Presidio Property Trust Inc
For the period ended Mar 31, 2025. Filed May 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 14, 2025
SQFTW$0.01-0.9%Stored close · as of Nov 5, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-19.
0001437749-24-035719
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001437749-25-016828
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 71 current paragraphs.
41 unchanged; 23 reworded; 4 added; 14 removed; 5 previous and 3 current paragraphs rearranged.
Tables are not compared: 14 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Rental Operating Costs. Rental operating costs totaled approximately $1.6 million for the*** three months ended March 31, 2025, ***compared to approximately $1.6 million for the same period in 2024. Rental operating costs as a percentage of total revenue was 39.1% and 32.6% for the three months ended March 31, 2025 and 2024, respectively. We expect rental operating costs to go down in future quarters due to the sale of our retail properties UTC and Research Parkway during the three months ended March 31, 2025; however, if we purchase additional properties, our rental operating costs will increase.
Current report
General and Administrative Expenses. G&A expenses for the*** ***three months ended March 31, 2025 and 2024 totaled approximately $1.7 million and $2.1 million, respectively. G&A expenses as a percentage of total revenue was 40.3%and 43.5%for the three months ended March 31, 2025 and 2024, respectively. G&A expenses for the three months ended March 31, 2025 decreased by approximately $0.4 million partially related to consulting fees in 2024 including a one-time payment for the setup of DMH 207, and additional legal fees related to Zuma Capital Management, LLC (Zuma Capital"), which was not repeated in 2025. Additionally, stock compensation was down by approximately $0.3 million due to the reduction of new restricted stock grants in 2025, slightly offset by an increase in accrued board compensation of $0.1 million related to estimated cash payment in-lieu-of restricted stock grants.
Current report
Loss on Conduit remeasurement. As of March 31, 2025 we held 29,431 shares of CDT, as a result of their 1-for-100 reverse stock split in January 2025, 709,000 public common stock warrants of CDTTW, and 540,000 private common stock warrants, with a combined value of approximately $29,519. Conduit's common stock (CDT) and public common stock warrants (CDTTW) and Private CDT Warrants presented on the consolidated balance sheets were measured at fair value using Level 1 and Level 3 market prices, taking into account the adoption of ASU 2022-03Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. * *The fair value adjusted during the three months ended March 31, 2025 resulted in the Company recording a loss of approximately $0.2 million as compared to a loss of approximately $3.9 million recorded during the three months ended March 31, 2024.
Current report
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 mortgage notes payable, during the last three quarters of 2025 and in the year ending December 31, 2026 total approximately$27.8 million and $18.4 million, respectively, of which$6.7 million in 2025 and $1.7 million in 2026 are related to model home properties. See Note 7. Mortgage Notes Payable, in Part I - Financial Information for additional information on the Dakota Center loan that matured on July 6, 2024. Management expects certain model home properties can be sold, and that the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes can be refinanced, as the Company has historically been able to do in the past with all model home properties. Additional principal payments will be made with cash flows from ongoing operations.
Removed paragraphs (14)
Previous report
Acquisitions during the nine months ended September 30, 2023
Previous report
Dispositions during the nine months ended September 30, 2023
Previous report
Revenues. Total revenues were approximately $4.7 million for the three months ended September 30, 2024, compared to approximately $4.5 million for the same period in 2023. As of September 30, 2024, we had approximately $131.4 million in net real estate assets including 83 model homes, compared to approximately $138.4 million in net real estate assets including 102 model homes at September 30, 2023. The change in revenue is directly related to the new commercial real estate leases at Grand Pacific Center, and model home transaction fees earned by the Company during the current period, slightly offset by the reduction in model home income during the current quarter.
Previous report
Rental Operating Costs. Rental operating costs increased 8.1%, totaling approximately $1.6 million* for the** three months ended September 30, 2024, ***compared to approximately $1.5 million for the same period in 2023, due to the increased cost of operating our commercial properties. Rental operating costs as a percentage of total revenue was 33.8% and 33.0% for thethree months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, our model home assets made up 30.5% of our total real estate assets, which is down from 33.2% as of September 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 September 30, 2024, our gross revenue from model home assets represented approximately 21.2% of our total revenue, compared to 24.4% for the three months ended September 30, 2023. This percentage is expected to decrease in 2024 as a large number of model homes were sold during the three and nine months ended September 30, 2024. There were no acquisitions or sales of retail, office or industrial properties during the three months ended September 30, 2024; however, management is selling two of our commercial real estate assets, totaling approximately $11.1 million, over the next 12 months, which will reduce future rental income until those proceeds are reinvested.
