Presidio Property Trust Inc

Previous wording

This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” and/or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and also of which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this 10-Q and our 2024 Annual Report on Form 10-K/A for the year ended December 31, 2023, filed with the SEC on April 16, 2024, respectively. Additional factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to, the risks associated with the ownership of real estate in general and our real estate assets in particular; the economic health of the metro regions where we conduct business; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to e-commerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; weather conditions, natural disasters and pandemics; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including ou…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" and/or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and also of which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this 10-Q and our 2024 Annual Report on Form 10-K/A for the year ended December 31, 2023, filed with the SEC on April 16, 2024, respectively. Additional factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to, the risks associated with the ownership of real estate in general and our real estate assets in particular; the economic health of the metro regions where we conduct business; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to the use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to e-commerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; weather conditions, natural disasters and pandemics; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, includin…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We own five commercial properties located in Colorado, four in North Dakota, one in Southern California, one in Texas and one in Maryland. Our model home properties are located in five states. While geographical clustering of real estate enables us to reduce our operating costs through economies of scale by servicing several properties with less staff, it makes us susceptible to changing market conditions in these discrete geographic areas. We do not develop properties but acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition. We consider a property to be stabilized once it has achieved an 80% occupancy rate for a full year as of January 1 of such year or has been operating for three years.

Current wording

We own five commercial properties located in Colorado, four in North Dakota, one in Southern California, one in Texas and one in Maryland. Our model home properties are located in three states. While geographical clustering of real estate enables us to reduce our operating costs through economies of scale by servicing several properties with less staff, it makes us susceptible to changing market conditions in these discrete geographic areas. We do not develop properties but acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition. We consider a property to be stabilized once it has achieved an 80% occupancy rate for a full year as of January 1 of such year or has been operating for three years.

Previous wording

For additional information regarding our Common Stock activity, see Footnote 10. Stockholders’ Equity in Item 1. Financial Statements.

Current wording

For additional information regarding our Common Stock activity, see Footnote 11. Stockholders' Equity in Item 1. Financial Statements.

Previous wording

For details regarding our sponsorship of a special purpose acquisition company, Murphy Canyon Acquisition Corp. ("Murphy Canyon" or the "SPAC"), see Note 9, Commitments and Contingencies, in the Notes to the Condensed Consolidated Financial Statements in “Part I, Item 1. Condensed Consolidated Financial Statements (Unaudited)” of this Quarterly Report.

Current wording

For details regarding our sponsorship of a special purpose acquisition company, Murphy Canyon Acquisition Corp. ("Murphy Canyon" or the "SPAC"), see Note 9, Investment in Conduit Pharmaceuticals, in the Notes to the Condensed Consolidated Financial Statements in "Part I, Item 1. Condensed Consolidated Financial Statements (Unaudited)" of this Quarterly Report.

Previous wording

Acquisitions during the three months ended March 31, 2024

Current wording

Acquisitions during the six months ended June 30, 2024

Previous wording

Dispositions during the three months ended March 31, 2024

Current wording

Dispositions during the six months ended June 30, 2024

Previous wording

Rental Operating Costs. Rental operating costs were relatively flat at $1.6 million* for the** three months ended March 31, 2024, ***compared to approximately $1.6 million for the same period in 2023. Rental operating costs as a percentage of total revenue was 32.6% and 38.2% for thethree months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 our model home assets made up 31.8% of our total real estate assets, which is up from 29.6% as of March 31, 2023. Additionally, for the three months ended March 31, 2024, our gross revenue from model home assets represented approximately 26.5% of our total revenue, compared to 20.5% for the three months ended March 31, 2023. This percentage is expected to decrease in 2024 as a large number of model homes were sold during the three months ended March 31, 2024. There were no acquisitions or sales of retail, office or industrial properties during the three months ended March 31, 2024; however, management may explore selling some of our commercial real estate assets over the next 12 months, which could reduce future rental income.

