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Presidio Property Trust, Inc. Announces Earnings for the First Quarter Ended March 31, 2024

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Presidio Property Trust (NASDAQ: SQFT) reported its first-quarter 2024 earnings, revealing a net loss of $5.8 million or ($0.47) per share, compared to a net loss of $1.5 million or ($0.13) per share in Q1 2023. Revenues increased to $4.8 million from $4.1 million a year earlier. Key highlights include signing leasing transactions totaling 24,476 sf and selling 27 model homes for $14 million, recognizing a gain of $2 million. The company also faced a $0.1 million non-cash impairment charge related to four model homes. Investments in Conduit Pharmaceuticals marked a $3.9 million fair value loss. FFO dropped to $(971,367) from $(228,914) in Q1 2023, and Core FFO decreased from $31,932 to $(429,445). No distributions were declared for Series A Common Stock, while Series D Preferred Stock distributions remained consistent at $0.58593 per share.

Positive
  • Total revenues increased to $4.8 million in Q1 2024 from $4.1 million in Q1 2023.
  • Leasing transactions of 24,476 sf completed, indicating active property management.
  • Sale of 27 model homes for $14 million, recognizing a gain of $2 million.
  • Model home transaction fees increased by $95,000 compared to Q1 2023.
  • Investments in Conduit Pharmaceuticals show a significant cost basis of $7.5 million.
Negative
  • Net loss attributable to common stockholders increased to $5.8 million from $1.5 million in Q1 2023.
  • Non-cash impairment charge of $0.1 million related to four model homes.
  • Fair value remeasurement of marketable securities led to a $3.9 million loss.
  • FFO decreased to $(971,367) from $(228,914) in Q1 2023.
  • Core FFO dropped from $31,932 to $(429,445) in Q1 2024.
  • No distributions declared for Series A Common Stock for Q1 2024.

Insights

Presidio Property Trust (PPT) reported significant details that investors should note. First and foremost, the $5.8 million net loss is considerable, especially when compared to the $1.5 million loss for the same period last year. -47% change per share highlights deteriorating financial health. These figures might raise concerns about the company's financial stability. The $3.9 million fair value remeasurement loss on investments in Conduit Pharmaceuticals adds another layer of worry, reflecting volatility in their investment portfolio.

The increase in total revenues to $4.8 million is a positive sign, up from $4.1 million in 2023. However, the FFO and Core FFO metrics show a decline, with Core FFO dropping to $(429,445) from $31,932. This suggests operational challenges beyond just revenue numbers. Investors should consider the context of these figures, particularly the non-cash impairment charges and fair value adjustments, which could signal underlying issues in property management and investment strategy.

Short-term, the stock may face pressure due to the increasing losses and investment revaluation. Long-term, stability in lease expirations and a proactive leasing strategy could stabilize revenues, but risk factors remain high.

Commercial lease stability is a important indicator for REITs like Presidio Property Trust. The company signed leasing transactions totaling 24,476 square feet, which is promising. The reduction in lease expirations scheduled for 2024, nearly half of 2023 levels, offers a more stable rent roll. This could benefit cash flows and operational stability in uncertain real estate markets. Nonetheless, the net loss and impairment charges on model homes raise red flags regarding asset management efficiency.

The sale of 27 model homes generating a $2 million gain demonstrates effective liquidation of assets, albeit with the caveat of an abnormally short hold period and associated impairment charges. These transactions might indicate a shift in focus or strategy, possibly away from long-term holds to quicker turnover. While this could boost liquidity, it may also reflect reactive, rather than proactive, asset management.

Looking ahead, minimizing unscheduled vacancies and maintaining or increasing leasing activity will be key for sustained growth. However, the broader market's unpredictability remains a significant concern for long-term investors.

SAN DIEGO, CA / ACCESSWIRE / May 14, 2024 / Presidio Property Trust, Inc. (NASDAQ:SQFT)(NASDAQ:SQFTP)(NASDAQ:SQFTW) (the "Company"), an internally managed, diversified real estate investment trust ("REIT"), today reported earnings for its quarter ended March 31, 2024.