Previous report
General and Administrative Expenses. General & Administrative (“G&A”) expenses for the*** ***three months ended September 30, 2024 and 2023 totaled approximately $1.6 million and $1.6 million, respectively. G&A expenses as a percentage of total revenue was 34.5% and 36.5% for the three months ended September 30, 2024 and 2023, respectively. G&A expenses was relatively flat for the three months ended September 30, 2024 when compared to the three months ended September 30, 2023.
Previous report
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. During the three months ended September 30, 2024, we sold four model homes for approximately $2.2 million, net of selling costs, and the Company recognized a net gain of approximately$0.4 million. We expect to record a net gain on model home sales in the fourth quarter of 2024 as well. During the three months ended September 30, 2023, we sold five model homes for approximately $2.5 million, net of selling costs, and the Company recognized a net gain of approximately $0.8 million.
Previous report
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 for entering into the lockup agreement, Conduit issued the Company a warrant ("Private CDT Warrants") to purchase 540,000 shares of common stock at an exercise price of $3.12 per share, with a two year term and 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 June 30 2024, the Private CDT Warrants were valued at $156,000 based on a Level 3 fair value measurement. As of September 30, 2024, the Private CDT Warrants fair value was adjusted to zero, which is included in the total Investment in Conduit Pharmaceuticals marketable securities on the September 30, 2024 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 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 $0.5 million as of September 30, 2024. The combined value of our Investment in Conduit Pharmaceuticals marketable securities, including the Private CDT Warrants, totaled $0.5 million as of September 30, 2024. In connection with these fair market value adjustments during the three months ended September 30, 2024, we recorded a net loss on our investment in Conduit of approximately $3.9 million.
Previous report
(1) Includes lease intangibles and the land purchase option related to property acquisitions.
Previous report
Rental Operating Costs. Rental operating costs were slightly higher totaling $4.7 million for the*** nine months ended September 30, 2024, ***compared to approximately $4.5 million for the same period in 2023. Rental operating costs as a percentage of total revenue was 33.0% and 33.9% for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, our model home assets made up 30.5% of our total real estate assets, which is down from 33.2% as of September 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 nine months ended September 30, 2024, our gross revenue from model home assets represented approximately 24.2% of our total revenue, compared to 22.5% for the nine months ended September 30, 2023. This percentage is expected to decrease in 2024 as a large number of model homes were sold during the nine months ended September 30, 2024. There were no acquisitions or sales of retail, office or industrial properties during the nine months ended September 30, 2024; however, management is selling two of our commercial real estate assets, totaling approximately $11.1 million, over the next 12 months, which will reduce future rental income until those proceeds are reinvested.
Previous report
General and Administrative Expenses. G&A expenses for the*** ***nine months ended September 30, 2024 and 2023 totaled approximately $5.9 million and $5.4 million, respectively. G&A expenses as a percentage of total revenue was 42.0%and 41.2%for the nine months ended September 30, 2024 and 2023, respectively. G&A expenses increased by approximately $0.5 million mainly related to the 2024 annual meeting and settlement with Zuma Capital and certain individuals and entities affiliated or associated with Zuma Capital Management, LLC (Zuma Capital"). This included additional consulting fees, higher proxy solicitation fees and legal fees, which increased by an aggregate of approximately $0.6 million in 2024 as compared to 2023. Additionally, stock compensation and bonus accruals increased during the nine months ended September 30, 2024 by approximately $0.5 million as compared to the same period in 2023 related to De-SPAC success bonuses to current and former employees. This was slightly offset by the reduction in salaries and employees cost by approximately $0.2 million in 2024 as compared to 2023, and the approximately $0.2 million reduction of D&O insurance related to the SPAC in 2023 that was not consolidated during 2024.