Current wording

Rental Operating Costs. Rental operating costs increased 6.7%, totaling approximately $1.5 million* for the** three months ended June 30, 2024, ***compared to approximately $1.4 million for the same period in 2023. Rental operating costs as a percentage of total revenue was 32.5% and 30.8% for thethree months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 our model home assets made up 29.7% of our total real estate assets, which is down from 32.9% as of June 30, 2023. Model home rental operating costs are relatively low for model home assets as they are leased on a triple net basis. Additionally, for the three months ended June 30, 2024, our gross revenue from model home assets represented approximately 25.2% of our total revenue, compared to 22.6% for the three months ended June 30, 2023. This percentage is expected to decrease in 2024 as a large number of model homes were sold during the three and six months ended June 30, 2024. There were no acquisitions or sales of retail, office or industrial properties during the three months ended June 30, 2024; however, management may explore selling some of our commercial real estate assets over the next 12 months, which could reduce future rental income.

Previous wording

Depreciation and Amortization. Depreciation and amortization expense wasapproximately $1.4 million for the three months ended March 31, 2024, compared toapproximately $1.3 million for the same period in 2023.

Current wording

Depreciation and Amortization. Depreciation and amortization expense wasapproximately $1.4 million for the three months ended June 30, 2024, compared toapproximately $1.4 million for the same period in 2023.

Previous wording

Asset Impairments. We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the three months ended March 31, 2024, we recognized a non-cash impairment charge of approximately $0.1 million related to four model homes, three of which already had an impairment as of December 31, 2023. The new impairment charges for the four model homes reflects the estimated sales prices for these specific model homes in April and May 2024 as a result of an abnormally short hold period, less than two years, on model homes purchased in 2022. The builder changed their product style in the neighborhoods where these model homes are located, in Texas, after we had purchased the homes. We do not believe these losses are indicative of our overall model home portfolio. As noted above in Significant Transactions, during the three months ended March 31, 2024, we sold 27 model homes for approximately $12.6 million and the Company recognized a net gain of approximately $2.0 million. We expect to record a net gain on model home sales in the second quarter of 2024 as well. The Company did not recognize a non-cash impairment to our real estate assets during the three months ended March 31, 2023.

Current wording

Asset Impairments. We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the three months ended June 30, 2024, we recognized a non-cash impairment charge of approximately $0.1 million related to three model homes. The new impairment charges for the three model homes reflects the estimated sales prices for these specific model homes in July and August 2024 as a result of an abnormally short hold period, less than two years, on model homes purchased in 2022. The builder changed their product style in the neighborhoods where these model homes are located, in Texas, after we had purchased the homes. We do not believe these losses are indicative of our overall model home portfolio. During the three months ended June 30, 2024, we sold 15 model homes for approximately $7.4 million and the Company recognized a net gain of approximately $0.8 million. We expect to record a net gain on model home sales in the third quarter of 2024 as well. The Company did not recognize a non-cash impairment to our real estate assets during the three months ended June 30, 2023.

Previous wording

Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges wasapproximately $1.5 million for the three months ended March 31, 2024, compared toapproximately $0.9 million for the same period in 2023. The weighted average interest rate on our outstanding debt was 5.23% and 4.66% as of March 31, 2024 and 2023, respectively. Mortgage notes payable totaled approximately $103.0 million and $99.5 million as of March 31, 2024 and 2023, respectively.

Current wording

Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges wasapproximately $1.5 million for the three months ended June 30, 2024, compared toapproximately $1.3 million for the same period in 2023. The weighted average interest rate on our outstanding debt was 5.38% and 4.83% as of June 30, 2024 and 2023, respectively. Mortgage notes payable totaled approximately $102.0 million and $104.2 million as of June 30, 2024 and 2023, respectively.

Previous wording

Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended March 31, 2024 and 2023 totaled approximately$1.5 million and$0.4 million, respectively.

Current wording

Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended June 30, 2024 and 2023 totaled approximately$0.5 million and$1.1 million, respectively.

