAC) was consolidated as a Variable Interest Entity (VIE) until its business combination with Conduit Pharma on September 22, 2023, after which it was deconsolidated64110 Immaterial Error Corrections and Recent Accounting Pronouncements Details corrections made to prior period financial statements and the company's evaluation of recently issued accounting standards - Corrections were made to prior period financial statements for restricted compensation expense (reclassified from liability to additional paid-in capital) and cash flow classification of unpaid building and tenant improvements6668 - The Company is evaluating the impact of recently issued ASUs on Income Taxes (ASU 2023-09), Segment Reporting (ASU 2023-07), Business Combinations (ASU 2023-05), and Income Statement Expenses (ASU 2024-03), as well as SEC climate-disclosure rules7374757677 3. Recent Real Estate Transactions The company engaged in both acquisitions and dispositions of model homes during the nine months ended September 30, 2024 and 2023, with a net gain on sales Real Estate Acquisitions (Nine Months Ended Sep 30) | Year | Model Homes Acquired | Purchase Price | | :--- | :------------------- | :------------- | | 2024 | 19 | ~$9.7 million | | 2023 | 25 | ~$13.7 million | Real Estate Dispositions (Nine Months Ended Sep 30) | Year | Model Homes Sold | Net Sales Proceeds | Net Gain | | :--- | :--------------- | :----------------- | :------- | | 2024 | 46 | ~$22.3 million | ~$3.2 million | | 2023 | 15 | ~$7.8 million | ~$2.3 million | 4. Real Estate Assets The company's real estate portfolio consists of office, industrial, retail, and triple-net leased model home properties across several states, with net asset value decreasing from December 31, 2023, to September 30, 2024, due to dispositions and impairments - As of September 30, 2024, the Company owned 8 office/industrial properties (758,175 sq ft), 3 retail properties (65,242 sq ft), and 83 model home residential properties (251,602 sq ft)85 Real Estate Assets and Lease Intangibles, Net | Asset Type | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | Commercial properties | $91,332,215 | $93,365,637 | | Model Home properties | $40,082,995 | $50,790,147 | | Total real estate assets and lease intangibles, net | $131,415,210 | $144,155,784 | - Depreciation expense for the nine months ended September 30, 2024, was approximately $3.8 million, up from $3.7 million in 202387 - Union Town Center and Research Parkway commercial properties, along with 5 model homes, were listed as held for sale as of September 30, 20244889 5. Lease Intangibles The net value of lease intangible assets, including in-place leases and leasing costs, decreased from December 31, 2023, to September 30, 2024, with the company also holding net below-market lease liabilities Net Value of Lease Intangibles | Intangible Asset | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | In-place leases, net | $12,911 | $20,248 | | Leasing costs, net | $11,247 | $17,055 | | Above-market leases, net | $0 | $0 | | Total lease intangibles, net | $24,158 | $37,303 | - The net value of acquired intangible liabilities related to below-market leases was approximately $9,535 at September 30, 2024, down from $13,266 at December 31, 202390 Future Aggregate Amortization Expense for Lease Intangible Assets | Year | Amortization Expense | | :--- | :------------------- | | 2024 | $4,382 | | 2025 | $15,669 | | 2026 | $4,107 | | Total | $24,158 | 6. Other Assets Other assets primarily consist of deferred rent receivable, prepaid expenses, notes receivable, and accounts receivable, with the company's investment in marketable securities (excluding Conduit) being zero as of September 30, 2024 Composition of Other Assets | Asset | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | Deferred rent receivable | $2,087,378 | $1,973,887 | | Prepaid expenses, deposits and other | $636,704 | $349,160 | | Notes receivable | $316,374 | $316,374 | | Accounts receivable, net | $135,353 | $694,869 | | Right-of-use assets, net | $69,962 | $15,649 | | Deferred offering costs | $0 | $5,000 | | Investment in marketable securities (not including Conduit) | $0 | $45,149 | | Total other assets | $3,245,771 | $3,400,088 | 7. Mortgage Notes Payable The company's mortgage notes payable, net, decreased from $107.7 million at December 31, 2023, to $102.3 million at September 30, 2024, with several commercial property loans maturing within the next 12 months Mortgage Notes Payable, Net | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | Mortgage Notes Payable, net | $102,319,219 | $107,713,273 | | Weighted average interest rate (Sep 30, 2024) | 5.44% | 5.06% (Sep 30, 2023) | - The non-recourse loan on the Dakota Center property matured on July 6, 2024, and the property is being offered for sale to settle the loan