SAN DIEGO, CA / ACCESSWIRE / August 14, 2023 / Presidio Property Trust, Inc. (NASDAQ:SQFT)(NASDAQ:SQFTP) (the "Company"), an internally managed, diversified real estate investment trust ("REIT"), today reported earnings for its quarter ended June 30, 2023.
Quarter Ended June 30, 2023, Financial Results
Net loss attributable to the Company's common stockholders for the three months ended June 30, 2023, was approximately $1,831,889, or $(0.15) per basic and diluted share, compared to a net loss of approximately $830,212, or $(0.07) per basic and diluted share for the three months ended June 30, 2022. The change in net income attributable to the Company's common stockholders was a result of:
• | An increase in G&A expenses of approximately $0.6 million due mainly to filing, accounting, and consulting costs related to the SPAC in Q2 2023. | |
• | An increase in interest expense related to mortgage notes payable of approximately $0.3 million in Q2 2023 compared to Q2 2022. This is due to the acquisition of real estate assets, most notably an increase in the number of homes in the model home portfolio. The Company owned 82 model homes as of June 30, 2022, and increased the holdings to 105 model homes as of June 30, 2023. Additionally, the interest rates on mortgages for the model home portfolio generally increased from a weighted average interest rate of 3.77% to 5.24% as of June 30, 2022, and June 30, 2023, respectively. | |
• | The increase in G&A and interest expense is partially offset by an increase in rental revenue and fee and other income of approximately $0.2 million in Q2 2023 compared to Q2 2022. This increase in rental income is due largely to the Company having a larger model home portfolio with 23 more homes in Q2 2023 versus Q2 2022, with no major changes to the commercial portfolio. | |
• | Noncontrolling interest payments were approximately $0.4 million larger in Q2 2023 compared to Q2 2022. This is due to the Company selling more homes in the joint ventures. In the JV's alone, the Company sold 7 homes for a gain of $1.1 million and 3 homes for a gain of $0.7 million in Q2 2023 and Q2 2022 respectively. |
FFO (non-GAAP) decreased by approximately $0.4 million to approximately $(489,404) from $(46,023) for the three months ended June 30, 2023, and June 30, 2022, respectively. A reconciliation of FFO to net income, the most directly comparable GAAP financial measure, is attached to this press release. However, because FFO excludes depreciation and amortization as well as the changes in the value of the Company's properties that result from use or market conditions, each of which have real economic effects and could materially impact the Company's results from operations, the utility of FFO as a measure of the Company's performance is limited.
We believe Core FFO (non-GAAP) provides a useful metric in comparing operations between reporting periods and in assessing the sustainability of our ongoing operating performance. Core FFO decreased by about $0.4 million, from approximately $234,958 in the three months ended June 30, 2022, to approximately $(209,748) in the three months ended June 30, 2023.
Acquisitions and Dispositions for the first two quarters of 2023
- The Company acquired 23 model home properties and leased them back to the homebuilders under triple net leases during the six months ended June 30, 2023. The purchase price for these properties was $12.9 million. The purchase price consisted of cash payments of $3.9 million and mortgage notes of $9.0 million.
- The Company sold 10 model home properties for approximately $5.0 million and recognized a gain of approximately $1.5 million.
Dividends paid during the first two quarters of 2023:
- During the first quarter and second quarter of 2023, the Company paid dividends to Common shareholders of $0.022 and $0.023 per share, respectively, for a total of $0.045 per share.
- During the first six months of 2023, the Company paid six monthly dividends, which totaled $1.17186 per share to shareholders of Series D preferred stock.
About Presidio Property Trust
Presidio is an internally managed, diversified REIT with holdings in model home properties which are triple-net leased to homebuilders, office, industrial, and retail properties. Presidio's model homes are leased to homebuilders located in Arizona, Illinois, Texas, Wisconsin, and Florida. Our office, industrial and retail properties are located primarily in Colorado, with properties also located in Maryland, North Dakota, Texas, and Southern California. 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, including those that have developed as a result of COVID-19. Presidio is also the sponsor of the Special Purpose Acquisition Company (SPAC) Murphy Canyon Acquisition Corp. (NASDAQ: MURF), which currently holds approximately $23.3 million in trust. Murphy Canyon Acquisition Corp. is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. The SPAC has entered into a definitive business combination agreement with Conduit Pharmaceuticals Limited (Conduit). A full description of the terms of the proposed business combination, which is expected to close in the second half of 2023 subject to the satisfaction of multiple conditions, including approval of the business combination by the SPAC's shareholders, is provided in the registration statement on Form S-4 that the SPAC has filed with the SEC. For more information on Presidio, please visit the Company's website at https://www.PresidioPT.com.
Definitions
Non-GAAP Financial Measures
Funds from Operations ("FFO") - The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.
However, because FFO excludes depreciation and amortization as well as the changes in the value of the Company's properties that result from use or market conditions, each of which have real economic effects and could materially impact the Company's results from operations, the utility of FFO as a measure of the Company's performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company's FFO may not be comparable to other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company's performance.
