Presidio Property Trust, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; comparisons are with Q1 2019 unless otherwise noted. Presidio is a diversified REIT with office, industrial, retail and model-home properties. At quarter-end, it reported 15 commercial properties and 138 model homes. COVID-19 had not significantly affected reported Q1 operating results, but management expected potential material effects thereafter.
Key financial results
| Metric | Q1 2020 | Q1 2019 / prior date |
|---|---|---|
| Total revenue | $7.03 million | $7.18 million; down 2.1% |
| Rental operating costs | $2.38 million | $2.76 million |
| Net operating income (segment basis) | $4.65 million | $4.42 million |
| General and administrative expense | $1.35 million | $1.76 million |
| Depreciation and amortization | $1.57 million | $2.21 million |
| Consolidated net loss | $0.93 million | $0.96 million |
| Net loss attributable to common stockholders | $1.11 million; $0.06 per share | $1.73 million; $0.10 per share |
| Cash from operating activities | $(0.47) million | $1.32 million |
| Cash from investing activities | $20.12 million | $7.99 million |
| Cash used in financing activities | $(21.06) million | $(6.24) million |
Segment NOI increased about 5.3%; rental operating costs were 33.9% of total revenue, versus 38.5% in Q1 2019. Same-store commercial NOI rose 15.1% to $3.01 million, with quarter-end occupancy of 85.6%, up from 81.1%.
At March 31, 2020, total assets were $196.3 million, down from $220.8 million at December 31, 2019. Cash, cash equivalents and restricted cash totaled $9.0 million, including $6.1 million of cash and cash equivalents available for general use. Total liabilities were $140.9 million. Net mortgage debt was $127.1 million and the net note payable was $7.6 million, compared with $142.4 million and $12.2 million, respectively, at year-end. The company paid no common-stock dividend in Q1.
Changes and notable transactions
- Revenue declined modestly, primarily reflecting property dispositions; higher occupancy partly offset the decline. Lower G&A and depreciation also improved year-over-year results.
- Presidio sold Centennial Tech Center for approximately $15.0 million and Union Terrace for approximately $11.3 million, and sold eight model homes for approximately $2.8 million. It acquired ten model homes for approximately $3.6 million, funded with about $1.1 million cash and $2.5 million of mortgage debt.
- Property-sale proceeds supported substantial debt repayments. Mortgage principal repayments were $19.8 million and note-payable repayments were $5.2 million during the quarter.
- Three properties were classified as held for sale at quarter-end: World Plaza, Garden Gateway Plaza and one of four Executive Office Park buildings. Management recorded no impairment at March 31 despite COVID-related economic triggers.
Liquidity, outlook and risks
- Mortgage principal maturities total approximately $20.2 million for the nine months remaining in 2020 and $23.4 million in 2021. Management expected to repay some maturities from property sales and refinance others.
- The $14.0 million Polar loan bears 8% interest, requires monthly interest-only payments and was due October 1, 2020, with a possible extension to March 31, 2021. The company reported compliance with its financial covenants. It had no revolving credit facility and was seeking one.
- Management warned that tenant rent deferrals, abatements, reduced rents, credit losses and slower leasing could materially affect future revenue and cash collections. Some commercial tenants had requested relief; lease amendments were under negotiation. The magnitude and duration of the pandemic’s financial effect could not be estimated.
- Management believed available resources could meet near-term needs, citing cash, operating cash flow, refinancing, property sales and potential borrowings. It cautioned that financing or asset sales could become more difficult and said dividends could be reduced if operating cash flow were insufficient.
- After quarter-end, Presidio received a $10,000 SBA Economic Injury Disaster Loan advance, not repayable, and a $462,000 Paycheck Protection Program loan, potentially forgivable subject to program conditions. These were Q2 events, not Q1 cash or results.
- Other risks include tenant defaults and vacancies, refinancing and interest-rate exposure, real estate valuation declines, REIT qualification and the geographic concentration of commercial properties. Management reported no material litigation or known material environmental liability.
Investor facts to verify
- Actual rent collections, tenant requests and concessions, and any resulting credit losses or lease amendments after March 31.
- Progress on the 2020 and 2021 mortgage maturities, the Polar loan repayment or extension, and access to refinancing or a credit facility.
- Available unrestricted cash after property reserves, debt service, capital needs and any subsequent operating cash flow.
- Occupancy, leasing demand, property valuations and any later impairment charges as the pandemic’s effects develop.
- The filing contains inconsistent descriptions of the Centennial Tech Center sale: Note 3 reports an approximately $913,000 loss, while the MD&A transaction discussion calls it a gain. The reported aggregate net loss on real estate sales was $9,835; verify the intended transaction-level description.