"During the first quarter of 2024, we have signed leasing transactions totaling 24,476 sf, including new leases and renewals. We believe 2024 is off to a good start. With currently scheduled lease expirations during 2024 at a level nearly one-half of that during 2023, there is good reason to anticipate that our rent roll will be more stable through the end of the year, even considering this period of uncertainty in the commercial real estate markets, " said Gary Katz, the Company's Chief Investment Officer

Three Months Ended March 31, 2024, Financial Results

Net loss attributable to the Company's common stockholders for the three months ended March 31, 2024 was approximately $5.8 million, or ($0.47) per basic and diluted share, compared to a net loss of approximately $1.5 million, or $(0.13) per basic and diluted share for the three months ended March 31, 2023. The change in net income attributable to the Company's common stockholders was a result of:

Total revenues were approximately $4.8 million for the three months ended March 31, 2024, compared to approximately $4.1 million for the same period in 2023. As of March 31, 2024, we had approximately $135.3 million in net real estate assets including 88 model homes, compared to approximately $133.9 million in net real estate assets including 98 model homes at March 31, 2023. The average number of model homes held during the three months ended March 31, 2024 and 2023 was 99 and 95, respectively. The change in revenue is directly related to the average real estate assets held during the period, new commercial real estate leases, and model home transaction fees earned by the Company during the current period.

During the three months ended March 31, 2024, we recognized a non-cash impairment charge of approximately $0.1 million related to four model homes, three of which already had an impairment as of December 31, 2023. The new impairment charges for the four model homes reflects the estimated sales prices for these specific model homes in April and May 2024. These homes had an abnormally short hold period, less than two years, where the builder changed their product style in the neighborhoods where our model homes are located, in Texas, after we had purchased the homes. We do not believe these losses are indicative of our overall model home portfolio.

Model home transactions fees were up $95k in Q1 2024 as compared to Q1 2023 related to the number of model home sales during the first quarter of 2024. There were 27 model home sales in 2024, compared to three during the first quarter in 2023. In connection with those sales, we recorded a gain of $2.0 million and $0.4 million during Q1 2024 and Q1 2023, respectively.

Our investments in the common stock and warrants of Conduit Pharmaceuticals Inc. presented in the consolidated balance sheets were measured at fair value using Level 1 market prices, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $14.5 million and $18.3 million as of March 31, 2024 and December 31, 2023, respectively, with a cost basis of approximately $7.5 million. For the three months ended March 31, 2024, the fair value remeasure resulted in a loss on marketable securities totaling approximately $3.9 million. As of March 31, 2024, our investments in in these securities presented in the consolidated balance sheets were measured at fair value using Level 1 market prices, which closed at $3.59 per share and $0.06 per warrant.

FFO (non-GAAP) decreased by approximately $0.7 million to approximately $(971,367) from $(228,914) for the three months ended March 31, 2024 and 2023, respectively. A reconciliation of FFO to net income, the most directly comparable GAAP financial measure, is attached to this press release. However, because FFO excludes depreciation and amortization as well as the changes in the value of the Company's properties that result from use or market conditions, each of which have real economic effects and could materially impact the Company's results from operations, the utility of FFO as a measure of the Company's performance is limited.

We believe Core FFO (non-GAAP) provides a useful metric in comparing operations between reporting periods and in assessing the sustainability of our ongoing operating performance. Core FFO decreased by about $0.4 million, from approximately $31,932 for the three months ended March 31, 2023, to approximately $(429,445) for the three months ended March 31, 2024. A reconciliation of Core FFO to net income, the most directly comparable GAAP financial measure, is attached to this press release.

Acquisitions and Dispositions for the three months ended March 31, 2024:

  • The Company acquired five model homes for approximately $2.2 million. The purchase price was paid through cash payments of approximately $0.6 million and mortgage notes of approximately $1.6 million.
  • The Company sold 27 model homes for approximately $14.0 million and recognized a gain of approximately $2.0 million.

Dividends paid during the three months ended March 31, 2024:

The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the three months ended March 31, 2024 and 2023.

Series A Common Stock

Quarter Ended
2024 2023
Distributions Declared Distributions Declared
March 31
$- $0.022
Total
$- $0.022

Series D Preferred Stock

Month
2024 2023
Distributions Declared Distributions Declared
January
$0.19531 $0.19531
February
0.19531 0.19531
March
0.19531 0.19531
Total
$0.58593 $0.58593

About Presidio Property Trust

Presidio is an internally managed, diversified REIT with holdings in model home properties which are triple-net leased to homebuilders, office, industrial, and retail properties. Presidio's model homes are leased to homebuilders located in Arizona, Illinois, Texas, Wisconsin, and Florida. Our office, industrial and retail properties are located primarily in Colorado, with properties also located in Maryland, North Dakota, Texas, and Southern California. While geographical clustering of real estate enables us to reduce our operating costs through economies of scale by servicing several properties with less staff, it makes us susceptible to changing market conditions in these discrete geographic areas, including those that have developed as a result of COVID-19. Presidio owns approximately 6.5% of the outstanding common stock of Conduit Pharmaceuticals Inc., a disease agnostic multi-asset clinical-stage disease-agnostic life science company providing an efficient model for compound development. For more information on Presidio, please visit the Company's website at https://www.PresidioPT.com.