Core Funds from Operations ("Core FFO") - We calculate Core FFO by using FFO as defined by NAREIT and adjusting for certain other non-core items. We also exclude from our Core FFO calculation acquisition costs, loss on early extinguishment of debt, changes in the fair value of the earn-out, changes in fair value of contingent consideration, non-cash warrant dividends and the amortization of stock-based compensation.
We believe Core FFO provides a useful metric in comparing operations between reporting periods and in assessing the sustainability of our ongoing operating performance. Other equity REITs may calculate Core FFO differently or not at all, and, accordingly, the Company's Core FFO may not be comparable to such other REITs' Core FFO.
Cautionary Note Regarding Forward-Looking Statements
This press release contains statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws. Forward-looking statements are statements that are not historical, including statements regarding management's intentions, beliefs, expectations, representations, plans or predictions of the future, and are typically identified by such words as "believe," "expect," "anticipate," "intend," "estimate," "may," "will," "should" and "could." Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements also include statements relating to the closing of the business combination with Conduit within a certain timeframe or at all. These forward-looking statements are based upon the Company's present expectations, but these statements are not guaranteed to occur. Except as required by law, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the " Risk Factors" section of the Company's documents filed with the SEC, copies of which are available on the SEC's website, www.sec.gov.
Investor Relations Contact:
Presidio Property Trust, Inc.
Lowell Hartkorn, Investor Relations
[email protected]
Telephone: (760) 471-8536 x1244
Presidio Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
ASSETS | ||||||||
Real estate assets and lease intangibles: | ||||||||
Land | $ | 20,803,978 | $ | 19,189,386 | ||||
Buildings and improvements | 135,185,098 | 125,979,374 | ||||||
Tenant improvements | 14,426,125 | 13,861,839 | ||||||
Lease intangibles | 4,110,139 | 4,110,139 | ||||||
Real estate assets and lease intangibles held for investment, cost | 174,525,340 | 163,140,738 | ||||||
Accumulated depreciation and amortization | (36,841,025 | ) | (34,644,511 | ) | ||||
Real estate assets and lease intangibles held for investment, net | 137,684,315 | 128,496,227 | ||||||
Real estate assets held for sale, net | 1,196,336 | 2,016,003 | ||||||
Real estate assets, net | 138,880,651 | 130,512,230 | ||||||
Other assets: | ||||||||
Cash, cash equivalents and restricted cash | 8,700,791 | 16,516,725 | ||||||
Deferred leasing costs, net | 1,546,034 | 1,516,835 | ||||||
Goodwill | 2,423,000 | 2,423,000 | ||||||
Other assets, net (see Note 6) | 4,161,325 | 3,511,681 | ||||||
Total other assets | 16,831,150 | 23,968,241 | ||||||
Investments held in Trust (see Notes 2 & 9) | 23,339,887 | 136,871,183 | ||||||
TOTAL ASSETS | $ | 179,051,688 | $ | 291,351,654 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities: | ||||||||
Mortgage notes payable, net | $ | 102,856,817 | $ | 95,899,176 | ||||
Mortgage notes payable related to properties held for sale, net | 482,142 | 999,523 | ||||||
Mortgage notes payable, total net | 103,338,959 | 96,898,699 | ||||||
Accounts payable and accrued liabilities | 4,373,983 | 4,028,564 | ||||||
Accounts payable and accrued liabilities of SPAC (see Notes 2 & 9) | 6,655,685 | 5,046,725 | ||||||
Accrued real estate taxes | 977,658 | 1,879,875 | ||||||
Dividends payable preferred stock | 177,145 | 178,511 | ||||||
Lease liability, net | 31,799 | 46,833 | ||||||
Below-market leases, net | 15,753 | 18,240 | ||||||
Total liabilities | 115,570,982 | 108,097,447 | ||||||
Commitments and contingencies (Note 2 & 9): | ||||||||
SPAC Class A common stock subject to possible redemption; 2,187,728 as of June 30, 2023 and 13,225,000 shares as of December 31, 2022 (at $10.45 per share), net of issuance cost of approximately $6,400,000 | 16,748,849 | 130,411,135 | ||||||
Equity: | ||||||||
Series D Preferred Stock, $0.01 par value per share; 1,000,000 shares authorized; 901,375 shares issued and outstanding (liquidation preference $25.00 per share) as of June 30, 2023 and 913,987 shares issued and outstanding as of December 31, 2022 | 9,014 | 9,140 | ||||||