Previous report
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 nine months ended September 30, 2024, we recognized a non-cash impairment charge of approximately $0.9 million related to model homes and one commercial property. The impairment on our commercial property, Dakota Center, was the result of the loan maturing in July and the Company not being able to reach an agreement with the lenders regarding a loan modification or extension. In October the lender has agreed to a sale of the property to settle the balance of the non-recourse loan. Due to the uncertainties in the Fargo market, we decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets and for long-lived assets to be disposed of, to be in line with the current loan balance and estimated closing costs, which is the expected sales price. As such, we recorded an impairment charge of approximately $0.7 million, as of September 31, 2024. The new impairment charges for the model homes reflects the estimated and actual sales prices for these specific model homes that were sold after the end of each quarter. This was the 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 nine months ended September 30, 2024, we sold 46 model homes for approximately $22.3 million, net of sales costs, and the Company recognized a net gain of approximately $3.2 million. We expect to record a net gain on model home sales in the fourth quarter of 2024 as well. The Company did not recognize a non-cash impairment to our real estate assets during the nine months ended September 30, 2023.
Previous report
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 for entering into the lockup agreement, Conduit issued the Company Private CDT Warrants to purchase 540,000 shares of common stock at an exercise price of $3.12 per share, a two year term and 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 September 30, 2024, the Private CDT Warrants fair value was adjusted to zero, which is included in the total Investment in Conduit Pharmaceuticals marketable securities on the September 30, 2024 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 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 $0.5 million as of September 30, 2024. The combined value of our Investment in Conduit Pharmaceuticals marketable securities, including the Private CDT Warrants, totaled $0.5 million as of September 30, 2024. Our investments in Conduit's common stock and public common stock warrants presented on the 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 nine months ended September 30, 2024, we recorded a net loss on our investment in Conduit of approximately $17.8 million. We will realize a portion of the loss during the fourth quarter of 2024. During October 2024, the Company paid part of an accrued bonus to the former CFO with shares of CDT common stock. The total number of CDT common stock shares transferred to our former CFO was 1,045,805 shares at $0.1087 per share with a fair market value of $113,679 at the time of transfer. After the transfer the Company still owns 2,944,514 shares of CDT common stock, 709,000 CDTTW warrants and 540,000 private warrants.
Previous report
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 $11.7 million, of which approximately $2.3 million is related to model home properties. During the next 12 months, five commercial property loans, in addition to the Dakota Center which matured in July 2024, for Research Parkway, Arapahoe Service Center, Union Town Center, One Park, and Genesis Plaza, have mortgage loans that will mature totaling approximately $28.4 million. The loan on the Dakota Center matured on July 6, 2024. Management was in negotiations with the special servicer of the loan in modifying and/or extending; however no agreement could be reached and in October we had agreed with the lender to sell the property in order to settle the balance on the non-recourse loan. The Company and the lender are currently reviewing real estate brokers to sell the property on the open market with the hopes of obtaining the best sales price; however there can be no guarantee the property will sell for more than the loan balance.
Previous report
For the three and nine months ended September 30, 2024, the Company has not declared a cash dividend for the Series A Common stockholders. For thethree and nine months ended September 30, 2023, the Company declared and paid approximately $0.3 million and $0.9 million in a cash dividend, respectively. For the three and nine months ended September 30, 2024, the Company declared and paid approximately $0.6 million and $1.7 million in monthly cash dividends, respectively for the Series D Preferred stockholders. For thethree and nine months ended September 30, 2023, the Company declared and paid approximately $0.5 million and $1.6 million in monthly cash dividends, respectively.
Reworded paragraphs (23)
Previous wording
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our2023 year end Annual Report.
Current wording
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our2024 year end Annual Report.
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 2023 year end 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,…
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 year end Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025, 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, i…
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 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.
Current wording
We own three 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 four 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 12. Stockholders' Equity in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.
Current wording
For additional information regarding our Common Stock activity, see Footnote 11. Stockholders' Equity in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.
