Generation me Properties(GIPR) - 2021 Q4 - Annual Report

Part I Business Generation Income Properties (GIPR) is a REIT focused on acquiring and managing single-tenant net-leased retail, office, and industrial properties in major U.S. markets - The company focuses on acquiring and managing income-producing retail, office, and industrial properties net leased to high-quality tenants in major U.S. markets[17] - GIPR utilizes an Umbrella Partnership Real Estate Investment Trust (UPREIT) structure, which allows property sellers to defer taxable gains by exchanging property for common units in the Operating Partnership. As of December 31, 2021, the company owned 85.3% of the outstanding common units[22] Portfolio Overview as of December 31, 2021 | Property Type | Location | Rentable Square Feet | Tenant(s) | S&P Credit Rating | Annualized Base Rent | % of Total Base Rent | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Retail | Washington, DC | 3,000 | 7-Eleven Corporation | A | $129,804 | 3.4% | | Retail | Tampa, FL | 2,200 | Starbucks | BBB+ | $182,500 | 4.8% | | Industrial | Huntsville, AL | 59,091 | Pratt & Whitney Automation, Inc. | A- | $684,996 | 18.1% | | Office | Norfolk, VA | 49,902 | General Services Administration | AA+ | $882,476 | 23.3% | | Office | Norfolk, VA | 22,247 | Maersk Line, Limited | BBB | $386,795 | 10.2% | | Office | Norfolk, VA | 34,847 | PRA Holdings, Inc. | BB+ | $742,850 | 19.6% | | Retail | Tampa, FL | 3,500 | Sherwin-Williams | BBB | $120,750 | 3.2% | | Office | Manteo, NC | 7,543 | General Services Administration | AA+ | $161,346 | 4.3% | | Office | Tampa, FL | 7,826 | Irby Construction Company | BBB- | $148,200 | 3.9% | | Retail | Boulder Springs, CO | 30,701 | BestBuy | BBB+ | $353,061 | 9.3% | | Total | | 220,857 | | | $3,792,778 | 100.0% | - In September 2021, the company closed an underwritten public offering, generating net proceeds of approximately $13.8 million. Its common stock and warrants began trading on the Nasdaq Capital Market under symbols "GIPR" and "GIPRW"[34] - Subsequent to year-end 2021, the company acquired three additional properties: a medical building leased to Fresenius Medical Care in Chicago, a Starbucks in Tampa, and a Kohl's in Tucson[42] - On August 31, 2021, the company sold a Walgreens property in Cocoa, Florida for net consideration of approximately $5.2 million[43] Risk Factors The company faces significant risks including limited operating history, tenant dependency, net losses, debt financing, REIT compliance, and stock price volatility Risks Related to Our Business and Properties Risks include limited operating history, small portfolio size, dependence on single tenants, cumulative net losses, and unsustainable distribution funding - The company has a limited operating history and owned only twelve properties as of March 9, 2022, making the loss of any single tenant a material risk[63][65] - From inception through December 31, 2021, the company had a cumulative net loss of approximately $5.4 million, attributed to start-up costs, high administrative expenses relative to portfolio size, and acquisition-related costs[67] - Many properties depend on a single tenant, making the company's financial condition susceptible to tenant bankruptcy, business downturns, or lease terminations[66] - Distributions have been and may continue to be paid from offering proceeds, not cash flow from operations. This reduces funds available for property acquisitions and may reduce overall investor return[82][83] General Risks Related to Investments in Real Estate Real estate investment risks include economic downturns, tenant bankruptcies, competition, geographic and tenant concentration, and environmental liabilities - The bankruptcy of a major tenant could significantly impact financial condition. As of March 9, 2022, four tenants (Pratt and Whitney, GSA, PRA Holding, and Kohl's) each account for more than 10% of annualized rent[92] - The portfolio has geographic concentration, with properties located primarily in Virginia and Florida. An adverse event in these areas could have a magnified negative effect[94] - The company faces competition from other real estate investors, including REITs and private equity funds with greater financial resources, which may increase acquisition prices and reduce profitability[120] - The company could be exposed to significant environmental liabilities, as federal, state, and local laws can impose cleanup costs on property owners regardless of fault[114][122] Risks Associated with Debt Financing Debt financing risks include increased expenses, foreclosure risk, restrictive covenants, interest rate fluctuations, and potential impact on cash flow and distributions - As of December 31, 2021, the company had approximately $29.0 million in outstanding debt against properties with a cost basis of $44.0 million[139] - The company's loan agreements contain financial covenants, including Debt Service Coverage Ratios (DSCRs) ranging from 1.15:1.0 to 1.50:1.0, which could inhibit financial flexibility[145][151] - High mortgage rates or the unavailability of financing could reduce the number of properties the company can acquire and hinder its ability to refinance existing debt on favorable terms[149] Federal Income Tax Risks Risks include failing to qualify or maintain REIT status, liquidity challenges from distribution requirements, and liabilities from tax protection agreements - The company intends to elect to be taxed as a REIT for the year ending December 31, 2021. Failure to qualify would subject it to federal income tax at corporate rates and reduce net earnings available for distribution[168][169] - The requirement to distribute at least 90% of REIT taxable income annually could adversely affect liquidity, potentially