Series A Common Stock, $0.01 par value per share, shares authorized: 100,000,000; 11,849,710 shares and 11,807,893 shares were issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 118,497 | 118,079 | ||||||
Additional paid-in capital | 180,365,055 | 182,044,157 | ||||||
Dividends and accumulated losses | (142,294,778 | ) | (138,341,750 | ) | ||||
Total stockholders' equity before noncontrolling interest | 38,197,788 | 43,829,626 | ||||||
Noncontrolling interest | 8,534,069 | 9,013,446 | ||||||
Total equity | 46,731,857 | 52,843,072 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 179,051,688 | $ | 291,351,654 | ||||
Presidio Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income | $ | 4,329,588 | $ | 4,188,076 | $ | 8,271,641 | $ | 8,640,394 | ||||||||
Fees and other income | 214,284 | 132,784 | 393,723 | 253,607 | ||||||||||||
Total revenue | 4,543,872 | 4,320,860 | 8,665,364 | 8,894,001 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Rental operating costs | 1,399,159 | 1,348,083 | 2,974,149 | 2,931,556 | ||||||||||||
General and administrative | 1,813,184 | 1,214,005 | 3,777,804 | 2,797,696 | ||||||||||||
Depreciation and amortization | 1,368,829 | 1,316,193 | 2,702,403 | 2,655,418 | ||||||||||||
Total costs and expenses | 4,581,172 | 3,878,281 | 9,454,356 | 8,384,670 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense - mortgage notes | (1,336,415 | ) | (1,085,860 | ) | (2,204,182 | ) | (2,103,573 | ) | ||||||||
Interest and other income, net | 398,085 | 93,128 | 1,140,201 | 166,733 | ||||||||||||
Gain on sales of real estate, net | 1,119,952 | 1,227,484 | 1,537,289 | 2,750,269 | ||||||||||||
Income tax expense | (349,074 | ) | (259,285 | ) | (497,527 | ) | (524,524 | ) | ||||||||
Total other income (expense), net | (167,452 | ) | (24,533 | ) | (24,219 | ) | 288,905 | |||||||||
Net income (loss) | (204,752 | ) | 418,046 | (813,211 | ) | 798,236 | ||||||||||
Less: Income attributable to noncontrolling interests | (1,094,852 | ) | (709,202 | ) | (1,481,933 | ) | (1,917,878 | ) | ||||||||
Net loss attributable to Presidio Property Trust, Inc. stockholders | $ | (1,299,604 | ) | $ | (291,156 | ) | $ | (2,295,144 | ) | $ | (1,119,642 | ) | ||||
Less: Preferred Stock Series D dividends | (532,285 | ) | (539,056 | ) | (1,067,733 | ) | (1,078,111 | ) | ||||||||
Less: Series A Warrant dividend | - | - | - | (2,456,512 | ) | |||||||||||
Net loss attributable to Presidio Property Trust, Inc. common stockholders | $ | (1,831,889 | ) | $ | (830,212 | ) | $ | (3,362,877 | ) | $ | (4,654,265 | ) | ||||
Net loss per share attributable to Presidio Property Trust, Inc. common stockholders: | ||||||||||||||||
Basic & Diluted | $ | (0.15 | ) | $ | (0.07 | ) | $ | (0.28 | ) | $ | (0.39 | ) | ||||
Weighted average number of common shares outstanding - basic & diluted | 11,839,359 | 11,799,689 | 11,837,020 | 11,786,741 | ||||||||||||
FFO and Core FFO Reconciliation
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| 6/30/2023 | 6/30/2022 | 6/30/2023 | 6/30/2022 | |||||||||||||
Net (loss) income attributable to Presidio Property Trust, Inc. common stockholders | $ | (1,831,889 | ) | $ | (830,212 | )$ | $ | (3,362,877 | ) | $ | (4,654,265 | ) | ||||
Adjustments: | ||||||||||||||||
Income attributable to noncontrolling interests | 1,094,852 | 709,202 | 1,481,933 | 1,917,878 | ||||||||||||
Depreciation and amortization | 1,368,829 | 1,316,193 | 2,702,403 | 2,655,418 | ||||||||||||
Amortization of above and below market leases, net | (1,244 | ) | (13,722 | ) | (2,487 | ) | (27,445 | ) | ||||||||
Loss (gain) on sale of real estate assets, net | (1,119,952 | ) | (1,227,484 | ) | (1,537,289 | ) | (2,750,269 | ) | ||||||||
FFO | $ | (489,404 | ) | $ | (46,023 | ) | $ | (718,317 | ) | $ | (2,858,683 | ) | ||||
Restricted stock compensation | 280,981 | 287,719 | 540,501 | 568,700 | ||||||||||||
Series A Warrant dividend | - | - | - | 2,456,512 | ||||||||||||
Core FFO | $ | (234,958 | ) | $ | 241,696 | $ | (177,816 | ) | $ | 166,529 | ||||||
Weighted average number of common shares outstanding - basic and diluted | 11,839,359 | 11,799,689 | 11,837,020 | 11,786,741 | ||||||||||||
Core FFO / Wgt Avg Share | $ | (0.018 | ) | $ | 0.020 | $ | (0.015 | ) | $ | 0.014 | ||||||
SOURCE: Presidio Property Trust