Presidio Property Trust, Inc. — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. The company is a self-managed REIT with office, industrial, retail and model-home properties.
Financial results and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Total revenue | $8.28 million, up 3.8% from $7.96 million | $24.67 million, essentially flat versus $24.73 million |
| Net loss | $1.60 million; loss attributable to common stockholders was $1.88 million, versus $1.78 million | $5.25 million; loss attributable to common stockholders was $6.10 million, versus $2.77 million |
| Loss per common share | $0.11, versus $0.10 | $0.16, unchanged |
| Operating cash flow | $2.26 million for the nine months, down from $4.33 million | |
| Cash and restricted cash | $11.84 million at September 30, including $7.1 million restricted | |
| Debt | $172.62 million mortgage principal; $170.83 million net of loan costs. Series B preferred stock, classified as a liability, was $30.60 million. |
For the quarter, same-store NOI rose 4.4%; for the nine months, same-store NOI was nearly flat, down 0.1%. Same-store occupancy was 85.0%, versus 89.1% a year earlier. Nine-month rental operating costs were 32.4% of revenue, versus 32.8%.
Changes and operating activity
- Q3 revenue increased mainly from higher model-home rental income and property-tax recoveries. Nine-month revenue remained stable despite lower occupancy, which management said was offset by higher rental rates.
- Nine-month net loss worsened, reflecting $1.51 million of deferred offering costs expensed, lower property-sale gains ($0.80 million versus $2.24 million), and a $0.53 million impairment of Waterman Plaza. Lower preferred-stock financing expense partly offset these items.
- The company acquired 39 model homes for approximately $15.2 million and sold 24 for approximately $9.0 million during the nine months, recognizing about $0.80 million in net gains.
- Nine-month investing cash use was $9.55 million, while financing provided $10.82 million, primarily from mortgage proceeds. Mortgage principal rose from $162.01 million at year-end 2017 to $172.62 million.
Outlook, liquidity and risks
The filing gives no quantitative earnings or revenue guidance. Management described leasing trends as cautiously positive and said it expects to use operating cash flow, property sales and mortgage refinancing to meet liquidity needs. It reported $11.84 million of cash and restricted cash, no revolving credit facility, and approximately $2.0 million of annual planned capital, tenant-improvement and leasing expenditures, net of lender reserves. Management cautioned that access to financing or public securities may be needed to pursue long-term investment objectives.
The 30,700 outstanding Series B preferred shares carry a 14% preferred return and were extended to a redemption date of August 1, 2019. The company reported compliance with material mortgage covenants; scheduled mortgage principal payments include $14.57 million in 2019, $38.38 million in 2020 and $24.33 million in 2021. The filing identifies risks including refinancing and interest-rate conditions, tenant defaults or vacancies, rent and operating-cost changes, geographic concentration, real-estate market conditions, capital availability, and maintaining REIT status. No dividends were declared or paid in the first nine months of 2018; distributions had been suspended in Q3 2017.
Waterman Plaza’s impairment valuation used Level 3 inputs and management estimates. The company reported no legal proceedings, defaults upon senior securities, or off-balance-sheet arrangements. Disclosure controls were concluded effective at quarter-end.
Key facts for investors to verify
- Availability and terms of financing to address the August 2019 Series B preferred-stock redemption and upcoming mortgage maturities.
- Whether operating cash flow can cover debt service, property investment and other liquidity needs, given the decline versus 2017.
- Occupancy, leasing spreads and Colorado property-tax trends, including whether lower occupancy affects future rental income.
- Waterman Plaza valuation assumptions and any further impairment risk.
- Dividend policy and the company’s capacity to resume distributions while managing debt and preferred-stock obligations.