Presidio Property Trust, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with FY 2020. This is an annual report, not a standalone fourth-quarter filing. The company is an internally managed REIT investing in office, industrial, retail and model-home properties.
Business context and portfolio
At year-end, Presidio owned or held interests in 13 commercial properties totaling approximately 878,630 square feet and 92 model homes. Commercial properties were 84.6% occupied overall. The company reported approximately 139 commercial tenants, an average remaining commercial lease term of 3.1 years, and one tenant, Halliburton, at 8.0% of annualized base rent. Colorado generated 48.5% of commercial annual base rent; approximately 96% of model homes were in Texas.
Financial and operating performance
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Total revenue | $19.23 million | $24.35 million |
| Rental operating costs | $6.18 million; 32.2% of revenue | $8.82 million; 36.2% of revenue |
| General and administrative expense | $6.23 million; 32.4% of revenue | $5.75 million; 23.6% of revenue |
| Depreciation and amortization | $5.40 million | $6.27 million |
| Net loss | $1.46 million | $6.26 million |
| Net loss attributable to common stockholders | $4.80 million; $0.46 per share | $7.67 million; $0.85 per share |
| Segment NOI (company-defined, non-GAAP) | $12.44 million | $13.80 million |
| Net cash from operating activities | $2.37 million | $3.69 million |
| Net cash from investing activities | $24.20 million | $27.68 million |
| Net cash used in financing activities | $23.42 million | $30.22 million |
Revenue fell 21%, mainly reflecting commercial property sales and a net reduction in model homes. Rental operating costs declined faster than revenue, in part because the portfolio included a larger share of triple-net properties and model homes. G&A rose 8%, principally due to higher stock compensation. Mortgage interest expense decreased 26% to $4.54 million; the company also paid off its 8% Polar note in March 2021. Net loss improved year over year, but common-stockholder loss includes $1.17 million of Series D preferred dividends and noncontrolling-interest allocations.
Balance sheet, debt and liquidity
Total assets were $161.20 million, down from $185.57 million; total liabilities were $95.71 million, down from $135.45 million. Total equity was $65.48 million. Net real estate assets were $138.06 million versus $166.25 million a year earlier.
Mortgage principal was $89.42 million gross ($88.86 million net of loan costs), compared with $120.79 million gross in 2020, and the company reported no variable-rate mortgage provisions at year-end. Debt included $67.27 million on commercial properties and $22.15 million on model homes. Cash, cash equivalents and restricted cash totaled $14.70 million, including $4.7 million restricted; management described approximately $10 million as unrestricted cash. Operating cash flow was below reported dividends paid to common and preferred holders combined.
Scheduled 2022 mortgage principal payments were approximately $12.21 million, including $8.63 million for model homes. Management expected to refinance or sell properties to address maturities and stated it believed available liquidity, portfolio cash flow and property sales would fund operations, planned capital expenditures and required dividends for at least 12 months. The filing also identifies a $2.2 million balloon payment on the 300 N.P. mortgage due June 2022.
Material changes, transactions and capital actions
- Acquired a Houston property for approximately $4.9 million and a Baltimore property for approximately $8.9 million, both fully leased on triple-net terms; acquired 18 model homes for $8.4 million.
- Sold four commercial properties and 44 model homes during 2021. Disposition proceeds and gains varied by asset; the company reported a net gain on real estate sales of $2.49 million in the income statement.
- Issued 920,000 Series D preferred shares, generating approximately $20.5 million net proceeds. The preferred stock carries a cumulative 9.375% annual dividend on a $25 liquidation preference, payable monthly.
- Raised approximately $8.9 million net from a July common-stock and warrant offering. A $10 million common-stock repurchase program was authorized; 29,721 shares were repurchased during 2021 for approximately $110,631.
- Declared $0.41 per common share in 2021 dividends, compared with $0.10 in 2020; common dividends for 2021 were treated as return of capital for tax purposes. Preferred dividends declared in 2021 totaled $1.27603 per share.
- After year-end, sold World Plaza for $10 million on March 11, 2022, and listed Grand Pacific Center for sale. The company also sponsored Murphy Canyon Acquisition Corp.; its February 2022 SPAC IPO raised $132.25 million, and Presidio funded a $7.54 million purchase of placement units.
Outlook, risks and unusual items
Management said recent property-sale levels were not expected to continue and that high property prices and compressed capitalization rates made acquisitions challenging. The company intends to grow the portfolio, while identifying investment opportunities and financing as constraints. No specific earnings or revenue guidance was provided.
Management said COVID-19 did not significantly affect FY 2021 operating results, although prior rent amendments and future leasing, collections and valuations remained uncertain. Key risks include lease expirations, tenant defaults, office-space demand changes, property-market and geographic concentration, inflation and higher interest rates, refinancing and balloon-maturity risk, access to capital, and the ability to maintain dividends and REIT qualification. Commercial leases representing 29.3% of annualized rent were scheduled to expire in 2022; 79.7% of model-home lease rent was scheduled to expire that year, subject to builder extension options.
Unusual items included $0.61 million of real-estate impairment charges in 2021, a $3.2 million gain on model-home sales disclosed in transaction details, and $1.61 million of stock-based compensation. The independent auditor issued an unmodified opinion on the financial statements and identified real-estate impairment assessment as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Reconcile reported debt figures across the filing, including gross mortgage principal, net carrying value, and any related-party or consolidated amounts.
- Confirm liquidity available for operations after restricted cash, the SPAC investment, capital needs, dividends and 2022 debt maturities.
- Track the 2022 commercial and model-home lease expirations, renewal outcomes, rent collections and occupancy changes.
- Review refinancing, repayment or sale plans for the 300 N.P. balloon and other 2022 principal obligations.
- Assess the sustainability of common and preferred dividends against operating cash flow, REIT distribution requirements and financing covenants.
- Verify the accounting and consolidation treatment of Murphy Canyon and the related investment, funding commitments and potential conflicts of interest.