balance97152 - Five commercial property loans totaling approximately $28.4 million are maturing within the next 12 months, with management reviewing options including refinancing, restructuring, or selling97192 Scheduled Principal Payments of Mortgage Notes Payable (as of Sep 30, 2024) | Year | Commercial Properties Notes Payable | Model Homes Notes Payable | Total Principal Payments | | :--------------------------------------- | :-------------------------------- | :------------------------ | :----------------------- | | 2024 | $9,367,570 | $2,321,811 | $11,689,381 | | 2025 | $28,644,941 | $8,885,311 | $37,530,252 | | 2026 | $16,521,100 | $1,008,650 | $17,529,750 | | 2027 | $157,739 | $551,267 | $709,006 | | 2028 | $168,907 | $9,119,969 | $9,288,876 | | Thereafter | $20,770,743 | $5,650,747 | $26,421,490 | | Total | $75,631,000 | $27,537,755 | $103,168,755 | 8. Notes Payable The company has an Economic Injury Disaster Loan (EIDL) from the SBA with a balance of approximately $144,854 as of September 30, 2024, and a promissory note to a subsidiary was paid in full in October 2024 - EIDL loan balance: ~$144,854 as of September 30, 2024, accruing interest at 3.75% per year, maturing August 17, 2050100 - A $0.3 million promissory note to a majority-owned subsidiary for a model home refinancing was paid in full in October 2024101 9. Investment in Conduit Pharmaceuticals The company sponsored Murphy Canyon Acquisition Corp. (SPAC), which completed its business combination with Conduit Pharma on September 22, 2023, leading to a significant decrease in the fair value of its investment and a substantial net loss - The Company sponsored Murphy Canyon Acquisition Corp. (SPAC), which completed its business combination with Conduit Pharmaceuticals Limited on September 22, 2023104109 - Upon deconsolidation of Conduit, the Company recorded a gain of approximately $40.3 million in September 2023110 Investment in Conduit Pharmaceuticals Marketable Securities | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | Fair Value | ~$0.5 million | ~$18.3 million | | Cost Basis | ~$7.5 million | N/A | | Net Loss (9 months ended Sep 30, 2024) | ~$17.8 million | N/A | - A lockup agreement was entered on April 22, 2024, for 2,700,000 shares of Conduit common stock, in exchange for private warrants to purchase 540,000 shares112 10. Commitments and Contingencies The company has estimated capital expenditures of approximately $1.0 million for tenant improvements and property expansion, while monitoring potential impacts from activist stockholder activities, litigation, environmental matters, and broader financial market risks - Estimated capital expenditures for existing properties: ~$1.0 million for the rest of 2024113 - An activist stockholder group's proxy contest was settled in May 2024, resulting in a new director appointment and customary standstill provisions114 - No material litigation or environmental liabilities are currently known115116 - The company monitors economic recession, interest rate increases, geopolitical conflicts, and inflation for potential impacts on commercial real estate fundamentals117 11. Stockholders' Equity This section details the company's preferred and common stock, including recent offerings, dividend policies, and stock repurchase programs, highlighting the issuance of Series D Preferred Stock in June 2024 and the ongoing stock repurchase program for Series A Common Stock Preferred Stock Describes the Series D Preferred Stock, including its issuance, dividend terms, liquidation preference, and redemption features - On June 20, 2024, the Company issued 109,054 shares of Series D Preferred Stock at $16.00 per share, generating gross proceeds of approximately $1.74 million120 - Holders of Series D Preferred Stock are entitled to cumulative cash dividends at 9.375% per annum ($2.34375 per share annually), payable monthly121 - Series D Preferred Stock has a liquidation preference of $25.00 per share and is redeemable by the Company after June 15, 2026, or upon a Change of Control124126 Dividends Paid to Series D Preferred Stockholders | Period | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Dividends Paid | ~$0.6 million | ~$0.5 million | ~$1.7 million | ~$1.6 million | Common Stock and Warrants Details the authorized common stock, outstanding warrants, and recent common stock issuances - The Company is authorized to issue up to 100,000,000 shares of Series A Common Stock, with identical rights except for Series B (no liquidation rights)128 - Common Stock Warrants (2,000,000 shares at $5.50 exercise price) and Placement Agent Warrants (80,000 shares at $6.25 exercise price) remain unexercised as of September 30, 2024129130 - Series A Warrants (14,450,069 shares at $7.00 exercise price) were distributed in January 2022 and will automatically convert to 