Definitions

Non-GAAP Financial Measures

Funds from Operations ("FFO") - The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.

However, because FFO excludes depreciation and amortization as well as the changes in the value of the Company's properties that result from use or market conditions, each of which have real economic effects and could materially impact the Company's results from operations, the utility of FFO as a measure of the Company's performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company's FFO may not be comparable to other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of the Company's performance.

Core Funds from Operations ("Core FFO") - We calculate Core FFO by using FFO as defined by NAREIT and adjusting for certain other non-core items. We exclude from our Core FFO calculation acquisition costs, loss on early extinguishment of debt, changes in the fair value of the earn-out, changes in fair value of contingent consideration, non-cash warrant dividends and the amortization of stock-based compensation.

We believe Core FFO provides a useful metric in comparing operations between reporting periods and in assessing the sustainability of our ongoing operating performance. Other equity REITs may calculate Core FFO differently or not at all, and, accordingly, the Company's Core FFO may not be comparable to such other REITs' Core FFO.

Cautionary Note Regarding Forward-Looking Statements

This press release contains statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws. Forward-looking statements are statements that are not historical, including statements regarding management's intentions, beliefs, expectations, representations, plans or predictions of the future, and are typically identified by such words as "believe," "expect," "anticipate," "intend," "estimate," "may," "will," "should" and "could." Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements also include statements relating to the closing of the business combination with Conduit within a certain timeframe or at all. These forward-looking statements are based upon the Company's present expectations, but these statements are not guaranteed to occur. Except as required by law, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the "Risk Factors" section of the Company's documents filed with the SEC, copies of which are available on the SEC's website, www.sec.gov.

Investor Relations Contact:

Presidio Property Trust, Inc.
Lowell Hartkorn, Investor Relations
LHartkorn@presidiopt.com
Telephone: (760) 471-8536 x1244


Presidio Property Trust, Inc. and Subsidiaries
Consolidated Balance Sheets

March 31, December 31,
2024 2023
(Unaudited)
ASSETS
Real estate assets and lease intangibles:
Land
$19,716,839 $21,660,644
Buildings and improvements
126,800,920 133,829,416
Tenant improvements
18,695,226 17,820,948
Lease intangibles
3,776,654 4,110,139
Real estate assets and lease intangibles held for investment, cost
168,989,639 177,421,147
Accumulated depreciation and amortization
(38,983,073) (38,725,356)
Real estate assets and lease intangibles held for investment, net
130,006,566 138,695,791
Real estate assets held for sale, net
5,254,952 5,459,993
Real estate assets, net
135,261,518 144,155,784
Other assets:
Cash, cash equivalents and restricted cash
7,159,432 6,510,428
Deferred leasing costs, net
1,563,551 1,657,055
Goodwill
1,574,000 1,574,000
Investment in Conduit Pharmaceuticals marketable securities (see Notes 2 & 9)
14,457,288 18,318,521
Deferred tax asset
346,762 346,762
Other assets, net (see Note 6)
3,115,782 3,400,088
Total other assets
28,216,815 31,806,854
TOTAL ASSETS
$163,478,333 $175,962,638
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net
$98,599,984 $103,685,444
Mortgage notes payable related to properties held for sale, net
3,692,713 4,027,829
Mortgage notes payable, total net
102,292,697 107,713,273
Accounts payable and accrued liabilities
4,076,683 4,792,034
Accrued real estate taxes
1,252,289 1,953,087
Dividends payable
174,011 174,011
Lease liability, net
8,090 16,086
Below-market leases, net
12,022 13,266
Total liabilities
107,815,792 114,661,757
Equity:
Series D Preferred Stock, $0.01 par value per share; 1,000,000 shares authorized; 890,946 shares issued and outstanding (liquidation preference $25.00 per share) as of March 31, 2024 and 890,946 shares issued and outstanding as of December 31, 2023
8,909 8,909
Series A Common Stock, $0.01 par value per share, shares authorized: 100,000,000; 12,429,139 shares and 12,265,061 shares were issued and outstanding at March 31, 2024 and December 31, 2023, respectively
124,291 122,651
Additional paid-in capital
182,533,423 182,310,219
Dividends and accumulated losses
(137,272,480) (131,508,785)
Total stockholders' equity before noncontrolling interest
45,394,143 50,932,994
Noncontrolling interest
10,268,398 10,367,887
Total equity
55,662,541 61,300,881
TOTAL LIABILITIES AND EQUITY
$163,478,333 $175,962,638