Previous wording
Acquisitions during the nine months ended September 30, 2024
Current wording
Acquisitions during the three months ended March 31, 2025
Previous wording
Dispositions during the nine months ended September 30, 2024
Current wording
Dispositions during the three months ended March 31, 2025
Previous wording
Revenues. Total revenues were approximately $14.1 million for the nine months ended September 30, 2024, compared to approximately $13.1 million for the same period in 2023. As of September 30, 2024, we had approximately $131.4 million in net real estate assets including 83 model homes, compared to approximately $138.4 million in net real estate assets including 102 model homes at September 30, 2023. The average number of model homes held during the nine months ended September 30, 2024 and 2023 was 84 and 102, respectively. The change in revenue is directly related to the increase in model home transaction fees during the current period, new commercial real estate leases, mainly at Grand Pacific Center, and the management fees earned from Conduit Pharma during the current period, which was terminated in June 2024. Below is additional revenue and asset information for real estate segments as of September 30, 2024.
Current wording
Revenues. Total revenues were approximately $4.1 million for the three months ended March 31, 2025, compared to approximately $4.8 million for the same period in 2024. As of March 31, 2025, we had approximately $117.4 million in net real estate assets including 84 model homes, compared to approximately $135.3 million in net real estate assets including 88 model homes at March 31, 2024. The average number of model homes held during the three months ended March 31, 2025 and 2024 was 81 and 99, respectively. The change in revenue is directly related to the decrease in model home rental income and transaction fees during the current period, and the sale of our two commercial properties on February 7, 2025.
Previous wording
Depreciation and Amortization. Depreciation and amortization expense wasapproximately $4.2 million and $4.1 millionfor the nine months ended September 30, 2024 and 2023, respectively.
Current wording
Depreciation and Amortization. Depreciation and amortization expense wasapproximately $1.2 million and $1.4 millionfor the three months ended March 31, 2025 and 2024, respectively.
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 September 30, 2024, we recognized a non-cash impairment charge of approximately $0.7 million related to three model homes and one commercial property. The impairment on our commercial property, Dakota Center, was the result of the loan maturing in July and the Company not being able to reach an agreement with the lenders regarding a loan modification or extension. In October the lender has agreed to a sale of the property to settle the balance of the non-recourse loan. Due to the uncertainties in the Fargo market, we decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets. As such, we recorded an impairment charge of approximately $0.7 million as of September 31, 2024. The new impairment charges for the three model homes reflects the estimated sales prices for these specific model homes in October and November 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 September 30, 2024, we sold four model homes for approximately $2.2 million and the Company recognized a net gain of approximately $0.4 million. We expect to record a net gain on model home sales in the fourth quarter of 2024 as well. The Company did not recognize a non-cash impairment to our real estate assets during the three months ended September 30, 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 March 31, 2025 and 2024, we recognized non-cash impairment charges of approximately $26,943 related to two model homes properties and approximately $0.1 million related to four model homes, respectively, based on estimated selling prices.
Previous wording
Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges wasapproximately $4.5 millionfor thenine months ended September 30, 2024, compared toapproximately $3.6 millionfor the same period in 2023. The weighted average interest rate on our outstanding debt was 5.44% and 5.06% as of September 30, 2024 and 2023, respectively. Mortgage notes payable totaled approximately $103.2 million and $103.3 million as of September 30, 2024 and 2023, respectively.
Current wording
Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges wasapproximately $1.5 millionfor thethree months ended March 31, 2025, compared toapproximately $1.5 millionfor the same period in 2024. The weighted average interest rate on our outstanding debt was 5.83% and 5.23% as of March 31, 2025 and 2024, respectively. Mortgage notes payable totaled approximately $94.4 million and $102.3 million as of March 31, 2025 and 2024, respectively. The decrease in mortgage notes payable is a direct result of the sale of our two commercial properties during February 2025 and the change in the number of model homes.
Previous wording
Income allocated to non-controlling interests. Income allocated to non-controlling interests for the nine months ended September 30, 2024 and 2023 totaled approximately $2.3 million and $2.2 million, respectively. This was directly related to the gain on sales of model homes held by our five affiliated limited partnerships.
Current wording
Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended March 31, 2025 and 2024 totaled approximately $0.1 million and $1.5 million, respectively. This was directly related to the gain on sales of model homes held by our affiliated limited partnerships.