forcing the company to borrow funds or sell assets to meet distribution requirements[173] - Tax protection agreements related to two properties contributed in 2019 limit the company's ability to sell them in a taxable transaction before the seventh anniversary of their contribution, creating a potential material liability[177] Risks Related to our Securities Securities risks include stock price volatility, potential delisting, shareholder dilution, reduced disclosure as an emerging growth company, and anti-takeover provisions - The market price of the company's common stock may be volatile, and there is no assurance it will not decline significantly[183] - The company has 100 million authorized shares of common stock and 10 million of preferred stock, allowing management to issue additional shares that could dilute existing shareholders[187] - The company is an emerging growth company and has elected to use the extended transition period for new accounting standards, which may make its financial statements not comparable to other public companies[192][193] - The company's charter limits stock ownership to 9.8% to preserve its REIT status, which may delay or prevent a change in control[195] Unresolved Staff Comments The company reports no unresolved staff comments - None[200] Properties The company's 2021 portfolio comprised nine 100% occupied properties, concentrated geographically and by key tenants, with most leases expiring after 2026 Geographic Diversification as of December 31, 2021 | State | Number of Properties | Aggregate Square Feet | % of Square Feet | Aggregate Annual Rent | % of Aggregate Annual Rent | | :--- | :--- | :--- | :--- | :--- | :--- | | Alabama | 1 | 59,091 | 26.8% | $684,996 | 18.1% | | Florida | 3 | 13,526 | 6.1% | $451,450 | 11.9% | | Colorado | 1 | 30,701 | 13.9% | $353,061 | 9.3% | | North Carolina | 1 | 7,543 | 3.4% | $161,346 | 4.3% | | Virginia | 2 | 106,996 | 48.4% | $2,012,121 | 53.0% | | District of Columbia | 1 | 3,000 | 1.4% | $129,804 | 3.4% | | Total | 9 | 220,857 | 100% | $3,792,778 | 100.0% | Top Tenants by Annualized Base Rent as of December 31, 2021 | Tenant | Number of Leases | Annualized Base Rent | % of Total Annualized Base Rent | | :--- | :--- | :--- | :--- | | General Services Administration | 2 | $1,043,822 | 28% | | PRA Holdings Inc. | 1 | $742,850 | 20% | | Pratt & Whitney | 1 | $684,996 | 18% | | Maersk Line Limited | 1 | $386,795 | 10% | | BestBuy | 1 | $353,061 | 9% | Lease Expiration Schedule as of December 31, 2021 | Expiration Year | Number of Leases Expiring | Square Footage | Annualized Base Rent | % of Total Annualized Base Rent | | :--- | :--- | :--- | :--- | :--- | | 2022 | 1 | 22,247 | $386,795 | 10% | | 2023 | - | — | — | — | | 2024 | 1 | 7,826 | $148,200 | 4% | | 2025 | - | — | — | — | | 2026 | 1 | 3,000 | $129,804 | 3% | | Thereafter | 7 | 187,784 | $3,127,979 | 82% | | Total | 10 | 220,857 | $3,792,778 | 100% | - All properties have maintained 100% occupancy during the company's ownership[207] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[210] Mine Safety Disclosures This item is not applicable to the company - Not applicable[211] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities GIPR common stock and warrants began trading on Nasdaq in October 2021 after a public offering, with distributions funded from offering proceeds - The company's common stock and warrants commenced trading on The Nasdaq Capital Market under the symbols "GIPR" and "GIPRW," respectively, on October 4, 2021[213] - In September 2021, the company completed a public offering of 1,665,000 units at $10.00 per unit, raising total net proceeds of approximately $13.8 million after expenses[214] - From inception through December 31, 2021, the company distributed approximately $1,299,000 to common stockholders. Because the company has not yet generated a cumulative profit, these distributions were made from proceeds of prior capital raises[221][219] - As part of the public offering, the company redeemed 112,500 shares of common stock from the CEO for $100 on September 8, 2021[223] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue increased in 2021 due to acquisitions, net loss decreased due to a property sale gain, and liquidity is sufficient with new credit facility Results of Operations Total revenue increased in 2021 due to acquisitions, while a property sale gain significantly reduced the net loss compared to 2020 Comparison of Operating Results (in thousands) | | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $3,900 | $3,520 | | General, administrative and organizational costs | $1,111 | $818 | | Building expenses | $768 | $711 | | Depreciation and amortization | $1,508 | $1,453 | | Interest expense, net | $1,311 | $1,400 | | Compensation costs | $850 | $483 | | Total Expenses | $5,548 | $4,865 | | Gain on disposal of property | $923 | $0 | | Net Loss | ($712) | ($1,345) | | Net Loss attributable to Shareholders | ($1,242) | ($1,832) | - Revenue increased by $380,000 in 2021 primarily due to the acquisition of three additional properties[236] - The company recognized a gain of $923,000 on the sale of its Walgreens property in Cocoa, Florida, which was a key factor in reducing the net loss for 2021[242] Liquidity and Capital Resources As of December 2021, the company had $10.6 million cash and $29.0 million debt, with liquidity boosted by a public offering and new credit facility Financial Position Summary | Metric | As of Dec 31, 2021 | | :--- | :--- | | Total Cash (unrestricted and restricted) | ~$10.6 million | | Properties Cost Basis | $44.0 million | | Outstanding Debt | ~$29.0 million | - In October 2021, the company entered into a $25 million master commitment credit facility with American Momentum Bank to fund future property