Previous wording

Revenues. Total revenues were approximately $4.8 million for the three months ended March 31, 2024, compared to approximately $4.1 million for the same period in 2023. As of March 31, 2024, we had approximately $135.3 million in net real estate assets including 88 model homes, compared to approximately $133.9 million in net real estate assets including 98 model homes at March 31, 2023. The average number of model homes held during the three months ended March 31, 2024 and 2023 was 99 and 95, respectively. The change in revenue is directly related to the average real estate assets held during the period, new commercial real estate leases, and model home transaction fees earned by the Company during the current period. Below is additional revenue and asset information for real estate segments as of March 31, 2024.

Current wording

Revenues. Total revenues were approximately $9.4 million for the six months ended June 30, 2024, compared to approximately $8.7 million for the same period in 2023. As of June 30, 2024, we had approximately $130.9 million in net real estate assets including, 80 model homes, compared to approximately $138.9 million in net real estate assets including, 105 model homes at June 30, 2023. The average number of model homes held during the six months ended June 30, 2024 and 2023 was 95 and 99, respectively. The change in revenue is directly related to the average real estate assets held during the period, new commercial real estate leases, and model home transaction fees earned by the Company during the current period. Below is additional revenue and asset information for real estate segments as of June 30, 2024.

Previous wording

Gain on Sale of Real Estate Assets, net. The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. See "Significant Transactions in 2024 and 2023" above for further detail.

Current wording

Gain on Sale of Real Estate Assets, net. The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. S ee "Significant Transactions in 2024 and 2023" above for further detail.

Previous wording

Loss on Conduit remeasurement. Our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value using Level 1 market prices, taking into account the adoption of ASU 2022-03Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $14.5 million and $18.3 million as of March 31, 2024 and December 31, 2023, respectively, with a cost basis of approximately $7.5 million. For the three months ended March 31, 2024, the fair value remeasure resulted in a loss on Conduit marketable securities totaling approximately $3.9 million. As of March 31, 2024, our investments in Conduit's common stock ("CDT") and common stock warrants ("CDTTW") presented on the consolidated balance sheets were measured at fair value using Level 1 market prices, which closed at $3.59 per share and $0.06 per warrant.

Current wording

Loss on Conduit remeasurement. On April 22, 2024, the Company entered into a lockup agreement with Conduit pursuant to which the Company agreed not to transfer or sell 2,700,000 of its 4,015,250 shares of Conduit common stock for a period of one year. In consideration Conduit issued the Company Private CDT Warrants to purchase 540,000 shares of common stock at an exercise price of $3.12 per share, the warrant has a two year term and is exercisable one year after the date of issue. The Private CDT Warrants meet the ASC 321 scope exception for derivative instruments and are accounted for as a derivative under ASC 815. As such, the Private CDT Warrants were recorded at fair value on the date of issuance and subsequently measured at fair value each period, with changes in fair value reported in gain or loss on Conduit Pharmaceuticals marketable securities. As of April 22, 2024, the Private CDT Warrants were valued at $891,000 based on a Level 3 fair value measurement. As of June 30, 2024, the Private CDT Warrants fair value was adjusted to $156,600, and is included in the total Investment in Conduit Pharmaceuticals marketable securities on the June 30, 2024 condensed consolidated balance sheet. Our investments in Conduit's common stock (3,990,319 shares of CDT) and public common stock warrants (709,000 warrants of CDTTW) presented on the condensed consolidated balance sheets were measured at fair value using Level 1 market prices, taking into account the adoption of ASU 2022-03Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $4.3 million as of June 30, 2024. The combined value of our Investment in Conduit Pharmaceuticals marketable securities, including the Private CDT Warrants, totaled $4.4 million as of June 30, 2024. Our investments in Conduit's common stock and public common stock warrants presented on the condensed consolidated balance sheet were measured at fair value using Level 1 market prices as of December 31, 2023, and totaled approximately $18.3 million. In connection with these fair market value adjustments during the six months ended June 30, 2024, we recorded a net loss on our investment in Conduit of approximately $13.9 million.