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 September 30, 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, and the sale of our equity or issuance of debt securities or bonds. Our cash and restricted cash at March 31, 2025 was approximately $12.0 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. 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
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 consolidated balance sheet. Our management team is working to fill the 45,535 square foot space and has leased approximately 35% of the space to a tenant during 2023 and 2024 and has reviewed various third party proposals for the remaining 65%. As of September 30, 2024, management is pursuing third party tenants who fit into our long-term plans, however, there is no guarantee we will be successful in signing these new tenants.
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. 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.
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. During the nine months ended September 30, 2024, we repurchased 137,709 shares of our Series A Common Stock, for a total cost of $97,394, with an average price of approximately $0.7072 per share. There were no repurchases of Series D Preferred Stock during the nine months ended September 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.
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. In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which expired in November 2024. In December 2024, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock, which shall expire in December 2025. During the three months ended March 31, 2025, we did not repurchase any shares of our Series A Common Stock. During the three months ended March 31, 2025, the Company repurchased 12,844 shares of our Series D Preferred Stock at an average price of approximately $15.18 per share, including a commission of $0.035 per share, for a total cost of $194,971 for the Series D Preferred Stock. 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
The Company is reviewing when it may pay dividends to our common stockholders on a quarterly basis again, cash permitting, and intends to continue on a monthly basis to pay dividends 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 nine months ended September 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 nine months ended September 30, 2024 and 2023.
Current wording
For the three months ended March 31, 2025 and 2024 the Company did not declare a cash dividend on shares of Series A Common Stock. For the three months ended March 31, 2025 and 2024, the Company declared and paid approximately $0.6 million and $0.5 million, respectively, in cash dividends on shares of Series D Preferred Stock. Cash permitting, the Company intends to continue to pay dividends 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 has not decided when it will resume dividends to our common stockholders on a quarterly basis. 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, 2025 and 2024.
Previous wording
At September 30, 2024, and December 31, 2023, we had approximately $7.2 million and$6.5 million in cash equivalents, respectively, including $3.5 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.
Current wording
At March 31, 2025, and December 31, 2024, we had approximately $12.0 million and $8.0 millionin cash equivalents, respectively, including $4.0 million and $5.0 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 2025 and 2024, we did not experience any loss or lack of access to our cash or cash equivalents. Approximately $1.5 million of our cash balance was used in our Tender Offer that closed on May 5, 2025. 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 September 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 $75.6 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 September 30, 2024, was approximately 4.97%, and our debt to estimated market value for our commercial properties was approximately 65.2%. During the next 12 months, five of our commercial property loans, totaling approximately $28.4 million, will mature, with an estimated combined loan to value of approximately 59.6% as of September 30, 2024. The non-recourse loan on the Dakota Center property matured on July 6, 2024. During October 2024, management has agreed with the lender to sell the property to settle the loan balance. Due to the uncertainties in the Fargo market, we have decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets and for long-lived assets to be disposed of, to be in line with the current loan balance and estimated closing costs, which is the expected sales price. As such, we recorded an impairment charge of approximately $0.7 million, as of September 30, 2024.
Current wording
As of March 31, 2025, all our commercial properties, except 300 N.P. which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $67.4 million, collateralized by a total of 9 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 March 31, 2025, was approximately 5.38%, and our debt to estimated market value for our commercial properties was approximately 67.6%. During the next 12 months, three of our commercial property loans, totaling approximately $28.2 million, will mature, with an estimated combined loan to value of approximately 69.3% as of March 31, 2025. The non-recourse loan on the Dakota Center property matured on July 6, 2024. During October 2024, management has agreed with the lender to sell the property to settle the loan balance. Due to the uncertainties in the Fargo market, we have decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets and for long-lived assets to be disposed of, to be in line with the current loan balance and estimated closing costs, which is the expected sales price. As such, we recorded an impairment charge of approximately $0.7 million, as of December 31, 2024. During December 2024, the lender agreed to the broker the Company would use to sell the property to settle the non-recourse debt. As of March 31, 2025, the property was included in the real estate assets held for sale, net on the consolidated balance sheet. Any purchase offers will be subject to lender approval. The loan is considered non-recourse and we will not be required to make up the difference if the property sells for less than the loan balance.