1/10 of a common share at expiration if unexercised212213 - In July 2024, 78,215 shares of Series A Common Stock were issued to a noncontrolling trust in exchange for their 36.4% ownership in NetREIT Genesis II89131 Stock Repurchase Program and Dividends Outlines the company's stock repurchase program and dividend declarations for common and preferred stock - A stock repurchase program authorized in November 2023 allows for up to $6.0 million of Series A Common Stock and $4.0 million of Series D Preferred Stock, expiring November 2024132 Stock Repurchases (Nine Months Ended Sep 30, 2024) | Stock Type | Shares Repurchased | Total Cost | Average Price Per Share | | :--------------------------------------- | :----------------- | :--------- | :---------------------- | | Series A Common Stock | 137,709 | $97,394 | ~$0.7072 | | Series D Preferred Stock | 0 | $0 | N/A | - No cash dividends were declared or paid on Series A Common Stock for the nine months ended September 30, 2024, compared to $0.9 million in 2023133197 12. Share-Based Incentive Plan The company maintains a restricted stock incentive plan for officers, employees, and board members, with shares vesting over three to ten years, and the plan was amended to increase available shares and includes an evergreen provision - The 2017 Incentive Award Plan was amended to increase available shares to 3.5 million and includes an evergreen provision to automatically increase shares to 15% of outstanding common stock136 Restricted Stock Activity (Nine Months Ended Sep 30, 2024) | Metric | Common Shares | | :--------------------------------------- | :-------------- | | Balance at Dec 31, 2023 | 760,995 | | Granted | 1,437,746 | | Vested | (164,078) | | Balance at Sep 30, 2024 | 2,034,663 | | Shares available to grant | ~63,000 | Share-Based Compensation Expense | Period | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Compensation Expense | ~$0.3 million | ~$0.3 million | ~$1.2 million | ~$0.8 million | 13. Segments 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), which showed increases across all segments for the nine months ended September 30, 2024 - Reportable segments: Office/Industrial Properties, Model Home Properties, and Retail Properties139 - Segment performance is evaluated using Net Operating Income (NOI), which excludes non-property income/expenses, depreciation, and G&A140 Net Operating Income (NOI) by Segment (Nine Months Ended Sep 30) | Segment | 2024 NOI | 2023 NOI | YoY Change | | :--------------------------------------- | :--------- | :--------- | :--------- | | Office/Industrial Properties | $5,036,099 | $4,843,580 | +3.97% | | Model Home Properties | $3,306,049 | $2,848,942 | +16.04% | | Retail Properties | $1,103,741 | $1,004,388 | +9.89% | | Total NOI | $9,445,889 | $8,696,910 | +8.61% | Capital Expenditures by Reportable Segment (Nine Months Ended Sep 30) | Segment | 2024 Capital Expenditures | 2023 Capital Expenditures | | :--------------------------------------- | :------------------------ | :------------------------ | | Office/Industrial Properties | $1,462,957 | $2,691,721 | | Model Home Properties (Acquisition) | $9,729,351 | $13,715,923 | | Retail Properties | $211,321 | $126,065 | | Total real estate investments | $11,403,629 | $16,533,709 | 14. Income Tax Provision As a REIT, the company is generally exempt from federal income tax on distributed earnings but is subject to taxes on its Taxable REIT Subsidiaries (TRSs), with a current income tax provision of $168,140 recorded for TRS activities for the nine months ended September 30, 2024 - The Company operates as a REIT, requiring annual distribution of at least 90% of REIT taxable income145 - A current income tax provision of $168,140 was recorded for TRS activities for the nine months ended September 30, 2024146 - A deferred tax asset of $346,762 related to TRS operating activities was maintained as of September 30, 2024146 15. Related Party The company leases portions of its corporate headquarters to entities owned by its CEO and his wife, and receives full payroll reimbursement for employee services provided to these entities Related Party Transactions (Three and Nine Months Ended Sep 30) | Transaction Type | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Rent billed to related entities | $2,688 | $2,688 | $8,064 | $8,064 | | Payroll reimbursement received | ~$32,611 | ~$37,103 | ~$108,326 | ~$114,453 | 16. Subsequent Events Subsequent events include the transfer of Conduit common stock to the former CFO as part of an accrued bonus and the ongoing process of selling the Dakota Center property to settle its matured non-recourse loan - In October 2024, 1,045,805 shares of Conduit common stock (fair market value $113,679) were transferred to the former CFO as part of an accrued bonus151 - The Dakota Center property