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Presidio Property Trust, Inc. Announces Earnings for the Quarter Ended September 30, 2023

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Presidio Property Trust, Inc. (Nasdaq: SQFT, SQFTP, SQFTW) reported a significant increase in net income, driven by a gain on deconsolidation from a business combination with Conduit Pharmaceuticals, Inc. However, the company also experienced a loss on the fair market value of its investment in Conduit and a decrease in the gain on sale of real estate, attributed to the number of model homes sold. Additionally, FFO and Core FFO decreased for the quarter.
Positive
  • Significant increase in net income
  • Successful business combination with Conduit Pharmaceuticals, Inc.
  • Useful metric in comparing operations with Core FFO
Negative
  • Loss on the fair market value of investment in Conduit
  • Decrease in gain on sale of real estate
  • Decrease in FFO and Core FFO

SAN DIEGO, Nov. 14, 2023 (GLOBE NEWSWIRE) -- Presidio Property Trust, Inc. (Nasdaq: SQFT, SQFTP, SQFTW) (the “Company”), an internally managed, diversified real estate investment trust (“REIT”), today reported earnings for its quarter ended September 30, 2023.

Quarter Ended September 30, 2023, Financial Results

Net income attributable to the Company’s common stockholders for the three months ended September 30, 2023 was approximately $20.96 million, or $1.77 per basic and diluted share, compared to a net loss of approximately $1.30 million, or $(0.11) per basic and diluted share for the three months ended September 30, 2022. The change in net income attributable to the Company’s common stockholders was a result of:

  • During September, the Company’s sponsored SPAC Murphy Canyon Acquisition Corp. completed its business combination with Conduit Pharmaceuticals, Inc., resulting in the Company recognizing a gain on deconsolidation of $40.32 million.
  • The Company remeasured the fair market value of its investment in Conduit as of September 30, 2023, resulting in a loss of approximately $17.68 million on the Conduit marketable securities.
  • The gain on sale of real estate decreased approximately $0.5 million for the three months ended September 30, 2023 as compared to the same period in 2022. This is directly related to the number of model homes that were sold in each quarter. There were seven model homes sold in Q3 2022 with an average gain per home of $180k, compared to five model homes sold in Q3 2023 with an average gain per home of $144k.
  • Noncontrolling interest payments were approximately $442,000 smaller in Q3 2023 compared to Q3 2022. This is due to the Company selling homes in its joint ventures. In the joint venture partnerships, the Company sold 3 homes for a gain of $0.6 million and 6 homes for a gain of $1.1 million in Q2 2023 and Q2 2022 respectively.

FFO (non-GAAP) decreased by approximately $0.2 million to approximately $(414,365) from $(189,927) for the three months ended September 30, 2023, and September 30, 2022, 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 $0.2 million, from approximately $91,054 in the three months ended September 30, 2022, to approximately $(126,673) in the three months ended September 30, 2023.   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 first three quarters of 2023

  • The Company acquired 25 model home properties and leased them back to the homebuilders under triple net leases during the nine months ended September 30, 2023. The purchase price for these properties was $13.7 million. The purchase price consisted of cash payments of $4.2 million and mortgage notes of $9.5 million.

  • The Company sold 15 model home properties for approximately $7.8 million and recognized a gain of approximately $2.3 million.

Dividends paid during the three quarters of 2023:

  • During the first, second and third quarters of 2023, the Company declared dividends to common shareholders of $0.022, $0.023 and $0.023 per share, respectively, for a total of $0.068 per share.

  • During the nine months ended September 30, 2023, the Company paid nine monthly dividends, which totaled $1.75779 per share, to shareholders of Series D preferred stock.