Presidio Property Trust, Inc. and Subsidiaries
Consolidated Statements of Operations

For the Three Months Ended March 31,
2024 2023
Revenues:
Rental income
$4,419,106 $3,942,053
Fees and other income
370,955 179,438
Total revenue
4,790,061 4,121,491
Costs and expenses:
Rental operating costs
1,563,577 1,574,990
General and administrative
2,084,450 1,964,620
Depreciation and amortization
1,351,018 1,333,574
Impairment of real estate assets
95,548 -
Total costs and expenses
5,094,593 4,873,184
Other income (expense):
Interest expense - mortgage notes
(1,515,206) (867,767)
Interest and other income, net
4,646 742,117
Gain on sales of real estate, net
2,018,095 417,337
Loss on Conduit Pharmaceuticals marketable securities (see footnote 9)
(3,861,233) -
Income expense
(79,565) (148,453)
Total other (expense) income, net
(3,433,263) 143,234
Net loss
(3,737,795) (608,459)
Less: Income attributable to noncontrolling interests
(1,503,868) (387,081)
Net loss attributable to Presidio Property Trust, Inc. stockholders
$(5,241,663) $(995,540)
Less: Preferred Stock Series D dividends
(522,032) (535,448)
Net loss attributable to Presidio Property Trust, Inc. common stockholders
$(5,763,695) $(1,530,988)
Net loss per share attributable to Presidio Property Trust, Inc. common stockholders:
Basic & Diluted
$(0.47) $(0.13)
Weighted average number of common shares outstanding - basic & dilutive
12,293,190 11,834,656


FFO AND CORE FFO RECONCILIATION


For the Three Months Ended March 31,

2024 2023
Net loss attributable to Presidio Property Trust, Inc. common stockholders
$(5,763,695) $(1,530,988)
Adjustments:
Income attributable to noncontrolling interests
1,503,868 387,081
Depreciation and amortization
1,351,018 1,333,574
Amortization of above and below market leases, net
(1,244) (1,244)
Impairment of real estate assets
95,548 -
Loss on Conduit Pharma marketable securities
3,861,233 -
Loss (Gain) on sale of real estate assets
(2,018,095) (417,337)
FFO
$(971,367) $(228,914)
Stock Based Compensation
541,921 260,845
Core FFO
$(429,445) $31,932

Weighted average number of common shares outstanding - basic
12,293,190 11,834,656

Core FFO / Wgt Avg Share
$(0.035) $0.003

SOURCE: Presidio Property Trust



View the original press release on accesswire.com

FAQ

What were Presidio Property Trust's Q1 2024 revenues?

Presidio Property Trust reported Q1 2024 revenues of approximately $4.8 million.

What was Presidio Property Trust's Q1 2024 net loss?

The net loss for Q1 2024 was approximately $5.8 million or ($0.47) per share.

How much did Presidio Property Trust earn from model home sales in Q1 2024?

Presidio Property Trust earned a gain of $2 million from selling 27 model homes for $14 million in Q1 2024.

What was the fair value loss on marketable securities for Presidio Property Trust in Q1 2024?

There was a fair value remeasurement loss of approximately $3.9 million on marketable securities in Q1 2024.

How much did Presidio Property Trust's FFO decrease in Q1 2024?

The FFO decreased to approximately $(971,367) from $(228,914) in Q1 2023.

Did Presidio Property Trust declare any dividends for Series A Common Stock in Q1 2024?

No distributions were declared for Series A Common Stock in Q1 2024.

What were the distributions for Series D Preferred Stock in Q1 2024?

The distributions for Series D Preferred Stock remained at $0.58593 per share in Q1 2024.

How many leasing transactions did Presidio Property Trust sign in Q1 2024?

Presidio Property Trust signed leasing transactions totaling 24,476 sf in Q1 2024.

Presidio Property Trust, Inc.

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