Presidio Property Trust, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparative period is Q1 2021. The company is an internally managed REIT with office, industrial, retail and triple-net model-home properties. It also consolidated Murphy Canyon Acquisition Corp. (a SPAC) during the quarter.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $4.57 million | $5.67 million |
| Segment NOI | $2.99 million | $3.53 million |
| Consolidated net income (loss) | $0.38 million | ($2.26 million) |
| Net loss attributable to common stockholders | ($3.82 million); ($0.32) per share | ($2.66 million); ($0.28) per share |
| Cash used in operating activities | $0.98 million | $1.47 million |
| Cash, cash equivalents and restricted cash | $22.49 million | $14.70 million at Dec. 31, 2021 |
| Mortgage notes payable, net | $92.84 million | $88.86 million at Dec. 31, 2021 |
| Total assets | $291.78 million | $161.20 million at Dec. 31, 2021 |
Segment NOI margin was approximately 65.4% of revenue, versus 62.3% in Q1 2021. General and administrative expense was $1.58 million, or 34.6% of revenue, compared with $1.54 million, or 27.1%. The increase in assets and quarter-end liquidity largely reflects the SPAC IPO and its trust account, not solely funds available for the REIT’s operations.
Changes versus the prior period
- Revenue fell about 19%, primarily following prior-period sales of commercial properties and model homes. Rental income declined to $4.45 million from $5.48 million.
- NOI decreased about 15%. Lower property operating costs and mortgage interest partly offset the revenue decline.
- Net income improved at the consolidated level, helped by a $1.52 million gain on real estate sales, compared with a $1.16 million net loss on sales in Q1 2021. The company nevertheless reported a larger common-stockholder loss, including $539,056 of Series D preferred dividends and a $2.46 million Series A warrant dividend allocation.
- Investing cash flow was a $122.31 million outflow, mainly due to $134.90 million placed in the SPAC trust account; financing cash flow was a $131.09 million inflow, including $132.25 million of SPAC IPO proceeds.
Portfolio, capital and outlook
- At March 31, the company reported interests in 12 commercial properties and 85 model homes. It acquired four model homes for approximately $2.4 million, sold World Plaza for approximately $10.0 million (recognized loss approximately $0.3 million), and sold 11 model homes for approximately $5.6 million (recognized gain approximately $1.8 million).
- Management said it intends to grow the commercial portfolio but noted elevated property prices and compressed capitalization rates are making acquisitions challenging. No quantitative earnings or revenue guidance was provided.
- Management expected cash on hand, operating cash flow, refinancing and property sales to fund operations for at least 12 months, while warning financing may not be available on acceptable terms. Mortgage principal payments scheduled for the remainder of 2022 totaled approximately $9.7 million, including $6.5 million on model homes. The $2.2 million 300 N.P. balloon loan was paid in full on May 11, 2022.
- The company stated COVID-19 had not significantly affected Q1 results, but expected possible additional rent deferrals, abatements or credit losses during 2022. It cited interest-rate increases, inflation, economic conditions and geopolitical volatility as risks. Management said it had experienced no direct material impact from the Russia-Ukraine conflict as of the filing.
- Series D preferred stock carries a 9.375% annual cumulative dividend on a $25 liquidation preference. The company said it intended to continue quarterly common and monthly preferred dividends, subject to board approval.
- Murphy Canyon raised $132.25 million in its February IPO; its funds are held in trust for SPAC purposes and public-share redemption rights. The company consolidated the SPAC and committed to fund possible extension payments if needed.
- The filing reported no material litigation, no material change in risk factors, and effective disclosure controls. Management noted tenant leases may not fully offset inflation and that financing, tenant collections and property values remain exposed to market conditions.
Investor verification priorities
- Distinguish operating liquidity from the $134.9 million SPAC trust balance, which is restricted to SPAC purposes; confirm the amount of cash available to the REIT.
- Review upcoming mortgage maturities, refinancing and property-sale assumptions, including the scheduled 2022 model-home repayments and the subsequent payoff of 300 N.P.
- Reconcile why consolidated net income was positive while common-stockholder loss widened, including the warrant dividend allocation and preferred dividends.
- Verify the Series A common-stock warrant exercise price: the filing generally states $5.50, but its off-balance-sheet discussion refers to $5.00 when estimating potential proceeds.
- Assess tenant concentration, occupancy and rent collections, COVID-related concessions, and the portfolio’s exposure to concentrated geographic markets and non-investment-grade tenants.