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

Condensed Consolidated Balance Sheets
       
  September 30,  December 31, 
  2023  2022 
  (Unaudited)     
ASSETS        
Real estate assets and lease intangibles:        
Land $20,580,587  $19,189,386 
Buildings and improvements  133,531,747   125,979,374 
Tenant improvements  15,636,305   13,861,839 
Lease intangibles  4,110,139   4,110,139 
Real estate assets and lease intangibles held for investment, cost  173,858,778   163,140,738 
Accumulated depreciation and amortization  (37,845,097)  (34,644,511)
Real estate assets and lease intangibles held for investment, net  136,013,681   128,496,227 
Real estate assets held for sale, net  2,434,624   2,016,003 
Real estate assets, net  138,448,305   130,512,230 
Other assets:        
Cash, cash equivalents and restricted cash  7,778,764   16,516,725 
Deferred leasing costs, net  1,501,812   1,516,835 
Goodwill  2,423,000   2,423,000 
Investment in Conduit Pharmaceuticals marketable securities (see Notes 2 & 9)  23,996,141    
Other assets, net (see Note 6)  3,785,367   3,511,681 
Total other assets  39,485,084   23,968,241 
Investments held in Trust (see Notes 2 & 9)  -   136,871,183 
TOTAL ASSETS $177,933,389  $291,351,654 
LIABILITIES AND EQUITY        
Liabilities:        
Mortgage notes payable, net $101,059,368  $95,899,176 
Mortgage notes payable related to properties held for sale, net  1,428,848   999,523 
Mortgage notes payable, total net  102,488,216   96,898,699 
Accounts payable and accrued liabilities  5,294,349   4,028,564 
Accounts payable and accrued liabilities of SPAC (see Notes 2 & 9)  -   5,046,725 
Accrued real estate taxes  1,506,532   1,879,875 
Dividends payable  478,253   178,511 
Lease liability, net  23,989   46,833 
Below-market leases, net  14,509   18,240 
Total liabilities  109,805,848   108,097,447 
Commitments and contingencies (Note 2 & 9):        
SPAC Class A common stock subject to possible redemption; none as of September 30, 2023 and 13,225,000 shares as of December 31, 2022 (at $10.45 per share), net of issuance cost of approximately $6,400,000  -   130,411,135 
Equity:        
Series D Preferred Stock, $0.01 par value per share; 1,000,000 shares authorized; 898,940 shares issued and outstanding (liquidation preference $25.00 per share) as of September 30, 2023 and 913,987 shares issued and outstanding as of December 31, 2022  8,989   9,140 
Series A Common Stock, $0.01 par value per share, shares authorized: 100,000,000; 11,859,726 shares and 11,807,893 shares were issued and outstanding at September 30, 2023 and December 31, 2022, respectively  118,597   118,079 
Additional paid-in capital  181,483,892   182,044,157 
Dividends and accumulated losses  (121,638,764)  (138,341,750)
Total stockholders' equity before noncontrolling interest  59,972,714   43,829,626 
Noncontrolling interest  8,154,827   9,013,446 
Total equity  68,127,541   52,843,072 
TOTAL LIABILITIES AND EQUITY $177,933,389  $291,351,654 
         


Presidio Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)
 
