Presidio Property Trust, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise noted. Presidio is an internally managed REIT with office, industrial, retail and model-home properties. At quarter-end, it reported 13 commercial properties and 106 model homes.
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $5.67 million | $7.03 million |
| Net loss | $2.26 million | $0.93 million |
| Net loss attributable to common stockholders | $2.66 million; $0.28 per share | $1.11 million; $0.12 per share |
| Net operating income (NOI), company-defined non-GAAP | $3.53 million | $4.65 million |
| Net cash used in operating activities | $1.47 million | $0.47 million |
| Net cash provided by investing activities | $18.91 million | $20.12 million |
| Net cash used in financing activities | $22.00 million | $21.06 million |
- Revenue fell 19.3%, primarily reflecting property sales and COVID-related tenant workouts, including rent abatements and deferrals. Segment NOI decreased about 24%.
- Rental operating costs declined to $1.84 million from $2.38 million; G&A increased to $1.54 million from $1.35 million. Depreciation and amortization was $1.43 million, down from $1.57 million.
- Interest expense was $1.58 million, down from $2.55 million, including lower mortgage interest and the payoff of the higher-cost Polar Note. The Polar Note was paid in full during the quarter.
- The company recorded a $0.30 million impairment related to Highland Court and a net $1.16 million loss on real estate sales. Q1 sales included Waterman Plaza and Garden Gateway, plus 12 model homes; no properties were acquired.
Balance sheet, debt and liquidity
- Total assets were $159.14 million at March 31, 2021, down from $185.57 million at December 31, 2020. Total liabilities were $114.31 million; total equity was $44.83 million.
- Mortgage debt was $109.57 million principal, or $108.69 million net of unamortized loan costs. The Polar Note balance was zero at quarter-end. The company reported a 3.9% weighted-average rate on outstanding debt in its results discussion; its debt disclosures give separate weighted rates for commercial mortgages (4.38%) and model-home loans (3.5%).
- Cash, cash equivalents and restricted cash totaled $6.99 million, including approximately $4.0 million of restricted cash. The filing’s narrative also describes cash and restricted cash separately; investors should confirm the available, unrestricted amount.
- Operating cash flow was negative, while investing cash flow was supported by property-sale proceeds. The company paid approximately $1.0 million in dividends ($0.101 per share) during the quarter.
- Scheduled mortgage principal payments for the remaining nine months of 2021 totaled approximately $11.3 million. Management expected the World Plaza loan to be repaid following a planned sale or within its one-year extension period, and expected certain model-home loans to be repaid from sales proceeds or refinanced.
Changes, outlook and risks
- Management said COVID-19 did not significantly affect Q1 2021 operating results, but anticipated possible additional rent deferrals, abatements and credit losses during the rest of 2021, with potential material effects on rental revenue and collections. The overall future financial impact could not be reasonably estimated.
- Management believed working capital and the ability to refinance commercial and model-home mortgages would fund operations for at least 12 months from issuance of the interim statements. This depends on access to financing and planned dispositions; the company had no revolving credit line and gave no specific earnings or revenue guidance.
- Other key risks include tenant payment and renewal risk, commercial-space leasing demand, concentrated geographic exposure, interest rates and refinancing availability, property values and impairments, and maintaining REIT qualification. Management stated it believed the company was in compliance with material mortgage covenants.
- Highland Court was held for sale and impaired by $0.30 million based on the agreed sale price; the sale was expected in May 2021. World Plaza was scheduled for sale in Q2 2021. The company’s Form S-3 became effective April 27, 2021, allowing potential offerings of up to $200 million in gross proceeds, subject to applicable limitations.
- After quarter-end, a subsidiary entered into a $330,000 unsecured note at 4% with a company controlled by director Larry Dubose, maturing April 30, 2022. The filing reported no material litigation and no off-balance-sheet arrangements. Management concluded disclosure controls were effective.
Most important facts for investors to verify
- Unrestricted cash available after excluding lender-restricted funds, and the timing and sufficiency of cash flows to meet near-term obligations.
- Status of the World Plaza and Highland Court sales, proceeds received, and repayment or extension of related debt.
- Amounts of rent deferred, abated or uncollected; tenant credit quality; and any resulting credit losses or leasing delays.
- Refinancing or repayment plans for 2021 maturities, including model-home debt, and continued compliance with loan covenants.
- Terms and potential dilution or other effects of any securities offerings under the $200 million Form S-3 shelf, as well as the related-party $330,000 note.