acquisitions[249][256] - The Company's President has personally guaranteed approximately $16.9 million of the company's outstanding debt as of December 31, 2021[255] Debt Maturity Schedule as of December 31, 2021 | Year | Minimum Principal Payments | | :--- | :--- | | 2022 | $580,740 | | 2023 | $4,240,446 | | 2024 | $12,981,450 | | 2025 | $251,011 | | 2026 | $261,675 | | 2027 and beyond | $11,291,666 | | Total | $29,606,988 | Non-GAAP Financial Measures The company uses FFO and AFFO as non-GAAP measures, with Core FFO and Core AFFO decreasing in 2021 compared to 2020 Reconciliation of Net Loss to FFO and AFFO (in thousands) | | Twelve Months Ended Dec 31, 2021 | Twelve Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Loss | $(712) | $(1,345) | | Gain on disposal of property | $(923) | - | | Depreciation and amortization | $1,508 | $1,453 | | Funds From Operations (FFO) | $(127) | $108 | | Adjustments for Core FFO | $434 | $297 | | Core Funds From Operations | $307 | $404 | | Adjustments for AFFO | $431 | $1,368 | | Adjusted Funds From Operations (AFFO) | $(154) | $133 | | Adjustments for Core AFFO | $314 | $162 | | Core Adjusted Funds From Operations | $160 | $295 | - The company computes FFO in accordance with the NAREIT definition and further adjusts it to derive Core FFO, AFFO, and Core AFFO to provide what it believes are useful supplemental measures of operating performance[276][277][278] Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide disclosures under this item as a smaller reporting company - The company is not required to make disclosures under this item as it qualifies as a smaller reporting company[287] Financial Statements and Supplementary Data This section presents the auditor's report and consolidated financial statements for 2021 and 2020, including balance sheets, operations, equity, cash flows, and notes Consolidated Balance Sheet Highlights (in thousands) | | As of Dec 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | | Total Investments, net | $41,300 | $38,532 | | Cash and cash equivalents | $10,590 | $938 | | Total Assets | $53,421 | $40,681 | | Mortgage loans, net | $28,969 | $28,357 | | Total Liabilities | $30,146 | $30,626 | | Redeemable Non-Controlling Interests | $9,621 | $8,684 | | Total Stockholders' Equity | $13,654 | $1,370 | | Total Liabilities and Stockholders' Equity | $53,421 | $40,681 | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Total Revenue | $3,900 | $3,520 | | Total Expenses | $5,548 | $4,865 | | Operating Loss | $(1,648) | $(1,345) | | Gain on disposal of property | $923 | $0 | | Net Loss | $(712) | $(1,345) | Notes to the Consolidated Financial Statements Notes detail accounting policies, real estate investments, debt, equity, and related-party transactions, including 2021 acquisitions, sales, and tax loss carryforwards - In 2021, the company acquired three properties for a total cost of approximately $8.2 million and sold one property for net proceeds of approximately $5.2 million, recognizing a gain of $923,178[337][344] - As of December 31, 2021, the company had Redeemable Non-Controlling Interests totaling $9.6 million, which includes preferred equity with redemption rights and specified rates of return, as well as common units in the Operating Partnership with redemption features[349] - As of December 31, 2021, the company had 1,914,850 warrants outstanding with exercise prices ranging from $10.00 to $20.00[370] - The company's net operating loss carryforwards were approximately $4.6 million as of December 31, 2021. A full valuation allowance of $1.7 million has been recorded against the deferred tax assets, resulting in no recognized tax benefit[397][400] - Subsequent to year-end, the company acquired three properties for a total consideration of approximately $12.6 million and announced monthly cash distributions of $0.054 per share for the first quarter of 2022[402][403][404][405] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants regarding accounting and financial disclosure - None[408] Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2021, with no material changes to internal controls identified - Based on an evaluation, the chief executive officer and chief financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[409] - The annual report does not include a report of management's assessment regarding internal control over financial reporting, as permitted for newly public companies[410] - There were no changes in internal control over financial reporting during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, internal controls[411] Other Information The company reports no other information under this item - None[412] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[413] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[415] Executive Compensation Information on executive compensation is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[416] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners and management is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[417] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[418] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2022 proxy statement - Information is incorporated by reference from the company's proxy statement for its 2022 annual meeting of stockholders[419] Part IV Exhibit and Financial Statement Schedules This section lists financial statements and exhibits filed with the Form 10-K, with all financial schedules omitted as inapplicable - This section lists the financial statements and exhibits filed as part of the annual report. All financial statement schedules are omitted as inapplicable or otherwise included in the consolidated financial statements[420][421][422] Form 10-K Summary No summary is provided under this item - None[426]