  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2023  2022  2023  2022 
Revenues:                
Rental income $4,262,790  $4,243,887  $12,534,431  $12,884,280 
Fees and other income  221,384   148,088   615,107   401,697 
Total revenue  4,484,174   4,391,975   13,149,538   13,285,977 
Costs and expenses:                
Rental operating costs  1,478,479   1,434,225   4,452,628   4,365,781 
General and administrative  1,635,610   1,509,139   5,413,413   4,306,835 
Depreciation and amortization  1,351,705   1,318,164   4,054,109   3,973,582 
Total costs and expenses  4,465,794   4,261,528   13,920,150   12,646,198 
Other income (expense):                
Interest expense - mortgage notes  (1,375,199)  (1,382,120)  (3,579,381)  (3,485,693)
Interest and other income, net  254,486   590,586   1,394,687   757,318 
Gain on sales of real estate, net  757,285   1,307,258   2,294,574   4,057,527 
Loss on Conduit marketable securities  (17,682,154)     (17,682,154)   
Gain on deconsolidation of SPAC  40,321,483      40,321,483    
Income tax expense  (134,620)  (294,996)  (632,147)  (819,520)
Total other income, net  22,141,281   220,728   22,117,062   509,632 
Net income  22,159,661   351,175   21,346,450   1,149,411 
Less: Income attributable to noncontrolling interests  (673,279)  (1,114,928)  (2,155,212)  (3,032,806)
Net income (loss) attributable to Presidio Property Trust, Inc. stockholders $21,486,382  $(763,753) $19,191,238  $(1,883,395)
Less: Preferred Stock Series D dividends  (527,873)  (538,286)  (1,595,606)  (1,616,397)
Less: Series A Warrant dividend           (2,456,512)
Net income (loss) attributable to Presidio Property Trust, Inc. common stockholders $20,958,509  $(1,302,039) $17,595,632  $(5,956,304)
                 
Net loss per share attributable to Presidio Property Trust, Inc. common stockholders:                
Basic & Diluted $1.77  $(0.11) $1.49  $(0.51)
                 
Weighted average number of common shares outstanding - basic & dilutive  11,851,343   11,780,090   11,841,847   11,784,500 
                 


FFO and Core FFO Reconciliation
 
  For the Three Months Ended  For the Nine Months Ended 
  09/30/23  09/30/22  09/30/23  09/30/22 
Net (loss) income attributable to Presidio Property Trust, Inc. common stockholders $20,958,509  $(1,302,039) $17,595,632  $(5,956,304)
Adjustments:                
Income attributable to noncontrolling interests  673,279   1,114,928   2,155,212   3,032,806 
Depreciation and amortization  1,351,705   1,318,164   4,054,109   3,973,582 
Amortization of above and below market leases, net  (1,244)  (13,722)  (3,731)  (41,167)
Impairment of real estate assets  -   -   -   - 
Loss on Conduit marketable securities  17,682,154   -   17,682,154   - 
Gain on deconsolidation of SPAC  (40,321,483)  -   (40,321,483)  - 
Loss (gain) on sale of real estate assets, net  (757,285)  (1,307,258)  (2,294,574)  (4,057,527)
FFO $(414,365) $(189,927) $(1,132,681) $(3,048,610)
Restricted stock compensation  287,691   293,136   828,193   861,837 
Series A Warrant dividend (non-cash)  -   -   -   2,456,512 
Core FFO $(126,673) $103,209  $(304,488) $269,739 
                 
Weighted average number of common shares outstanding - basic and diluted  11,851,343   11,780,090   11,841,847   11,784,500 
                 
Core FFO / Wgt Avg Share $(0.011) $0.01  $(0.026) $0.02 
                 

FAQ

What were Presidio Property Trust, Inc.'s financial results for the quarter ended September 30, 2023?

Net income attributable to the Company’s common stockholders for the three months ended September 30, 2023 was approximately $20.96 million, or $1.77 per basic and diluted share, compared to a net loss of approximately $1.30 million, or $(0.11) per basic and diluted share for the three months ended September 30, 2022.

What was the result of the business combination with Conduit Pharmaceuticals, Inc.?

The business combination with Conduit Pharmaceuticals, Inc. resulted in the Company recognizing a gain on deconsolidation of $40.32 million.

Why did the gain on sale of real estate decrease?

The decrease in the gain on sale of real estate was attributed to the number of model homes sold, with fewer homes sold in Q3 2023 compared to Q3 2022.

What is FFO and Core FFO?

FFO (non-GAAP) and Core FFO (non-GAAP) are metrics used to assess the company's ongoing operating performance, with Core FFO providing a useful measure in comparing operations between reporting periods.

Presidio Property Trust, Inc.

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REIT - Diversified
Real Estate Investment Trusts
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United States of America
SAN DIEGO