is being offered for sale in October 2024, in conjunction with the lender, to settle the non-recourse loan that matured on July 6, 2024152 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting key trends, significant transactions, and liquidity management strategies for both short-term and long-term needs Overview Provides a high-level summary of the company's business, including its REIT status, diversified property portfolio, and recent strategic committee establishment - The Company is an internally managed, diversified REIT with holdings in office, industrial, retail, and triple-net leased model home properties156 - As of September 30, 2024, the portfolio includes 8 office/industrial buildings, 3 retail shopping centers, and 83 model home residential properties156 - A Strategic Planning and Cyber Committee was established in June 2024 to oversee business strategy and cybersecurity risks160 Significant Transactions in 2024 and 2023 Highlights key real estate acquisition and disposition activities undertaken by the company during 2024 and 2023 Real Estate Acquisitions (Nine Months Ended Sep 30) | Year | Model Homes Acquired | Purchase Price | | :--- | :------------------- | :------------- | | 2024 | 19 | ~$9.7 million | | 2023 | 25 | ~$13.7 million | Real Estate Dispositions (Nine Months Ended Sep 30) | Year | Model Homes Sold | Net Sales Proceeds | Net Gain | | :--- | :--------------- | :----------------- | :------- | | 2024 | 46 | ~$22.3 million | ~$3.2 million | | 2023 | 15 | ~$7.8 million | ~$2.3 million | Management Evaluation of Results of Operations Explains management's approach to evaluating operational performance, focusing on cash flow generation and property value enhancement rather than non-cash charges - Management assesses operating results based on cash flow generation for expenses, debt service, and distributions, de-emphasizing non-cash charges like depreciation and impairment168 - Focus is on increasing and enhancing property value, re-leasing efforts, and reinvesting proceeds from property sales into new acquisitions169 Results of Operations (Three Months Ended September 30, 2024 and 2023) Presents a comparative analysis of the company's financial performance for the three months ended September 30, 2024, and 2023, detailing revenue, expenses, and net income changes Key Financial Metrics (Three Months Ended Sep 30) | Metric | 2024 | 2023 | Change | | :--------------------------------------- | :----------- | :----------- | :------- | | Total Revenues | ~$4.7 million | ~$4.5 million | +4.4% | | Rental Operating Costs | ~$1.6 million | ~$1.5 million | +8.1% | | G&A Expenses | ~$1.6 million | ~$1.6 million | Flat | | Depreciation and Amortization | ~$1.5 million | ~$1.4 million | +7.1% | | Asset Impairments | ~$0.7 million | $0 | N/A | | Interest Expense - mortgage notes | ~$1.5 million | ~$1.4 million | +7.1% | | Gain on Sale of Real Estate, net | ~$0.4 million | ~$0.8 million | -50% | | Loss on Conduit remeasurement | ~$3.9 million | ~$17.7 million | -77.9% | | Income allocated to non-controlling interests | ~$0.4 million | ~$0.7 million | -42.9% | - Total revenues increased due to new commercial leases at Grand Pacific Center and model home transaction fees, partially offset by reduced model home income170 - Asset impairments of ~$0.7 million were recognized, primarily for Dakota Center due to loan maturity issues and for three model homes due to short hold periods and builder style changes174 - Loss on Conduit remeasurement significantly decreased from $17.7 million in 2023 to $3.9 million in 2024, reflecting fair value adjustments of the investment178 Results of Operations (Nine Months Ended September 30, 2024 and 2023) Provides a detailed comparative analysis of the company's financial performance for the nine months ended September 30, 2024, and 2023, covering revenue, expenses, and key financial metrics Key Financial Metrics (Nine Months Ended Sep 30) | Metric | 2024 | 2023 | Change | | :--------------------------------------- | :----------- | :----------- | :------- | | Total Revenues | ~$14.1 million | ~$13.1 million | +7.6% | | Rental Operating Costs | ~$4.7 million | ~$4.5 million | +4.4% | | G&A Expenses | ~$5.9 million | ~$5.4 million | +9.3% | | Depreciation and Amortization | ~$4.2 million | ~$4.1 million | +2.4% | | Asset Impairments | ~$0.9 million | $0 | N/A | | Interest Expense - mortgage notes | ~$4.5 million | ~$3.6 million | +25% | | Gain on Sale of Real Estate, net | ~$3.2 million | ~$2.3 million | +39.1% | | Loss on Conduit remeasurement | ~$17.8 million | ~$17.7 million | +0.6% | | Income allocated to non-controlling interests | ~$2.3 million | ~$2.2 million | +4.5% | - Total revenues increased due to higher model home transaction fees, new commercial leases (Grand Pacific Center), and management fees from