Previous wording

Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, the sale of our investment in Conduit Pharma, and the sale of our equity or issuance of debt securities or bonds. Our cash and restricted cash at March 31, 2024 was approximately $7.2 million.. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. We also are actively seeking model home investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

Current wording

Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, the sale of our investment in Conduit Pharma, and the sale of our equity or issuance of debt securities or bonds. Our cash and restricted cash at June 30, 2024 was approximately $8.5 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. We also are actively seeking model home investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

Previous wording

Our short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of our existing mortgages, completing tenant improvements, paying leasing commissions, and funding dividends to stockholders. Future principal payments due on our mortgage notes payables during 2024 total approximately $17.0 million, of which approximately $7.0 million is related to model home properties. During the next 12 months our four commercial property loans, Dakota Center, Research Parkway, Arapahoe Service Center and Union Town Center, have mortgage loans with maturity dates, totaling approximately $25.9 million. Management has begun discussions with various lenders to either restructure, extend or refinance these loans. Additionally, management may consider selling these properties if we are unsuccessful in extending the maturity dates or are unable to raise additional funds to pay these non-recourse loans in full. Only the loan on Research Parkway, for $1.6 million has recourse to the Company. Management expects certain model homes will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past. Additional principal payments will be made with cash flows from ongoing operations. On December 31, 2022, the lease for our largest tenant at that time, Halliburton, expired. Halliburton was located in our Shea Center II property in Colorado and did not renew the lease. We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary, in connection with Halliburton's vacant space, none of which has been used as of December 31, 2023. This reserve amount is included in "Cash, cash equivalents and restricted cash" on the balance sheet. Our management team is working to fill the 45,535 square foot space and has leased approximately 20% of the space to a tenant during 2023 and has reviewed various third party proposals for the remaining 80%. As of March 31, 2024, management is pursuing a third party tenant who fits into our long-term plans, however, there is no guarantee we will be successful in signing this new tenant.

Current wording

Management has begun discussions with various lenders to either restructure, extend or refinance the other three loans. Additionally, management may consider selling these properties if we are unsuccessful in extending the maturity dates or are unable to raise additional funds to pay these non-recourse loans in full. Only the loan on Research Parkway, for $1.6 million has recourse to the Company. Management expects certain model homes will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past. Additional principal payments will be made with cash flows from ongoing operations. On December 31, 2022, the lease for our largest tenant at that time, Halliburton, expired. Halliburton was located in our Shea Center II property in Colorado and did not renew the lease. We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary, in connection with Halliburton's vacant space, none of which has been used as of December 31, 2023. This reserve amount is included in "Cash, cash equivalents and restricted cash" on the condensed consolidated balance sheet. Our management team is working to fill the 45,535 square foot space and has leased approximately 20% of the space to a tenant during 2023 and has reviewed various third party proposals for the remaining 80%. As of June 30, 2024, management is pursuing a third party tenant who fits into our long-term plans, however, there is no guarantee we will be successful in signing this new tenant.

Previous wording

While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock, which expired in September 2023. In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which shall expire in November 2024. During the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock. There were no stock repurchases during the three months ended March 31, 2024 Any repurchased shares will be treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost.

Current wording

While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock, which expired in September 2023. In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which shall expire in November 2024. During the year ended December 31, 2023, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $16.06 per share, including a commission of $0.035 per share, and no shares of our Series A Common Stock, for a total cost of $0.4 million for the Series D Preferred Stock. During the six months ended June 30, 2024 we repurchased 10,446 shares of our Series A Common Stock, for a total cost of $7,613, with an average price of approximately $0.73 per share. There were no repurchases of Series D Preferred Stock during the six months ended June 30, 2024. Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost.

Previous wording

Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and reinvesting the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, privately place securities or sell securities to the public we may not be able to acquire additional properties to meet our long-term objectives.

Current wording

Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and while seeking to reinvest the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, privately place securities or sell securities to the public we may not be able to acquire additional properties to meet our long-term objectives.