Previous wording
As of September 30, 2024, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $27.5 million, excluding loans eliminated through consolidation, collateralized by a total of 82 Model Homes. These loans generally have a term at issuance of three to five years. As of September 30, 2024, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $335,826 and 6.74%, 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 September 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 original maturity date of August 15, 2024, which was extended for another year with an interest rate of 8.0% per annum. 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. This property was subsequently sold in October 2024, and the loan was paid in full.
Current wording
As of March 31, 2025, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $27.1 million, collateralized by a total of 84 Model Homes. These loans generally have a term at issuance of three to five years. As of March 31, 2025, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $322,340 and 6.97%, respectively. Our debt to estimated market value on all our model home properties is approximately 64.5%. 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.
Previous wording
Cash Flow for thenine months ended September 30, 2024, and September 30, 2023
Current wording
Cash Flow for thethree months ended March 31, 2025, and March 31, 2024
Previous wording
*Operating Activities:*Net cash used in operating activities for thenine months ended September 30, 2024, totaled approximately$1.0 million, as compared to cash used in operating activities of$0.4 million for thenine months ended September 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.
Current wording
*Operating Activities:*Net cash used in operating activities for thethree months ended March 31, 2025, totaled approximately$0.1 million, as compared to cash used in operating activities of$0.9 million for thethree months ended March 31, 2024. 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 thenine months ended September 30, 2024, was approximately$10.7 million compared to approximately$129.0 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 nine months ended September 30, 2024. Proceeds from the sale of real estate assets total approximately $22.3 million, net of selling costs, while cash used in real estate acquisition and capital improvement totaled approximately $11.7 million, for the nine months ended September 30, 2024.
Current wording
*Investing Activities:*Net cash provided by investing activities for thethree months ended March 31, 2025, was approximately$13.6 million compared to approximately$9.2 million used in investing activities during the same period in 2024. The change from each period was primarily related to the sale of our commercial properties in February 2025 for approximately $16.95 million. There were no similar commercial property sales during the three months ended March 31, 2024. Proceeds from the sale of real estate assets total approximately $18.4 million, net of selling costs, while cash used in real estate acquisition and capital improvement totaled approximately $4.8 million, for the three months ended March 31, 2025.
Previous 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 next 12 months. 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 $1.8 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 next 12 months. 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 thenine months ended September 30, 2024, was$8.9 million compared to$137.4 million provided by financing activities for the same period in 2023 and was primarily due to the following activities for thenine months ended September 30, 2024:
Current wording
*Financing Activities:*Net cash used in financing activities during thethree months ended March 31, 2025, was$9.5 million compared to$7.7 million provided by financing activities for the same period in 2024 and was primarily due to the following activities for thethree months ended March 31, 2025:
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Acquisitions during the three months ended March 31, 2024
Current report — wording carried from elsewhere
Dispositions during the three months ended March 31, 2024
Current report — wording carried from elsewhere
As the Company continues its operations, it may re-finance or seek additional financing. However, there can be no assurance that any such re-financing or additional financing will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company's ability to achieve its intended business objectives. Management believes that the combination of working capital on hand and the ability to refinance commercial and model home mortgages will fund operations through at least the next twelve months from the date of the issuance of these unaudited interim financial statements.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Depreciation and Amortization. Depreciation and amortization expense wasapproximately $1.5 million for the three months ended September 30, 2024, compared toapproximately $1.4 million for the same period in 2023.
Previous report — wording carried elsewhere
Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges wasapproximately $1.5 million for the three months ended September 30, 2024, compared toapproximately $1.4 million for the same period in 2023. The weighted average interest rate on our outstanding debt was 5.44% and 5.06% as of September 30, 2024 and 2023, respectively. Mortgage notes payable totaled approximately $103.2 million and $103.3 million as of September 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended September 30, 2024 and 2023 totaled approximately$0.4 million and$0.7 million, respectively.
Previous report — wording carried elsewhere
RESULTS OF OPERATIONS FOR THE nine MONTHS ENDED September 30, 2024 and 2023
Previous report — wording carried elsewhere
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.