Conduit Pharma (terminated June 2024)179 - G&A expenses increased by ~$0.5 million, mainly due to consulting, proxy solicitation, and legal fees related to the 2024 annual meeting and settlement with Zuma Capital, plus higher stock compensation and bonus accruals182 - Geographic diversification of commercial properties: Colorado (39.4% of square feet, 47.3% of annual rent), North Dakota (48.4% of square feet, 30.6% of annual rent)189 - Model home properties are concentrated in Texas (93.4% of square feet, 91.0% of annual rent)190 Liquidity and Capital Resources Discusses the company's sources and uses of liquidity, including anticipated cash flows, debt obligations, and capital expenditure plans - Anticipated liquidity sources include existing cash, cash flows from operations, refinancing, real estate sales, new borrowings, and equity/debt issuance191 - Short-term needs: operating costs, debt service, tenant improvements, leasing commissions, and dividends192 - Five commercial property loans, totaling ~$28.4 million, are maturing in the next 12 months, in addition to the Dakota Center loan192 - 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 2024194 - Cash and restricted cash totaled ~$7.2 million at September 30, 2024, with ~$1.5 million to $2.0 million earmarked for capital expenditures201 - Commercial properties have $75.6 million in fixed-rate mortgage notes payable (weighted-average interest rate 4.97%), while model homes have $27.5 million (weighted-average interest rate 6.74%)202203 Cash Flow Summary (Nine Months Ended Sep 30) | Activity | 2024 | 2023 | | :--------------------------------------- | :----------- | :----------- | | Operating Activities | Used ~$1.0 million | Used ~$0.4 million | | Investing Activities | Provided ~$10.7 million | Provided ~$129.0 million | | Financing Activities | Used ~$8.9 million | Used ~$137.4 million | - The significant change in investing and financing cash flows from 2023 to 2024 was primarily due to the absence of SPAC redemptions in 2024205207 - The company's exposure to inflation is reduced by triple-net lease agreements, where tenants are responsible for property expenses215 Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the registrant is not required to provide specific quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as a smaller reporting company216 Item 4. Controls and Procedures 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 for REIT and non-REIT subsidiaries and Conduit shares - A material weakness was identified in internal control over financial reporting related to the annual income tax provision, specifically for REIT and non-REIT subsidiaries and Conduit shares218 - The material weakness stems from a lack of formal review and approval processes and inadequate internal controls for income tax provision218 - Remediation measures include adding controls, engaging third-party experts, and continuously monitoring the taxable status of subsidiaries221 Part II. Other Information Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings or threatened litigation - No material legal proceedings are currently ongoing or threatened against the Company222 Item 1A. Risk Factors This section states that there are no new material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K/A - No new material changes to risk factors since the 2023 Annual Report on Form 10-K/A223 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has an active stock repurchase program for its Series A Common Stock and Series D Preferred Stock, and during the nine months ended September 30, 2024, the company repurchased Series A Common Stock - A stock repurchase program authorized in November 2023 allows for up to $6.0 million of Series A Common Stock and $4.0 million of Series D Preferred Stock, expiring November 2024224 Series A Common Stock Repurchases (Nine Months Ended Sep 30, 2024) | Month | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--------------------------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------- | | January 2024 | — | $— | $6,000,000 | | February 2024 | — | $— | $6,000,000 | | March 2024 | — | $— | $6,000,000 | | April 2024 | — | $— | $6,000,000 | | May 2024 | — | $— | $6,000,000 | | June 2024 | 10,446 | $0.729 | $5,992,387 | | July 2024 | — | $— | $5,992,387 | | August 2024 | 44,190 | $0.679 | $5,962,369 | | September 2024 | 83,073 | $0.719 | $5,902,606 | | Total | 137,709 | $0.707 | $5,902,606 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported227 Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report - No mine safety disclosures to report228 Item 5. Other Information No other information is reported in this section - No other information is reported229 Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)230232
PRESIDIO PROPERT(SQFTP) - 2024 Q3 - Quarterly Report