Previous wording

For the three months ended March 31, 2024, the Company has not declared a cash dividend. For thethree months ended March 31, 2023, the Company declared and paid approximately $0.3 million in a cash dividend. The Company intends to continue to pay dividends to our common stockholders on a quarterly basis and on a monthly basis to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends. The Company is still considering how much it may pay during the next quarter, as there was no cash dividend paid during the first quarter of 2024. The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the three months ended March 31, 2024 and 2023.

Current wording

The Company intends to pay dividends to our common stockholders on a quarterly basis, cash permitting, and on a monthly basis to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends. The Company is still considering how much it may declare during 2024 on the Series A Common Stock, as there was no cash dividend declared or paid during the six months ended June 30, 2024. The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the six months ended June 30, 2024 and 2023.

Previous wording

Our long-term liquidity needs include the proceeds necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and reinvesting the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, issue debt instruments, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives.

Current wording

Our long-term liquidity needs include the proceeds necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and while seeking to reinvest the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, issue debt instruments, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives.

Previous wording

At March 31, 2024, and December 31, 2023, we had approximately $7.2 million and$6.5 million in cash equivalents, respectively, including $3.1 million and$3.7 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts, short-term bonds and cash held in bank accounts at third-party institutions. During 2024 and 2023, we did not experience any loss or lack of access to our cash or cash equivalents. Approximately $3.7 million of our cash balance is intended for capital expenditures on existing properties, net of any construction financing (some of which is held in deposits reserve accounts by our lenders) during the rest of the year. We intend to use the remainder of our existing cash and cash equivalents for asset/property acquis itions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditionsare met), or dividends to our stockholders.

Current wording

At June 30, 2024, and December 31, 2023, we had approximately $8.5 million and$6.5 million in cash equivalents, respectively, including $3.2 million and$3.7 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts, short-term bonds and cash held in bank accounts at third-party institutions. During 2024 and 2023, we did not experience any loss or lack of access to our cash or cash equivalents. Approximately $1.5 million to 2.0 million of our cash balance is intended for capital expenditures on existing properties, net of any construction financing (some of which is held in deposits reserve accounts by our lenders) during the rest of the year. We intend to use the remainder of our existing cash and cash equivalents for asset/property acquis itions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditionsare met), or dividends to our stockholders.

Previous wording

As of March 31, 2024, all our commercial properties, except 300 N.P. which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $74.1 million, collateralized by a total of 11 commercial properties with loan terms at issuance ranging from 7 to 10 years. The weighted-average interest rate on these mortgage notes payable as of March 31, 2024, was approximately 4.89%, and our debt to estimated market value for our commercial properties was approximately 61.0%. During the next 12 months four of our commercial property loans, totaling approximately $25.9 million, will mature, with an estimated combined loan to value of approximately 58% as of March 31, 2024.

Current wording

As of June 30, 2024, all our commercial properties, except 300 N.P. which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $75.7 million, collateralized by a total of 11 commercial properties with loan terms at issuance ranging from 5 to 10 years. The weighted-average interest rate on these mortgage notes payable as of June 30, 2024, was approximately 4.97%, and our debt to estimated market value for our commercial properties was approximately 61.4%. During the next 12 months four of our commercial property loans, totaling approximately $25.8 million, will mature, with an estimated combined loan to value of approximately 61% as of June 30, 2024.

Previous wording

As of March 31, 2024, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $28.9 million, excluding loans eliminated through consolidation, collateralized by a total of 87 Model Homes. These loans generally have a term at issuance of three to five years. As of March 31, 2024, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $331,832 and 6.12%, respectively. Our debt to estimated market value on all our model home properties is approximately 61.5%, excluding any loans eliminated through consolidation. We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions. The Company anticipates that any new mortgages used to acquire commercial properties or model homes in the near future will be at rates higher than our currently weighted average interest rate. As of March 31, 2024, we had issued two promissory notes to our majority owned subsidiaries, Dubose Model Home Investors 202 LP and Dubose Model Home Investors 204 LP, for the refinancing of two model home properties in Texas and Wisconsin, for approximately $0.5 million with interest rates ranging from 3.0% to 5.55% per annum and maturity dates between August 2024 and November 2025. These notes payable and notes receivable, including interest expense and interest income related to these promissory notes, are eliminated through consolidation on our financial statements.

Current wording

As of June 30, 2024, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $26.3 million, excluding loans eliminated through consolidation, collateralized by a total of 79 Model Homes. These loans generally have a term at issuance of three to five years. As of June 30, 2024, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $332,588 and 6.58%, respectively. Our debt to estimated market value on all our model home properties is approximately 56.0%, excluding any loans eliminated through consolidation. We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions. The Company anticipates that any new mortgages used to acquire commercial properties or model homes in the near future will be at rates higher than our currently weighted average interest rate. As of June 30, 2024, we had issued one promissory note to our majority owned subsidiary, Dubose Model Home Investors 202 LP, for the refinancing of one model home property in Texas, for approximately $0.3 million with an interest rate of 5.55% per annum and maturity date of August 15, 2024. This note payable and note receivable, including interest expense and interest income related to this promissory note, is eliminated through consolidation on our financial statements.

Previous wording

Cash Flow for thethree months ended March 31, 2024, and March 31, 2023

Current wording

Cash Flow for thesix months ended June 30, 2024, and June 30, 2023

Previous wording

*Operating Activities:*Net cash used in operating activities for thethree months ended March 31, 2024, totaled approximately$1.1 million, as compared to cash used in operating activities of$1.6 million for thethree months ended March 31, 2023. The change in net cash used in operating activities is mainly due to changes in net income, which fluctuates based on timing of receipt and payment, as well as an increase in non-cash addbacks such as straight-line rent.

Current wording

*Operating Activities:*Net cash used in operating activities for thesix months ended June 30, 2024, totaled approximately$1.9 million, as compared to cash used in operating activities of$1.6 million for thesix months ended June 30, 2023. The change in net cash used in operating activities is mainly due to changes in net income, which fluctuates due to new leases, leasing renewals, tenant move outs and model home sales and acquisitions, as well as changes in non-cash addbacks or subtractions such as straight-line rent.

Previous wording

*Investing Activities:*Net cash provided by investing activities for thethree months ended March 31, 2024, was approximately$9.4 million compared to approximately$109.6 million used in investing activities during the same period in 2023. The change from each period was primarily related to the gross cash withdrawal of approximately $113.8 million during the three months ended March 31, 2023 for SPAC redemptions. There were no similar transactions during the three months ended March 31, 2024.

Current wording

*Investing Activities:*Net cash provided by investing activities for thesix months ended June 30, 2024, was approximately$13.2 million compared to approximately$105.3 million used in investing activities during the same period in 2023. The change from each period was primarily related to the gross cash withdrawal of approximately $114.1 million during the first quarter of 2023 for SPAC redemptions. There were no similar transactions during the six months ended June 30, 2024. Proceeds from the sale of real estate assets total approximately $20.1 million, net of selling costs, while cash used in real estate acquisition and capital improvement totaled approximately $7.0 million, for the six months ended June 30, 2024.

Previous wording

We currently project that we could spend up to $1.0 million (some of which is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio during the rest of the year. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties. We may spend more on capital expenditures in the future due to rising construction costs. Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Current wording

We currently project that we could spend up to $1.5 million to $2.0 million (some of which is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio during the rest of the year. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties. We may spend more on capital expenditures in the future due to rising construction costs. Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Previous wording

*Financing Activities:*Net cash used in financing activities during thethree months ended March 31, 2024, was$7.6 million compared to$112.5 million provided by financing activities for the same period in 2023 and was primarily due to the following activities for thethree months ended March 31, 2024:

Current wording

*Financing Activities:*Net cash used in financing activities during thesix months ended June 30, 2024, was$9.3 million compared to$111.5 million provided by financing activities for the same period in 2023 and was primarily due to the following activities for thesix months ended June 30, 2024: