UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162020
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 333-205893
THE PARKING REIT, |
(Exact name of registrant as specified in its charter) |
MARYLAND | 47-3945882 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
8880 W. Sunset Road Suite 240, Las Vegas,9130 WEST POST ROAD SUITE 200, LAS VEGAS, NV 89148
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number: (858) 369-7959
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s) | ||
N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 Par Value | ||
(Title of class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [ X ] Emerging growth company [ X ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
There is no established market for the Registrant's shares of common stock. On January 14, 2021, the board of directors of the Registrant approved an estimated net asset value per share of the Registrant's common stock of $11.75. There were approximately 5,995,062 shares of common stock held by non-affiliates at June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter.
Class | Market Value as of June 30, 2016 | ||
Common Stock, $0.0001 Par Value | $ | 24,359,590 | |
Indicate the number of shares outstanding of each of the registrant'sregistrant’s classes of common stock, as of the latest practicable date.
Class | Number of Shares Outstanding As of March | ||
Common Stock, $0.0001 Par Value | 7,739,952 |
TABLE OF CONTENTS
Page | |||
1 | |||
UNRESOLVED STAFF COMMENTS | 25 | ||
ITEM 2. | PROPERTIES | 25 | |
ITEM 3. | LEGAL PROCEEDINGS | 26 | |
ITEM 4. | |||
27 | |||
SELECTED FINANCIAL DATA | 28 | ||
ITEM 7. | |||
92 | |||
104 | |||
ITEM 16. | SUMMARY | 105 | |
Certain statements included in this annual report on Form 10-K (this "Annual Report") that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential" or the negative of such terms and other comparable terminology.
The forward-looking statements included herein are based upon ourthe Company’s current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond ourthe Company’s control. Although we believethe Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, ourthe actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Annual Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertakethe Company undertakes no obligation to publicly update or revise any forward-lookingforward – looking statements made after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-lookingforward – looking statements included in this Annual Report, including, without limitation, the risks described under "Risk Factors," the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.
This report may include market data and forecasts with respect to the REIT industry. Although the Company is responsible for all of the disclosure contained in this report, in some cases the Company relies on and refers to market data and certain industry forecasts that were obtained from third party surveys, market research, consultant surveys, publicly available information and industry publications and surveys that are believed to be reliable.
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Summary Risk Factors
Set forth below is a summary of the risks described under Item 1A. Risk Factors in this Annual Report on Form 10-K:
Risks Related to an Investment in the Company
Risks Related to Our Investments
Risks Related to Our Financing Strategy
Risks Related to Conflicts of Interest
Risks Related to Our Corporate Structure
Federal Income Tax Risks
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PART I
General
The Parking REIT, Inc., formerly known as MVP REIT II, Inc. (the "Company," "we," "us,"(the “Company,” “we,” “us” or "our"“our”), is a Maryland corporation formed on May 4, 20152015. It had elected to be taxed and intendsbelieves it had operated in a manner that allowed the Company to qualify as a real estate investment trust ("REIT"(“REIT”) for U.S. federal income tax purposes beginning with the taxable year endingended December 31, 2016. As of2017 through December 31, 2016,2019. As a result of the COVID-19 pandemic, the Company ceased all selling effortsentered into temporary lease amendments with some of its tenants. The income generated under these lease amendments did not constitute qualifying REIT income for purposes of the REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the initial public offering (the "Offering")year ended December 31, 2020. Accordingly, the Company did not qualify as a REIT in 2020 and will be taxed as a C corporation for the year ended December 31, 2020 and for at least its next four taxable years.
As a C corporation, the Company will be subject to federal income tax on its taxable income at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which it no longer qualified as a REIT. Failing to qualify as a REIT will materially and adversely affect the Company’s net income. In addition, distributions to its stockholders will not be deductible by the Company. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C Corp, the Company is not required to distribute any amounts to its stockholders and all distributions to stockholders would be taxable as regular corporate dividends to the extent of its common stock, $0.0001 par value per share, at $25.00 per share, pursuantcurrent and accumulated earnings and profits. In such event, corporate stockholders may be eligible for the dividends-received deduction. In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income. Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a registration statement on Form S-11 filed with the U.S. SecuritiesREIT, other than capital gain dividends and Exchange Commission (the "SEC") under the Securities Act of 1933,dividends treated as amended. As ofqualified dividend income, for taxable years beginning after December 31, 2016, the Company raised approximately $56.4 million in the Offering2017 and before paymentJanuary 1, 2026 for purposes of deferred offering costs of approximately $1.1 million, contribution from the Sponsor of approximately $1.1 million and cash distributions of approximately $274,000. The Company has also registered $50 million in shares of common stockdetermining their U.S. federal income tax (but not for issuance pursuant to a distribution reinvestment plan (the "DRIP") under which common stock holders may elect to have their distributions reinvested in additional shares of common stock at $25.00 per share.
The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. No more than 10% of the proceeds of the Offering will be used for investment in Canadian properties. To a lesser extent, the Company may also invest in parking properties that contain other than parking facilities. MVP Realty Advisor, LLC (the "Advisor"),sources of rental income, potentially including office, retail, storage, residential, billboard or cell towers.
The Company is the Company's affiliated advisor.
utilizesThe Company has utilized an Umbrella Partnership Real Estate Investment Trust ("UPREIT"(“UPREIT”) structure to enable usthe Company to acquire real property in exchange for limited partnership interests in the Company's operating partnershipOperating Partnership from owners who desire to defer taxable gain that would otherwise normally be recognized by them upon the disposition of their real property or transfer of their real property to usthe Company in exchange for shares of the Company'sCompany’s common stock or cash.
The Company also sold 5,000 shares of common stock to VRM II in the Offering.
As part of March 21,the Company’s initial capitalization, 8,000 shares of common stock were sold for $200,000 to an affiliate of the former Advisor (as defined below).
Merger of MVP REIT with Merger Sub, LLC
On May 26, 2017,, the Company, had raisedMVP REIT, Inc., a Maryland corporation (“MVP I”), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the former Advisor entered into an agreement and plan of merger (the “Merger Agreement”), pursuant to which MVP I would merge with and into Merger Sub (the “Merger”). On December 15, 2017, the Merger was consummated. Following the Merger, the Company contributed 100% of its equity interests in Merger Sub to the Operating Partnership.
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At the effective time of the Merger, each share of MVP I common stock, par value $0.001 per share, that was issued and outstanding immediately prior to the Merger (the “MVP I Common Stock”), was converted into the right to receive 0.365 shares of Company common stock. A total of approximately $60.13.9 million shares of Company common stock were issued to former MVP I stockholders, and $2.7 million fromformer MVP I stockholders, immediately following the Merger, owned approximately 59.7% of the Company's common and preferred stock offerings, respectively, and purchased approximately $114 million in parking assets.
During Objectives2016, the Company had the following highlights:
The Company'sCompany’s primary investment objectives are to:
In mid-2019, the Company engaged financial and legal advisors and began to explore a broad range of potential strategic alternatives to provide liquidity alternatives duringto stockholders. On January 8, 2021, the second quarter of 2017, subjectCompany, entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, MVP REIT II Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII” and together with VRMI and Mr. Shustek, the “Advisor”) and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). See the Company’s Form 8-K Current Report filed on January 14, 2021 for additional information. While the Bombe Transaction is expected to then prevailing market conditions. Thereprovide liquidity, there can be no assurance that wethe Company will cause a liquidity eventreceive the anticipated benefits of the Bombe Transaction or that the Bombe Transaction will be completed on the anticipated timeline or at all.
For example, the Company expects to occur.
Prior Investment Strategy
The Company'sCompany’s investment strategy will focushas historically focused primarily on parking lots, parking garagesacquiring, owning and other parking structures throughout the United States and Canada. To a lesser extent, the Company may also invest in properties other than parking facilities. No more than 10% of the proceeds of the Offering will be used for investment in Canadian properties.
However, as a result of this offering willthe current COVID-19 pandemic, among other factors, such demand drivers have been and are expected to be usedsignificantly diminished for investmentan indeterminate period of time. Many state and local governments are currently restricting public gatherings or requiring people to shelter in Canadian properties. To a lesser extent,place, which has in some cases eliminated or severely reduced the demand for parking. For further information regarding the impact of COVID-19 on the Company, may also invest in properties other than parking facilities.
The Company believes parking facilities possess attractive characteristics not found in other commercial real estate investments, including the following:
Management Internalization
On March 29, 2019, the selection of specific properties.
Contribution Agreement
On March 29, 2019, the Company entered into a Contribution Agreement (the “Contribution Agreement”) with the former Advisor, Vestin Realty Mortgage I, Inc. (“VRTA”) (solely for purposes of Section 1.01(c) thereof), Vestin Realty Mortgage II, Inc. (“VRTB”) (solely for purposes of Section 1.01(c) thereof) and Shustek (solely for purposes of Section 4.03 thereof). In exchange for the Contribution, the Company agreed to issue to the former Advisor 1,600,000 shares of Common Stock as consideration (the “Consideration”), issuable in four equal installments. The first three installments of 400,000 shares of Common Stock per installment were issued on April 1, 2019, December 31, 2019 and December 31, 2020, respectively. See Note R —Deferred Management Internalization in Part II, Item 8 Notes to the Consolidated Financial Statements of this Annual Report for additional information. The remaining installment was due to be issued on December 31, 2021; however, pursuant to the Purchase Agreement, the Advisor has agreed to surrender its claim to such shares. If requested by the Company in connection with any contemplated capital raise by the Company, the former Advisor has agreed not to sell, pledge or supplementotherwise transfer or dispose of any of the Internalization Consideration for a period not to exceed the lock-up period that focusotherwise would apply to include other targeted investments from time to time without stockholder consent.stockholders of the Company in connection with such capital raise. See the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2019 for more information regarding the Management Internalization.
Concentration
The Company had sixfourteen and fifteen parking tenants as oftenants/operators, respectively during both the years ended December 31, 2016.2020 and 2019. One tenant, Standard Parking + ("tenant/operator, SP Plus Corporation (Nasdaq: SP) (“SP+"”), represented a concentration61.0% of the Company’s base parking rental revenue for the year ended December 31, 2016,2020.
SP+ is one of the largest providers of parking management in regards to parking base rental revenue. During the year endedUnited States. As of December 31, 2016,2020, SP+ accounted for 42%, of the parking base rental revenue. managed approximately 3,200 locations in North America.
Below is a table that summarizes base parking rent by tenant:
For the Years Ended December 31, | |||
Parking Tenant | 2020 | 2019 | |
SP + | 61.0% | 60.8% | |
Premier Parking | 15.9% | 14.8% | |
Denison | 6.4% | 2.7% | |
ISOM Mgmt | 5.1% | 3.9% | |
342 N. Rampart | 2.0% | 2.9% | |
Interstate Parking | 2.8% | 2.9% | |
St. Louis Parking | 1.3% | 2.0% | |
TNSH, LLC | 1.5% | 1.1% | |
Lanier | 1.0% | 2.4% | |
BEST PARK | 1.4% | 0.2% | |
Riverside Parking | 0.6% | 0.9% | |
ABM | 0.7% | 3.9% | |
Denver School | 0.2% | 0.2% | |
Secure | 0.1% | 0.1% | |
Premium Parking | 0.0% | 1.2% |
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In addition, the Company had concentrations in various cities based on parking rental revenue for the years ended December 31, 2020 and 2019, as well as concentrations in various cities based on the real estate the Company owned as of December 31, 2020 and 2019. The below tables summarize this information by city.
City Concentration for Parking Rental Revenue | |||
For the Years Ended December 31, | |||
2020 | 2019 | ||
Detroit | 24.3% | 22.6% | |
Houston | 12.2% | 11.7% | |
Fort Worth | 10.1% | 7.0% | |
Cincinnati | 8.2% | 9.3% | |
Indianapolis | 6.4% | 6.1% | |
Lubbock | 5.1% | 3.9% | |
Cleveland | 4.5% | 5.8% | |
Honolulu | 4.4% | 4.3% | |
Milwaukee | 3.7% | 3.7% | |
Nashville | 3.7% | 3.1% | |
St. Louis | 3.6% | 5.0% | |
Minneapolis | 2.9% | 3.6% | |
St Paul | 2.8% | 2.9% | |
New Orleans | 2.0% | 2.9% | |
Bridgeport | 1.4% | 1.9% | |
Memphis | 1.4% | 1.4% | |
San Jose | 1.0% | 2.0% | |
Denver | 0.7% | 0.7% | |
Louisville | 0.6% | 0.9% | |
Clarksburg | 0.4% | 0.3% | |
Wildwood | 0.3% | 0.3% | |
Canton | 0.3% | 0.2% | |
Ft. Lauderdale | 0.0% | 0.4% | |
Real Estate Investment Concentration by City | |||
As of December 31, | |||
2020 | 2019 | ||
Detroit | 19.0% | 17.7% | |
Houston | 11.7% | 12.1% | |
Fort Worth | 9.3% | 8.8% | |
Cincinnati | 8.1% | 8.8% | |
Honolulu | 7.0% | 6.8% | |
Indianapolis | 6.1% | 5.8% | |
Cleveland | 5.8% | 6.3% | |
Lubbock | 4.6% | 4.3% | |
St Louis | 4.2% | 4.4% | |
Minneapolis | 4.0% | 4.3% | |
Nashville | 4.0% | 3.7% | |
Milwaukee | 3.9% | 3.9% | |
St Paul | 2.9% | 2.7% | |
Bridgeport | 2.8% | 2.6% | |
New Orleans | 2.6% | 2.6% | |
Memphis | 1.3% | 1.3% | |
Denver | 1.1% | 1.0% | |
Louisville | 1.0% | 1.0% | |
Wildwood | 0.2% | 0.4% | |
Clarksburg | 0.2% | 0.2% | |
Canton | 0.2% | 0.2% | |
San Jose | -- | 1.1% |
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Economic Dependency
Although the Company has engaged or will engageinternalized its management function, the Company remains dependent upon the former Advisor and its affiliates to providefor certain services, that are essential toparticularly the Company, including asset management services, supervisionprovision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company's common stock available for issue, as well as other administrative responsibilities for the Company including accounting services and investor relations. The Company also depend upon VRM I and VRM II, the owners of the Advisor, to continue to support and fund the Company's costs and expenses
Competition
The Company has significant competition with respect to the acquisition of real property. Competitors include other REITs, owners and managers of parking facilities, private investment funds, hedge funds and other investors, many of which have significantly greater resources. The Company may not be able to compete successfully for investments.investments, particularly in light of the Company’s lack of liquidity available for investments which would preclude the Company from making any additional investments unless it sells some of its existing assets and enhances existing liquidity resources. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If the Company pays higher prices for investments the returns will be lower, and the value of assets may not increase or may decrease significantly below the amount paid for such assets.
The Company’s parking facilities acquired or invested in will face intense competition, which may adversely affect rental and fee income. The Company believes that competition in parking facility operations is intense. The relatively low cost of entry has led to a strongly competitive, fragmented market consisting of competitors ranging from single facility operators to large regional and national multi-facility operators, including several public companies. In addition, any parkingthe Company’s facilities acquired may compete with building owners that provide on-site paid parking. Many of the competitors have more experience in owning and operating parking facilities. Moreover, some of the competitors will have greater capital resources, greater cash reserves, less demanding rules governing distributions to stockholders and a greater ability to borrow funds. Competition for investments may reduce the number of suitable investment opportunities available, may increase acquisition costs and may reduce demand for parking facilities, all of which may adversely affect operating results.
In addition, the Company may compete against VRM I and VRM II, both of which are managed by affiliates of the Company’s Sponsor and the former Advisor, for the acquisition of investments to the extent that the Company is able to pursue acquisition in the future. The Company hasbelieves this potential conflict is mitigated, in part, by the Company's focus on parking facilities as its core investments, while the investment strategy of VRM I and VRM II focuses on acquiring office buildings and other commercial real estate and loans secured by commercial real estate.
Income Taxes
Commencing with the taxable year ended December 31, 2017 through December 31, 2019 the Company believes it had been organized and conducts itsconducted operations to qualify as a REIT under Sections 856 to 860 of the Internal Revenue CodeCode. As a result of 1986,the COVID-19 pandemic, the Company entered into temporary lease amendments with some of its tenants during the year ended December 31, 2020. The income generated under these lease amendments did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as amended (the "Code"),. Thea result, the Company expects towas not in compliance with the annual REIT income tests for the year ended December 31, 2020. Accordingly, the Company did not qualify as a REIT commencing within 2020 and will be taxed as a C corporation for the taxable year endingended December 31, 2016.
As a C corporation, the Company will be subject to federal income tax on that portion of its REIT taxable income ("Taxable Income"),at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which it no longer qualified as a REIT. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C corporation, the Company is distributednot be required to distribute any amounts to its stockholders provided that at least 90%and all distributions to stockholders would be taxable as regular corporate dividends to the extent of Taxable Income is distributedits current and provided that certain other requirements are met. accumulated earnings and profits. In such event, corporate stockholders may be eligible for the dividends-received deduction. In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income.
The Company's Taxable Income may substantially exceed or be less than the Company's net income as determined based on GAAP, because, differences in GAAPCompany uses a two-step approach to recognize and taxable net income consist primarily of allowances for loan losses or doubtful account, write-downs on real estate held for sale, amortization of deferred financing cost, capital gains and losses, and deferred income.
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A full valuation allowance for deferred tax assets was historically provided each year since the Company believed that as a REIT it was more likely than not that it would not realize the benefits of its deferred tax assets. The Company has evaluated its deferred tax assets (primarily net operating losses and tax basis in goodwill that was taken as an expense on the financial statements.Company’s books) as a taxable C Corporation. The Company had a §382 study performed to determine limitations on the potential utilization of pre-2020 net incomeoperating losses and concluded that it does not expect significant limitations on its ability to utilize such losses in the future as a C Corporation. However, given the Company’s history of taxable losses and its current taxable losses, and due to the ongoing impact to the Company of the COVID-19 pandemic to the Company, the Company has determined that it will continue to record a full valuation allowance against its deferred tax provisionassets for the year ended December 31, 2016 was approximately zero.
Regulations
The Company’s investments are subject to various federal, state, local and foreign laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity.
The Company intends to obtain all permits and approvals necessary under current law to operate theReview of the Company’s Policies
The Company’s board of directors, including the independent directors, has reviewed the policies described in this Annual Report and determined that they are in the best interest of the Company’s stockholders because: (1) they increase the likelihood that the Company will be able implement and execute the Company’s business strategies; (2) the Company’s executive officers and directors have expertise with the type of real estate
investments the CompanyEmployees
The Company had 16 employees as of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws typically impose liability without regardDecember 31, 2020. Prior to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In connection with the Company's ownership of parking facilities,July 1, 2019 the Company may be potentially liable for any such costs.
Available Information
The Company does not believe that compliance with existing laws will have a material adverse effect on the Company's financial condition or results of operations. However, the Company cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which the Company holds an interest, or on properties that may be acquired directly or indirectly in the future.
Risks Related to an Investment in the Company
There are a number of pending legal matters involving us and our affiliates, which could distract our officers from attending to the Company's business and could have a material adverse effect on the Company.
The pending investigations and legal proceedings involving us, and our affiliates could harm the reputation of the Company and may distract our management from attending to the Company's business. The adverse publicity arising out of the pendency of such investigations or proceedings could impair our ability to raise additional capital or pursue liquidity transactions as it could make the Company less attractive to potential counterparties. We maintain insurance in such amounts and with such coverage and deductibles as management believes is reasonable. However, there can be no assurance that our insurance will be sufficient to fully cover all potential liabilities from any such proceedings. Accordingly, our failure to successfully defend or settle such legal proceedings could result in liability that, to the extent not covered by insurance, could have an adverse effect on our business, financial condition, results of operations and cash flow. The loss of key personnel or circumstances causing such personnel to otherwise become unavailable to manage our business, would result in the loss of experience, skill, resources, relationships and contacts of individuals that we believe are important to our investment and operating strategies.
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On March 12, 2019, stockholder SIPDA Revocable Trust (“SIPDA”) filed a purported class action complaint in the United States District Court for the District of Nevada, against the Company and certain of its current and former officers and directors. SIPDA filed an Amended Complaint on October 11, 2019. The Amended Complaint purports to assert class action claims on behalf of all public shareholders of the Company and MVP I between August 11, 2017 and April 1, 2019 in connection with the (i) August 2017 proxy statements filed with the SEC to obtain shareholder approval for the merger of the Company and MVP I (the “proxy statements”), and (ii) August 2018 proxy statement filed with the SEC to solicit proxies for the election of certain directors (the “2018 proxy statement”). The Amended Complaint alleges, among other things, that the 2017 proxy statements failed to disclose that two major reasons for the merger and certain charter amendments implemented in connection therewith were (i) to facilitate the execution of an amended advisory agreement that allegedly was designed to benefit Mr. Shustek financially in the event of an internalization and (ii) to give Mr. Shustek the ability to cause the Company to internalize based on terms set forth in the amended advisory agreement. The Amended Complaint further alleges, among other things, that the 2018 proxy statement failed to disclose the Company’s purported plan to internalize its management function.
The Amended Complaint alleges, among other things, (i) that all defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, by disseminating proxy statements that allegedly contain false and misleading statements or omit to state material facts; (ii) that the director defendants violated Section 20(a) of the Exchange Act; and (iii) that the director defendants breached their fiduciary duties to the members of the class and to the Company.
The Amended Complaint seeks, among other things, unspecified damages; declaratory relief; and the payment of reasonable attorneys' fees, accountants' and experts' fees, costs and expenses.
On June 13, 2019, the court granted SIPDA’s motion for Appointment as Lead Plaintiff. The litigation is still at a preliminary stage. On January 9, 2020, the Company and the Board of Directors moved to dismiss the Amended Complaint. Upon being advised by the parties that they are engaged in on-going, active settlement efforts, on November 30, 2020, the court denied the pending motions to dismiss without prejudice as moot and subject to refiling of the settlement efforts are not successful. The Company and the Board of Directors have reviewed the allegations in the Amended Complaint and believe the claims asserted against them in the Amended Complaint are without merit and intend to vigorously defend this action if the parties cannot agree on settlement terms (which would include the Maryland actions described below).
On May 31, 2019, and June 27, 2019, alleged stockholders filed class action lawsuits alleging direct and derivative claims against the Company, certain of our officers and directors, MVP Realty Advisors, Vestin Realty Mortgage I, and Vestin Realty Mortgage II in the Circuit Court for Baltimore City, captioned Arthur Magowski v. The Parking REIT, Inc., et. al, No. 24-C-19003125 (filed on May 31, 2019) (the “Magowski Complaint”) and Michelle Barene v. The Parking REIT, Inc., et. al, No. 24-C-19003527 (filed on June 27, 2019) (the “Barene Complaint”).
The Magowski Complaint asserts purportedly direct claims on behalf of all stockholders (other than the defendants and persons or entities related to or affiliated with any defendant) for breach of fiduciary duty and unjust enrichment arising from the Company’s decision to internalize its advisory function. In this Complaint, Plaintiff Magowski asserts that the stockholders have allegedly been directly injured by the internalization and related transactions. The Barene Complaint asserts both direct and derivative claims for breach of fiduciary duty arising from substantially similar allegations as those contained in the Magowski Complaint. The purportedly direct claims are asserted on behalf of the same class of stockholder as the purportedly direct claims in the Magowski Complaint, and the derivative claims in the Barene Complaint are asserted on behalf of the Company.
On September 12 and 16, 2019, the defendants filed motions to dismiss the Magowski and Barene complaints, respectively. The Magowski and Barene Complaints seek, among other things, damages; declaratory relief; equitable relief to reverse and enjoin the internalization transaction; and the payment of reasonable attorneys' fees, accountants' and experts' fees, costs and expenses. The actions are at a preliminary stage. The parties have requested that these two cases be consolidated and stayed while the parties pursue settlement efforts. The Company and the board of directors intend to vigorously defend against these lawsuits if the parties cannot agree on settlement terms (which would include the federal action described above).
The Magowski Complaint also previewed that a stockholder demand would be made on the Board to take action with respect to claims belonging to the Company for the alleged injury to the Company. On June 19, 2019, Magowski submitted a formal demand letter to the Board asserting the same alleged wrongdoing as alleged in the Magowski Complaint and demanding that the Board investigate the alleged wrongdoing and take action to remedy the alleged injury to the Company. The demand includes that claims be initiated against the same defendants as are named in the Magowski Complaint. In response to this stockholder demand letter, on July 16, 2019, the Board established a demand review committee of one independent director to investigate the allegations of wrongdoing made in the letter and to make a recommendation to the Board for a response to the letter. On September 27, 2019, the Board replaced the demand review committee with a special litigation committee. The special litigation committee is responsible for investigating the allegations of wrongdoing made in the letter and making a final determination regarding the allegations. The work of the special litigation committee is on-going.
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The SEC is conducting an investigation relating to the Parking REIT. On March 11, 2021, the SEC sent counsel for the Parking REIT a letter stating the following: “We have conducted an investigation involving The Parking REIT, Inc. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against The Parking REIT, Inc. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.” (The full text of Release No. 5310 can be found at: http://www.sec.gov/divisions/enforce/wells-release.pdf.).” The SEC investigation also relates to the conduct of the Company’s chairman and chief executive officer, Michael V. Shustek. The Company has an obligation to indemnify Mr. Shustek for certain expenses relating to the investigation, subject to certain limits specified in the agreements relating to the Bombe transaction. The Company cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies, if any, that may be imposed on Mr. Shustek, any other entity arising out of the SEC investigation, nor can it estimate the amount of the Company’s indemnification obligation (except to the extent such obligation is capped).
The ongoing COVID-19 pandemic, restrictions intended to prevent its spread and local governments’ actions impacting our ability to collect rent could adversely impact our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations.
The ongoing COVID-19 pandemic and restrictions intended to prevent its spread has already had a significant adverse impact on economic and market conditions around the world, including the United States, and could further trigger a period of sustained global and U.S. economic downturn or recession. In particular, many of our properties are located near government buildings and sports centers, which depend in large part on customer traffic, and conditions that lead to a decline in customer traffic will have a material and adverse impact on those businesses. Several such conditions already exist and may intensify. Many state and local governments are currently restricting public gatherings or requiring people to shelter in place, which has in some cases eliminated or severely reduced the demand for parking. Such events are adversely impacting and may continue to adversely impact our tenants’ sales and/or cause the temporary closure of our tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, significantly impact or eliminate the rental revenue we generate from our leases with them. In particular, a majority of our property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking. These trends may influence the immediate ability or willingness of certain of our tenants to pay rent in full on a timely basis.
As of December 31, 2020, the Company had entered into forty-one lease amendments with eight tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent from May 2020 through July 2021, (ii) conversion of certain leases to management agreements pursuant to which the operator will receive a monthly fee; or (iii) extension of certain leases. While the Company continues to review and negotiate rent relief requests with tenants and plans to continue to execute lease amendments based on its evaluation of each tenant’s circumstances, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. There can be no assurance as to if or when tenants who request or receive rent relief and/or fail to timely make rent payments for any particular month will resume making payments at all or that such tenants will not default on their obligations under their respective leases or rent relief agreements.
At this time, we cannot predict whether tenants who have paid or will continue to do so thereafter, including with respect to our largest tenants. As the COVID-19 pandemic continues, additional tenants may cease to pay their rent obligations to us in full or at all, and tenants may elect not to renew their leases, seek to terminate their leases, seek relief from their leases (including through negotiation, restructuring or bankruptcy), or decline to renew expiring leases or enter into new leases, all of which may adversely impact our rental revenue, generate additional expenses, and adversely impact our results of operations and financial condition. Likewise, the deterioration of global economic conditions as a result of the pandemic may ultimately lead to a further decrease in rental rates across our portfolio as tenants reduce or defer their spending, institute restructuring plans or file for bankruptcy. In addition, the measures taken to prevent the spread of COVID-19 (including quarantine, shelter-in-place or similar orders requiring that people remain in their homes) have led and may lead to further closures, or other operational issues at, our properties.
Moreover, the ongoing COVID-19 pandemic and restrictions intended to prevent its spread could have significant adverse impacts on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations in a variety of ways that are difficult to predict. Such adverse impacts could depend on, among other factors:
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The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present material risks and uncertainties with respect to our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and could also have a material adverse effect on the value and trading price of our common stock. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in this “Risk Factors” section.
The Company will need to improve cash flow from operations or through a sale of assets to avoid a future liquidity shortfall.
The Company has significantly limited liquidity. Absent operational improvements or additional funds from an asset sale, the Company could face a liquidity shortfall in 2021. While the Company is actively focused on operational and other initiatives to increase cash flow, and the Company has entered into the Purchase Agreement with an affiliate of Bombe to provide for additional liquidity, no assurances can be given that these initiatives will be successful or that the Bombe Transaction will close on the expected timeline or at all. The Company’s ability to generate sufficient cash flow from operations will depend on a range of economic, competitive and business factors, many of which are outside its control, including the impact of COVID-19. As a result of current economic conditions, the Company’s cash flow from operations might be impacted. Some of the Company’s loan agreements require that the Company maintain certain liquidity and net worth levels. For example, the loan with Bank of America for MVP Detroit Center Garage requires the Company to maintain $2.3 million of unencumbered cash and cash equivalents at all times. As of the time of this filing, the Company was in compliance with this lender requirement; however, unless the Company sells some of its existing assets, it does not expect that it will be able to maintain such required minimum balances beyond the second quarter of 2021, if the Company does not receive a waiver for this requirement. The Company may be unable to sell assets and may be unable to negotiate a waiver or amendment of the liquidity and net worth requirements, in which case, the Company could experience an event of technical default under its loan agreements, which, if uncured, could result in an acceleration of such indebtedness.
We have entered into an equity purchase agreement with Bombe to provide liquidity to stockholders; however, there can be no assurance that we will complete such transaction on a timely basis, or at all.
On January 8, 2021, we entered into the Purchase Agreement with an affiliate of Bombe, as described in the Company’s Form 8-K Current Report filed on January 14, 2021. The closing of the Bombe Transaction is subject to a number of conditions set forth in the Purchase Agreement including, among other things, that (i) the Company has received a conditional resignation letter from existing director Shawn Nelson, (ii) the Company shall have an authorized Board of Directors consisting of seven directors, which shall be comprised of persons designated pursuant to the terms of the Stockholders’ Agreement (as described below), five of whom shall be nominated by the Purchaser and not have previously served on the Board of Directors, (iii) Mr. Shustek shall have resigned as a director and officer of the Company and its subsidiaries, (iv) the Circuit Court for Baltimore City, Maryland shall have entered a judgment of dismissal and approval for a class settlement of certain pending putative class action litigation in which the Company is a defendant and (v) the Purchaser shall have received written correspondence from the Securities and Exchange Commission stating that it does not intend to recommend any enforcement action against the Company. In addition, the consummation of the Bombe Transaction is subject to certain customary closing conditions, including, among others, (i) the absence of any order or law preventing, enjoining, prohibiting or making illegal the consummation of the Bombe Transaction, (ii) the accuracy of each party’s representations and warranties, subject to customary materiality or material adverse effect qualifications, (iii) each party’s material performance of its obligations and compliance with its covenants and (iv) the absence of a material adverse effect with respect to any party. There can be no assurance that the Company will be able to satisfy such conditions or close the Bombe Transaction on a timely basis, or at all.
Shares of our common stock are illiquid. No public market currently exists for our shares, and our charter does not require us to liquidate our assets or list our shares on an exchange by any specified date, or at all. It will be difficult for stockholders to sell shares, and if stockholders are able to sell shares, it will likely be at a substantial discount.
There is no current public market for our shares, and our charter does not require us to liquidate our assets or list our shares on an exchange by any specified date, or at all. Our charter limits stockholdersstockholders' ability to transfer or sell shares unless the prospective stockholder meets the applicable suitability and minimum purchase standards. Our charter also prohibits the ownership of more than 9.8% in value of the aggregate of our outstanding capital stock or more than 9.8% in value or number, whichever is more restrictive, of the aggregate of our outstanding common stock unless exempted prospectively or retroactively by our board of directors. Effective March 29, 2019, the Company's Board of Directors granted an exemption from the Common Stock Ownership Limit contained in the charter to (i) MVP Realty Advisors, LLC, (ii) Vestin Realty Mortgage I, Inc. and (iii) Vestin Realty Mortgage II, Inc. These restrictions may inhibit large investors from desiring to purchase stockholdersstockholders' shares. Moreover, our share repurchase program includes numerous restrictions that limit stockholders abilitywas suspended in May 2018, other than with respect to sell shares to us, and ourhardship repurchases in connection with a shareholders’ death, which were suspended by the board of directors may amend, suspend or terminate our share repurchase program without stockholder approval upon 30 days' written prior notice.on March 24, 2020. It will be difficult for stockholders to sell shares promptly or at all. If stockholders are able to sell shares, stockholders will likely have to sell them at a substantial discount to their purchase price. It is also likely that stockholdersstockholders' shares would not be accepted as the primary collateral for a loan.
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In addition, Nasdaq has informed us that (i) our common stock will not be approved for listing currently on the Nasdaq Global Market, and (ii) it is highly unlikely that our common stock would be approved for listing while the SEC investigation is ongoing. There can be no assurance that our common stock will ever be approved for listing on the Nasdaq Global Market or any other stock exchange, even if the SEC investigation referred to above is completed and no wrongdoing is found and no action is taken in connection therewith against us, Mr. Shustek or any other person. Accordingly, we are not pursuing a listing and do not anticipate the ability to list in the foreseeable future. Our board of directors does not anticipateis actively evaluating a transaction providingactions that could provide liquidity for our stockholders. However, our ability to achieve liquidity for our stockholders until the second quarter of 2017,is subject to then prevailing market conditions. Thereconditions, legal requirements and loan covenants, and there can be no assurance that we will affect a liquidity event. If we do not successfully implement a liquidity transaction, a stockholder may have to hold his or her investment for an indefinite period.
We have a limited operating history which makes our future performance difficult to predict.
We are a recentlywere formed companyon May 4, 2015 and merged with MVP REIT, Inc., which was formed on April 3, 2012, on December 15, 2017. In addition, our management function was internalized effective April 1, 2019. Accordingly, we have a limited operating history.history, particularly as an internally managed company. Stockholders should not assume that our performance will be similar to the past performance of other real estate investment programs sponsored by our Sponsor oran affiliate of the parent of our Sponsor.former Advisor. Our lack of an operating history increases the risk and uncertainty that stockholders face in making or holding an investment in our shares.
We have experienced net losses in the past, and we may experience additional net losses in the future.
Historically, we have experienced net losses (calculated in accordance with accounting principles generally accepted in the United States of America)GAAP), and we may not be profitable or realize growth in the value of our investments. Many of our losses can be attributed to start-up costs, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments. For a further discussion of our operational history and the factors affecting our net losses, see "Management's“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” appearing elsewhere in this Annual Report on Form 10-K and our accompanying consolidated financial statements and notes thereto.
Our cash distributions are not guaranteed and may fluctuate.
The Company's board of directors unanimously authorized a suspension of our cash distributions and stock dividends to pay distributions on the sharesholders of our common stock, effective as of March 22, 2018. In addition, on a monthly basis, there is no guaranty that we will be able to payMarch 24, 2020, the full amountCompany’s board of directors unanimously authorized the distribution, or at all. In determining whether to authorize a distribution or make such distribution and the amount, our directors will consider all relevant factors, including the amountsuspension of cash available for distribution, capital expenditure and reserve requirements and general operational requirements. We cannot assure you that we will consistently be able to generate sufficient available cash flow to fund distributions on our shares nor can we assure you that sufficient cash will be available to make distributions to you. With limited prior operations, we cannot predict the amount of distributions you may receive and we may be unable to pay, maintain or increase distributions over time. Our inability to acquire additional properties or make real estate-related investments or operate profitably may have a negative effect on our ability to generate sufficient cash flow from operations to pay distributions on our shares.
We depend on our overall investment performance. Our inability to raise substantial funds would also increase our fixed operating expenses as a percentagemanagement team. The loss of gross income. Each of these factorskey personnel could have ana material adverse effect on our financial condition and ability to make distributions to our stockholders.
Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of the Advisor and its affiliates as well as the Advisor's real estate, finance and securities professionalsour management team in the identification and acquisition of investments, the determination of any financing arrangements, the management of our assets and operation of our day-to-day activities. We also depend upon Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc., the owners of our advisor, to continue to support and fund our costs and expenses. Any adverse changes in the Advisor's financial condition or our relationship with the Advisor, its owners or its other affiliates could hinder the Advisor's ability to successfully manage our operations and our portfolio of investments.
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Stockholders should not rely on the purchase price paid for our shares of common stock may be higher than such estimated NAV. The estimated NAV per share may not beas being an accurate reflectionmeasure of the fair value of our assets and liabilities and likely will not represent the amount of net proceeds that would result if we were liquidated or dissolved.
Our board of directors, including all of our independent directors, approves and the date of the data used to develop the estimated values. For this purpose, we intend to use the price paid to acquire a common share in our primary offering as our estimated per share value until 150 days following the second anniversary of the date we satisfy the minimum offering requirement in the primary offering. This approach to valuing our shares may bear little relationship and will likely exceed what a stockholder might receive for his or her shares if they tried to sell them or if we liquidated our portfolio. We expect to discloseestablishes at least annually an estimated per share valueNAV of our shares no later than 150 days following the second anniversary of the date we satisfy the minimum offering requirement in the primary offering, or the Valuation Date, although we may determine to providecommon stock, which is based on an estimated per share value based upon a valuation earlier than presently anticipated.
In the most recent estimation of NAV, our board of directors relied upon information provided by the Company’s management team and the price per share and unit being paid in its sole discretion, amend, suspend,connection with the Bombe Transaction, which will not necessarily result in a reflection of fair value under generally accepted accounting principles. Further, different parties using different methods could derive an estimated NAV per share that is significantly different from the estimated NAV per share determined by our board of directors. The estimated NAV per share is not a representation or terminate the SRP at any time upon 30 days prior notice. Therefore,indication that, among other things: a stockholder may not havewould be able to realize the opportunityestimated NAV per share if he or she attempts to makesell shares; a repurchase request priorstockholder would ultimately realize distributions per share equal to any potential terminationthe estimated NAV per share; a third party would offer the estimated NAV per share in an arms-length transaction to purchase all or substantially all of our SRP.
We disclose funds from operations or FFO,(“FFO”), a non-GAAP financial measure, in communications with investors, including documents filed with the SEC; however, FFO is not equivalent to our net income or loss as determined under GAAP, and our computation of FFO may not be comparable to other REITs.
Cash generated from operations is not equivalent to our net income from continuing operations as determined under U.S. GAAP. One non-U.S. GAAPnon-GAAP supplemental performance measure that we consider due to the certain unique operating characteristics of real estate companies is known as funds from operations, or "FFO."FFO. The National Association of Real Estate Investment Trusts, or "NAREIT,"NAREIT, an industry trade group, promulgated this measure, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with U.S. GAAP, excluding gains or losses from sales of property, plus depreciation and amortization on real property and after adjustments for unconsolidated partnerships and joint ventures in which we hold an interest. In addition, NAREIT has recently clarified its computation of FFO, which includes adding back real estate impairment charges for all periods presented,presented; however, under U.S. GAAP, impairment charges reduce net income. While impairment charges are added back in the calculation of FFO, we caution that due to the fact that impairments to the value of any property are typically based on estimated future undiscounted cash flows compared to current carrying value, declines in the undiscounted cash flows which led to the impairment charges reflect declines in property operating performance which may be permanent.
The calculation of FFO may vary from entity to entity since capitalization and expense policies tend to vary from entity to entity. Items that are capitalized do not impact FFO, whereas items that are expensed reduce FFO. Consequently, our presentation of FFO may not be comparable to other similarly titled measures presented by other REITs.companies. FFO does not represent cash flows from operations as defined by U.S. GAAP, it is not indicative of cash available to fund all cash flow needs nor is it indicative of liquidity, including our ability to pay distributions, and should not be considered as an alternative to net income, as determined in accordance with U.S. GAAP, for purposes of evaluating our operating performance. Management uses the calculation of FFO for severalmultiple reasons. We use FFO to compare our operating performance to that of other REITs.companies. Additionally, we compute FFO as part of our acquisition process to determine whether a proposed investment will satisfy our investment objectives.
The historical cost accounting rules used for real estate assets require, among other things, straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT or other real estate company using historical cost accounting for depreciation may be less informative than FFO. We believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our operating performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs.
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However, FFO should not be construed to be equivalent to or a substitute for the current U.S. GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the performance of real estate under U.S. GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-U.S.non- GAAP FFO measures and the adjustments to U.S. GAAP in calculating FFO. Furthermore, FFO is not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations calculated in accordance with U.S. GAAP, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders.
FFO should be reviewed in conjunction with other U.S. GAAP measurements as an indication of our performance. The exclusion of impairments limits the usefulness of FFO as a historical operating performance measure since an impairment indicates that the property'sproperty’s operating performance may have been permanently affected. FFO is not a useful measure in evaluating net asset valueNAV because impairments are taken into accountconsidered in determining net asset valueNAV but not in determining FFO.
We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems.
We will face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our information technology, or IT, networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations, and, in some cases, may be critical to the operations of certain of our tenants. There can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could adversely impact our financial condition, results of operations, cash flows,flow and our ability to satisfy our debt service obligations and to pay distributions to our stockholders.
Risks Related to Our Investments
Our revenues will beare significantly influenced by demand for parking facilities generally, and a decrease in such demand would likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.
The focus for our portfolio of investments and acquisitions will beis on parking facilities. Based on our current investment strategy to focus on parking facilities, including parking lots, parking garages and other parking structures, aA decrease in the demand for parking facilities, or other developments adversely affecting such sectors of the property market would likely have a more pronounced effect on our financial performance than if we owned a more diversified real estate portfolio. Adverse changes in global, national and local economic conditions could have a negative impact on our business. If adverse economic conditions reduce discretionary spending, business travel or other economic activity, such as sporting events and entertainment, that fuels demand for parking services, our revenues could be reduced. In addition, our parking facilities tend to be concentrated in urban areas. The COVID-19 pandemic has resulted in reduced discretionary spending, reduced travel and other activity. Users of our parking facilities include workers who commute by car to their places of employment in these urban centers. The return on our investments couldhas been and may continue to be materially adversely affected by restrictions requiring people to shelter in place in reaction to the COVID-19 outbreak and may further continue to be materially adversely affected to the extent that weak economic conditions or demographic factors have resultedresult in the elimination of jobs and high unemployment in these urban areas. In addition, increased unemployment levels,or the movementmigration of white-collar jobs from the urban centers where our parking facilities are situated to suburbsother locations. As of December 31, 2020, we have entered forty-one lease amendments with eight tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or out(iii) extension of North America entirely, increasedthe lease. We expect to receive requests from tenants for additional rent relief in addition to those that we have already received. There can be no assurance as to if or when tenants who request or receive rent relief and/or fail to timely make rent payments for any particular month will resume making payments at all or that such tenants will not default on their obligations under their respective leases or rent relief agreements.
Increased office vacancies in urban areas, movement toward home office alternatives or lower consumer spending could reduce consumer demand for parking, which could adversely impact our revenues and financial condition. Moreover, changing lifestyles and technology innovations also may decrease the need for parking spaces, thereby decreasing the demand for parking facilities. The need for parking spaces, for example, may decrease as the public increases its use of livery service companies and ride sharing companies or elects to take public transit for their transportation needs. Future technology innovations, such as driverless vehicles, also may decrease the need for parking spaces. TheseIt is also possible that cities could enact new or additional measures such as higher tolls, increased taxes and other developments affectingvehicle occupancy requirements in certain circumstances, to encourage car-pooling and the use of mass transit, all of which could adversely impact the demand for parking. Weather conditions, such as hurricanes, snow, flooding or severe weather storms, and other natural disasters and acts of terrorism could also disrupt our parking could have a material, adverse effect onoperations and further reduce the value of our properties as well as our revenues and our distributions to stockholders.
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Our parking facilities we acquire or invest in will face intense competition, which may adversely affect rental and fee income.
We believe that competition in parking facility operations is intense. The relatively low cost of entry has led to a strongly competitive, highly fragmented market consisting of competitors ranging from single facility operators to large regional and national multi-facility operators, including several public companies. In addition, any parking facilities we acquire may compete with building owners that provide on-site paid parking. Many of the competitors have more experience than we do in owning and operating parking facilities. Moreover, some of our competitors will have greater capital resources, greater cash reserves, less demanding rules governing distributions to stockholders and a greater ability to borrow funds. Competition for investments may reduce the number of suitable investment opportunities available to us, may increase acquisition costs and may reduce demand for parking facilities, all of which may adversely affect our operating results. Additionally, an economic slowdown in a particular market could have a negative effect on our parking fee revenues.
If competitors build new facilities that compete with our facilities or offer space at rates below the rates we charge, our lessees may lose potential or existing customers and may be pressured to discount their rates to retain business, andthereby causing them to reduce rents paid to us. As a result, our ability to make distributions to stockholders may be impaired. In addition, increased competition for customers may require us to make capital improvements to facilities that we would not otherwise make, which could reduce cash available for distribution to our stockholders.
Our leases expose us to certain risks.
We net lease our parking facilities to lessees that will either offer parking services to the public or provide parking to their employees. We rely upon the lessee to manage and conduct the daily operations of the facilities. In addition, under a net lease arrangement, the lessee is generally responsible for taxes and fees at a leased location. The loss or renewal on less favorable terms of a substantial number of leases, or a breach, default or other failure to perform by a lessee under a lease, could have a material adverse effect on our business, financial condition and results of operations. A material reduction in the rental income associated with the leases (or an increase in anticipated expenses to the extent we are responsible for such expenses) also could have a material adverse effect on our business, financial condition and results of operations.
Due to the COVID-19 pandemic the Company transitioned eleven leases to management agreements due to the fact that many state and local governments are currently restricting public gatherings, requiring people to shelter in national, regionalplace and implementing social distancing measures, which has in some cases eliminated or local economic, demographic severely reduced the demand for parking. This reduced demand for parking is adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or real estate market conditions may adversely affect our resultscause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, returnsin turn, may impact or eliminate the rental revenue the Company generates from its leases with them. Per these management agreements, the tenant now operates the property on behalf of the Company and pays their operating expenses from gross parking revenue and is required to our investors.
Our investments in real estate will be subject to the risks typically associated with real estate.
We invest directly in real estate. We will not know whether the values of properties that we own directly will remain at the levels existing on the dates of acquisition. If the values of properties we own drop,decrease, our risk will increase because of the lower value of the real estate. In this manner, real estate values could impact the value of our real estate investments. Therefore, our investments will be subject to the risks typically associated with real estate.
The value of real estate may be adversely affected by a number of risks, including:
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A small number of our parking tenants account for a significant percentage of our total rental revenues, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations.
The successful performance of our investments may reduce our profitability andis materially dependent on the return on stockholder's investment.
Uninsured losses or premiums for insurance coverage relating to real property may adversely affect stockholder returns.
Our real properties may incur casualty losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Risks associated with potential acts of terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders sometimes require property owners to purchase specific coverage against terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance real property we may hold. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our real property incurs a casualty loss which is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure stockholders that funding will be available to us for repair or reconstruction of damaged real property in the future.
Our costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.
All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liabilities on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.
Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. For example, the presence of significant mold or other airborne contaminants at any of our real property investments could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others if property damage or personal injury occurs.
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Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, operations of our parking facilities and other tenant operations, the existing condition of land when we buy it, operations in the vicinity of our real property, such as the presence of underground storage tanks, oil leaks and other vehicle discharge, or activities of unrelated third parties may affect our real property. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of real property, we may be exposed to such costs in connection with such regulations. The cost of defending against environmental claims, of any damages
Real property is an illiquid investment, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.
Real property is an illiquid investment. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property. Also, we may acquire real properties that are subject to contractual "lock-out"“lock-out” provisions that could restrict our ability to dispose of the real property for a period of time.
We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure stockholders that we will have funds available to correct such defects or to make such improvements.
In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. Our real properties may also be subject to resale restrictions. All these provisions would restrict our ability to sell a property, which could reduce the amount of cash available for distribution to our stockholders.
Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.
Some of our assets will be classified for accounting purposes as "available-for-sale."“available-for-sale.” These investments are carried at estimated fair value, and temporary changes in the market values of those assets will be directly charged or credited to stockholders'stockholders’ equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security falls below its amortized value and is not temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.
A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.
Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.
Market values of our investments may decline for a number of reasons, such as changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.
Risks Related to Our Financing Strategy
We may not be able to access financing sources on attractive terms or at all, which could adversely affect our ability to execute our business plan.
Our operating income has been, and we expect may continue to be, insufficient to cover our operating expenses and other liquidity needs. In addition, we have and intend to continue to finance our assets with outside capital. As a result of Nasdaq’s decision not to approve the listing of the Company’s common stock, our ability to raise equity capital will be limited in the future. In addition, we currently have limited or no access to additional debt financing and, as a result, expect that we will be dependent on the sale of assets for liquidity. In the past we have used short-term financing to complete planned development projects, perform renovations to our properties, or to meet other liquidity needs, however we do not believe such financing is currently available to us.
We do not know whether anyexpect that we will be able to obtain additional financing on acceptable terms or at all. Future access to sources of capitalfinancing will depend upon a number of factors, over which we may have little or no control, including:
In addition, our ability to sell assets may also be availablelimited due to us inseveral factors, including general market conditions and limitations under our existing loan agreements, and as a result, we may receive less than the futurevalue at which those assets are carried on terms that are acceptableour consolidated financial statements or we may be unable to us, ifsell certain assets at all.
If we cannot obtain sufficient capital on acceptable terms, our businesses and our ability to operate could be severelymaterially adversely impacted.
In addition to incurcustomary representations, warranties, covenants, and indemnities, our existing loan agreements require us and/or our subsidiaries to comply with covenants involving, among other matters, limitations on incurrence of indebtedness, debt cancellation, property cash flow allocation, liens on properties and high debt levelsrequirements to maintain minimum unrestricted cash balances. As noted above, unless we are able to sell assets, we may be unable to meet the minimum unrestricted cash balances in our loan agreements, which could hinderresult in events of default. Our existing loan agreements contain covenants that may limit our ability to make distributionssell assets, including covenants that limit debt cancellation and decreaseassignment of debt in connection with the valuesale of a stockholder's investment.
If we can increasebreach covenants under our borrowingsloan agreements, we could be held in excessdefault under such loans, which could accelerate our repayment date and materially adversely affect our financial condition, results of 300%operations and cash flows.
Our failure to comply with covenants in any of our net assets,loan agreements will likely constitute an event of default and, if a majoritynot cured or waived, may result in:
Further, our stockholders in our next quarterly report. Our board of directors is required to review our debt levels at least quarterly. High debt levels would cause us to incur higher interest charges and higher debt service payments and could also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute andloan agreements may contain cross default provisions, which could result in a decline in the valuedefault on our other outstanding debt.
Any such event of a stockholder's investment.
Instability in the debt markets and other factors may make it more difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make to our stockholders.
If mortgage debt is unavailable on reasonable terms as a result of increased interest rates or other factors, we may not be able to finance the initial purchase of properties. In addition, if we place mortgage debt on properties, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us or could result in the foreclosure of such properties. For example, some of our loans are packed into commercial mortgage-backed securities, which place restrictions on our ability to restructure such loans without the consent of holders of the commercial mortgage-backed securities. Obtaining such consents may be time-consuming or may not be possible at all and could delay or prevent us from restructuring one or more loans. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.
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Interest rates may increase, which could increase the amount of our debt payments and negatively impact our operating results.
Interest we pay on our debt obligations will reduce cash available for distributions. If we incur variable rate debt, increasesIncreases in interest rates would increase our interest costs on our variable rate debt and increase the cost of refinancing existing debt and issuing new debt, which wouldcould limit our growth prospects, reduce our cash flows and our ability to make distributions to stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.
Failure to hedge effectively against interest rate changes may require us to enter into restrictive covenants relating tomaterially adversely affect our business, financial condition, results of operations which could limit ourand ability to make distributions to our stockholders.
We currently have, and may impose restrictions on usincur in the future, debt that bears interest at variable rates. An increase in interest rates would increase our interest costs to the extent we have not effectively hedged against such increase, which could adversely affect our distributioncash flows and operating policiesresults of operations. Subject to our exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we may manage and mitigate our exposure to interest rate risk attributable to variable-rate debt by using interest rate swap arrangements, interest rate cap agreements and other derivatives. The goal of any interest rate management strategy that we may adopt is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets. However, these derivatives themselves expose us to various risks, including the risk that: (i) counterparties may fail to honor their obligations under these arrangements; (ii) the credit quality of the counterparties owing money under these arrangements may be downgraded to such an extent that it impairs our ability to incur additional debt. Loan documentssell or assign our side of the hedging transactions; (iii) the duration of the hedging transactions may not match the duration of the related liability; (iv) these arrangements may not be effective in reducing our exposure to interest rate changes; and (v) these arrangements may actually result in higher interest rates than we enter intowould otherwise have. Moreover, no hedging activity can completely insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate changes may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace the Advisor. In addition, loan documents may limit our ability to replace a property's property manager or terminate certain operating or lease agreements related to a property. These or other limitations maymaterially adversely affect our flexibilitybusiness, financial condition, results of operations and our ability to achievemake distributions to our investment objectives.
Certain loans are and may be secured by mortgages on our properties and if we default under our loans, we may lose properties through foreclosure.
We have obtained, and intend to continue to obtain, loans that are secured by mortgages on our properties, and we may obtain additional loans evidenced by promissory notes secured by mortgages on our properties. As a general policy, we will seek to obtain mortgages securing indebtedness which encumber only the particular property to which the indebtedness relates, but recourse on these loans may include all of our assets. If recourse on any loan incurred by us to acquire or refinance any particular property includes all of our assets, the equity in other properties could be reduced or eliminated through foreclosure on that loan. If a loan is secured by a mortgage on a single property, we could lose that property through foreclosure if we default on that loan. We may also give full or partial guarantees to lenders of mortgage debt to the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. Some of our loans contain cross collateralization or cross default provisions, and therefore, a default on a single property could affect multiple properties. In addition, for tax purposes, a foreclosure on any of our properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. Further, if we default under a loan, it is possible that we could become involved in litigation related to matters concerning the loan, and such litigation could result in significant costs to us which could affect distributions to stockholders or lower our working capital reserves or our overall value.
Risks Related to Conflicts of Interest
Our executive officers and the Advisor's key real estate, finance and securities professionals will face conflicts of interest caused by our compensation arrangements with the Advisor and its affiliates, which could result in actions that are not in the long-term best interests of our company.
Our executive officers and the Advisor's key real estate, finance and securities professionals are also executive officers, directors, managers and key professionals of MVP American Securities and/or other affiliated entities. As a result, they owe duties to each of these entities, their members and limited partners and these investors, which duties may from time to time conflict with the fiduciary duties that they owe to us. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Conflicts with our business and interests are most likely to arise from involvement in activities related to (a) allocation of new investments and management time and services between us and the other entities, (b) the timing and terms of the investment in or sale of an asset, (c) development of our stockholders. In addition, our Sponsor may grant equity interests in the Advisor to certain management personnel performing services for the Advisor.properties by such affiliates, and (d) investments with such affiliates. The loyalties of these individuals to other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to stockholders and to maintain or increase the value of our assets.
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Further, our directors and officers and any of their respective affiliates are not prohibited from third parties who have existingengaging, directly or previous business relationships with affiliates of the Advisor, and, as a result,indirectly, in any such transaction, we may not havebusiness or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the benefitacquisition or sale of arm's-length negotiations of the type normally conducted between unrelated parties.
Risks Related to Our Corporate Structure
Certain provisions of Maryland law could inhibit changes in control.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of inhibiting a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock. Under the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested stockholder (as defined in the statute) or an affiliate of such an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (2) two-thirds of the votes entitled to be cast by holders of shares of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our board of directors has by resolution exempted any business combination between us and any other person.
The MGCL provides that holders of “control shares” of our company (defined as shares of voting stock that, if aggregated with all other shares of capital stock owned or controlled by the acquirer, would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares”) have no voting rights except to the extent approved at a special meeting of stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares. Our bylaws currently contain a provision exempting any and all acquisitions by any person of shares of our stock from this statute.
The “unsolicited takeover” provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses if we have a class of equity securities registered under the Exchange Act and at least three independent directors (which we will have upon the completion of this offering). These provisions may have the effect of inhibiting a third party from acquiring us or of delaying, deferring or preventing a change in control of our company under the circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-current market price. Our charter contains a provision whereby we have elected to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our board of directors. See “Certain Provisions of Maryland Law and of our Charter and Bylaws—Business Combinations” and “Certain Provisions of Maryland Law and of our Charter and Bylaws—Control Share Acquisitions.”
Our charter contains provisions that make removal of our directors difficult, which makes it more difficult for our stockholders to effect changes to our management and may prevent a change in control of our company that is in the best interests of our stockholders.
Our charter provides that a director may be removed only for cause and only by the affirmative vote of at least two-thirds of all the votes of stockholders entitled to be cast generally in the election of directors. Vacancies on our board of directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any individual elected to fill such a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until his or her successor is duly elected and qualifies. These requirements make it more difficult for our stockholders to effect changes to our management by removing and replacing directors and may prevent a change in control of our company that is otherwise in the best interests of our stockholders.
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Our rights and the rights of our stockholders to recover claimstake action against directors, including our independent directors and our officers are limited, which could reduce a stockholder'slimited.
As permitted by Maryland law, our charter limits the liability of our directors and officers to us and our recovery against them if they negligently cause usstockholders for money damages to incur losses.
As a result, a stockholderwe and we mayour stockholders have more limited rights against our directors and officers that are more limited than might otherwise exist under common law, which could reduce a stockholder'sexist. Accordingly, in the event that actions taken by any of our directors or officers impede the performance of our company, stockholders and our recoveryability to recover damages from these personssuch director or officer will be limited. In addition, our charter and our bylaws require us to indemnify our directors and officers for actions taken by them in those and certain other capacities to the maximum extent permitted by Maryland law.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the exclusive forum for certain actions and proceedings that may be initiated by our stockholders against us or any of our directors, officers or other employees.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if they actthat court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, (b) any derivative action or proceeding brought on our behalf, (c) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws or (e) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our stock will be deemed to have notice of and consented to the provisions of our charter and bylaws, including the exclusive forum provisions in our bylaws. This choice of forum provisions may limit a stockholder’s ability to bring a claim in a negligent manner. In addition, wejudicial forum that the stockholder believes is favorable for such disputes and may be obligated to fund the defense costs incurred bydiscourage lawsuits against us and any of our directors, (as well as by our officers employeesor other employees. We believe that requiring these claims to be filed in a single court in Maryland is advisable because (i) litigating these claims in a single court avoids unnecessarily redundant, inconvenient, costly and agents)time-consuming litigation in some cases, which would decrease the cash otherwise available for distribution to stockholders.
Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary or appropriate to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Code, among other purposes, our charter generally prohibits a person from beneficially or constructively owning more than 9.8% in value of the aggregate of our outstanding shares of capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of the aggregate of our outstanding common stock, unless exempted, prospectively or retroactively, by our board of directors. This limit can generally be waivedEffective March 29, 2019, the Company's Board of Directors granted an exemption from the Common Stock Ownership Limit contained in the charter to (i) MVP Realty Advisors, LLC, (ii) Vestin Realty Mortgage I, Inc. and adjusted by our board of directors prospectively or retroactively.(iii) Vestin Realty Mortgage II, Inc. The ownership limit may have the effect of precluding a change in control of us by a third party, even if such change in control would be in the interest of the our stockholders (and even if such change in control would not reasonably jeopardize our REIT status). This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock. In addition, these provisions may also decrease a stockholder'sstockholder’s ability to sell their shares of our common stock.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our board of directors may classify or reclassify any unissued shares of common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of repurchase of any such classes or series of stock. Thus, our board of directors could authorize the issuance of shares of a class or series of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of our stockholders. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to our stockholders. However, the issuance of preferred stock must be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel.
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We are not and do not plan to be registered as an investment company under the Investment Company Act, and therefore we will not be subject to the requirements imposed and stockholder protections provided by the Investment Company Act; maintaining an exemption from registration may limit or otherwise affect our investment choices.
None of us, our operating partnership, norOperating Partnership, or any of our subsidiaries areis registered or intendintends to register as an investment company under the Investment Company Act. Our operating partnership'sOperating Partnership’s and subsidiaries'subsidiaries’ investments in real estate will represent the substantial majority of our total asset mix. In order for us not to be subject to regulation under the Investment Company Act, we engage, through our operating partnershipOperating Partnership and our wholly and majority-owned subsidiaries, primarily in the business of buying real estate. These investments must be made within a year after our public offering ends.
If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:
Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. We are organized as a holding company that conducts its businesses primarily through our operating partnershipOperating Partnership and its subsidiaries. We believe neither we nornone of us, our operating partnership nor theOperating Partnership or our subsidiaries will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nornone of us, our operating partnership nor theOperating Partnership or our subsidiaries will engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating partnership'sOperating Partnership’s wholly owned or majority-owned subsidiaries, we and our operating partnershipOperating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.
Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer'sissuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to herein as the 40% test. Excluded from the term "investment“investment securities,"” among other things, are (i) U.S. government securities and (ii) securities issued by majority-owned subsidiaries that are (a) not themselves investment companies and (b) not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act relating to private investment companies. We believe that we, our operating partnershipOperating Partnership and the subsidiaries of our operating partnershipOperating Partnership will each comply with the 40% test as we have invested in real property, rather than in securities, through our wholly and majority-owned subsidiaries. As our subsidiaries will be investing either solely or primarily in real property, they would be outside of the definition of "investment company"“investment company” under Section 3(a)(1)(C) of the Investment Company Act. As weWe are organized as a holding company that conducts its businesses primarily through our operating partnership,Operating Partnership, which in turn is a holding company conducting its business of investing in real property through wholly-ownedwholly owned or majority-owned subsidiaries. We have monitored and will continue to monitor our holdings to ensure continuing and ongoing compliance with the 40% test.
Even if the value of investment securities held by one of our subsidiaries were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exception from the definition of an investment company under Section 3(c)(5)(C) of the Investment Company Act, which is available for entities "primarily“primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate."” Section 3(c)(5)(C), as interpreted by the SEC staff, of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in "mortgage“mortgage and other liens on and interests in real estate,"” which we refer to herein as "qualifying real estate assets," and maintain at least 80% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets.
For purposes of the exclusions provided by Sections 3(c)(5)(C), we will classify our investments based in large measure on no-action letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC Guidance,guidance, on our view of what constitutes a qualifying real estate asset and a real estate related asset. Although we intend to monitor our portfolio periodically and prior to each investment acquisition and disposition, there can be no assurance that we will be able to maintain this exclusion for each of these subsidiaries. It is not certain whether or to what extent the SEC or its staff in the future may modify its interpretive guidance to narrow the ability of issuers to rely on the exemption from registration provided by Section 3(c)(5)(C). Any such future guidance may affect our ability to rely on this exception.
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Although we intend to monitor our portfolio periodically and prior to each investment acquisition and disposition, there can be no assurance that we, our operating partnershipOperating Partnership or our subsidiaries will be able to maintain this exemption from registration for the Companyus and each of itsour subsidiaries. If the SEC or its staff does not agree with our determinations, we may be required to adjust our activities or those of our subsidiaries.
In the event that we, or our operating partnership,Operating Partnership, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1)(C) of the Investment Company Act, we believe that we would still qualify for the exception from the definition of "investment company"“investment company” provided by Section 3(c)(6). Although the SEC or its staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our operating partnershipOperating Partnership may rely on Section 3(c)(6) if 55% of the assets of our operating partnershipOperating Partnership consist of, and at least 55% of the income of our operating partnershipOperating Partnership is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of our operating partnership.
Qualification for this exemption will limit our ability to make certain investments. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon such tests and/or exceptions, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.
Further, if we, our operating partnershipOperating Partnership or our subsidiaries are required to register as investment companies under the Investment Company Act, our investment options may be limited by various limitations, such as those mentioned above, and we or our subsidiaries would be subjected to a complex regulatory scheme, the costs of compliance with which can be high.
Stockholders will have limited control over changes in our policies and operations, which increases the uncertainty and risks a stockholder faces.
Our board of directors determines our major policies, including our policies regarding investment strategies and approach, growth, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under the Maryland General Corporation Law or MGCL,(the “MGCL”) and our charter, our stockholders have a right to vote only on limited matters. Our board's of directors’ broad discretion in setting policies and our stockholders'stockholders’ inability to exert control over those policies increase the uncertainty and risks a stockholder faces.
Stockholders' interest in us willcould be diluted if we issue additional shares.
Stockholders do not have preemptive rights to any shares issued by us in the future.future and generally have no appraisal rights. Our charter currently has authorized 100,000,000 shares of capital stock. Of the total number of shares of capital stock of whichauthorized, 98,999,000 shares are classified as common stock, par value $0.0001 per share,share; and 1,000,000 shares are classified as preferred stock, par value $0.0001 per share, within which (i) 97,000 shares are classified and designated as Series 1 Convertible Redeemable Preferred Stock, and (ii) 50,000 shares are classified and designated as Series A Convertible Redeemable Preferred Stock, and 1,000 shares are classified as convertible stock, par value $0.0001 per share. We have designated 50,000 shares of our preferred stock as the Series A Redeemable Convertible Preferred Stock, or the Series A preferred stock. Subject to any limitations set forth under Maryland law, a majority of our board of directors may amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series, or classify or reclassify any unissued shares into other classes or series of stock without the necessity of obtaining stockholder approval.
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Our Chartercharter also authorizes our board of directors, without stockholder approval, to designate and issue any classes or series of preferred stock (including equity or debt securities convertible into preferred stock) and to set or change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions and qualifications or terms or conditions of redemption of each class or series of shares so issued. Because our board of directors has the power to establish the preferences and rights of each class or series of preferred stock, it may afford the holders of any series or class of preferred stock preferences, powers, and rights senior to the rights of holders of common stock or preferred stock.
Under this power, our board of directors has created the Series A preferred stock and the Series 1 preferred stock, each of which ranks senior to our common stock with respect to the payment of dividends and rights upon liquidation, dissolution or winding up. Specifically, payment of any distribution preferences on the Series A preferred stock, Series 1 preferred stock, or any future series of preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of our preferred stock are entitled to receive a preference payment if we liquidate, dissolve, or wind up before any payment is made to the common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. Holders of our preferred stock will have the right to require us to convert their shares into shares of our common stock. The conversion of our preferred stock into common stock may further dilute the ownership interest of our common stockholders. Following a "Listing Event"Listing Event (as defined below), we also have the right, but not the obligation, to redeem the Series A preferred stock and Series 1 Preferred Stock. We may make suchpreferred stock and pay the redemption payments in the form of shares of our common stock, which may further dilute the ownership interest of our common stockholders.
Any sales or perceived sales in the public market of shares of our common stock issuable upon the conversion or redemption of our preferred stock could adversely affect prevailing market prices of shares of our common stock. The issuance of common stock upon any conversion or redemption of our preferred stock also may have the effect of reducing our net income per share (or increasing our net loss per share). In addition, if a Listing Event occurs, the existence of our preferred stock may encourage short selling by market participants because the existence of redemption payments could depress the value or market price of shares of our common stock.
Federal Income Tax Risks
Our failure to qualify as a real estate investment trust, orREIT will have significant adverse consequences to us and the value of our common stock.
The Company elected to be taxed and believes it operated in a manner that allowed the Company to qualify as a REIT for U.S. federal income tax purposes. Although we have received an opinion of counselpurposes beginning with respect to our qualification asits taxable year ended December 31, 2017 through December 31, 2019. As a REIT, investors should be aware, among other things, that such opinion does not bind the Internal Revenue Service and was based on certain representations as to factual matters and covenants made by us. Both the validity of such opinion and our qualification as a REIT will depend on our satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex provisionsresult of the Code, for which there are only limited judicial or administrative interpretations, and involvesCOVID-19 pandemic, the determinationCompany entered into temporary lease amendments with some of various factual matters and circumstancesits tenants. The income generated under these lease amendments did not entirely within our control. Importantly, as of the date hereof we have a limited operating history and both the opinion and any other assessment regarding our qualification as aconstitute qualifying REIT depends wholly on projections regarding our future activities and our ability, within one year after our receipt thereof, to apply the proceeds of the Offering to qualifying assetsincome for purposes of the REIT requirements.
Any such corporate tax onliability could be substantial and would reduce our undistributed taxable incomecash available for, among other things, our operations and netdistributions to our stockholders. In addition, being taxed as a C corporation could impair our ability to expand our business and raise capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net incomecould materially and 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on acquisitions of properties, and it is possible that we might be required to borrow funds or sell assets to fund these distributions. We may not always be able to make distributions sufficient to meet the annual distribution requirements and to avoid corporate income and excise taxes.
You may have current tax liability on distributions if theyyou elect to reinvest in our shares.
Our stockholders who elect to participate in the distribution reinvestment plan,Company's DRIP, if it is ever reactivated, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair market value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the cash distributions used to purchase those shares of common stock. As a result, if a stockholder isyou are not a tax-exempt entity, such stockholderyou may have to use funds from other sources to pay itsyour tax liability on the value of the common stock received.
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We and the reducedoperating partnership may inherit tax rates that apply to other corporate dividends.
Pursuant to the individual recipient, rather than the 20% preferential rate. The more
The stock ownership limit imposed by the Code for REITs and our charter may restrict our business combination opportunities.
To qualify as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of any taxable year after our first year in which we qualify as a REIT. Our charter, with certain exceptions, authorizes our board of directors to take the actions that are necessary or appropriate to preserve our qualification as a REIT. Unless an exemption is granted prospectively or retroactively by our board of directors, no person (as defined to include certain entities) may own more than 9.8% in value of the aggregate of our outstanding shares of capital stock or more than 9.8%, in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of common stock following the completion of the Offering.stock. Generally, this limit can be waived and adjusted by the board of directors. In addition, our charter will generally prohibit beneficial or constructive ownership of shares of our capital stock by any person that owns, actually or constructively, an interest in any of our tenants that would cause us to own, actually or constructively, 10% or more of any of our tenants. Our board of directors may grant an exemption from the 9.8% ownership limit prospectively or retroactively in its sole discretion, subject to such conditions, representations and undertakings as required by our charter or as it may determine. These and other ownership limitations in our charter are common in REIT charters and are intended, among other purposes, to assist us in complying with the tax law requirements and to minimize administrative burdens. However, these ownership limits and the other restrictions on ownership and transfer in our charter might also delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
Non-U.S. investors may be subject to FIRPTA on the sale of common stock if we are unable to qualify as a domestically controlled REIT.
A non-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax under the Foreign Investment in Real Property Tax Act of 1980, or "FIRPTA,"“FIRPTA,” on the gain recognized on the disposition. FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is a "domestically controlled REIT." A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. There can be no assurance that we will qualify as a domestically controlled REIT.
None.
The Company’s headquarters wereis located at 12730 High Bluff Drive, Suite 110, San Diego, CA 92130. During March 2017, the Company moved our headquarters to our Southern Nevada office, located at 88809130 West SunsetPost Road, Suite 240,200, Las Vegas, Nevada 89148. The office in San Diego will be closed on March 31, 2017.
As of December 31, 2016,2020, the Company had acquired, along with affiliated entities, 17 properties of which the Company's share of the aggregate purchase price total $51.8 million, plus closing costs. These acquisitions were funded by the ongoing initial public offering, through the issuance of the Company's common stock and financing.
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The following map and table sets forth the property name, percentage owned, location and other information with respect to the parking lots/lots and/or facilities that the Company had acquiredheld as of December 31, 2016:
Property Name | Location | Acquisition Date | Property Type | # Spaces | Property Size (Acres) | Retail Sq. Ft | Investment Amount | % Owned |
MVP Cleveland West 9th (1) | Cleveland, OH | 5/11/2016 | Lot | 260 | 2.00 | N/A | $5,844,000 | 100% |
33740 Crown Colony (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $2,954,000 | 100% |
MCI 1372 Street | Canton, OH | 7/8/2016 | Lot | 66 | 0.44 | N/A | $700,000 | 100% |
MVP Cincinnati Race Street Garage | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $5,848,000 | 100% |
MVP St. Louis Washington | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $1,637,000 | 100% |
MVP St. Paul Holiday Garage | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,396,000 | 100% |
MVP Louisville Station Broadway | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,007,000 | 100% |
White Front Garage Partners | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $11,673,000 | 100% |
Cleveland Lincoln Garage Owners | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.14 | 45,272 | $8,271,000 | 100% |
MVP Houston Preston Lot | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $2,820,000 | 100% |
MVP Houston San Jacinto Lot | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,250,000 | 100% |
MVP Detroit Center Garage | Detroit, MI | 1/10/2017 | Garage | 1,275 | 1.28 | N/A | $55,477,000 | 100% |
St. Louis Broadway | St Louis, MO | 2/1/2017 | Lot | 161 | 0.96 | N/A | $2,400,000 | 100% |
St. Louis Seventh & Cerre | St Louis, MO | 2/1/2017 | Lot | 174 | 1.06 | N/A | $3,300,000 | 100% |
MVP Preferred Parking (3) | Houston, TX | 6/29/2017 | Garage/Lot | 528 | 0.98 | 784 | $20,480,000 | 100% |
MVP Raider Park Garage | Lubbock, TX | 11/21/2017 | Garage | 1,495 | 2.15 | 20,536 | $13,640,000 | 100% |
MVP PF Memphis Poplar | Memphis, TN | 12/15/2017 | Lot | 127 | 0.87 | N/A | $3,670,000 | 100% |
MVP PF St. Louis 2013 | St Louis, MO | 12/15/2017 | Lot | 183 | 1.22 | N/A | $5,041,000 | 100% |
Mabley Place Garage | Cincinnati, OH | 12/15/2017 | Garage | 775 | 0.9 | 8,400 | $18,210,000 | 83% |
MVP Denver Sherman | Denver, CO | 12/15/2017 | Lot | 28 | 0.14 | N/A | $705,000 | 100% |
MVP Fort Worth Taylor | Fort Worth, TX | 12/15/2017 | Garage | 1,013 | 1.18 | 11,828 | $27,663,000 | 100% |
MVP Milwaukee Old World | Milwaukee, WI | 12/15/2017 | Lot | 54 | 0.26 | N/A | $2,044,000 | 100% |
MVP Houston Saks Garage | Houston, TX | 12/15/2017 | Garage | 265 | 0.36 | 5,000 | $7,923,000 | 100% |
MVP Milwaukee Wells | Milwaukee, WI | 12/15/2017 | Lot | 148 | 1.07 | N/A | $4,463,000 | 100% |
MVP Wildwood NJ Lot 1 (2) | Wildwood, NJ | 12/15/2017 | Lot | 29 | 0.26 | N/A | $278,000 | 100% |
MVP Wildwood NJ Lot 2 (2) | Wildwood, NJ | 12/15/2017 | Lot | 45 | 0.31 | N/A | $418,000 | 100% |
MVP Indianapolis City Park | Indianapolis, IN | 12/15/2017 | Garage | 370 | 0.47 | N/A | $10,934,000 | 100% |
MVP Indianapolis WA Street | Indianapolis, IN | 12/15/2017 | Lot | 141 | 1.07 | N/A | $5,749,000 | 100% |
MVP Minneapolis Venture | Minneapolis, MN | 12/15/2017 | Lot | 195 | 1.65 | N/A | $4,013,000 | 100% |
MVP Indianapolis Meridian | Indianapolis, IN | 12/15/2017 | Lot | 36 | 0.24 | N/A | $1,551,000 | 100% |
MVP Milwaukee Clybourn | Milwaukee, WI | 12/15/2017 | Lot | 15 | 0.06 | N/A | $262,000 | 100% |
MVP Milwaukee Arena Lot | Milwaukee, WI | 12/15/2017 | Lot | 75 | 1.11 | N/A | $4,631,000 | 100% |
MVP Clarksburg Lot | Clarksburg, WV | 12/15/2017 | Lot | 94 | 0.81 | N/A | $625,000 | 100% |
MVP Denver 1935 Sherman | Denver, CO | 12/15/2017 | Lot | 72 | 0.43 | N/A | $2,533,000 | 100% |
MVP Bridgeport Fairfield | Bridgeport, CT | 12/15/2017 | Garage | 878 | 1.01 | 4,349 | $8,268,000 | 100% |
Minneapolis City Parking | Minneapolis, MN | 12/15/2017 | Lot | 268 | 1.98 | N/A | $7,718,000 | 100% |
MVP New Orleans Rampart | New Orleans, LA | 2/1/2018 | Lot | 78 | 0.44 | N/A | $7,835,000 | 100% |
MVP Hawaii Marks Garage | Honolulu, HI | 6/21/2018 | Garage | 311 | 0.77 | 16,205 | $19,952,000 | 100% |
(1) These properties are based on dollar amountsheld by West 9th St. Properties II, LLC.
(2) These properties are held by MVP REIT II paid for each property at the timeWildwood NJ Lot, LLC.
(3) MVP Preferred Parking holds two properties.
As of purchase in relation to total purchases held at December 31, 2016.
Property Name | Location | Purchase Date | Property Type | # Spaces | Property Size (Acres) | Retail Sq Ft | Initial Aggregate Purchase Price | % Owned |
Minneapolis City Parking, LLC | Minneapolis, MN | 1/6/2016 | Lot | 270 | 4.36 | N/A | $9,395,000 | 13.0% |
MVP Denver Sherman 1935, LLC | Denver, CO | 2/12/2016 | Lot | 72 | 0.43 | N/A | $2,437,500 | 24.0% |
MVP Cleveland West 9th, LLC (1) | Cleveland, OH | 5/11/2016 | Lot | 254 | 2.16 | N/A | $5,675,000 | 51.0% |
33740 Crown Colony, LLC (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $3,030,000 | 51.0% |
MCI 1372 Street, LLC | Canton, OH | 7/8/2016 | Lot | 68 | 0.44 | N/A | $700,000 | 100.0% |
MVP St. Louis Washington, LLC | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $3,000,000 | 100.0% |
MVP Louisville Station Broadway, LLC | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,050,000 | 100.0% |
MVP Houston Jefferson Lot, LLC (2) | Houston, TX | 11/22/2016 | For Sale | 76 | 0.52 | N/A | $700,000 | 100.0% |
MVP Houston Preston Lot, LLC | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $2,800,000 | 20.0% |
MVP Houston San Jacinto Lot, LLC | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,200,000 | 100.0% |
MVP Bridgeport Fairfield Garage, LLC | Bridgeport, CT | 3/30/2016 | Garage | 878 | 1.01 | 4,349 | $7,800,000 | 10.0% |
MVP San Jose 88 Garage, LLC | San Jose, CA | 6/15/2016 | Garage | 328 | 1.33 | N/A | $3,575,500 | 100.0% |
MVP Cincinnati Race Street Garage, LLC | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $4,500,000 | 100.0% |
MVP St. Paul Holiday Garage, LLC | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,200,000 | 100.0% |
White Front Garage Partners, LLC | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $11,496,000 | 80.0% |
Cleveland Lincoln Garage Owners, LLC | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.20 | 45,272 | $7,316,950 | 100.0% |
MVP Minneapolis Venture, LLC | Minneapolis, MN | 1/6/2016 | For Sale | 185 | 4.36 | N/A | $6,100,000 | 13.0% |
The nature of the Company’s business exposes its properties, the Company, its Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted above or routine litigation arising out of the ordinary course of business, the Company or its subsidiaries may becomeis not presently subject to legal proceedings, claims or disputes. As of March 24, 2017, neither the Company nor any of its subsidiaries was a party to any material pending legal proceedings.
None.
ITEM 5.
MARKET FORStockholder Information
As of March 30, 2021, there were 3,856 holders of record of the Company’s common shares and 52 and 635 holders of record of the Company’s Series A and Series 1 preferred shares, respectively. The number of stockholders is based on the records of the Company’s transfer agent.
Market Information
The Company'sCompany’s shares of common stock are not currently listed on a national securities exchange or any over-the-counter market. The Company doesmarket and might not expect shares to becomebe listed in the near future, and they may not become listed at all. The board of directors does not anticipate evaluating a transaction providing liquidity for stockholders until after the date the Offering closes.future. The charter does not require the board of directors to pursue a liquidity event. Dueevent, however, as noted above, in mid-2019, the Company engaged financial and legal advisors and began to explore a broad range of potential strategic alternatives, including potential sales of assets, a potential sale of the Company or a portion thereof, a potential strategic business combination or a potential liquidation. On January 8, 2021, the Company, entered into the Purchase Agreement to provide additional liquidity to the uncertainties of market conditions in the future, the Company believes setting finite dates for possible, but uncertain, liquidity events may result in actions not necessarily in the best interests or within the expectations ofCompany. the Company's stockholders. The Company expects that the Company's board of directors, in the exercise of its fiduciary duty to stockholders, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such a transaction is in the best interests of stockholders. A liquidity event
In order for members of the Financial Industry Regulatory Authority, Inc., or FINRA and their associated persons to have participated in the offering and sale of the Company'sCompany’s common shares or to participate in any future offering of common shares, the Company is required pursuant to FINRA Rule 5110 to disclose in each Annual Report distributed to stockholders a per share estimated value of the Company'sCompany’s common shares, the method by which it was developed and the date of the data used to develop the estimated value. In addition, the AdvisorCompany must prepare annual statements of estimated share values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports relating to an investment in the Company'sCompany’s common shares. For these purposes,On January 14, 2021 the Company announced an estimated per common share net asset value (“NAV”) of shares shall be deemed to be $25.00$11.75 per common share as of December 31, 2015. The basis for this valuation is the net investment amount of the Company'sJanuary 8, 2021 shares, which is based on the "amount available for investment" percentage shown in the. In determining an estimated use of proceeds table in the prospectus for the Offering.
The estimated NAV per share determined by the Board of Directors is not a representation, warranty or guarantee that, among other things:
• a stockholder would be able to realize the estimated NAV per share if such stockholder attempts to sell his or her shares;
• a stockholder would ultimately realize distributions per share equal to the Company's distribution reinvestment plan.
• shares of Common Stock would trade at the beginningestimated NAV per share on a national securities exchange;
• a third party would offer the estimated NAV per share in an arms-length transaction to purchase all or substantially all of the covered period, and the total number of shares of common stock owned atCommon Stock; or
• the endmethods used to determine the estimated NAV per share would be acceptable to FINRA, the SEC, any state securities regulatory entity or the Department of the covered period. The Company have the discretion not to provide a distribution reinvestment plan, and a majority of the Company's board of directors may amend, suspend or terminate the Company's distribution reinvestment plan for any reason (except that the Company may not amend the distribution reinvestment plan to eliminate a participant's ability to withdraw from the plan) at any time upon 10 days' prior notice to the participants. The Stockholder's participation in the plan will also be terminated to the extent that a reinvestment of the Stockholder's distributions in the Company's common stock would cause the percentage ownership limitation contained in the Company's charter to be exceeded. Otherwise, unless the Stockholder terminate the Stockholder's participation in the Company's distribution reinvestment plan in writing, the Stockholder's participation will continue even if the shares to be issued under the plan are registered in a future registration. The Stockholder may terminate the Stockholder's participation in the distribution reinvestment plan at any time by providing us with 10 days' written notice. A withdrawal from participation in the distribution reinvestment plan will be effective onlyLabor with respect to distributions paid more than 30 days after receipt of written notice. Generally, a transfer of common stock will terminatetheir respective requirements.
Further, the stockholder's participation in the distribution reinvestment planestimated NAV per share was calculated as of a particular moment in time and the first day of the month in which the transfer is effective.
Share Repurchase Program
On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, ("SRP") that enables stockholders to sell their shares to the Company. Under the SRP, stockholders may request that the Company redeem all or any portion, subject to certain minimum conditions described below, if such repurchase does not impair the Company's capital or operations.
As of the date of this filing, no48,318 shares have been redeemed.
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Since inception, there have been 33,232 hardship repurchases in connection with a shareholder’s death through filing date. On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
Recent Sales of Unregistered Securities
The Company did not sell any of its equity securities during the year ended December 31, 2020 that were not registered under the Securities Act.
Use of Offering Proceeds
As of December 31, 2016, the Company ceased all selling efforts for the initial public offering but may accept additional subscriptions through March 31, 2017.
The following is a table of summary of offering proceeds from inception through December 31, 2016:
Type | Number of Shares - Common | Value | ||||||
Issuance of common stock | 2,254,253 | 56,356,000 | ||||||
DRIP shares | 18,311 | -- | ||||||
Dividend shares | 29,264 | -- | ||||||
Distributions | -- | (274,000 | ) | |||||
Deferred offering costs | -- | (1,086,000 | ) | |||||
Contribution from Advisor | 1,147,000 | |||||||
Total | 2,301,828 | $ | 56,143,000 |
Type | Number of Shares Preferred |
| Number of Shares Common |
| Value | ||
Issuance of common stock | -- |
| 3,651,238 | $ | 83,041,000 | ||
Redeemed shares |
| -- |
| (48,318) |
|
| (1,185,000) |
DRIP shares | -- |
| 83,437 |
| 2,086,000 | ||
Issuance of Series A preferred stock |
| 2,862 |
| -- |
|
| 2,544,000 |
Issuance of Series 1 preferred stock |
| 39,811 |
| -- |
|
| 35,981,000 |
Dividend shares |
| -- |
| 153,826 |
|
| 3,845,000 |
Distributions |
| -- |
| -- |
|
| (13,305,000) |
Deferred offering costs |
| -- |
| -- |
|
| (1,086,000) |
Contribution from advisor | -- |
| -- |
| 1,147,000 | ||
Shares added for merger |
| -- |
| 3,887,513 |
|
| 85,701,000 |
Total | 42,673 |
| 7,727,696 | $ | 198,769,000 |
From October 22, 2015 through December 31, 2016,2020, the Company incurred organization and offering costs in connection with the issuance and distribution of the registered securities of approximately $1.1 million, which were paid to unrelated parties by the Sponsor. From October 22, 2015 through December 31, 2016,2020, the net proceeds to the
Item not required for a smaller reporting company.
ITEM 7.
The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with the "Company," "we," "us," or "our"consolidated financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K. Also see ) is“Forward Looking Statements” preceding Part I.
Overview
The Company elected to be taxed and believes it operated in a Maryland corporation formed on May 4, 2015 and intendsmanner that allowed the Company to qualify as a real estate investment trust ("REIT")REIT for U.S. federal income tax purposes beginning with theits taxable year endingended December 31, 2016. As of2017 through December 31, 2016,2019. As a result of the COVID-19 pandemic, the Company ceased all selling effortsentered into temporary lease amendments with some of its tenants. The income generated under these lease amendments did not constitute qualifying REIT income for purposes of the REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the initial public offering (the "Offering")year ended December 31, 2020. Accordingly, the Company did not qualify as a REIT in 2020 and will be taxed as a C corporation for the year ended December 31, 2020 and for at least its next four taxable years.
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As a C corporation, the Company will be subject to federal income tax on its taxable income at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which it no longer qualified as a REIT. In addition, distributions to its stockholders will not be deductible by the Company. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C corporation, the Company is not required to distribute any amounts to its stockholders and all distributions to stockholders would be taxable as regular corporate dividends to the extent of its common stock, $0.0001 par value per share,current and accumulated earnings and profits. In such event, corporate stockholders may be eligible for the dividends-received deduction. In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income. Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for purposes of the 3.8% Medicare tax), subject to certain limitations.
The Company was incorporated in Maryland on May 4, 2015 and is the sole member of the Operating Partnership. The Company owns substantially all of its assets and conduct its operations through the Operating Partnership.
Prior to the management Internalization effective on April 1, 2019, the Company was externally managed by MVP Realty Advisors, LLC, dba The Parking REIT Advisors (the “former Advisor”), a Nevada limited liability company. As a result of the management Internalization, the Company will no longer incur an asset management fee equal to 1.1% of the cost of all assets held by the Company, effective April 1, 2019.
Impact of COVID-19
The ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributed to significant volatility and negative pressure in financial markets and resulted in unprecedented job losses causing many to fear an imminent global recession. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified, many countries, including the United States, have reacted by instituting quarantines, density limitations and social distancing measures, mandating business and school closures and restricting travel.
As a result of these measures, the COVID-19 pandemic continues to negatively impact almost every industry directly or indirectly, including ours and the industries in which our tenants operate, with much of the impact still unknown. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. In particular, many of the Company’s properties are located in urban centers, near government buildings and sports centers. Demand for parking in these locations depends in large part on customer traffic, and conditions that lead to a decline in customer traffic have had and may continue to have a material and adverse impact on those businesses. Many state and local governments are currently restricting public gatherings, requiring people to shelter in place and implementing social distancing measures, which has in some cases eliminated or severely reduced the demand for parking. Such events are adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or cause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, may impact or eliminate the rental revenue the Company generates from its leases with them. In addition, some state governments and other authorities were in varying stages of lifting or modifying some of these measures and some have already been forced to, and others may in the future, reinstitute these measures or impose new, more restrictive measures, if the risks, or the perception of the risks, related to the COVID-19 pandemic worsen at $25.00 per share,any time. The Company’s rental revenue and the return on its investments has been and may continue to be materially adversely affected by restrictions requiring people to shelter in place in reaction to the COVID-19 outbreak and may be further materially adversely affected to the extent that economic conditions result in the elimination of jobs or the migration of jobs from the urban centers where the Company’s parking facilities are situated to other locations. In particular, a majority of the Company’s property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking.
The Company experienced certain disruptions in base rent revenue and percentage rent revenue during the year ended December 31, 2020. For further information regarding the impact of COVID-19 on the Company’s see Results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019. While the Company is currently unable to completely estimate the future impact that the COVID-19 pandemic and efforts to contain its spread will have on the Company’s business and on its tenants, as of March 30, 2021, the Company had entered into forty-nine lease amendments with eight tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent from May 2020 through July 2020, (ii) conversion of certain leases to management agreements pursuant to which the operator will receive a registration statementmonthly fee; or (iii) extension of certain leases. While the Company continues to review and negotiate rent relief requests with tenants and plans to continue to execute lease amendments based on its evaluation of each tenant’s circumstances, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. The extent of the impact of COVID-19 on the Company’s financial and operational performance will depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted. The extent to which COVID-19 may impact the Company’s financial condition or results of operations cannot be determined at this time. For further information regarding the impact of COVID-19 on the Company, see Note T —Subsequent Events in Part II, Item 8 Notes to the Consolidated Financial Statements of this Annual Report andPart I, Item 1A titled “Risk Factors.”
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In January of 2019, the Company was notified by the City of Minneapolis that a portion of the Company’s property, Minneapolis City Parking, located at 1022 Hennepin Ave would be utilized for an expansion of the street and for a new transit center. After negotiating with the City for over a year, the Company was able to settle on the City taking approximately 6,000 sq. ft. of frontage on Hennepin Avenue, where the Company would still be left with one entrance on Hennepin Avenue and multiple entrances and exits on 10th and 11th streets. The City agreed to compensate The Parking REIT in the amount of $1.3 million, with a portion to be used to reconfigure the parking lot, to enable it to fit 266 parking spaces compared to 268 prior to the taking, and will be required to landscape the front portion of the lot once the improvements are complete. Proceeds totaling $1.3 million have been received in full as of the time of this filing.
On July 31, 2020, the Company entered into three loan modification agreements and an escrow agreement with American National Insurance Company (“ANICO”) for the following three loans: (i) Minneapolis City Parking, LLC, (ii) West 9th Properties II, LLC and (iii) MVP Fort Worth Taylor, LLC in which $950,000 in condemnation proceeds from the City of Minneapolis shall be used to pay the monthly principal and interest due under each note, beginning with the payment due June 1, 2020, until the termination date defined as the earlier of (i) payment in full of the Minneapolis City loan or (ii) the date that the debt service coverage of the real property securing each loan is at least 1.10 to 1.0 calculated on a trailing three-month basis. On August 6, 2020, $704,000 was wired to the ANICO escrow account. On October 23, 2020, the Company received the remaining condemnation proceeds of $596,000 from the city of Minneapolis and funded the remaining $246,000 due to the ANICO escrow account on October 26, 2020.
On September 25, 2020, the Company entered into Parking Management Agreements with Interstate Parking Company for the following three properties: MVP St. Paul Holiday Garage, LLC effective October 1, 2020 through September 30, 2025; MVP Milwaukee Old World, LLC effective November 1, 2020 through October 31, 2025 and MVP Milwaukee Arena Lot, LLC effective December 1, 2020 through November 30, 2025. These Parking Management Agreements provide for Interstate Parking Company to receive a monthly base management fee and monthly incentive fee which consists of a certain percent of net operating income over a defined threshold. All other net operating income is remitted to the Company.
On October 30, 2020, the Company entered into a Parking Management Agreement with Magnolia Parking and Bike Rentals, LLC for MVP Wildwood NJ Lots 1 and 2. Under the terms of this agreement, the Company will receive 75% of the monthly gross revenue generated by the parking lots. The term of this agreement is month-to-month.
On December 8, 2020, the “Company, as guarantor, entered into the Second Amendment to Loan Agreement and Loan Documents (the “Second Amendment”) by and among MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Parking Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, MVP Milwaukee Wells LLC (each a “Borrower” and together “Borrowers”) and LLC Warehouse V LLC (the “Lender”), as successor-in-interest to LoanCore Capital Credit REIT LLC (the “ Original Lender”). The Second Amendment amends the Loan Agreement and Loan Documents, dated as of November 30, 2018, as amended by the First Amendment to Loan Agreement and Loan Documents, dated as of July 9, 2020 (the “Loan Agreement”), pursuant to which the Original Lender agreed to make a secured loan to the Borrowers in the original principal amount of $39.5 million (the “Loan”).
Pursuant to the Second Amendment, the Borrowers were granted the option to extend the maturity date of the Loan for two one-year periods upon the satisfaction of certain conditions, payment of certain amounts due under the Loan Agreement and, in connection with the Borrowers’ exercise of their option with respect to the first extension period, delivery by the Company of a partial payment guaranty. On December 8, 2020, the Borrowers exercised their option to extend the term of the Loan to December 9, 2021 and made a $0.5 million payment to the Lender (consisting of the payment of accrued interest and the deposit of additional capital expenditure and general shortfall reserves), and the Company delivered a $5.0 million partial payment guaranty. See Form 8-K Current Report filed on December 14, 2020 for additional information
On December 16, 2020, the Company entered into the Second Amendments to the Leases with Premier Parking for the following four properties: (i) White Front Garage Partners, (ii) MVP Houston Preston Lot, (iii) MVP Preferred Parking and (iv) MVP Houston Saks Garage; and the Third Amendment for MVP Houston San Jacinto Lot. Effective October 2020 through December 2021, these amendments provide for the Company to receive a certain percent of net operating income. Effective January 1, 2022, the original lease terms are reinstated.
On December 18, 2020, Minneapolis Venture, LLC, a subsidiary of the Company, entered into an Amended and Restated Promissory Note Agreement (the “agreement”) with multiple lenders. The agreement increased the interest rate from 8% to 9%, an additional $2 million was funded increasing the note balance to $4 million and the maturity date of the note was extended to December 31, 2021.
On January 15, 2021, the Company entered into the Second Amendment to the Master lease with Isom Maintenance Company, LLC for MVP Raider Park Garage, LLC regarding payment terms of approximately $121,000 of delinquent percentage rent owed to the Company. Under the terms of this amendment. The Company received $25,000 of the 2020 percentage rent owed on March 1, 2021 and the remaining balance of approximately $96,000 is due on or before December 31, 2021.
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On January 29, 2021, the Company entered into a Second Lease Amendment with SP Plus for the following seven properties: (i) MVP Bridgeport Fairfield Garage, LLC, (ii) MVP Fort Worth Taylor, LLC, (iii) MVP Detroit Center garage, LLC, (iv) Mabley Place, LLC, (v) MVP Hawaii Marks Garage, LLC, (vi) MVP Denver 1935 Sherman, (vii) MVP PF St. Louis, LLC. Under the terms of the second amendment, SP Plus will pay the Company full base rent for these properties for January 2021, 75% of base rent for the period February 1, 2021 through July 31, 2021 and a one-time cost of contract fee of $275,000 on February 15, 2021. Effective August 1, 2021, the original lease terms are reinstated.
On February 8, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into an Amended and Restated Promissory Note Agreement (the “agreement”) with multiple lenders. The agreement increased the interest rate from 8% to 9%, an additional $845,000 was funded increasing the note balance to $1,807,000 and the maturity date of the note was extended to December 31, 2021.
Objectives
The Company’s primary objectives are to:
In mid-2019, the Company engaged financial and legal advisors and began to explore a broad range of potential strategic alternatives to provide liquidity to stockholders. On January 8, 2021, the Company, entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, MVP REIT II Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII” and together with VRMI and Mr. Shustek, the “Advisor”) and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). See the Company’s Form 8-K Current Report filed on January 14, 2021 for additional information. While the Bombe Transaction is expected to provide liquidity, there can be no assurance that the Company will receive the anticipated benefits of the Bombe Transaction or that the Bombe Transaction will be completed on the anticipated timeline or at all.
For example, we expect to incur additional costs in connection with ongoing litigation, the SEC investigation discussed in Note O - Legalin Part II, Item 8 Notes to the Consolidated Financial Statements of this Annual Report on Form S-1110-K and legal and consulting fees associated with pursuing any potential strategic alternatives, which in the aggregate may be material, none of which was taken in consideration when the board of directors determined the prior estimated NAV per share. Please see our Current Reports on Form 8-K filed with the SEC underon May 28, 2019 for additional information regarding the Securities Act. As of December 31, 2016, the Company raised approximately $56.4 millionNAV calculation, as well as “Item 1A. Risk Factors—Risks Related to an Investment in the Offering before paymentCompany–Stockholders should not rely on the estimated NAV per share as being an accurate measure of deferred offering coststhe current value of approximately $1.1 million, contribution from the Sponsor of approximately $1.1 million and cash distributions of approximately $274,000.
Prior Investment Strategy
The Company was formed to focusCompany’s investment strategy has historically focused primarily on investments inacquiring, owning and managing parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. NoThe Company historically focused primarily on investing in income-producing parking lots and garages with air rights in central business districts. In building its current portfolio, the Company sought geographically targeted investments that present key demand drivers, that were expected to generate cash flows and provide greater predictability during periods of economic uncertainty. Such targeted investments include, but are not limited to, parking facilities near one or more than 10% of the proceedsfollowing demand drivers:
However, as a result of this offering willthe current COVID-19 pandemic, among other factors, such demand drivers have been and are expected to be usedsignificantly diminished for investmentan indeterminate period of time. Many state and local governments are currently restricting public gatherings or requiring people to shelter in Canadian properties. To a lesser extent,place, which has in some cases eliminated or severely reduced the demand for parking. For further information regarding the impact of COVID-19 on the Company, may also invest in properties other than parking facilities.
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Prior Investment Criteria
The Company historically focused on acquiring properties that met the following criteria:
As noted above, the Company does not currently expect to make any additional acquisitions unless and until it is able to sell some of its existing assets, and then only after ensuring that it has sufficient liquidity resources. In the sole general partnerevent of a future acquisition, the Company would expect the foregoing criteria to serve as guidelines, however, Management and the Company’s board of directors may vary from these guidelines to acquire properties which they believe represent value opportunities.
Management Internalization
On March 29, 2019, the Company and the former Advisor entered into definitive agreements to internalize the Company’s management function effective April 1, 2019 (the “Internalization”). Under the supervision of the board of directors (the “Board of Directors”), the former Advisor had been responsible for managing the operations of the Company and MVP I, which merged with a wholly owned indirect subsidiary of the Company in December 2017, since their respective formations. As part of the Internalization, among other things, the Company agreed with the former Advisor to (i) terminate the Second Amended and Restated Advisory Agreement, dated as of May 26, 2017 and, for the avoidance of doubt, the Third Amended and Restated Advisory Agreement, dated as of September 21, 2018, which by its terms would have become effective only upon a listing of the Company’s common stock on a national securities exchange (collectively, the “Management Agreements”), each entered into among the Company, the former Advisor and MVP REIT II Operating Partnership, LP a Delaware limited partnership (the "Operating Partnership"“Operating Partnership”). The Company plans; (ii) extend employment to own substantially all of its assetsthe executives and conduct its operations through the Operating Partnership. The Company's wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partnerother employees of the Operating Partnership. The operating agreement provides thatformer Advisor; (iii) arrange for the Operating Partnership is operated in a manner that enables the Companyformer Advisor to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability, and (3) ensure that the Operating Partnership is not classified as a "publicly traded partnership" for purposescontinue to provide certain services with respect to outstanding indebtedness of Section 7704 of the Internal Revenue Code, which classification could result in the Operating Partnership being taxed as a corporation.
Contribution Agreement
On March 29, 2019, the Company in that MVP REIT also invests primarily in parking facilities.
Property Name | MVP REIT II % | MVP REIT % | Total Purchase Price | Purchase Date | Parking Lease is with | Tenant Portion of Property Tax | Term in Years | Annual Base Rent | Revenue Sharing Starting Point $ |
Consolidated Properties listed as investments in real estate | |||||||||
MVP San Jose 88 Garage | 100.00% | 0.00% | $3,575,500 | 6/15/2016 | ABM | N/A | 1 | N/A | Management Agreement |
MCI 1372 Street | 100.00% | 0.00% | $700,000 | 7/8/2016 | ABM | $3,034 | 5 | $50,000 | 70% > $100,000 |
MVP Cincinnati Race Street Garage | 100.00% | 0.00% | $4,500,000 | 7/8/2016 | SP + | $120,000 | 5 | $330,000 | 70%> 610,000 |
MVP St. Louis Washington | 100.00% | 0.00% | $3,000,000 | 7/18/2016 | SP + | N/A | 5 | $162,500 | 70%> $245,000 |
MVP St. Paul Holiday Garage | 100.00% | 0.00% | $8,200,000 | 8/12/2016 | Interstate Parking | $150,000 | 10 | $534,500 | 75% > $900,000 |
MVP Louisville Station Broadway | 100.00% | 0.00% | $3,050,000 | 8/23/2016 | Riverside Parking | $25,000 | 5 | $200,000 | 75% > $275,000 |
Cleveland Lincoln Garage Owners | 100.00% | 0.00% | $7,316,950 | 10/19/2016 | SP + | $125,000 | 5 | $500,000 | 80% > $900,000 |
MVP Houston Jefferson Lot | 100.00% | 0.00% | $700,000 | 11/22/2016 | iPark Services | N/A | 10 | $87,000 | 65% > $154,000 |
MVP Houston San Jacinto Lot | 100.00% | 0.00% | $3,200,000 | 11/22/2016 | iPark Services | N/A | 10 | $264,000 | 65% > $325,000 |
White Front Garage Partners | 80.00% | 20.00% | $11,496,000 | 9/30/2016 | Premier Parking | ALL | 10 | $700,000 | 70% > $850,000 |
MVP Cleveland West 9th (1) | 51.00% | 49.00% | $5,675,000 | 5/11/2016 | SP + | $120,000 | 5 | $330,000 | 70% >650,000 |
33740 Crown Colony (1) | 51.00% | 49.00% | $3,030,000 | 5/17/2016 | SP + | $40,000 | 5 | $185,000 | 70% >$325,000 |
Investment in equity method investee | |||||||||
MVP Denver Sherman 1935 | 24.00% | 76.00% | $2,437,500 | 2/12/2016 | SP + | N/A | 10 | $120,000 | 70% > $160,000 |
MVP Houston Preston Lot | 20.00% | 80.00% | $2,800,000 | 11/22/2016 | iPark Services | N/A | 10 | $228,000 | 65% > $300,000 |
Investment in cost method investees | |||||||||
Minneapolis City Parking | 13.00% | 87.00% | $9,395,000 | 1/6/2016 | SP + | N/A | 5 | $800,000 | 0% > $1,032,000 |
MVP Bridgeport Fairfield Garage | 10.00% | 90.00% | $7,800,000 | 3/30/2016 | SP + | $100,000 | 10 | $400,000 | 65%> $775,000 |
Assets held for sale | |||||||||
MVP Minneapolis Venture | 13.00% | 87.00% | $6,100,000 | 1/6/2016 | N/A | N/A | N/A | N/A | N/A |
MVP Houston Jefferson Lot | 100.00% | 0.00% | $700,000 | 11/22/2016 | iPark Services | N/A | 10 | $87,000 | 65% > $154,000 |
Rental revenues (by property) | 2016 | ||||
MVP Cleveland West 9th, LLC (b) | $ | 211,000 | |||
33740 Crown Colony, LLC (b) | 115,000 | ||||
MVP San Jose 88 Garage, LLC | (a) | 423,000 | |||
MCI 1372 Street, LLC | 24,000 | ||||
MVP Cincinnati Race Street Garage, LLC | 189,000 | ||||
MVP St. Louis Washington, LLC | 72,000 | ||||
MVP St. Paul Holiday Garage, LLC | 206,000 |
MVP Louisville Station Broadway, LLC | 72,000 | |||
White Front Garage Partners, LLC | 175,000 | |||
Cleveland Lincoln Garage Owners, LLC | 93,000 | |||
MVP Houston San Jacinto Lot, LLC | 22,000 | |||
Total revenues | $ | 1,602,000 |
Results of Operations for the year ended December 31, 20162020 compared to the periodyear ended December 31, 2019.
For the Year Ended December 31, | ||||||||
2020 | 2019 | $ Change | % Change | |||||
Revenues |
|
|
|
|
|
|
|
|
Base rent income | $ | 14,034,000 | $ | 20,151,000 | $ | (6,117,000) | (30.4%) | |
Percentage rent income |
| 448,000 |
| 2,643,000 |
| (2,195,000) |
| (83.0%) |
Management income |
| 827,000 |
| -- |
| 827,000 | 100.0% | |
Total revenues | $ | 15,309,000 | $ | 22,794,000 | $ | (7,485,000) | (32.8%) |
Rental revenue
The decrease in rental revenues is primarily attributable to decreased demand as a result of COVID-19 and restrictions intended to prevent its spread, including restrictions on public gatherings, requiring people to shelter in place and implementing social distancing measures, which in some cases eliminated or severely reduced the demand for parking. In addition, as a result of COVID-19, the Company transitioned 11 leases to management agreements. Per these management agreements, the tenant now operates the property on behalf of the Company and pays their operating expenses from gross parking revenue and is required to remit an agreed upon percentage of the remainder to the Company instead of base rent payments. Revenues from these properties are recorded as management income.
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For additional information see Note D – Investments in Real Estate, Note J - Disposition of Investments in Real Estate in the notes to the consolidated financial statements included in Part II, Item 8 - Notes to the Consolidated Financial Statements of this Annual Report.
During the years ended December 31, 2020 and 2019 the Company earned percentage rent on the following properties:
For the Year Ended December 31, | ||||||||
2020 | 2019 | $ Change | % Change | |||||
Percentage rent income | ||||||||
MVP PF Ft. Lauderdale (a) | $ | -- | $ | 32,000 | $ | (32,000) | (100.0%) | |
MVP St Louis 2013 (b) | -- | 57,000 | (57,000) | (100.0%) | ||||
Mabley Place Garage (b) | -- | 316,000 | (316,000) | (100.0%) | ||||
MVP Ft Worth Taylor (c) | 94,000 | 8,000 | 86,000 | 1075.0% | ||||
MVP Indianapolis Washington (b) | -- | 116,000 | (116,000) | (100.0%) | ||||
MVP Indianapolis Meridian Lot (b) | -- | 9,000 | (9,000) | (100.0%) | ||||
MVP Milwaukee Arena (b) | 31,000 | 173,000 | (142,000) | (82.1%) | ||||
MVP Denver 1935 Sherman (b) | -- | 9,000 | (9,000) | (100.0%) | ||||
MVP Cleveland West 9th (b) (b) | -- | 11,000 | (11,000) | (100.0%) | ||||
MVP St Paul Holiday (b) | -- | 82,000 | (82,000) | (100.0%) | ||||
MVP Houston Preston (b) | -- | 17,000 | (17,000) | (100.0%) | ||||
MVP Houston San Jacinto (b) | -- | 57,000 | (57,000) | (100.0%) | ||||
MVP Detroit Center Garage (b) | 153,000 | 1,574,000 | (1,421,000) | (90.3%) | ||||
MVP Raider Park Garage (d) | 121,000 | 62,000 | 59,000 | 95.2% | ||||
St. Louis Broadway (b) | 5,000 | 31,000 | (26,000) | (83.9%) | ||||
MVP New Orleans Rampart (b) | 44,000 | 89,000 | (45,000) | (50.6%) | ||||
Total revenues | $ | 448,000 | $ | 2,643,000 | $ | (2,195,000) | (83.0%) |
a) Property was sold in September 2019
b)Lost transient business as a result of restrictions intended to slow the spread of COVID-19
c)Increased due to increased demand, and long-term contracts the Company had in place with the Fort Worth Club and Barnett Plaza
d)This was due to the new leases that went in effect for new office space for ISOM and Happy Bank
For the Year Ended December 31, | ||||||||
2020 | 2019 | $ Change | % Change | |||||
Operating expenses | ||||||||
Property taxes | $ | 3,514,000 | $ | 3,023,000 | $ | 491,000 | 16.2% | |
Property operating expense | 1,496,000 | 1,701,000 | (205,000) | (12.1%) | ||||
Asset management expense – related party | -- | 854,000 | (854,000) | (100.0%) | ||||
General and administrative | 6,029,000 | 5,601,000 | 428,000 | 7.6% | ||||
Professional fees, net of reimbursement of insurance proceeds | 970,000 | 8,528,000 | (7,558,000) | (88.6%) | ||||
Management internalization | -- | 32,004,000 | (32,004,000) | (100.0%) | ||||
Acquisition expenses | 3,000 | 251,000 | (248,000) | (98.8%) | ||||
Depreciation and amortization expenses | 5,206,000 | 5,172,000 | 34,000 | 0.7% | ||||
Impairment | 14,115,000 | 1,452,000 | 12,663,000 | 872.1% | ||||
Total operating expenses | 31,333,000 | 58,586,000 | (27,253,000) | (46.5%) | ||||
Loss from operations | $ | (16,024,000) | (35,792,000) | 19,768,000 | 55.2% |
The Company is continuing to monitor the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on rental rates and rent collections. As of December 31, 2020, the Company had entered into forty-one lease amendments with eight tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent from May 4, 2015 (Datethrough year-end 2020, (ii) conversion of Inception)certain leases to management agreements pursuant to which the operator will receive a monthly fee; or (iii) extension of certain leases. Although the Company is and will continue to be actively engaged in rent collection efforts related to uncollected rent, as well as working with certain tenants who have requested rent relief, the Company can provide no assurance that such efforts or its efforts in future periods will be successful, particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period. The decrease in base rent income and percentage rent income during the year ended December 31, 2015.
For the Year ended | For the Period from May 4, 2015 (Date of Inception) to | |||||||
December 31, 2016 | December 31, 2015 | |||||||
Revenues | ||||||||
Rental revenue | $ | 1,602,000 | $ | -- | ||||
Total revenues | 1,602,000 | |||||||
Operating expenses | ||||||||
General and administrative | 1,049,000 | 119,000 | ||||||
Acquisition expenses | 2,472,000 | -- | ||||||
Acquisition expenses – related party | 1,229,000 | -- | ||||||
Operation and maintenance | 460,000 | -- | ||||||
Operation and maintenance – related party | 197,000 | -- | ||||||
Seminar | 16,000 | -- | ||||||
Organizational costs | -- | 6,000 | ||||||
Depreciation | 195,000 | |||||||
Total operating expenses | 5,618,000 | 125,000 | ||||||
Loss from operations | (4,016,000 | ) | (125,000 | ) | ||||
Other income (expense) | ||||||||
Interest expense | (154,000 | ) | (1,000 | ) | ||||
Distribution income – related party | 34,000 | -- | ||||||
Income from investment in equity method investee | 3,000 | -- | ||||||
Total other income | (117,000 | ) | (1,000 | ) | ||||
Loss from continuing operations | $ | (4,133,000 | ) | $ | (126,000 | ) | ||
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Property taxes
The increase in property taxes in 2020 compared to 2019 is attributable primarily to the lease amendments which have increased the property tax burden on the Company for 2020.
General and administrative expenses. General
The increase in general and administrative expenses werefrom 2019 to 2020 of approximately $1.0 million$428,000 was primarily attributable to an increase in director and officer insurance expense of approximately $655,000 and an increase in office rent expense of approximately $140,000. The increase in the director and officer insurance expense is due to the fact that the Company’s insurance expense increased significantly with the renewal of the D&O insurance policies effective July 1, 2019 and these premiums increased again with the renewals effective July 1, 2020. Due to the timing of the premium year, six months of this increase in insurance expense are reflected in general and administrative expense for the year ended December 31, 2016. This mainly consisted2019 and twelve months of professional fees of approximately $635,000, director fees of approximately $197,000, higher insurance totaling $173,000 and other expenses. The Company expects most of these expenses will continueexpense are reflected in similar amounts in future years. General and administrative expenses were $119,000 for the period from May 4, 2015 (date of inception) through December 31, 2015. A portion of these general and administrative expenses were paid through the Sponsor and recorded as a contribution from the Sponsor.
Professional fees
Professional fees decreased approximately $7.6 million in 2020. The decrease was primarily due to lower legal fees incurred during the year ended December 31, 2020 compared to the year ended December 31, 2019 and $4.8 million of insurance proceeds received to reimburse the Company for legal fees, during the year ended December 31, 2020 for claims made against the director and officer insurance policy. These reimbursements were related to legal expenses incurred relating to lawsuits filed in 2019 and the SEC investigation, which $1.2 million were incurred by related parties. was initiated in June of 2019.
See Note E -
Management internalization
The Company was externally managed by the Company did not acquire any properties during 2015, Advisor prior to the Company had no acquisition expense formanagement Internalization that became effective on April 1, 2019. These expenses include (i) the period from May 4, 2015 (dateInternalization Consideration to be paid in aggregate to the Manager and (ii) professional fees incurred to complete the Internalization of inception) through December 31, 2015. As the Company continues to grow and acquire more properties Company’s management. The cost of the Company expects acquisition expenses to grow as well.
See Note PA —Organization and BusinessOperations and Note T –
.Acquisition expenses
Acquisition expenses related to purchased properties are capitalized with the investment in real estate. Acquisition expenses incurred during the years ended December 31, 2020 and maintenance
Depreciation and amortization expenses
The increase in depreciation and amortization expenses was due to assets placed in service following the Company'scompletion of construction projects or general improvements on properties already held.
operationImpairment
During the years ended December 31, 2020 and maintenance expenses totaled2019, the Company recorded approximately $657,000,$14.1 million and mainly consisted$1.5 million, respectively, of asset management feesimpairment charges. These charges were recorded to
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did not acquire any properties during 2015, the Company had no operations and maintenance expense for the period from May 4, 2015 (date of inception) through December 31, 2015.
For the Year Ended December 31, | ||||||||
2020 | 2019 | $ Change | % Change | |||||
Other income (expense) | ||||||||
Interest expense | $ | (9,274,000) | $ | (9,513,000) | $ | 239,000 |
| 2.5% |
Gain from sale of investment in real estate |
| 694,000 |
| 2,509,000 |
| (1,815,000) |
| (72.3%) |
Other income |
| 151,000 |
| 82,000 |
| 69,000 |
| 84.1% |
Income from DST | 34,000 | 218,000 | (184,000) |
| (84.4%) | |||
Settlement income |
| 370,000 |
| -- |
| 370,000 |
| 100.0% |
Total other expense | $ | (8,025,000) | $ | (6,704,000) | $ | (1,321,000) |
| (19.7%) |
Interest expense. For
The decrease in interest expense for the yearperiod ended December 31, 2016,2020, as compared to the same period in 2019, is primarily attributable to principal amortization of existing debt and a slight reduction of interest rates on the variable rate loan.
In the past, to maximize the use of cash, the Company sought opportunities to utilize debt financing in acquisitions, including the use of long-term debt. The interest expense totaled approximately $154,000, related to the interest expense incurred by the Company's KeyBank line of credit for $56,000, amortized loan cost of approximately $37,000, interest expensewill vary based on the two Cleveland lots (MVP Cleveland West 9th, LLC & 33740 Crown Colony, LLC) for approximately $46,000amount of the Company’s borrowings and approximately $1,000 relatedcurrent interest rates at the time of financing. Historically, the Company’s intent was to secure appropriate leverage with the lowest interest rate available. The terms of any loans, in the future, will vary depending on the quality of the applicable property, the credit worthiness of the tenant and the amount of income the property is able to generate through parking leases. There is no assurance, however, that the Company will be acquiring additional properties in the future or will be able to secure additional financing of the Company's Directors and Officers liability Insurance. on favorable terms or at all.
Interest expense was $1,000recorded for the period from May 4, 2015 (date of inception) throughyears ended December 31, 2015, which was due to2020 and 2019 includes amortization of loan issuance costs. Total amortization of loan issuance cost for the financing of the Company's Directors and Officers Liability Insurance. As ofyears ended December 31, 2016, the Company's loan to cost ratio2020 and 2019 was approximately 24% (line of credit $8.0$0.8 million and notes payable of $5.3$0.9 million, divided by total parking assets of $54.4 million). The Companyrespectively.
expects to continue to leverage the Company's parking assets and future parking assets to fundFor additional purchases. This will result in higher interest expense in the future. Seeinformation see Note N - K – Notes Payablein Part II, Item 8 and Note M – Line of Credit of the Notes to the Consolidated Financial Statements included in Part 2, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K, for additional informationinformation.
Gain from sale of investment in real estate
On May 26, 2020 the Company sold a parking garage in San Jose, CA for cash consideration of $4.1 million to UC 88 Garage Owner LLC, a third-party buyer. The Company used $2.5 million of the proceeds to pay off the existing promissory note secured by the MVP San Jose 88 Garage, LLC. The property was originally purchased in June 2016 for approximately $3.6 million. The gain on sale is approximately $0.7 million.
During September 2019, the Company sold the surface parking lot and office building in Ft. Lauderdale, Florida for $6.1 million, which resulted in a gain from sale of investments in real estate of approximately $2.3 million.
On October 29, 2019, the Company sold a surface parking lot in Memphis, Tennessee for cash consideration of $675,000, which resulted in a gain on sale of investments in real estate of approximately $0.2 million.
Settlement income
On November 23, 2020, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with a third-party service provider. Under the terms of the Settlement Agreement, the Company received proceeds of approximately $0.4 million and the forgiveness approximately $0.2 million due the provider, as of the date of the settlement. The settlement proceeds are included in other income and the forgiveness of the previously incurred unpaid debts aggregating approximately $0.2 million is included as reduction in professional fees in the accompanying statement of operations
Discontinued operations, net of income taxes | 2016 | |||
Loss from assets held for sale, net of income taxes | $ | (19,000 | ) | |
Total loss from discontinued operations | $ | (19,000 | ) |
Other income
During January 2020, the Company earned $144,000 from Premium Parking for the early termination of the parking lease at MVP Memphis Poplar.
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During February 2020, the Company received approximately $6,000 for the energy efficiency fee at Detroit Center Garage. Upon the completion of the lighting project at this property last year, the tenant agreed that if the energy costs did not meet or surpass $46,000 for the year, then the tenant would pay the Company 80% of the difference.
During January 2019, the Company received a rebate of approximately $31,000 from Hawaii Energy for the completion of a project to replace and improve the lighting of the property located in Hawaii
During August 2019, the Company received $50,000 from Inner Fire Fitness, LLC for the early termination of the retail lease at Mabley Place Garage.
Income from DST
The decrease in income from DST is due to the impact of COVID-19. From March 2020, through the remainder of the year, the DST, St. Louis Cardinal Lot, did not generate distributable net income due the delay of the opening of the major league baseball season and the fact that no fans were allowed to attend the games when the season opened.
Non-GAAP Financial Measures
Funds from Operations and Modified Funds from Operations
The AdvisorCompany believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient. Additionally, publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, the Company believes that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases.
In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts ("NAREIT")NAREIT promulgated a measure known as funds from operations ("FFO").FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, adding back asset impairment write-downs, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures. Because FFO calculations exclude such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, the Company believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of the Company'sCompany’s performance relative to the Company'sCompany’s competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than the Company does, making comparisons less meaningful.
The Investment Program Association ("IPA"(“IPA”) issued Practice Guideline 2010-01 (the "IPA“IPA MFFO Guideline"Guideline”) on November 2, 2010, which extended financial measures to include modified funds from operations ("MFFO"(“MFFO”). In computing MFFO, FFO is adjusted for certain non-operating cash items such as acquisition fees and expenses and certain non-cash items such as straight-line rent, amortization of in-place lease valuations, amortization of discounts and premiums on debt investments, nonrecurring impairments of real estate-related investments, mark-to-market adjustments included in net income (loss), and nonrecurring gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Management is responsible for managing interest rate, hedge and foreign exchange risk. To achieve the Company'sCompany’s objectives, the Company may borrow at fixed rates or variable rates. In order to mitigate the Company'sCompany’s interest rate risk on certain financial instruments, if any, the Company may enter into interest rate cap agreements and in order to mitigate the Company'sCompany’s risk to foreign currency exposure, if any, the Company may enter into foreign currency hedges. The Company views fair value adjustments of derivatives, impairment charges and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Additionally, the Company believes it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations, assessments regarding general market conditions, and the specific performance of properties owned, which can change over time.
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No less frequently than annually, the Company evaluates events and changes in circumstances that could indicate that the carrying amounts of real estate and related intangible assets may not be recoverable. When indicators of potential impairment are present, the Company assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) expected from the use of the assets and the eventual disposition. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of MFFO as described above, investors are cautioned that due to the fact thatbecause impairments are based on estimated future undiscounted cash flows and the relatively limited term of
For all of these reasons, the Company believes the non-GAAP measures of FFO and MFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of the Company'sCompany’s real estate portfolio. However, a material limitation associated with FFO and MFFO is that they are not indicative of the Company'sCompany’s cash available to fund distributions since other uses of cash, such as capital expenditures at the Company'sCompany’s properties and principal payments of debt, are not deducted when calculating FFO and MFFO. Additionally, MFFO has limitations as a performance measure in an offering such as the Company'sCompany’s where the price of a share of common stock is a stated value. The use of MFFO as a measure of long-term operating performance on value is also limited if the Company does not continue to operate under the Company'sCompany’s current business plan as noted above. MFFO is useful
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None of the SEC, NAREIT noror any other organization body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate MFFO and its use as a non-GAAP performance measure. In the future, the SEC or NAREIT may decide to standardize the allowable exclusions across the REIT industry, and the Company may have to adjust the calculation and characterization of this non-GAAP measure.
The Company'sCompany’s calculation of FFO and MFFO attributable to common shareholders is presented in the following table for the years ended December 31 2016,, 2020 and for the period from May 4, 2015 (Inception) through December 31, 2015.2019:
For the year ended December 31, 2016 | For the period from May 4, 2015 (Inception) through December 31, 2015 | |||||||
Net loss attributable to MVP REIT II, Inc. common shareholders | $ | (4,268,000 | ) | $ | (126,000 | ) | ||
Add: | ||||||||
Depreciation and amortization of real estate assets | 195,000 | -- | ||||||
Discontinued operations loss | 19,000 | |||||||
FFO | $ | (4,054,000 | ) | $ | (126,000 | ) | ||
Add: | ||||||||
Acquisition fees and expenses to non-affiliates | 2,472,000 | -- | ||||||
Acquisition fees and expenses to affiliates | 1,229,000 | -- | ||||||
MFFO attributable to MVP REIT II, Inc. common shareholders | $ | (353,000 | ) | $ | (126,000 | ) |
For the Years Ended December 31, | ||||
2020 | 2019 | |||
Net loss attributable to The Parking REIT, Inc. common shareholders | $ | (26,474,000) | $ | (45,558,000) |
Add (Subtract): | ||||
Gain on Sale of investment in real estate | (694,000) | (2,509,000) | ||
Provision for impairment of investment in real estate |
| 14,115,000 |
| 1,452,000 |
Depreciation and Amortization of real estate assets | 5,206,000 | 5,172,000 | ||
FFO | $ | (7,847,000) | $ | (41,443,000) |
Add: | ||||
Acquisition fees and expenses | 3,000 | 251,000 | ||
Subtract: |
|
|
|
|
Increase in Deferred Rental Assets |
| (72,000) |
| (31,000) |
MFFO attributable to The Parking REIT, Inc. shareholders | $ | (7,916,000) | $ | (41,223,000) |
Distributions paid to Common Shareholders | $ | -- | $ | -- |
Liquidity and Capital and Liquidity Resources
The Company commenced operations on December 30, 2015.
The Company'sCompany’s principal demand for funds will be/and ishistorically was for the acquisition of real estate assets, funding of loans secured by real estate, the payment of operating expenses, capital expenditures, principal and interest on the Company'sCompany’s outstanding indebtedness and the payment of distributions to the Company'sCompany’s stockholders. Over time, the Company intends to generally fund its operating expenses from its cash flow from operations. The cash required for acquisitions and investments in real estate will behas, to date, been funded primarily from the sale of shares of the Company'sCompany’s common stock and preferred stock, including those shares offered for sale through the Company'sCompany’s distribution reinvestment plan, dispositions of properties in the Company'sCompany’s portfolio and through third party financing and the assumption of debt on acquired properties.
On December 31, 2016, the Company anticipates raising additional funds though private placementsceased all selling efforts for its initial public offering of shares of its preferredcommon stock as well asat $25.00 per share, pursuant to a registration statement on Form S-11 (No. 333-205893). The Company accepted additional subscriptions through additional debt financing. As of March 22,31, 2017, the last day of the initial public offering, and raised approximately $61.3 million in the initial public offering before payment of deferred offering costs of approximately $1.1 million, contribution from an affiliate of the former Advisor of approximately $1.1 million and cash distributions of approximately $1.8 million.
The Company had raised $2,679,000approximately $2.5 million, net of offering costs, in funds from the private placements of Series A Convertible Redeemable Preferred Stock and Warrants.
As disclosed in Note O - Legal in Part II, Item 8 Notes to the Consolidated Financial Statements of this Annual Report, Nasdaq has informed the Company that (i) the Company’s common stock will not be approved for listing currently on the Nasdaq Global Market, and (ii) it is highly unlikely that the Company’s common stock would be approved for listing while the SEC investigation is ongoing. There can be no assurance that the Company’s common stock will ever be approved for listing on the Nasdaq Global Market or any other stock exchange, even if the SEC investigation referred to above is completed and no wrongdoing is found and no action is taken in connection therewith against the Company, Mr. Shustek or any other person. As a result of this Nasdaq decision, the Company has determined not to proceed with the registration and sale of the Company’s common stock as contemplated by the Registration Statement (File No. 333-205893) on Form S-11 filed with the U.S. Securities and Exchange Commission on October 5, 2018 and such Registration Statement was withdrawn on August 29, 2019.
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As of December 31, 2020, the Company’s debt consisted of approximately $120.0 millionin fixed rate debt and $39.5 million in variable rate debt, net of loan issuance costs and the Company’s cash and cash equivalents and restricted cash were approximately $7.9 million ($3.7 million of which was restricted cash). The Company’s unrestricted cash balance was approximately $3.0 million as of the date of filing.
The Company currently has little cash available for acquisitions and no ability to raise new debt or equity financing, and, accordingly, the Company’s only source of near-term liquidity is from operating activities or the sale of assets. In order to enhance liquidity, in mid-2019, the Company’s board of directors engaged financial and legal advisors and began to explore a broad range of potential strategic alternatives to provide liquidity to stockholders. On January 8, 2021, the Company, entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, MVP REIT II Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII” and together with VRMI and Mr. Shustek, the “Advisor”) and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). See the Company’s Form 8-K Current Report filed on January 14, 2021 for additional information. While the Bombe Transaction is expected to provide liquidity, there can be no assurance that the Company will receive the anticipated benefits of the Bombe Transaction or that the Bombe Transaction will be completed on the anticipated timeline or at all.
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the year ended December 31, 2020, the Company had a net loss of $24.1 million and had $7.9 million in cash, cash equivalents and restricted cash. In connection with preparing the consolidated financial statements for the year ended December 31, 2020, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through March 30, 2022.
Management has implemented the following plan to address the Company’s liquidity over the next twelve months plus a day from the filing of this Annual Report:
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If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. If the Company is unable to obtain additional financing, it may be required to significantly scale back its business and operations. The Company’s ability to raise additional capital will also be impacted by the recent outbreak of COVID-19.
Based on this current business plan, the Company believes its existing cash, anticipated cash collections and cash inflows is sufficient to conduct planned operations for one year from the issuance of the December 31, 2020 financial statements.
Sources and Uses of Cash
The following table summarizes our cash flows for the years ended December 31, 2020 and 2019:
For the Years Ended December 31, | ||||
2020 | 2019 | |||
Net cash used in operating activities | $ | (6,415,000) | $ | (1,767,000) |
Net cash provided by investing activities | 1,492,000 | 2,811,000 | ||
Net cash provided by financing activities |
| 1,174,000 |
| 1,165,000 |
Comparison of the year ended December 31, 2020 to the year ended December 31, 2019:
The Company’s cash and cash equivalents and restricted cash were approximately $7.9 million as of December 31, 2020, which was a decrease of approximately $3.7 million from the balance at December 31, 2019.
Cash flows from operating activities
Net cash used in operating activities for the year ended December 31, 2016 totaled2020 was approximately $3.6 million. Operating cash flows were used$6.4 million, compared to approximately $1.8 million for the paymentsame period in 2019. The increase in cash used was primarily due to an increase in accounts receivable and a decrease in net loss adjusted for impairment recorded during the year ended December 31, 2020 compared to net loss adjusted for impairment and internalization expense during the year ended December 31, 2019. These increases were partially offset by a decrease in gain on sale of normal operating expenses. investment and prepaids.
Cash flows from investing activities
Net cash used inprovided by investing activities totaledfor the year ended December 31, 2020 was approximately $59.4$1.5 million, and consistedcompared to approximately $2.8 million for the same period in 2019. The decrease in cash provided by investing activities was due primarily to lower proceeds from the sale of investments in real estate of approximately $53.7 million, investment in equity method investee of approximately $1.1 million, investments in cost method investees of
Cash flows from non-controlling interest of $6.6 million. These deposits were used to fund the Detroit Center Parking Garage in January 2017 and the two St. Louis lots in February 2017. financing activities
Net cash provided by financing activities totaledfor the year ended December 31, 2020 was approximately $65.7$1.2 million and mainly consisted of proceeds from issuance of common stock ofcompared to approximately $54.0 million. In addition, financing activity included proceeds from notes payable of approximately $6.5$1.1 million proceeds from the Company's KeyBank line of credit of approximately $8.2 million and cash distributions of approximately $274,000. Net cash used inprovided by financing activities also included approximately $2.6 million distributed to non-controlling interest related to their portion ofduring the loan proceeds.
Company Indebtedness
The loan with Bank of America for the MVP Detroit garage requires the Company to maintain $2.3 million in our organizationalliquidity at all times, which is defined as unencumbered cash and offering cost on our behalf, which have been accounted for as contributions. Duringcash equivalents. As of the year ended December 31, 2015,date of this filing, the Company did not acquire any assets or earn any income from operations.
The Company’s secured mortgage debt of approximately $52.9 million and $54.1 million as offering proceeds are usedof December 31, 2020 and 2019, respectively, require Mr. Shustek and the former Advisor to acquirecontinue to provide guarantees. In connection with the Contribution Agreement and operate assetsthe Internalization, Mr. Shustek and may experience a temporary, relative increasethe former Advisor will continue to provide such guarantees. For additional information regarding the Company’s indebtedness, please see Note K – Notes Payable in liquidity if and when investments are sold,Part II, Item 8 Notes to the extent such sales generate proceeds that are availableConsolidated Financial Statements of this Annual Report for additional investments. information.
The Advisor may, but is not required to, establish working capital reserves from offering proceeds of cash flow generated by the Company's investments or out of proceeds from the sale of investments. The Company does not anticipate establishing a general working capital reserve during the initial stages of the Offering; however, the Company may establish capital reserves with respect to particular investments. The Company also may, but is not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. The Company'sCompany’s lenders also may require working capital reserves.
To the extent that the working capital reserve is insufficient to satisfy the Company'sCompany’s cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing.borrowing, if such borrowing becomes available in the future. In addition, subject to thecertain exceptions and limitations, previously described in the Company's prospectus, the Company may incur indebtedness in connection with the acquisition of any real estate asset to the extent such indebtedness becomes available to the Company in the future, refinance the debt thereon, arrange for the leveraging of any previously unfinancedunencumbered property or reinvest the proceeds of financing or refinancing in additional properties.
The Company's management is not awareongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributed to significant volatility and negative pressure in financial markets and resulted in unprecedented job losses causing many to fear an imminent global recession. Due to these factors, the Company entered into the following loan modification agreements with its lenders during the year ended December 31, 2020.
On May 12, 2020, the Company entered into a Loan Modification Agreement with Farm Bureau Life Insurance Company for an interest-only period commencing with the payment due June 1, 2020 and continuing through the payment due August 1, 2020. During the Interest-Only Period, the monthly installments due under the Note are modified to provide for payment of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affectingaccrued interest only in the Company's targeted portfolio,amount of $13,384.
On July 9, 2020, the U.S. parking facility industry, which may reasonably be expected to haveCompany entered into a material impact on either capital resources orloan modification agreement (the “Agreement”) with LoanCore Capital Credit REIT, LLC for the revenues or incomes to be derived from the operationfollowing notes payable: (i) MVP Raider Park Garage, LLC, (ii) MVP New Orleans Rampart, LLC, (iii) MVP Hawaii Marks Garage, LLC, (iv) MVP Milwaukee Wells, LLC, (v) MVP Indianapolis City Park, LLC, (vi) MVP Indianapolis WA Street, LLC. The Agreement defers a portion of the Company's assets.
On December 8, 2020, the Company, expectsas guarantor, entered into the Second Amendment to use its capital resourcesLoan Agreement and Loan Documents (the “Second Amendment”) by and among MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Parking Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, MVP Milwaukee Wells LLC (each a “Borrower” and together “Borrowers”) and LLC Warehouse V LLC (the “Lender”), as successor-in-interest to LoanCore Capital Credit REIT LLC (the “ Original Lender”). The Second Amendment amends the Loan Agreement and Loan Documents, dated as of November 30, 2018, as amended by the First Amendment to Loan Agreement and Loan Documents, dated as of July 9, 2020 (the “Loan Agreement”), pursuant to which the Original Lender agreed to make a secured loan to the Borrowers in the original principal amount of $39.5 million (the “Loan”).
Pursuant to the Second Amendment, the Borrowers were granted the option to extend the maturity date of the Loan for two one-year periods upon the satisfaction of certain payments to
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On July 31, 2020, the Company entered into three loan modification agreements (the “Agreements”) with American National Insurance Company (“ANICO”) for the following three loans: (i) Minneapolis City Parking, LLC, (ii) West 9th Properties II, LLC and (iii) MVP Fort Worth Taylor, LLC. The Company has entered into an Escrow Agreement with ANICO in which $950,000 in condemnation proceeds from the City of Minneapolis shall be paidused to
On August 4, 2020, the Company’s wholly owned subsidiary (Mabley Place Garage, LLC) entered into a loan modification agreement with Wells Fargo Bank, National Association, as Trustee for the Benefit of the Company"Registered Holders of JPMBB Commercial Mortgage Securities Trust 2015-C27 (the “Lender”). Under the terms of the agreement, the Lender will permit the Company to apply funds in an amount up to $43,000 per month from a replacement reserve account, to the extent there are sufficient funds available, to pay all or any portion of the monthly debt service payment amount then due for the May, June, July and August 2020 payment dates.
On December 18, 2020, Minneapolis Venture, LLC, a subsidiary of the Company, entered into an Amended and Restated Promissory Note Agreement (the “agreement”) with multiple lenders. The agreement increased the interest rate from 8% to 9%, included inan additional $2 million was funded increasing the note balance to $4 million and the maturity date of the note was extended to December 31, 2021.
On February 8, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into an Amended and Restated Promissory Note E —
advisor and the Company's board of directors.
The following table summarizes all compensation and fees incurred by us and paid or payable to the Company'sformer Advisor and its affiliates in connection with the Company'sCompany’s organizationthe Company's initial public offering and the Company's operations for the yearyears ended December 31, 20162020 and for2019.
For the Year Ended December 31, | ||||
2020 | 2019 | |||
Asset Management Fees | $ | -- | $ | 854,000 |
Total | $ | -- | $ | 854,000 |
The Company ceased payment of asset management fees effective April 1, 2019, as a result of the period from May 4, 2015 (Date of Inception) through December 31, 2015.
For the year ended December 31, 2016 | For the Period from May 4, 2015 (Date of Inception) through December 31, 2015 | |||||||
Acquisition Fees – related party | $ | 1,229,000 | $ | -- | ||||
Asset Management Fees | 197,000 | -- | ||||||
Total | $ | 1,426,000 | $ | -- |
Distributions and Stock Dividends
On March 22, 2018 the Company intends to make regularsuspended the payment of distributions on its common stock. There can be no assurance that cash and stock distributions to itsthe Company’s common stockholders typically on a monthly basis.will be resumed in the future. The actual amount and timing of distributions, if any, will be determined by the Company'sCompany’s board of directors in its discretion and typically will depend on the amount of funds available for distribution, which is impacted by current and projected cash requirements, tax considerations and other factors. As a result, the Company'sCompany’s distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for federal income tax purposes, the Company must make distributions equal to at least 90% of its REIT taxable income each year.
The initial cash distributionCompany is not currently and stock dividend were paid on February 10, 2016 to stockholders of record as of January 24, 2016. The initial cash distributions were paid from offering proceeds rather than funds from operations and therefore may represent a return of capital. There can be no assurance that distributions and dividends will continue to be paid at this rate. The Company's board of directors may at any time change the distribution and dividend rate or suspend payment of distributions and dividends if it determines that such action isnot in the best interest of the Company and its stockholders. The Company expects that its board of directors will continue to authorize, and it will declare, distributions based on a record date on the 24th of each month, and it expects to continue to pay distributions on the 10th day of the following month (or the next business day if the 10th is not a business day), monthly in arrears. The Company has not established a minimum distribution level, and its charter does not require that it make distributions to its stockholders; however, the Company anticipates the payment of monthly distributions. The Company may also make special stock dividends.
Distributions paid in Cash | Distributions paid through DRIP | Total Distributions Paid | Cash Flows Used in Operations (GAAP basis) | |||||||||||||
1st Quarter, 2016 | $ | 10,000 | $ | 14,000 | $ | 24,000 | $ | (134,000 | ) | |||||||
2nd Quarter, 2016 | 47,000 | 67,000 | 114,000 | (435,000 | ) | |||||||||||
3rd Quarter, 2016 | 85,000 | 136,000 | 221,000 | (1,181,000 | ) | |||||||||||
4th Quarter, 2016 | 132,000 | 241,000 | 373,000 | (1,894,000 | ) | |||||||||||
Total 2016 | $ | 274,000 | $ | 458,000 | $ | 732,000 | $ | (3,644,000 | ) |
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Common Stock
From inception through December 31, 2020, the Company had paid approximately $1.8 million in cash, issued 83,437 shares of its common stock as DRIP and Arrangements
The Company’s total distributions paid for the period presented, the sources of such distributions, the cash flows provided by (used in) operations and the number of shares of common stock issued pursuant to the Company’s DRIP are detailed below.
On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
To date, all distributions were paid from offering proceeds and therefore represent a return of capital.
Distributions Paid in Cash | Distributions Paid through DRIP | Total Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||
1st Quarter, 2020 | $ | -- | $ | -- | $ | -- | $ | (793,000) |
2nd Quarter, 2020 | -- | -- | -- | (1,899,000) | ||||
3rd Quarter, 2020 | -- | -- | -- | (2,656,000) | ||||
4th Quarter, 2020 | -- | -- | -- | (1,067,000) | ||||
Total 2020 | $ | -- | $ | -- | $ | -- | $ | (6,415,000) |
Distributions Paid in Cash | Distributions Paid through DRIP | Total Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||
1st Quarter, 2019 | $ | -- | $ | -- | $ | -- | $ | (1,272,000) |
2nd Quarter, 2019 | -- | -- | -- | (942,000) | ||||
3rd Quarter, 2019 | -- | -- | -- | (989,000) | ||||
4th Quarter, 2019 | -- | -- | -- | 1,436,000 | ||||
Total 2019 | $ | -- | $ | -- | $ | -- | $ | (1,767,000) |
Preferred Series A Stock
The Company has entered into agreementsoffered up to $50 million in shares of the Company’s Series A Convertible Redeemable Preferred Stock (“Series A”), par value $0.0001 per share, together with affiliates of its Sponsor, wherebywarrants to acquire the Company’s common stock, in a Regulation D 506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016, the Company will pay certain fees
The offering price was $1,000 per share. In addition, each investor in the Series A received, for every $1,000 in shares subscribed by such investor, 30 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or its affiliatesprior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of December 31, 2020 is immaterial. As of December 31, 2020, there were 84,510 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A, however, such distributions will continue to accrue in connectionaccordance with among other things, acquisitionthe terms of the Series A.
For additional information see Note Q —Preferred Stock and financing activities, asset management services and reimbursement of operating and offering related costs. See Note E —Warrants in Related Party Transactions and Arrangements in in Part II, Item 8 Notes to the Consolidated Financial Statementsof this Annual Report on Form 10-K
From initial issuance through December 31, 2020, the Company purchased 338,409had declared distributions of approximately $775,000 of which approximately $597,000 had been paid to Series A stockholders.
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Total Series A Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||
1st Quarter, 2020 | $ | 54,000 | $ | (793,000) | ||
2nd Quarter, 2020 |
|
| -- |
|
| (1,899,000) |
3rd Quarter, 2020 |
|
| -- |
|
| (2,656,000) |
4th Quarter, 2020 |
|
| -- |
|
| (1,067,000) |
Total 2020 | $ | 54,000 | $ | (6,415,000) |
Total Series A Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||
1st Quarter, 2019 | $ | 54,000 | $ | (1,272,000) | ||
2nd Quarter, 2019 |
|
| 54,000 |
|
| (942,000) |
3rd Quarter, 2019 |
|
| 54,000 |
|
| (989,000) |
4th Quarter, 2019 |
|
| 54,000 |
|
| 1,436,000 |
Total 2019 | $ | 216,000 | $ | (1,767,000) |
Preferred Series 1 Stock
On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of MVP REIT'sits authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock (“Series 1”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1, together with warrants to acquire the Company’s common stock, from an unrelated third party for $3.0to accredited investors. On January 31, 2018, the Company closed this offering. The Company had raised approximately $36.0 million, or $8.865net of offering costs, in the Series 1 private placements and had 39,811 shares of Series 1 issued and outstanding.
The offering price is $1,000 per share. DuringIn addition, each investor in the year endedSeries 1 will receive, for every $1,000 in shares subscribed by such investor, 35 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series 1 offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before January 31, 2023, the five-year anniversary date, these warrants then will expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of December 31, 2106,2020 is immaterial. As of December 31, 2020, there were 1,382,675 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in accordance with the terms of the Series 1.
For additional information see Note Q —Preferred Stock and Warrants inPart II, Item 8 Notes to the Consolidated Financial Statements of this Annual Reportfor a discussion of the various related party transactions, agreements and fees.
From issuance date through December 31, 2020, the Company received,had declared distributions of approximately $34,000 in distributions, related$8.7 million of which approximately $6.4 million had been paid to Series 1 stockholders.
Total Series 1 Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||
1st Quarter, 2020 | $ | 697,000 | $ | (793,000) | ||
2nd Quarter, 2020 |
|
| -- |
|
| (1,899,000) |
3rd Quarter, 2020 |
|
| -- |
|
| (2,656,000) |
4th Quarter, 2020 |
|
| -- |
|
| (1,067,000) |
Total 2020 | $ | 697,000 | $ | (6,415,000) |
Total Series 1 Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||
1st Quarter, 2019 | $ | 697,000 | $ | (1,272,000) | ||
2nd Quarter, 2019 |
|
| 695,000 |
|
| (942,000) |
3rd Quarter, 2019 |
|
| 696,000 |
|
| (989,000) |
4th Quarter, 2019 |
|
| 696,000 |
|
| 1,436,000 |
Total 2019 | $ | 2,784,000 | $ | (1,767,000) |
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Related-Party Transactions and Arrangements
The Company had entered into agreements with affiliates of its Sponsor, whereby the Company paid certain fees or reimbursements to the Company's ownership former Advisor or its affiliates prior to the Internalization. For additional information see Note E —Related Party Transactions and Arrangementsin Part II, Item 8 Notes to the Consolidated Financial Statements of MVP REIT common stock.
Inflation
The Company expects to include provisions in its tenant leases designed to protect the Company from the impact of inflation. These provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. Due to the generally long-term nature of these leases, annual rent increases may not be sufficient to cover inflation and rent may be below market.
Income Taxes
Commencing with the taxable year ended December 31, 2017 through December 31, 2019, and subject to the discussion below relating to the Company’s REIT status from and after January 1, 2020, the Company believes it has been organized and conducts itsconducted operations to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the "Code"). The Company expects to qualify as a REIT commencing with the taxable year ending December 31, 2016.Code. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of its REITsuch taxable income is distributed and provided that certain other requirements are met. The Company'sCompany’s REIT taxable income
As a result of the COVID-19 pandemic, the Company entered into temporary lease amendments with some of its tenants during the year ended December 31, 2020. The income generated under these lease amendments does not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, taxable net income consist primarily of allowances for loan losses or doubtful account, write-downs on real estate held for sale, amortization of deferred financing cost, capital gains and losses, and deferred income.
The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of December 31, 2020.
A full valuation allowance for deferred tax assets was historically provided each year since the Company believed that as a REIT it was more likely than not that it would not realize the benefits of its deferred tax assets. While the Company may pursue statutory or administrative relief, or changes to its operations, to retain its status as a REIT, the Company has evaluated its deferred tax assets (primarily net operating losses and tax basis in goodwill that was taken as an expense on the Company’s books) both in the context of retaining its status as a REIT and as a taxable C corporation. The Company had a §382 study performed to determine limitations on the potential utilization of pre-2020 net operating losses and concluded that it does not expect significant limitations on its ability to utilize such losses in the future as a C corporation. However, given the Company’s history of taxable losses and its current taxable losses, and due to the ongoing impact to the Company of the COVID-19 pandemic to the Company, the Company has determined that it will continue to record a full valuation allowance against its deferred tax assets for the year ended December 31, 2020. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur.
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REIT Status
The Company elected to be treated as a REIT for federal income tax purposes for the year ended December 31, 2017 and continued to operate in a manner to qualify as a REIT for federal income tax purposes for the years ended December 31, 2018 and 2019. In order to qualify as a REIT, there are a number of requirements that the Company must satisfy as set forth in sections 856 to 860 of the Code. As a result of the COVID-19 pandemic, the Company entered into temporary lease amendments with some of its tenants during the year ended December 31, 2020. The income generated under these lease amendments did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with its annual REIT income tests for the year ended December 31, 2020. Accordingly, the Company did not qualify as a REIT in 2020 and will be taxed as a C corporation for the year ended December 31, 2020 and for at least its next four taxable year,years.
As a C corporation, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on theits taxable income at regular corporate rates.
Off-Balance Sheet Arrangements
Series A Preferred Stock
Each investor in the Series A received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company had no off-balance sheet arrangementsengaged a third-party expert to value these warrants and the estimated value as of December 31, 2016.
On March 24, 2020, the operations related to properties that have been sold or properties that are intended to be sold, as discontinued operations inCompany’s board of directors unanimously authorized the statementsuspension of operations for all periods presented. Properties that are intended to be sold are to be designated as "held for sale"the payment of distributions on the balance sheet.
On March 24, 2020, the National Parking Association, ("NPA"), released their annual Parking Demand Report, which highlighted long-term demand and potential trendsBoard of Directors suspended all repurchases, even in the parking industry. Accordingcase of a shareholder’s death.
For additional information see “— Liquidity and Capital Resources” and “—Preferred Series A Stock” above and Note Q —Preferred Stock and Warrants in Part II, Item 8 Notes to the NPA's website http://weareparking.org someConsolidated Financial Statements of this Annual Report for additional information.
Series 1 Preferred Stock
Each investor in the Series 1 received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the key finds include:
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On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in tandemaccordance with the terms of the Series 1.
On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
For additional information see “— Liquidity and Capital Resources” and “—Preferred Series A Stock” above and Note Q —Preferred Stock and Warrants in Part II, Item 8 Notes to affect demand and usage. When looking at macroeconomic, demographic, employment, and industry statistics, NPA see a picture the Consolidated Financial Statements of patterns that influence parking demand in North America:
this Annual Report for additional information.
|
The Company'sCompany’s accounting policies have been established to conformin conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management'smanagement’s judgment or interpretation of the facts and circumstances relating to various transactions is different, it is possible that different accounting policies will be applied, or different amounts of assets, liabilities, revenues and expenses will be recorded, resulting in a different presentation of the financial statements or different amounts reported in the financial statements.
Additionally, other companies may utilize different estimates that may impact comparability of the Company'sCompany’s results of operations to those of companies in similar businesses. Below is a discussion of the accounting policies that management considers to be most critical once the Company commences significant operations. These policies require complex judgment in their application or estimates about matters that are inherently uncertain.
Real Estate Investments
Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.
The Company areis required to make subjective assessments as to the useful lives of the Company'sCompany’s properties for purposes of determining the amount of depreciation to record on an annual basis with respect to the Company'sCompany’s investments in real estate. These assessments have a direct impact on the Company'sCompany’s net income because if the Company were to shorten the expected useful lives of the Company'sCompany’s investments in real estate, the Company would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.
The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on the Company'sCompany’s analysis of comparable properties in the Company'sCompany’s portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable.
The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by the Company in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into accountconsidering current market conditions and costs to execute similar leases. In estimating carrying costs, the Company will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized. Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management'smanagement’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant'stenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
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The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on
theThe value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event, does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, the Company will utilize a number ofseveral sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Deferred Costs
Deferred costs may consist of deferred financing costs, deferred offering costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These costs are amortized over the terms of the respective financing agreements using the effective interest
The following is a summary of the Company's gross contractual obligations as of December 31, 2016:
Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Long-term debt obligations | $ | 5,393,000 | $ | 231,000 | $ | 253,000 | $ | 277,000 | $ | 4,632,000 | ||||||||||
Capital and Operating Lease Obligations | -- | -- | -- | -- | -- | |||||||||||||||
Line of credit: | -- | -- | -- | -- | -- | |||||||||||||||
Interest | -- | -- | -- | -- | -- | |||||||||||||||
Principle | 8,190,000 | 8,190,000 | -- | -- | -- | |||||||||||||||
Purchase Obligations | -- | -- | -- | -- | -- | |||||||||||||||
Total | $ | 13,583,000 | $ | 8,421,000 | $ | 253,000 | $ | 277,000 | $ | 4,632,000 |
See Note T —Subsequent Events in Part II, Item 8 Notes to the Company and MVP REIT, through MVP Detroit Center Garage, LLC ("MVP Detroit Center"), an entity owned by the Company and MVP REIT, acquired a multi-level parking garage consisting Consolidated Financial Statements of approximately 1,275 parking spaces, located in Detroit, Michigan,this Annual Report for a purchase price of $55.0 million, plus acquisition and financing-related transaction costs. The Company owns a 80% equity interest in the MVP Detroit Center and MVP REIT owns an 20% equity interest. The parking garage will be operated by SP Plus Corporation ("SP+") under a long-term lease, where SP will be responsible for the first $572,000 in property taxes, pay annual base rent of $3.4 million, and 80% of all gross revenue above $5.0 million. As partdiscussion of the acquisition MVP Detroit Center entered into a $31.5 million loan agreement with Bank of America, N.A., with a term of 10 years, amortized over 25 years, with monthly principal and interest payments totaling approximately $194,000, bearing an annual interest rate of 5.52%, secured by the parking garage, and maturing in February 2027. In connection with this purchase the company paid a broker commission totaling 2% of the purchase price.
Item not required for a smaller reporting company.
INDEX TO FINANCIAL STATEMENTS
Page | |
FINANCIAL STATEMENTS | |
To the Board of Directors and StockholdersShareholders of
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MVPThe Parking REIT, II, Inc. and subsidiariesSubsidiaries (the "Company"“Company”) as of December 31, 20162020 and 2015, and2019, the related consolidated statements of operations, changes in equity, and cash flows for each of the yeartwo years in the period ended December 31, 20162020, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period from May 4, 2015 (date of inception) throughended December 31, 2015. Our audits also included2020, in conformity with accounting principles generally accepted in the consolidatedUnited States of America.
Basis for Opinion
These financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. OurAs part of our audits, included considerationwe are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MVP REIT II, Inc. and subsidiaries as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for the year ended December 31, 2016 and for the period from May 4, 2015 (date of inception) through December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
New York, New York
March 24, 2017
THE PARKING REIT, II, Inc.
December 31, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Cash | $ | 4,885,000 | $ | 2,268,000 | ||||
Cash - restricted | 100,000 | -- | ||||||
Prepaid expenses | 283,000 | 180,000 | ||||||
Accounts receivable | 208,000 | -- | ||||||
Investments in MVP REIT, Inc. | 3,034,000 | |||||||
Land and improvements | 28,854,000 | -- | ||||||
Buildings and improvements | 24,889,000 | -- | ||||||
Investments in real estate and fixed assets | 53,743,000 | -- | ||||||
Accumulated depreciation | (195,000 | ) | -- | |||||
Total investments in real estate and fixed assets, net | 53,548,000 | -- | ||||||
Other assets | 4,575,000 | -- | ||||||
Assets held for sale | 700,000 | |||||||
Investment in equity method investee | 1,150,000 | -- | ||||||
Investments in cost method investee – held for sale | 836,000 | -- | ||||||
Investments in cost method investee | 936,000 | -- | ||||||
Total assets | $ | 70,255,000 | $ | 2,448,000 | ||||
LIABILITIES AND EQUITY | ||||||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 485,000 | $ | 6,000 | ||||
Security Deposit | 2,000 | -- | ||||||
Due to related parties | 575,000 | 32,000 | ||||||
Line of credit, net of unamortized loan issuance costs of approximately $0.2 million | 7,957,000 | -- | ||||||
Deferred revenue | 45,000 | -- | ||||||
Notes payable, net of unamortized loan issuance costs of approximately $0.1 million | 5,318,000 | 106,000 | ||||||
Total liabilities | 14,382,000 | 144,000 | ||||||
Commitments and contingencies | -- | -- | ||||||
Equity | ||||||||
MVP REIT II, Inc. Stockholders' Equity | ||||||||
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, none outstanding | -- | -- | ||||||
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, none outstanding | ||||||||
Non-voting, non-participating convertible stock, $0.0001 par value, no shares issued and outstanding | -- | -- | ||||||
Common stock, $0.0001 par value, 98,999,000 shares authorized, 2,301,828 and 94,749 shares issued and outstanding as of December 31, 2016 and 2015, respectively | -- | -- | ||||||
Additional paid-in capital | 56,143,000 | 2,430,000 | ||||||
Accumulated deficit | (4,394,000 | ) | (126,000 | ) | ||||
Total MVP REIT II, Inc. Shareholders' Equity | 51,749,000 | 2,304,000 | ||||||
Non-controlling interest – related party | 4,124,000 | -- | ||||||
Total equity | 55,873,000 | 2,304,000 | ||||||
Total liabilities and equity | $ | 70,255,000 | $ | 2,448,000 | ||||
As of December 31, | ||||
2020 | 2019 | |||
ASSETS | ||||
Investments in real estate | ||||
Land and improvements | $ | 128,284,000 | $ | 136,607,000 |
Buildings and improvements | 163,792,000 | 170,276,000 | ||
Construction in progress | 1,320,000 | 714,000 | ||
Intangible assets | 2,107,000 | 2,288,000 | ||
295,503,000 | 309,885,000 | |||
Accumulated depreciation | (17,039,000) | (12,049,000) | ||
Total investments in real estate, net | 278,464,000 | 297,836,000 | ||
Fixed Assets, net of accumulated depreciation of $78,000 and $42,000 as of December 31, 2020 and 2019, respectively | 63,000 | 21,000 | ||
Assets held for sale, net of accumulated depreciation of $212,000 | -- | 3,288,000 | ||
Cash | 4,235,000 | 7,707,000 | ||
Cash – restricted | 3,660,000 | 3,937,000 | ||
Prepaid expenses | 1,909,000 | 1,679,000 | ||
Accounts receivable, net allowance of doubtful accounts of $0.7 million as of December 31, 2020, no allowance for December 31, 2019 | 1,114,000 | 929,000 | ||
Investment in DST | 2,821,000 | 2,836,000 | ||
Due from related parties | 1,000 | -- | ||
Other assets | 183,000 | 111,000 | ||
Right of use leased asset | 1,282,000 | -- | ||
Total assets | $ | 293,732,000 | $ | 318,344,000 |
LIABILITIES AND EQUITY | ||||
Liabilities | ||||
Notes payable, net of unamortized loan issuance costs of approximately $1.2 million and $1.8 million as of December 31, 2020 and 2019, respectively | $ | 158,996,000 | $ | 159,120,000 |
Paycheck protection program loan | 348,000 | -- | ||
Accounts payable and accrued liabilities | 11,967,000 | 10,883,000 | ||
Accounts payable and accrued liabilities – related party | -- | -- | ||
Right of use lease liability | 1,282,000 | -- | ||
Deferred management internalization | 10,040,000 | 17,800,000 | ||
Security deposits | 141,000 | 138,000 | ||
Due to related parties | -- | 54,000 | ||
Deferred revenue | 140,000 | 104,000 | ||
Total liabilities | 182,914,000 | 188,099,000 | ||
Commitments and contingencies | -- | -- | ||
Equity | ||||
The Parking REIT, Inc. Stockholders’ Equity | ||||
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of December 31, 2020 and 2019) | -- | -- | ||
Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of December 31, 2020 and 2019) | -- | -- | ||
Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, no shares issued and outstanding | -- | -- | ||
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,727,696 and 7,332,811 shares issued and outstanding as of December 31, 2020 and 2019, respectively | -- | -- | ||
Additional paid-in capital | 198,769,000 | 194,137,000 | ||
Accumulated deficit | (89,985,000) | (66,511,000) | ||
Total The Parking REIT, Inc. Shareholders’ Equity | 108,784,000 | 127,626,000 | ||
Non-controlling interest | 2,034,000 | 2,619,000 | ||
Total equity | 110,818,000 | 130,245,000 | ||
Total liabilities and equity | $ | 293,732,000 | $ | 318,344,000 |
The accompanying notes are an integral part of these consolidated financial statements.
For the Year Ended December 31, 2016 | For the period from May 4, 2015 (Date of Inception) through December 31, 2015 | |||||||
Revenues | ||||||||
Rental revenue | $ | 1,602,000 | $ | -- | ||||
Total revenues | 1,602,000 | -- | ||||||
Operating expenses | ||||||||
General and administrative | 1,049,000 | 119,000 | ||||||
Acquisition expenses | 2,472,000 | -- | ||||||
Acquisition expenses – related party | 1,229,000 | -- | ||||||
Operation and maintenance | 460,000 | -- | ||||||
Operation and maintenance – related party | 197,000 | -- | ||||||
Seminar | 16,000 | -- | ||||||
Organizational costs | -- | 6,000 | ||||||
Depreciation and amortization | 195,000 | -- | ||||||
Total operating expenses | 5,618,000 | 125,000 | ||||||
Loss from operations | (4,016,000 | ) | (125,000 | ) | ||||
Other income (expense) | ||||||||
Interest expense | (154,000 | ) | (1,000 | ) | ||||
Distribution income – related party | 34,000 | -- | ||||||
Income from investment in equity method investee | 3,000 | -- | ||||||
Total other expense | (117,000 | ) | (1,000 | ) | ||||
Loss from continuing operations | (4,133,000 | ) | (126,000 | ) | ||||
Discontinued operations, net of income taxes | ||||||||
Loss from assets held for sale, net of income taxes | (19,000 | ) | -- | |||||
Total loss from discontinued operations | (19,000 | ) | -- | |||||
Provision for income taxes | -- | -- | ||||||
Net loss | (4,152,000 | ) | (126,000 | ) | ||||
Net income attributable to non-controlling interest – related party | 116,000 | -- | ||||||
Net loss attributable to MVP REIT II, Inc.'s common stockholders | $ | (4,268,000 | ) | $ | (126,000 | ) | ||
Basic and diluted loss per weighted average common share: | ||||||||
Loss from continuing operations attributable to MVP REIT II, Inc.'s common stockholders – basic and diluted | $ | (3.85 | ) | $ | (15.01 | ) | ||
Loss from discontinued operations – basic and diluted | $ | (0.02 | ) | $ | -- | |||
Net loss attributable to MVP REIT II, Inc.'s common stockholders - basic and diluted | $ | (3.87 | ) | $ | (15.01 | ) | ||
Distributions declared per common share | $ | 0.66 | $ | -- | ||||
Weighted average common shares outstanding, basic and diluted | 1,102,459 | 8,396 |
For the Years Ended December 31, | ||||
2020 | 2019 | |||
Revenues | ||||
Base rent income | $ | 14,034,000 | $ | 20,151,000 |
Percentage rent income | 448,000 | 2,643,000 | ||
Management income | 827,000 | -- | ||
Total revenues | 15,309,000 | 22,794,000 | ||
Operating expenses | ||||
Property taxes | 3,514,000 | 3,023,000 | ||
Property operating expense | 1,496,000 | 1,701,000 | ||
Asset management fee – related party | -- | 854,000 | ||
General and administrative | 6,029,000 | 5,601,000 | ||
Professional fees, net of reimbursement of insurance proceeds | 970,000 | 8,528,000 | ||
Management internalization | -- | 32,004,000 | ||
Acquisition expenses | 3,000 | 251,000 | ||
Provision for impairment of investments in real estate | 14,115,000 | 1,452,000 | ||
Depreciation and amortization | 5,206,000 | 5,172,000 | ||
Total operating expenses | 31,333,000 | 58,586,000 | ||
Loss from operations | (16,024,000) | (35,792,000) | ||
Other income (expense) | ||||
Interest expense | (9,274,000) | (9,513,000) | ||
Gain on sale of investments in real estate | 694,000 | 2,509,000 | ||
Other Income | 151,000 | 82,000 | ||
Settlement income | 370,000 | -- | ||
Income from DST | 34,000 | 218,000 | ||
Total other expense | (8,025,000) | (6,704,000) | ||
Net loss | (24,049,000) | (42,496,000) | ||
Net income (loss) attributable to non-controlling interest | (575,000) | 62,000 | ||
Net loss attributable to The Parking REIT, Inc.’s stockholders | $ | (23,474,000) | $ | (42,558,000) |
Preferred stock distributions declared - Series A | (216,000) | (216,000) | ||
Preferred stock distributions declared - Series 1 | (2,784,000) | (2,784,000) | ||
Net loss attributable to The Parking REIT, Inc.’s common stockholders | (26,474,000) | (45,558,000) | ||
Basic and diluted loss per weighted average common share: | ||||
Net loss per share attributable to The Parking REIT, Inc.’s common stockholders - basic and diluted | $ | (3.62) | $ | (6.66) |
Distributions declared per common share | $ | -- | $ | -- |
Weighted average common shares outstanding, basic and diluted | 7,329,045 | 6,836,693 |
The accompanying notes are an integral part of these consolidated financial statements.
Preferred stock | Common stock | |||||||||||||||
Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Non-controlling interest | Total | |||||||||
Balance, December 31, 2018 | 42,673 | $ | -- | 6,542,797 | $ | -- | $ | 183,382,000 | $ | (23,953,000) | $ | 2,691,000 | $ | 162,120,000 | ||
Distributions to non-controlling interest | -- | -- | -- | -- | -- | -- | (134,000) | (134,000) | ||||||||
Issuance of common stock | -- | -- | 800,000 | -- | 14,000,000 | -- | -- | 14,000,000 | ||||||||
Redeemed Shares | -- | -- | (9,986) | -- | (245,000) | -- | -- | (245,000) | ||||||||
Distributions – Series A | -- | -- | -- | -- | (216,000) | -- | -- | (216,000) | ||||||||
Distributions – Series 1 | -- | -- | -- | -- | (2,784,000) | -- | -- | (2,784,000) | ||||||||
Net income (loss) | -- | -- | -- | -- | -- | (42,558,000) | 62,000 | (42,496,000) | ||||||||
Balance, December 31, 2019 | 42,673 | $ | -- | 7,332,811 | $ | -- | $ | 194,137,000 | $ | (66,511,000) | $ | 2,619,000 | $ | 130,245,000 | ||
Distributions to non-controlling interest | -- | -- | -- | -- | -- | -- | (10,000) | (10,000) | ||||||||
Issuance of common stock | -- | -- | 400,000 | -- | 7,760,000 | -- | -- | 7,760,000 | ||||||||
Redeemed Shares | -- | -- | (5,115) | -- | (128,000) | -- | -- | (128,000) | ||||||||
Distributions – Series A | -- | -- | -- | -- | (216,000) | -- | -- | (216,000) | ||||||||
Distributions – Series 1 | -- | -- | -- | -- | (2,784,000) | -- | -- | (2,784,000) | ||||||||
Net loss | -- | -- | -- | -- | -- | (23,474,000) | (575,000) | (24,049,000) | ||||||||
Balance, December 31, 2020 | 42,673 | $ | -- | 7,727,696 | $ | -- | $ | 198,769,000 | $ | (89,985,000) | $ | 2,034,000 | $ | 110,818,000 |
The accompanying notes are an integral part of Inception) Through December 31, 2016
Common stock | ||||||||||||||||||||||||
Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Non-controlling interest | Total | |||||||||||||||||||
Balance, May 4, 2015 | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | |||||||||||||
Issuance of common stock – purchase | 94,749 | 2,369,000 | 2,369,000 | |||||||||||||||||||||
Deferred offering costs | (1,086,000 | ) | (1,086,000 | ) | ||||||||||||||||||||
Contributions from the Sponsor (unreimbursed expenditures) | 1,147,000 | 1,147,000 | ||||||||||||||||||||||
Net loss | (126,000 | ) | (126,000 | ) | ||||||||||||||||||||
Balance, December 31, 2015 | 94,749 | -- | 2,430,000 | (126,000 | ) | -- | 2,304,000 | |||||||||||||||||
Issuance of common stock – Purchase | 2,159,504 | -- | 53,987,000 | -- | -- | 53,987,000 | ||||||||||||||||||
Issuance of common stock – DRIP | 18,311 | -- | 458,000 | -- | -- | 458,000 | ||||||||||||||||||
Issuance of common stock – Dividend | 29,264 | -- | -- | -- | -- | -- | ||||||||||||||||||
Investment from non-controlling interest | -- | -- | -- | -- | 6,584,000 | 6,584,000 | ||||||||||||||||||
Distributions to non-controlling interest | -- | -- | -- | -- | (2,576,000 | ) | (2,576,000 | ) | ||||||||||||||||
Distributions to stockholders | -- | -- | (732,000 | ) | -- | -- | (732,000 | ) | ||||||||||||||||
Net (loss) income | -- | -- | -- | (4,268,000 | ) | 116,000 | (4,152,000 | ) | ||||||||||||||||
Balance, December 31, 2016 | 2,301,828 | $ | -- | $ | 56,143,000 | $ | (4,394,000 | ) | $ | 4,124,000 | $ | 55,873,000 |
THE PARKING REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31 | ||||
2020 | 2019 | |||
Cash flows from operating activities: | ||||
Net Loss | $ | (24,049,000) | $ | (42,496,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Depreciation and amortization expense | 5,206,000 | 5,172,000 | ||
Gain from acquisition of real estate | (694,000) | (2,509,000) | ||
Management internalization | -- | 31,800,000 | ||
Income from DST | (33,000) | (218,000) | ||
Amortization of right of use lease assets | 111,000 | -- | ||
Impairment on real estate | 14,115,000 | 1,452,000 | ||
Amortization of loan costs | 768,000 | 902,000 | ||
Changes in operating assets and liabilities | ||||
Due to/from related parties | (55,000) | 57,000 | ||
Accounts payable | (1,119,000) | 6,286,000 | ||
Accounts payable – related party | -- | (653,000) | ||
Loan Fees | (106,000) | (287,000) | ||
Lease liability | (111,000) | -- | ||
Deferred revenue | 36,000 | 40,000 | ||
Other assets | (72,000) | (32,000) | ||
Security deposits | 3,000 | (1,000) | ||
Accounts receivable | (185,000) | (217,000) | ||
Prepaid expenses | (230,000) | (1,063,000) | ||
Net cash used in operating activities | (6,415,000) | (1,767,000) | ||
Cash flows from investing activities: | ||||
Building and land improvements | (1,214,000) | (1,696,000) | ||
Fixed Asset Purchase | (78,000) | (41,000) | ||
Distributions from Investments | 48,000 | 203,000 | ||
Proceeds from sale of investments in real estate | 2,736,000 | 4,345,000 | ||
Payment of deposit for purchase of investment in real estate or debt | -- | (97,000) | ||
Deposits applied to purchase of investment in real estate or debt | -- | 97,000 | ||
Net cash provided by investing activities | 1,492,000 | 2,811,000 | ||
Cash flows from financing activities | ||||
Proceeds from notes payable | 5,545,000 | 11,181,000 | ||
Payments on notes payable | (3,483,000) | (6,637,000) | ||
Distribution to non-controlling interest | (10,000) | (118,000) | ||
Redeemed shares | (128,000) | (245,000) | ||
Dividends paid to stockholders | (750,000) | (3,016,000) | ||
Net cash provided by financing activities | 1,174,000 | 1,165,000 | ||
Net change in cash, cash equivalents and restricted cash | (3,749,000) | 2,209,000 | ||
Cash, cash equivalents and restricted cash, beginning of period | 11,644,000 | 9,435,000 | ||
Cash, cash equivalents and restricted cash, end of period | $ | 7,895,000 | $ | 11,644,000 |
The accompanying notes are an integral part of these consolidated financial statements.
For the Year Ended December 31, 2016 | For the period from May 4, 2015 (Inception) through December 31, 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net Loss | $ | (4,152,000 | ) | $ | (126,000 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: Income from investment in equity method investee | (3,000 | ) | -- | |||||
Distribution from MVP REIT | (34,000 | ) | -- | |||||
Amortization | 40,000 | -- | ||||||
Depreciation expense | 195,000 | -- | ||||||
Contribution from Sponsor for unreimbursed organizational expenses | -- | 61,000 | ||||||
Changes in operating assets and liabilities | ||||||||
Cash - Restricted | (100,000 | ) | -- | |||||
Due to related parties | 543,000 | 32,000 | ||||||
Accounts payable | 479,000 | 6,000 | ||||||
Loan fees | (348,000 | ) | -- | |||||
Security deposits | 2,000 | -- | ||||||
Deferred revenue | 45,000 | -- | ||||||
Accounts receivable | (208,000 | ) | -- | |||||
Prepaid expenses | (103,000 | ) | (180,000 | ) | ||||
Net cash used in operating activities | (3,644,000 | ) | (207,000 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of investment in real estate | (53,743,000 | ) | -- | |||||
Investment in assets held for sale | (700,000 | ) | -- | |||||
Investment in cost method investee – held for sale | (836,000 | ) | -- | |||||
Investment in cost method investee | (1,994,000 | ) | -- | |||||
Investment in equity method investee | (1,160,000 | ) | -- | |||||
Investment in MVP REIT, Inc. | (3,000,000 | ) | -- | |||||
Proceeds from non-controlling interest | 6,584,000 | -- | ||||||
Payment of deposits on future acquisitions | (4,575,000 | ) | -- | |||||
Net cash used in investing activities | (59,424,000 | ) | -- | |||||
Cash flows from financing activities | ||||||||
Proceeds from note payable – investment in equity method investee | 6,498,000 | 151,000 | ||||||
Payments on note payable | (153,000 | ) | (45,000 | ) | ||||
Proceeds from of line of credit | 8,190,000 | -- | ||||||
Distribution to non-controlling interest | (2,576,000 | ) | -- | |||||
Distribution received from investment in equity method investee | 13,000 | -- | ||||||
Proceeds from issuance of common stock - Sponsor | -- | 200,000 | ||||||
Proceeds from issuance of common stock | 53,987,000 | 2,169,000 | ||||||
Distribution made to common stockholders | (274,000 | ) | -- | |||||
Net cash provided by financing activities | 65,685,000 | 2,475,000 | ||||||
Net change in cash | 2,617,000 | 2,268,000 | ||||||
Cash, beginning of period | 2,268,000 | -- | ||||||
Cash, end of period | $ | 4,885,000 | $ | 2,268,000 | ||||
Supplemental disclosures of cash flow information: | -- | |||||||
Interest Paid | $ | 154,000 | $ | -- | ||||
Non-cash investing and financing activities: | ||||||||
Distributions - DRIP | $ | (458,000 | ) | $ | -- | |||
Contribution from Sponsor for unreimbursed deferred offering expenses | $ | -- | $ | 1,147,000 |
(Continued)
For the Years Ended December 31, | ||||
2020 | 2019 | |||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||
Cash, cash equivalents at beginning of period | $ | 7,707,000 | $ | 5,106,000 |
Restricted cash at beginning of period | 3,937,000 | 4,329,000 | ||
Cash, cash equivalents and restricted at beginning of period | $ | 11,644,000 | $ | 9,435,000 |
Cash and cash equivalents at end of period | $ | 4,235,000 | 7,707,000 | |
Restricted cash at end of period | 3,660,000 | 3,937,000 | ||
Cash, cash equivalents and restricted at end of period | $ | 7,895,000 | 11,644,000 | |
Supplemental disclosures of cash flow information: | ||||
Interest Paid | $ | 8,506,000 | $ | 8,611,000 |
Non-cash investing and financing activities: | ||||
Dividends declared not yet paid | $ | 2,501,000 | $ | 250,000 |
Payment of deposit for purchase of investment in real estate or debt | $ | -- | $ | (97,000) |
Deposits applied to purchase of investment in real estate or debt | $ | -- | $ | 97,000 |
Issuance of common stock – internalization | $ | 7,760,000 | $ | 14,000,000 |
Deferred management internalization | $ | (7,760,000) | $ | 24,800,000 |
Payments on note payable through sale of investment in real estate | $ | (2,500,000) | $ | (2,000,000) |
Recognition of use lease asset / liability | $ | 1,393,000 | $ | -- |
The accompanying notes are an integral part of these consolidated financial statements.
THE PARKING REIT, II, Inc.
DECEMBER 31, 2016
Note A — Organization and Proposed Business Operations
The Parking REIT, Inc., formerly known as MVP REIT II, Inc. (the "Company," "we," "us,"(the “Company,” “we,” “us” or "our"“our”), is a Maryland corporation formed on May 4, 2015 and intendshas elected to be taxed, and subject to the discussion below under the heading Income Taxes in Note B, has operated in a manner that allowed the Company to qualify as a real estate investment trust ("REIT"(“REIT”) for U.S. federal income tax purposes beginning with the taxable year endingended December 31, 2016. As of2017 through December 31, 2016,2019. As a result of the COVID-19 pandemic, the Company ceased all selling effortsentered into temporary lease amendments with some of its tenants during the year ended December 31, 2020. The income generated under these lease amendments did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the initial public offering (the "Offering")year ended December 31, 2020. Accordingly, the Company did not qualify as a REIT in 2020 and will be taxed as a C corporation for the year ended December 31, 2020 and for at least its next four taxable years.
As a C corporation, the Company will be subject to federal income tax on its taxable income at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which it no longer qualified as a REIT. [Failing to qualify as a REIT could materially and adversely affect the Company’s net income.] In addition, distributions to its stockholders will not be deductible by the Company. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C Corp, the Company is not required to distribute any amounts to its stockholders and all distributions to stockholders would be taxable as regular corporate dividends to the extent of its common stock, $0.0001 par value per share, at $25.00 per share, pursuantcurrent and accumulated earnings and profits. In such event, corporate stockholders may be eligible for the dividends-received deduction. In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income. Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a registration statement on Form S-11 filed with the U.S. SecuritiesREIT, other than capital gain dividends and Exchange Commission (the "SEC") under the Securities Act of 1933,dividends treated as amended. As ofqualified dividend income, for taxable years beginning after December 31, 2016,2017 and before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for purposes of the Company raised approximately $56.4 million in the Offering before payment of deferred offering costs of approximately $1.1 million, contribution from the Sponsor of approximately $1.1 million and cash distributions of approximately $274,000. The Company has also registered $50 million in shares of common stock for issuance pursuant3.8% Medicare tax), subject to a distribution reinvestment plan (the "DRIP") under which common stock holders may elect to have their distributions reinvested in additional shares of common stock at $25.00 per share.
The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. No more than 10% of the proceeds of this offering will be used for investment in Canadian properties. To a lesser extent, the Company may also invest in parking properties that contain other than parking facilities.
The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the "Operating Partnership"“Operating Partnership”). The Company plans to ownowns substantially all of its assets and conductconducts substantially all of its operations through the Operating Partnership. The Company'sCompany’s wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partner of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated in a manner that enables the Company to (1) satisfy the requirements for being classifiedto qualify and maintain qualification as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership is not classified as a "publicly“publicly traded partnership"partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”), which classification could result in the Operating Partnership being taxed as a corporation.
We utilizeThe Company utilizes an Umbrella Partnership Real Estate Investment Trust ("UPREIT"(“UPREIT”) structure to enable usthe Company to acquire real property in exchange for limited partnership interests in the Company'sOperating Partnership from owners who desire to defer taxable gain that would otherwise normally be recognized by them upon the disposition of their real property or transfer of their real property to usthe Company in exchange for shares of the Company'sCompany’s common stock or cash.
The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc., a Maryland corporation and Nasdaq-listed company that has provided notice of its intent to delist from Nasdaq, to be effective on or about March 30, 2017 ("VRM II"), and 40% by Vestin Realty Mortgage I, Inc., a Maryland corporation and OTC pink sheet company ("VRM I"), both which are managed by Vestin Mortgage, LLC, a Nevada limited liability company in which Michael Shustek owns a significant majority. The Company also sold 5,000 shares of common stock to VRM II in the Offering.
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As part of the Company’s initial capitalization, 8,000 shares of common stock were sold for $200,000 to an affiliate of the former Advisor (as defined below).
Merger of MVP REIT with Merger Sub, LLC
On May 26, 2017, the Company, MVP REIT, Inc., a Maryland corporation (“MVP I”), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the former Advisor entered into an agreement and plan of merger (the “Merger Agreement”), pursuant to which MVP I would merge with and into Merger Sub (the “Merger”).
On December 15, 2017, the Merger was consummated. Following the Merger, the Company contributed 100% of its equity interests in Merger Sub to the Operating Partnership.At the effective time of the Merger, each share of MVP I common stock, par value $0.001 per share, that was issued and outstanding immediately prior to the Merger (the “MVP I Common Stock”), was converted into the right to receive 0.365 shares of Company common stock. A total of approximately 3.9 million shares of Company common stock were issued to former MVP I stockholders, and former MVP I stockholders, immediately following the Merger, owned approximately 59.7% of the Company's common stock. The Company has no paid employees.
Capitalization
As of December 31, 2020, the Company had 7,727,696 shares of common stock issued and outstanding. On December 31, 2016, the Company has paid approximately $732,000 in distributions, including issuing 18,311 sharesceased all selling efforts for the initial public offering of its common stock as DRIP and issuing 29,264 shares of its common stock as dividend in distributions to the Company's stockholders, all of which have been paid from offering proceeds and constituted a return of capital. (the “Common Stock Offering”). The Company may pay distributions from sources other than cash flow from operations, including proceeds fromaccepted additional subscriptions through March 31, 2017, the Offering and other stock sales,last day of the sale of assets, or borrowings. The Company has no limits on the amounts it may pay from such sources. If the Company continues to pay distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted.
On October 27, 2016, the Company filed a Form 8-K, summarizing the terms of its new Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share (the "Series A Convertible Redeemable Preferred Stock"), The Company also disclosed its intentions to offer up to $50 million in shares of the Series A Convertible Redeemable Preferred Stock, together with warrants (the "Warrants") to acquire the Company's common stock, in a Regulation D 506(c) private placement to accredited investors (the "private placement"). In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary (the "Articles Supplementary") to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock.Stock, par value $0.0001 per share (the “Series A”). The Company commenced thea private placement of the shares of Series A, Convertible Redeemable Preferred Stock andtogether with warrants to acquire the WarrantsCompany’s common stock, to accredited investors on November 1, 2016 and terminatedclosed the offering as ofon March 23,24, 2017. The Company raised an aggregate of $2,434,000 in proceeds,approximately $2.5 million, net of offering expenses,costs, in the Series A private placement.
On October 27, 2016,March 29, 2017, the Company filed a Form 8-K announcing, among other things, an amendmentwith the State Department of Assessments and Taxation of Maryland, Articles Supplementary to the SRP providing for participation in the SRP by any holdercharter of the Company'sCompany classifying and designating 97,000 shares of its authorized capital stock as shares of Series A1 Convertible Redeemable Preferred Stock or any future board-authorized series or classpar value $0.0001 per share (the “Series 1”). On April 7, 2017, the Company commenced a private placement of preferred stock that is convertible intoshares of Series 1, together with warrants to acquire the Company’s common stock to accredited investors and closed the offering on January 31, 2018. The Company raised approximately $36.0 million, net of the Company. Under the amendment, which becomes effective on November 26, 2016, a preferred stock holder may participateoffering costs, in the SRP by converting its preferred stock into common stock of the Company,Series 1 private placements and submitting such commonhad 39,811 Series 1 shares for repurchase. The time period, for purposes of determining how long such stockholder has held the common shares submitted for repurchase, beginsissued and outstanding as of the date such preferred stockholder acquired the underlying preferred shares that were converted into common shares and submitted for repurchase.
Note B — Summary of Significant Accounting Policies
Basis of Accounting
The consolidated financial statements of the Company are prepared on the accrual basis of accounting and in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”). for financial information as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), and in conjunction with rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included.
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Liquidity Matters
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the year ended December 31, 2020, the Company had a net loss of $24.2 million and had $7.9 million in cash, cash equivalents and restricted cash. In connection with preparing the consolidated financial statements for the year ended December 31, 2020, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through March 30, 2022.
Management has implemented the following plan to address the Company’s liquidity over the next twelve months plus a day from the filing of this Annual Report:
• | On December 8, 2020, the Company, as guarantor, entered into the Second Amendment to Loan Agreement and Loan Documents (the “Second Amendment”) by and among MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Parking Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, MVP Milwaukee Wells LLC (each a “Borrower” and together “Borrowers”) and LLC Warehouse V LLC (the “Lender”), as successor-in-interest to LoanCore Capital Credit REIT LLC (the “ Original Lender”). The Second Amendment exercised the Company’s option to extend the loan to December 9, 2021 with an additional one-year renewal option thereafter. Concurrent with the Second Amendment, the Company entered into an Interest Rate Protection Agreement (rate cap) that caps the loan’s interest rate at the loan’s LIBOR Floor. This rate cap effectively fixes the rate on this loan to the current rate of 5.60% and eliminates the threat of rising interest rates on this floating rate loan. See Company Indebtedness in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Form 8-K Current Report filed on December 14, 2020 for additional information. |
• | While the Company is currently unable to completely estimate the impact that the COVID-19 pandemic and efforts to contain its spread will have on the Company’s business and on its tenants, as of December 31, 2020, the Company has entered into lease amendments (Second Amendments) with its two largest tenants, SP Plus and Premier Parking since the end of the third quarter of 2020 that should increase the amount of rental revenue received by the Company compared to the (First Amendments) entered into with these two tenants in May 2020 for COVID relief as follows: |
o | Premier Parking – Second Amendment, entered into December 16, 2020 and effective October 1, 2020, splits gross revenue from the properties, after approved expenses 95%/5% in favor of the Company and requires Premier to pay a portion of the property taxes per the original leases. The First Amendment split was 85%/15% in favor of the Company and required no property tax payments during the term of the amendment. The Premier leases revert back to their original terms January 1, 2022. |
o | SP Plus - Second Amendment, entered into January 29, 2021 and effective January 1, 2020, required SP Plus to pay full base rent for the month of January for the seven largest properties leased by SP Plus, and requires 75% of base rent to be paid on the 1st of each month for the months of February through July 2021 and a one-time cost of contract payment of $275,000 received in February 2021. On August 1, 2021, these properties revert back to their original lease terms. This amendment should result in (i) more base rent revenue during the lease term than was earned previously under the First Amendment and (ii) certainty with respect to base rent to be received from these properties during the term of the Second Amendment. |
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If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. If the Company is unable to obtain additional financing, it may be required to significantly scale back its business and operations. The Company’s ability to raise additional capital will also be impacted by the recent outbreak of COVID-19.
Based on this current business plan, the Company believes its existing cash, anticipated cash collections and cash inflows is sufficient to conduct planned operations for one year from the issuance of the December 31, 2020 financial statements.
Consolidation
The Company’s consolidated financial statements include its accounts, the accounts of the Company’s assets that were sold during 2020 and 2019 (as applicable), the accounts of its subsidiaries, Operating Partnership and all of the following subsidiaries. All intercompany profits and losses, balances and transactions are eliminated in consolidation.
MVP PF Memphis Poplar 2013, LLC | MVP Indianapolis Meridian Lot, LLC | White Front Garage Partners, LLC |
MVP PF St. Louis 2013, LLC | MVP Milwaukee Clybourn, LLC | Cleveland Lincoln Garage, LLC |
Mabley Place Garage, LLC | MVP Milwaukee Arena Lot, LLC | MVP Houston Preston, LLC |
MVP Denver Sherman, LLC | MVP Clarksburg Lot, LLC | MVP Houston San Jacinto Lot, LLC |
MVP Fort Worth Taylor, LLC | MVP Denver 1935 Sherman, LLC | MVP Detroit Center Garage, LLC |
MVP Milwaukee Old World, LLC | MVP Bridgeport Fairfield Garage, LLC | St. Louis Broadway, LLC |
MVP Houston Saks Garage, LLC | West 9th Street Properties II, LLC | St. Louis Seventh & Cerre, LLC |
MVP Milwaukee Wells, LLC | MVP San Jose 88 Garage, LLC | MVP Preferred Parking, LLC |
MVP Wildwood NJ Lot, LLC | MCI 1372 Street, LLC | MVP Raider Park Garage, LLC |
MVP Indianapolis City Park, LLC | MVP Cincinnati Race Street, LLC | MVP New Orleans Rampart, LLC |
MVP Indianapolis WA Street Lot, LLC | MVP St. Louis Washington, LLC | MVP Hawaii Marks Garage, LLC |
Minneapolis City Parking, LLC | MVP St. Paul Holiday Garage, LLC | |
MVP Minneapolis Venture, LLC | MVP Louisville Station Broadway, LLC |
Under GAAP, the Company'sCompany’s consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, or in which the Company has a controlling interest. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, the Company'sCompany’s management considers factors such as an entity'sentity’s purpose and design and the Company'sCompany’s ability to direct the activities of the entity that most significantly impacts the entity'sentity’s economic performance, ownership interest, board representation, management representation, authority to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity in which it will absorb the majority of the entity'sentity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both.
Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. The Company's share of its equity method investees' earnings or losses is included in other income in the accompanying consolidated statements of operations. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable.
Concentration
The Company had sixfifteen and fifteen parking tenants as oftenants/operators during the years ended December 31, 2016.2020 and 2019, respectively. One tenant, Standard Parking + ("tenant/operator, SP Plus Corporation (Nasdaq: SP) (“SP+"”), represented a concentration61.0% of the Company’s base parking rental revenue for the year ended December 31, 2016,2020.
SP+ is one of the largest providers of parking management in regards to parking base rental revenue. During the year endedUnited States. As of December 31, 2016,2020, SP+ accounted for 43%, of the parking base rental revenue. managed approximately 3,200 locations in North America.
Below is a table that summarizes base parking rent by tenant:
For the Years Ended December 31, | ||||
Parking Tenant | 2020 | 2019 | ||
SP + | 61.0% | 60.8% | ||
Premier Parking | 15.9% | 14.8% | ||
Denison | 6.4% | 2.7% | ||
ISOM Mgmt | 5.1% | 3.9% | ||
342 N. Rampart | 2.0% | 2.9% | ||
Interstate Parking | 2.8% | 2.9% | ||
St. Louis Parking | 1.3% | 2.0% | ||
TNSH, LLC | 1.5% | 1.1% | ||
Lanier | 1.0% | 2.4% | ||
BEST PARK | 1.4% | 0.2% | ||
Riverside Parking | 0.6% | 0.9% | ||
ABM | 0.7% | 3.9% | ||
Denver School | 0.2% | 0.2% | ||
Secure | 0.1% | 0.1% | ||
Premium Parking | 0.0% | 1.2% |
In addition, the Company had concentrations in various cities based on parking rental revenue for the year ended December 31, 2020 and 2019, as well as concentrations in various cities based on the real estate the Company owned as December 31, 2020 and 2019. The below tables summarize this information by city.
City Concentration for Parking Rental Revenue | ||||
For the Years Ended December 31, | ||||
2020 | 2019 | |||
Detroit | 24.3% | 22.6% | ||
Houston | 12.2% | 11.7% | ||
Fort Worth | 10.1% | 7.0% | ||
Cincinnati | 8.2% | 9.3% | ||
Indianapolis | 6.4% | 6.1% | ||
Lubbock | 5.1% | 3.9% | ||
Cleveland | 4.5% | 5.8% | ||
Honolulu | 4.4% | 4.3% | ||
Milwaukee | 3.7% | 3.7% | ||
Nashville | 3.7% | 3.1% | ||
St. Louis | 3.6% | 5.0% | ||
Minneapolis | 2.9% | 3.6% | ||
St Paul | 2.8% | 2.9% | ||
New Orleans | 2.0% | 2.9% | ||
Bridgeport | 1.4% | 1.9% | ||
Memphis | 1.4% | 1.4% | ||
San Jose | 1.0% | 2.0% | ||
Denver | 0.7% | 0.7% | ||
Louisville | 0.6% | 0.9% | ||
Clarksburg | 0.4% | 0.3% | ||
Wildwood | 0.3% | 0.3% | ||
Canton | 0.3% | 0.2% | ||
Ft. Lauderdale | 0.0% | 0.4% |
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Real Estate Investment Concentration by City | ||||
As of December 31, | ||||
2020 | 2019 | |||
Detroit | 19.0% | 17.7% | ||
Houston | 11.7% | 12.1% | ||
Fort Worth | 9.3% | 8.8% | ||
Cincinnati | 8.1% | 8.8% | ||
Honolulu | 7.0% | 6.8% | ||
Indianapolis | 6.1% | 5.8% | ||
Cleveland | 5.8% | 6.3% | ||
Lubbock | 4.6% | 4.3% | ||
St Louis | 4.2% | 4.4% | ||
Minneapolis | 4.0% | 4.3% | ||
Nashville | 4.0% | 3.7% | ||
Milwaukee | 3.9% | 3.9% | ||
St Paul | 2.9% | 2.7% | ||
Bridgeport | 2.8% | 2.6% | ||
New Orleans | 2.6% | 2.6% | ||
Memphis | 1.3% | 1.3% | ||
Denver | 1.1% | 1.0% | ||
Louisville | 1.0% | 1.0% | ||
Wildwood | 0.2% | 0.4% | ||
Clarksburg | 0.2% | 0.2% | ||
Canton | 0.2% | 0.2% | ||
San Jose | -- | 1.1% |
Acquisitions
The Company records the acquired tangible and intangible assets and assumed liabilities of acquisitions of all operating properties and those development and redevelopment opportunities that meet the accounting criteria to be accounted for as business combinations at fair value at the acquisition date. The Company assesses and considers fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that the Company deems appropriate. Estimates of future cash flows are based on a number ofseveral factors including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an operating property acquisition generally include but are not limited to: land, buildings and improvements, construction in progress and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any.
Impairment of Long LivedLong-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property'sproperty’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, the property is written down to fair value and an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.
The Company recorded impairment charges of approximately $14.1 million and $1.5 million for the years ended December 31, 2020 and 2019, respectively. These charges were recorded to write down the carrying value of these assets to their current appraised values net of estimated closing costs. The appraisals were performed by independent third-party appraisers primarily using the income capitalization approach based on the contracted rent to be received from the operator or the sales comparison approach. The income capitalization approach reflects the property’s income-producing capabilities based on the assumption that value is created by the expectation of benefits to be derived in the future. The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate value.
The following is a summary of the impairments for the year ended December 31, 2020:
Property | Impairment | Valuation Method |
Mabley Place Garage | $3,000,000 | Income Capitalization |
MVP Houston Saks | $2,500,000 | Income Capitalization |
MVP Milwaukee Wells | $620,000 | Sales Comparison |
MVP Wildwood NJ Lot | $535,000 | Sales Comparison |
MVP Indianapolis Meridian | $50,000 | Income Capitalization |
MVP Clarksburg Lot | $90,000 | Income Capitalization |
Minneapolis City Parking | $320,000 | Sales Comparison |
33740 Crown Colony | $95,000 | Income Capitalization |
MVP St Louis Washington | $1,320,000 | Income Capitalization |
MVP Cincinnati Race Street | $500,000 | Income Capitalization |
MVP Louisville Broadway | $100,000 | Income Capitalization |
Cleveland Lincoln Garage | $2,725,000 | Income Capitalization |
MVP Preferred Parking | $740,000 | Sales Comparison |
MVP New Orleans Rampart | $270,000 | Income Capitalization |
MVP Hawaii Marks Garage | $1,250,000 | Income Capitalization |
Total | $14,115,000 |
The following is a summary of the impairments for the year ended December 31, 2019:
Property | 2019 Impairment | Valuation Method |
MVP Memphis Court | $558,000 | Sales Comparison |
Minneapolis City Parking | $500,000 | Income Capitalization |
MVP San Jose 88 Garage | $344,000 | Income Capitalization |
MVP St Louis Washington | $50,000 | Income Capitalization |
Total | $1,452,000 |
Cash
The Company maintains a significant portion of its cash deposits cash with high quality financial institutions. These depositsat KeyBank, which are guaranteedheld by the Company’s subsidiaries allowing the Company to maximize FDIC insurance coverage. The balances are insured by the Federal Deposit Insurance Company up to an insurance limit upCorporation (“FDIC”) under the same ownership category of $250,000. As of December 31, 20162020 and 2019, the Company had approximately $3.4$1.9 million and $2.7 million, respectively, in excess of the federally-insured limits. federally insured limits. As of December 31, 2015the date of this filing, the Company was federally-insured for the full balance.
Restricted cash primarily consists of escrowed tenant improvement funds, real estate taxes, capital improvement funds, insurance premiums and other amounts required to be escrowed pursuant to loan agreements.
Revenue Recognition
The Company's revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the Company's leases will provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease.
The Company will continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant'stenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event thatIf the collectability of a receivable is in doubt, the Company will record an increase in the Company's allowance for uncollectible accounts or record a direct write-off of the receivable after exhaustive efforts at collection.
Advertising Costs
Advertising costs incurred in the normal course of operations and are expensed as incurred. During the yearyears ended December 31, 20162020 and for the period from May 4, 2015 (date of inception) through December 31, 2015,2019, the Company had no advertising costs.
Investments in Real Estate and Fixed Assets
Investments in real estate and fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are primarily 3 to 40 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
Purchase Price Allocation
The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other
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Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management'smanagement’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease.
The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant'stenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.
The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company's evaluation of the specific characteristics of each tenant'stenant’s lease and the Company's overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant'stenant’s credit quality and expectations of lease renewals, among other factors.
The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.
In making estimates of fair values for purposes of allocating purchase price, the Company will utilize a number ofseveral sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the Company's pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Stock-Based Compensation
The Company records stock-based compensation expense according to the termsprovisions of ASC Topic 718, Compensation – Stock Compensation. ASC Topic 718 requires all share-based payments to employees and nonemployees, to be recognized in the Advisory Agreement,financial statements based on their fair values. Under the provisions of ASC Topic 718, the Company will not reimbursedetermines the Advisorappropriate fair value to be used for these out of pocket costs and future organization and offering costs it may incur. Such costs shall include legal, accounting, printing and other offering expenses, including marketing, and direct expenses of the Advisor's employees and employees of the Advisor's affiliates and others.
The Company has a stock-based incentive award plan, which is accounted for under the guidance for share based payments. The expense for such awards will be included in general and administrative expenses and is recognized over the vesting period or when the requirements for exercise of the award have been met (See(See Note G — Stock-Based Compensation)Compensation).
Income Taxes
Commencing with the taxable year ended December 31, 2016. If2017 through December 31, 2019, and subject to the discussion below relating to the Company’s REIT status from and after January 1, 2020, the Company qualifies for taxationbelieves it has been organized and conducted operations to qualify as a REIT itunder Sections 856 to 860 of the Code. A REIT is generally will not be subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met. The Company’s REIT taxable income may substantially exceed or be less than the income calculated according to GAAP. In addition, the Company will be subjected to corporate income tax to the extent it distributes allthat less than 100% of the net taxable income is distributed, including any net capital gain.
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As a result of the COVID-19 pandemic, the Company entered into temporary lease amendments with some of its tenants during the year ended December 31, 2020. The income generated under these lease amendments does not constitute qualifying REIT taxable income to its stockholders,for purposes of the annual REIT gross income tests, and, so long as it distributes at least 90% of its REIT taxable income. REITs are subject to a number of other organizational and operational requirements. Even ifresult, the Company qualifieswas not in compliance with the annual REIT income tests for the year ended December 31, 2020. Unless the Company is entitled to relief under specific statutory or administrative procedures that it may seek, and chooses to pursue any such relief, it will lose its qualification as a REIT. If the Company fails to qualify as a REIT in any taxable year, including and after the taxable year in which the Company initially elects to be taxed as a REIT, the Company will become subject to federal income tax on its taxable income at regular corporate rates and will generally not be permitted to qualify for treatment as a REIT for federal income tax purposes again for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect the Company’s net income. In addition, distributions to stockholders in any year in which the Company fails to qualify as a REIT will not be deductible by the Company. As a result, the failure to qualify as a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, if the Company were to fail to qualify as a REIT, it would not be required to distribute any amounts to its stockholders and all distributions to stockholders would be taxable as regular corporate dividends to the extent of its current and accumulated earnings and profits. In such event, corporate stockholders may be eligible for the dividends-received deduction. In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income. Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for purposes of the 3.8% Medicare tax), subject to certain statelimitations.
The Company uses a two-step approach to recognize and local taxesmeasure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of December 31, 2020.
A full valuation allowance for deferred tax assets was historically provided each year since the Company believed that as a REIT it was more likely than not that it would not realize the benefits of its deferred tax assets. While the Company may pursue statutory or administrative relief, or changes to its operations, to retain its status as a REIT, the Company has evaluated its deferred tax assets (primarily net operating losses and tax basis in goodwill that was taken as an expense on the Company’s books) both in the context of retaining its status as a REIT and as a taxable C Corporation. The Company had a §382 study performed to determine limitations on the potential utilization of pre-2020 net operating losses and concluded that it does not expect significant limitations on its ability to utilize such losses in the future as a C Corporation. However, given the Company’s history of taxable losses and its current taxable losses, and due to the ongoing impact to the Company of the COVID-19 pandemic to the Company, the Company has determined that it will continue to record a full valuation allowance against its deferred tax assets for the year ended December 31, 2020. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income and property, and federal income and excise taxes on its undistributed income.
Per Share Data
The Company calculates basic income (loss) per share by dividing net income (loss) for the period by weighted-average shares of its common stock outstanding for the respective period. Diluted income per share takes into accountconsiders the effect of dilutive instruments, such as stock options and convertible stock, but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. The Company had no outstanding common share equivalents during the yearyears ended December 31, 20162020 and 2019.
There is a potential for dilution from the Company’s Series A Convertible Redeemable Preferred Stock which may be converted into the Company’s common stock at any time. As of December 31, 2020, there were 2,862 shares of the Series A Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.
There is a potential for dilution from the Company’s Series 1 Convertible Redeemable Preferred Stock which may be converted upon a holder’s election into the Company’s common stock at any time. As of December 31, 2020, there were 39,811 shares of the Series 1 Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.
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Each share of Series A preferred stock and Series 1 preferred stock will convert into the number of shares of the Company’s common stock determined by dividing (i) the stated value per Series A share or Series 1 share of $1,000 (as may be adjusted pursuant to the applicable articles supplementary) plus any accrued but unpaid dividends to, but not including, the conversion date by (ii) the conversion price. The conversion price is equal to the net asset value per share of the Company’s common stock; provided that if a “Listing Event” (as defined in the applicable articles supplementary) occurs, the conversion price will be 100% of the volume weighted average price per share of the Company’s common stock for the period from May 4, 2015 (date20 trading days prior to the delivery date of inception) through December 31, 2015.
Accounting and Auditing Standards Applicable to "Emerging“Emerging Growth Companies"
The Company is an "emerging“emerging growth company"company” under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"“JOBS Act”). For as long as the Company remains an "emerging“emerging growth company,"” which mayis expected to be up to five fiscal years,through December 31, 2020, the Company is not required to (1) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (2) provide an auditor'sauditor’s attestation report on management'smanagement’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (3) comply with any new requirements adopted by the Public Company Accounting Oversight Board or the PCAOB,(the “PCAOB”), requiring mandatory audit firm rotation or a supplement to the auditor'sauditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (4) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. The Company intends to take advantage of such extended transition period. Since the Company will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, the Company'sCompany’s financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If the Company were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
The FASB issued authoritative guidance for non-controlling interests in December 2007, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest.
Note C — Commitments and Contingencies
Environmental Matters
Investments in real property create the ordinary coursepotential for environmental liability on the part of business,the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. The Company has obtained a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted by independent environmental consultants on each of the properties and, in certain instances, has conducted additional investigation, including a Phase II environmental assessment. Furthermore, the Company may becomehas adopted a policy of conducting a Phase I environmental study on each property acquired and any additional investigation as warranted.
During the Company’s predecessor’s due diligence of a property purchased on December 15, 2017 (originally purchased by predecessor on March 31, 2015) and located in Milwaukee, it was discovered that the soil and ground water at the subject property had been impacted by the site’s historical use as a printing press as well as neighboring property uses. As a result, the Company retained a local environmental engineer to litigationseek a closure letter or claims. There aresimilar certificate of no further action from the State of Wisconsin due to the Company’s use of the property as a parking lot. As of December 31, 2020, management has not received the closure letter, however the Company does not anticipate a material legal proceedings pending or knownadverse effect related to be contemplated againstthis environmental matter. On February 5, 2021, the Company.
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The Company believes that it complies, in all material respects, with all federal, state and local governments. We doordinances and regulations regarding hazardous or toxic substances. Furthermore, as of December 31, 2020, the Company has not believebeen notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that compliance with existing lawsit believes will have a material adverse effect on the Company's financial condition or results of operations. However, weThe Company, however, cannot predict the impact of any unforeseen environmental contingencies or new or changed laws or regulations on properties in which we holdthe Company holds an interest, or on properties that may be acquired directly or indirectly in the future.
Note D – Investments in Real Estate
2020
As of December 31, 2016,2020, the Company had the following Investments in Real Estate:
Property | Location | Date Acquired | Property Type | Investment Amount | Size / Acreage | # Spaces | Retail /Office Square Ft. | Ownership % |
MVP San Jose 88 Garage, LLC | San Jose, CA | 6/15/2016 | Garage | $3,575,500 | 1.33 | 328 | N/A | 100.0% |
MCI 1372 Street, LLC | Canton, OH | 7/8/2016 | Lot | $700,000 | 0.44 | 68 | N/A | 100.0% |
MVP Cincinnati Race Street Garage, LLC | Cincinnati, OH | 7/8/2016 | Garage | $4,500,000 | 0.63 | 350 | N/A | 100.0% |
MVP St. Louis Washington, LLC | St Louis, MO | 7/18/2016 | Lot | $3,000,000 | 0.39 | 63 | N/A | 100.0% |
MVP St. Paul Holiday Garage, LLC | St Paul, MN | 8/12/2016 | Garage | $8,200,000 | 0.85 | 285 | N/A | 100.0% |
MVP Louisville Station Broadway, LLC | Louisville, KY | 8/23/2016 | Lot | $3,050,000 | 1.25 | 165 | N/A | 100.0% |
Cleveland Lincoln Garage Owners, LLC | Cleveland, OH | 10/19/2016 | Garage | $7,316,950 | 1.20 | 536 | 45,272 | 100.0% |
MVP Houston Jefferson Lot, LLC | Houston, TX | 11/22/2016 | Lot | $700,000 | 0.52 | 76 | N/A | 100.0% |
MVP Houston San Jacinto Lot, LLC | Houston, TX | 11/22/2016 | Lot | $3,200,000 | 0.65 | 85 | 240 | 100.0% |
White Front Garage Partners, LLC | Nashville, TN | 9/30/2016 | Garage | $9,196,800 | 0.26 | 155 | N/A | 80.0% |
MVP Cleveland West 9th, LLC | Cleveland, OH | 5/11/2016 | Lot | $2,894,250 | 2.16 | 254 | N/A | 51.0% |
33740 Crown Colony, LLC | Cleveland, OH | 5/17/2016 | Lot | $1,545,300 | 0.54 | 82 | N/A | 51.0% |
Property Name | Location | Date Acquired | Property Type | # Spaces | Property Size (Acres) | Retail Sq. Ft | Investment Amount | Parking Tenant / Operator |
MVP Cleveland West 9th (1) | Cleveland, OH | 5/11/2016 | Lot | 260 | 2 | N/A | $5,844,000 | SP + |
33740 Crown Colony (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $2,954,000 | SP + |
MCI 1372 Street | Canton, OH | 7/8/2016 | Lot | 66 | 0.44 | N/A | $700,000 | ABM |
MVP Cincinnati Race Street Garage | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $5,848,000 | SP + |
MVP St. Louis Washington | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $1,637,000 | SP + |
MVP St. Paul Holiday Garage | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,396,000 | Interstate Parking |
MVP Louisville Station Broadway | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,007,000 | Riverside Parking |
White Front Garage Partners | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $11,673,000 | Premier Parking |
Cleveland Lincoln Garage | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.14 | 45,272 | $8,271,000 | SP + |
MVP Houston Preston Lot | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $2,820,000 | Premier Parking |
MVP Houston San Jacinto Lot | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,250,000 | Premier Parking |
MVP Detroit Center Garage | Detroit, MI | 2/1/2017 | Garage | 1,275 | 1.28 | N/A | $55,477,000 | SP + |
St. Louis Broadway | St Louis, MO | 5/6/2017 | Lot | 161 | 0.96 | N/A | $2,400,000 | St. Louis Parking |
St. Louis Seventh & Cerre | St Louis, MO | 5/6/2017 | Lot | 174 | 1.06 | N/A | $3,300,000 | St. Louis Parking |
MVP Preferred Parking (4) | Houston, TX | 8/1/2017 | Garage/Lot | 528 | 0.98 | 784 | $20,480,000 | Premier Parking |
MVP Raider Park Garage | Lubbock, TX | 11/21/2017 | Garage | 1,495 | 2.15 | 20,536 | $13,640,000 | ISOM Management |
MVP PF Memphis Poplar | Memphis, TN | 12/15/2017 | Lot | 127 | 0.87 | N/A | $3,670,000 | Best Park |
MVP PF St. Louis | St Louis, MO | 12/15/2017 | Lot | 183 | 1.22 | N/A | $5,041,000 | SP + |
Mabley Place Garage (2) | Cincinnati, OH | 12/15/2017 | Garage | 775 | 0.9 | 8,400 | $18,210,000 | SP + |
MVP Denver Sherman | Denver, CO | 12/15/2017 | Lot | 28 | 0.14 | N/A | $705,000 | Denver School |
MVP Fort Worth Taylor | Fort Worth, TX | 12/15/2017 | Garage | 1,013 | 1.18 | 11,828 | $27,663,000 | SP + |
MVP Milwaukee Old World | Milwaukee, WI | 12/15/2017 | Lot | 54 | 0.26 | N/A | $2,044,000 | Interstate |
MVP Houston Saks Garage | Houston, TX | 12/15/2017 | Garage | 265 | 0.36 | 5,000 | $7,923,000 | Premier Parking |
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MVP Milwaukee Wells | Milwaukee, WI | 12/15/2017 | Lot | 148 | 1.07 | N/A | $4,463,000 | TNSH |
MVP Wildwood NJ Lot 1 (3) | Wildwood, NJ | 12/15/2017 | Lot | 29 | 0.26 | N/A | $278,000 | SP + |
MVP Wildwood NJ Lot 2 (3) | Wildwood, NJ | 12/15/2017 | Lot | 45 | 0.31 | N/A | $418,000 | SP+ |
MVP Indianapolis City Park | Indianapolis, IN | 12/15/2017 | Garage | 370 | 0.47 | N/A | $10,934,000 | Denison |
MVP Indianapolis WA Street | Indianapolis, IN | 12/15/2017 | Lot | 141 | 1.07 | N/A | $5,749,000 | Denison |
MVP Minneapolis Venture | Minneapolis, MN | 12/15/2017 | Lot | 195 | 1.65 | N/A | $4,013,000 | N/A |
Minneapolis City Parking | Minneapolis, MN | 12/15/2017 | Lot | 268 | 1.98 | N/A | $7,718,000 | SP + |
MVP Indianapolis Meridian | Indianapolis, IN | 12/15/2017 | Lot | 36 | 0.24 | N/A | $1,551,000 | Denison |
MVP Milwaukee Clybourn | Milwaukee, WI | 12/15/2017 | Lot | 15 | 0.06 | N/A | $262,000 | Secure |
MVP Milwaukee Arena Lot | Milwaukee, WI | 12/15/2017 | Lot | 75 | 1.11 | N/A | $4,631,000 | Interstate |
MVP Clarksburg Lot | Clarksburg, WV | 12/15/2017 | Lot | 94 | 0.81 | N/A | $625,000 | ABM |
MVP Denver 1935 Sherman | Denver, CO | 12/15/2017 | Lot | 72 | 0.43 | N/A | $2,533,000 | SP + |
MVP Bridgeport Fairfield | Bridgeport, CT | 12/15/2017 | Garage | 878 | 1.01 | 4,349 | $8,268,000 | SP + |
MVP New Orleans Rampart | New Orleans, LA | 2/1/2018 | Lot | 78 | 0.44 | N/A | $7,835,000 | 342 N. Rampart |
MVP Hawaii Marks Garage | Honolulu, HI | 6/21/2018 | Garage | 311 | 0.77 | 16,205 | $19,952,000 | SP + |
Construction in progress | $1,320,000 | |||||||
Total Investment in real estate and fixed assets | $295,503,000 |
(1) These properties are held by West 9th St. Properties II, LLC.
(2) The Company holds an 83.3% undivided interest in the Mabley Place Garage pursuant to a tenancy-in-common agreement and is the Managing Co-Owner of the property.
(3) These properties are held by MVP Wildwood NJ Lot, LLC.
(4) MVP Preferred Parking, LLC holds a Garage and a Parking Lot.
2019
As of December 31, 2019, the Company had the following Investments in Real Estate continued:
Property Name | Location | Date Acquired | Property Type | # Spaces | Property Size (Acres) | Retail Sq. Ft | Investment Amount | Parking Tenant |
MVP Cleveland West 9th (1) | Cleveland, OH | 5/11/2016 | Lot | 260 | 2 | N/A | $5,845,000 | SP + |
33740 Crown Colony (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $3,050,000 | SP + |
MCI 1372 Street | Canton, OH | 7/8/2016 | Lot | 66 | 0.44 | N/A | $700,000 | ABM |
MVP Cincinnati Race Street Garage | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $6,331,000 | SP + |
MVP St. Louis Washington | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $2,957,000 | SP + |
MVP St. Paul Holiday Garage | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,396,000 | Interstate Parking |
MVP Louisville Station Broadway | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,107,000 | Riverside Parking |
White Front Garage Partners | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $11,673,000 | Premier / iPark |
Cleveland Lincoln Garage Owners | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.14 | 45,272 | $10,649,000 | SP + |
MVP Houston Preston Lot | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $2,820,000 | Premier / iPark |
MVP Houston San Jacinto Lot | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,250,000 | Premier / iPark |
MVP Detroit Center Garage | Detroit, MI | 2/1/2017 | Garage | 1,275 | 1.28 | N/A | $55,476,000 | SP + |
St. Louis Broadway | St Louis, MO | 5/6/2017 | Lot | 161 | 0.96 | N/A | $2,400,000 | St. Louis Parking |
St. Louis Seventh & Cerre | St Louis, MO | 5/6/2017 | Lot | 174 | 1.06 | N/A | $3,300,000 | St. Louis Parking |
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MVP Preferred Parking (4) | Houston, TX | 8/1/2017 | Garage/Lot | 528 | 0.98 | 784 | $21,210,000 | Premier / iPark |
MVP Raider Park Garage | Lubbock, TX | 11/21/2017 | Garage | 1,495 | 2.15 | 20,536 | $13,517,000 | ISOM Management |
MVP PF Memphis Poplar | Memphis, TN | 12/15/2017 | Lot | 127 | 0.87 | N/A | $3,747,000 | Best Park |
MVP PF St. Louis | St Louis, MO | 12/15/2017 | Lot | 183 | 1.22 | N/A | $5,145,000 | SP + |
Mabley Place Garage (2) | Cincinnati, OH | 12/15/2017 | Garage | 775 | 0.9 | 8,400 | $21,185,000 | SP + |
MVP Denver Sherman | Denver, CO | 12/15/2017 | Lot | 28 | 0.14 | N/A | $705,000 | Denver School |
MVP Fort Worth Taylor | Fort Worth, TX | 12/15/2017 | Garage | 1,013 | 1.18 | 11,828 | $27,663,000 | SP + |
MVP Milwaukee Old World | Milwaukee, WI | 12/15/2017 | Lot | 54 | 0.26 | N/A | $2,044,000 | SP + |
MVP Houston Saks Garage | Houston, TX | 12/15/2017 | Garage | 265 | 0.36 | 5,000 | $10,423,000 | Premier / iPark |
MVP Milwaukee Wells | Milwaukee, WI | 12/15/2017 | Lot | 148 | 1.07 | N/A | $5,083,000 | TNSH |
MVP Wildwood NJ Lot 1 (3) | Wildwood, NJ | 12/15/2017 | Lot | 29 | 0.26 | N/A | $545,000 | SP + |
MVP Wildwood NJ Lot 2 (3) | Wildwood, NJ | 12/15/2017 | Lot | 45 | 0.31 | N/A | $686,000 | SP+ |
MVP Indianapolis City Park | Indianapolis, IN | 12/15/2017 | Garage | 370 | 0.47 | N/A | $10,934,000 | ABM |
MVP Indianapolis WA Street | Indianapolis, IN | 12/15/2017 | Lot | 141 | 1.07 | N/A | $5,749,000 | Denison |
MVP Minneapolis Venture | Minneapolis, MN | 12/15/2017 | Lot | 195 | 1.65 | N/A | $4,013,000 | N/A |
Minneapolis City Parking | Minneapolis, MN | 12/15/2017 | Lot | 268 | 1.98 | N/A | $9,338,000 | SP + |
MVP Indianapolis Meridian | Indianapolis, IN | 12/15/2017 | Lot | 36 | 0.24 | N/A | $1,601,000 | Denison |
MVP Milwaukee Clybourn | Milwaukee, WI | 12/15/2017 | Lot | 15 | 0.06 | N/A | $262,000 | Secure |
MVP Milwaukee Arena Lot | Milwaukee, WI | 12/15/2017 | Lot | 75 | 1.11 | N/A | $4,631,000 | SP + |
MVP Clarksburg Lot | Clarksburg, WV | 12/15/2017 | Lot | 94 | 0.81 | N/A | $715,000 | ABM |
MVP Denver 1935 Sherman | Denver, CO | 12/15/2017 | Lot | 72 | 0.43 | N/A | $2,533,000 | SP + |
MVP Bridgeport Fairfield | Bridgeport, CT | 12/15/2017 | Garage | 878 | 1.01 | 4,349 | $8,256,000 | SP + |
MVP New Orleans Rampart | New Orleans, LA | 2/1/2018 | Lot | 78 | 0.44 | N/A | $8,105,000 | 342 N. Rampart |
MVP Hawaii Marks Garage | Honolulu, HI | 6/21/2018 | Garage | 311 | 0.77 | 16,205 | 21,127,000 | SP + |
Construction in progress | $714,000 | |||||||
Total Investment in real estate and fixed assets | $309,885,000 |
(5) These properties are held by West 9th St. Properties II, LLC.
(6) The Company holds an 83.3% undivided interest in the Mabley Place Garage pursuant to a tenancy-in-common agreement and is the Managing Co-Owner of the property.
(7) These properties are held by MVP Wildwood NJ Lot, LLC.
(8) MVP Preferred Parking, LLC holds a Garage and a Parking Lot.
Note E — Related Party Transactions and Arrangements
2020
The transactions described in this Note were approved by a majority of the Company'sCompany’s board of directors (including a majority of the independent directors) not otherwise interested in such transactiontransactions as fair and reasonable to the Company and on terms and conditions no less favorable to the Company than those available from unaffiliated third parties.
Ownership of Company Stock
As of December 31, 2016,2020, the Company's Sponsor owned 8,0009,108 shares, VRM II owned 1,084,960 shares and VRM III owned 5,000616,834 shares of the Company'sCompany’s outstanding common stock.
VRM I and VRM II own 40% and 60%, respectively, of the former Advisor. Neither VRM I nor VRM II paid any up-front consideration for these ownership interests, but each willagreed to be responsible for its proportionate share of future expenses of the former Advisor.
On March 29, 2019, the Company entered into a Contribution Agreement (the “Contribution Agreement”) with the former Advisor, Vestin Realty Mortgage I, Inc. (“VRTA”) (solely for purposes of Section 1.01(c) thereof), Vestin Realty Mortgage II, Inc. (“VRTB”) (solely for purposes of Section 1.01(c) thereof) and Shustek (solely for purposes of Section 4.03 thereof). In exchange for the Contribution, the Company agreed to issue to the former Advisor 1,600,000 shares of Common Stock as consideration (the “Consideration”), issuable in four equal installments. The operating agreementfirst three installments of 400,000 shares of Common Stock per installment were issued on April 1, 2019, December 31, 2019 and December 31, 2020, respectively. See Note R —Deferred Management Internalization in Part II, Item 8 Notes to the Consolidated Financial Statements of this Annual Report for additional information. The remaining installment was due to be issued on December 31, 2021; however, pursuant to the Purchase Agreement, the Advisor has agreed to surrender its claim to such shares. If requested by the Company in connection with any contemplated capital raise by the Company, the former Advisor has agreed not to sell, pledge or otherwise transfer or dispose of any of the Internalization Consideration for a period not to exceed the lock-up period that otherwise would apply to other stockholders of the Company in connection with such capital raise. See the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2019 for more information regarding the Management Internalization.
2019
The transactions described in this Note were approved by a majority of the Company’s board of directors (including a majority of the independent directors) not otherwise interested in such transactions as fair and reasonable to the Company and on terms and conditions no less favorable to the Company than those available from unaffiliated third parties.
Prior to the Internalization, the former Advisor provides that once had the option to request reimbursement of certain payroll expenses for salaries and benefits paid to non-executive officers. As of December 31, 2019, all reimbursable expenses had been paid.
Ownership of Company Stock
As of December 31, 2019, the Sponsor owned 9,108 shares, VRM II owned 844,960 shares and VRM I owned 456,834 shares of the Company’s outstanding common stock. During the year ended December 31, 2018, VRM II and VRM I received approximately $33,000 and $19,000 in distributions in accordance with the Company’s distribution reinvestment program (“DRIP”). No DRIP distributions were received by either entity during the year ended December 31, 2019 due to the suspension of the DRIP program.
Ownership of the Former Advisor
VRM I and VRM II have been repaid in full for any capital contributions to the Advisor or for any expenses advanced on the Advisor's behalf, or capital investment,own 40% and once they have received an annualized return on their capital investment of 7.5%60%, then Michael Shustek will receive 40%respectively, of the net profitsformer Advisor. Neither VRM I nor VRM II paid any up-front consideration for these ownership interests, but each agreed to be responsible for its proportionate share of future expenses of the former Advisor.
Fees Paid in Connection with the Operations of the Company
Prior to the Internalization (as defined below), the former Advisor or its affiliates will receivereceived an acquisition fee of 2.25% of the purchase price of any real estate provided, however, the Company will not pay any fees when acquiring loans from affiliates. During the year ended December 31, 2016, approximately $1.2 million in acquisition fees have been earned by the Advisor.
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The Company willwas to reimburse the former Advisor or its affiliates for costs of providing administrative services, subject to the limitation that weit will not reimburse the former Advisor for any amount by which the Company'sCompany’s operating expenses, at the end of the four preceding fiscal quarters (commencing after the quarter in which we make the Company'sCompany made its first investment), exceed the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income in connection with the selection or acquisition of an investment, whether or not the Company ultimately acquires, unless the excess amount is approved by a majority of the Company'sCompany’s independent directors. We willThe Company was not to reimburse the former Advisor for personnel costs in connection with services for which the former Advisor receivesreceived a separate fee, such as an acquisition fee, disposition fee or debt financing fee, or for the salaries and benefits paid to the Company'sCompany’s executive officers. In addition, we willthe Company was not to reimburse the former Advisor for rent or depreciation, utilities, capital equipment or other costs of its own administrative items. During the year ended December 31, 2016, no2019, approximately $1.4 million, in operating expenses have beenwere incurred by the Advisor.
On March 29, 2019, the Company and the former Advisor entered into definitive agreements to internalize the Company’s management function effective April 1, 2019 (the “Internalization”). Since their formation, under the supervision of the board of directors (the “Board of Directors”), the former Advisor has been responsible for managing the operations of the Company and MVP I, which merged with a wholly owned indirect subsidiary of the Company in ConnectionDecember 2017. As part of the Internalization, among other things, the Company agreed with the Liquidation or Listingformer Advisor to (i) terminate the Second Amended and Restated Advisory Agreement, dated as of May 26, 2017 and, for the avoidance of doubt, the Third Amended and Restated Advisory Agreement, dated as of September 21, 2018, which by its terms would have become effective only upon a listing of the Company's Real Estate Assets
Note F — Economic Dependency
Under various agreements, the Company has engaged or will engage the former Advisor and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition services, the sale of shares of the Company's common stockCompany’s securities available for issue,issuance, as well as other administrative responsibilities for the Company, including accounting services and investor relations. In addition, the Sponsor payspaid selling commissions in connection with the sale of the Company'sCompany’s shares in the Common Stock Offering and the former Advisor payspaid the Company'sCompany’s organization and offering expenses.
As a result of these relationships, the Company is dependent upon the former Advisor and its affiliates. In the event thatIf these companies are unable to provide the Company with the respective services, the Company willmay be required to find alternative providers of these services.
Note G — Stock-Based Compensation
On October 14, 2020, the Compensation Committee of the Board of Directors of the Company approved the award of non-restricted shares to the Company’s four independent directors and to the Company’s chief financial officer, J. Kevin Bland. Total stock-compensation expense for the year ended December 31, 2020 was approximately $144,000.
The non-restricted shares were issued by the Company on March 1, 2021 at a price of $11.75 per share. This price equals the price agreed to in the Equity Purchase Agreement entered into between the Company and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). For additional information see the Current Report Form 8-K filed by the Company on January 14, 2021.
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The shares awarded fully vested immediately upon issuance and these shares are not from the Company’s Incentive Plan.
Long-Term Incentive Plan
The Company'sCompany’s board of directors has adopted a long-term incentive plan which we willthe Company may use to attract and retain qualified directors, officers, employees and consultants. The Company'sCompany’s long-term incentive plan will offer these individuals an opportunity to participate in the Company'sCompany’s growth through awards in the form of, or based on, the Company'sCompany’s common stock. WeThe Company currently anticipateanticipates that weit will not issue awards under the Company'sCompany’s long-term incentive plan, although weit may do so in the future, including possible equity grants to the Company'sCompany’s independent directors as a form of compensation.
The long-term incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company's affiliates'Company’s affiliates selected by the board of directors for participation in ourthe Company’s long-term incentive plan. Stock options granted under the long-term incentive plan will not exceed an amount equal to 10% of the outstanding shares of ourthe Company’s common stock on the date of grant of any such stock options. Stock options may not have an exercise price that is less than the fair market value of a share of ourthe Company’s common stock on the date of grant.
The Company’s board of directors or a committee appointed by ourits board of directors will administer the long-term incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the long-term incentive plan if the grant or vesting of the awards would jeopardize ourthe Company’s status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under ourits charter. Unless otherwise determined by ourthe Company’s board of directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.
The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between our companythe Company and ourits stockholders that causes the per-share value of ourthe Company’s common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the long-term incentive plan will be adjusted proportionately and the board of directors will make such adjustments to the long-term incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the long-term incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.
The Company’s board of directors may in its sole discretion at any time determine that all or a portion of a participant'sparticipant’s awards will become fully vested. The board may discriminate among participants or among awards in exercising such discretion. The long-term incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by ourthe board of directors and stockholders, unless extended or earlier terminated by ourthe board of directors. OurThe Company’s board of directors may terminate the long-term incentive plan at any time. The expiration or other termination of the long-term incentive plan will not, without the participant'sparticipant’s consent, have an adverse impact on any award that is outstanding at the time the long-term incentive plan expires or is terminated. OurThe board of directors may amend the long-term incentive plan at any time, but no amendment will adversely affect any award without the participant'sparticipant’s consent and no amendment to the long-term incentive plan will be effective without the approval of ourthe Company’s stockholders if such approval is required by any law, regulation or rule applicable to the long-term incentive plan. During the yearyears ended December 31, 2016,2020 and 2019, no grants have beenwere made under the long-term incentive plan.
Note H – Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03, Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs related to borrowings be presented in the balance sheet as a direct deduction from the carrying amount of the borrowing, consistent with debt discounts. The ASU does not affect the amount or timing of expenses for debt issuance costs. The Company adopted ASU 2015-03 effective January 1, 2016 on a retrospective basis, by recasting all prior periods shown to reflect the effect of adoption, the effect of which is not material.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. During the first quarter 2020, the Company adopted ASU 2016-13 and such adoption did not have a material impact on the Company’s consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The objective of ASU 2017-12 is to expand hedge accounting for both financial (interest rate) and commodity risks and create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. ASU 2017-12 will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods in the year of adoption. Early adoption is permitted for any interim or annual period. During the first quarter 2019, the Company adopted ASU 2017-12 and such adoption did not have a retrospective transition method should be applied. The Company is currently evaluatingmaterial impact on the effect of this update on itsCompany's consolidated financial statements.
Note I - Acquisitions
Property | Location | Date Acquired | Property Type | # Spaces | Size / Acreage | Retail /Office Square Ft. | Investment Amount | Ownership % |
MVP Cleveland West 9th, LLC | Cleveland, OH | 5/11/2016 | Lot | 254 | 2.16 | N/A | $2,894,250 | 51.00% |
33740 Crown Colony, LLC | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $1,545,300 | 51.00% |
MVP San Jose 88 Garage, LLC | San Jose, CA | 6/15/2016 | Garage | 328 | 1.33 | N/A | $3,575,500 | 100.00% |
MCI 1372 Street, LLC | Canton, OH | 7/8/2016 | Lot | 68 | 0.44 | N/A | $700,000 | 100.00% |
MVP Cincinnati Race Street Garage, LLC | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $4,500,000 | 100.00% |
MVP St. Louis Washington, LLC | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $3,000,000 | 100.00% |
MVP St. Paul Holiday Garage, LLC | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,200,000 | 100.00% |
MVP Louisville Station Broadway, LLC | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,050,000 | 100.00% |
White Front Garage Partners, LLC | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $9,196,800 | 80.00% |
Cleveland Lincoln Garage Owners, LLC | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.2 | 45,272 | $7,316,950 | 100.00% |
MVP Houston Jefferson Lot, LLC | Houston, TX | 11/22/2016 | Lot | 76 | 0.52 | N/A | $700,000 | 100.00% |
MVP Houston San Jacinto Lot, LLC | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,200,000 | 100.00% |
2020
No assets were held for sale as of December 31, 2016.
Assets | Liabilities | |||||||||||||||||||
Land and Improvements | Building and improvements | Total assets acquired | Notes Payable Assumed | Net assets and liabilities acquired | ||||||||||||||||
West 9th Properties II | $ | 5,675,000 | -- | $ | 5,675,000 | $ | -- | $ | 5,675,000 | |||||||||||
33740 Crown Colony | 3,030,000 | -- | 3,030,000 | -- | 3,030,000 | |||||||||||||||
San Jose 88 Garage | 1,073,000 | 2,503,000 | 3,576,000 | -- | 3,576,000 | |||||||||||||||
MCI 1372 Street | 700,000 | -- | 700,000 | -- | 700,000 | |||||||||||||||
Cincinnati Race Street | 2,142,000 | 2,358,000 | 4,500,000 | -- | 4,500,000 | |||||||||||||||
St. Louis Washington | 3,000,000 | -- | 3,000,000 | -- | 3,000,000 | |||||||||||||||
St. Paul Holiday Garage | 1,673,000 | 6,527,000 | 8,200,000 | -- | 8,200,000 | |||||||||||||||
Louisville Station Broadway | 3,050,000 | -- | 3,050,000 | -- | 3,050,000 | |||||||||||||||
White Front Garage | 3,116,000 | 8,379,000 | 11,495,000 | -- | 11,495,000 | |||||||||||||||
Cleveland Lincoln Garage | 2,195,000 | 5,122,000 | 7,317,000 | 7,317,000 | ||||||||||||||||
Houston Jefferson * | 700,000 | -- | 700,000 | -- | 700,000 | |||||||||||||||
Houston San Jacinto | 3,200,000 | -- | 3,200,000 | -- | 3,200,000 | |||||||||||||||
$ | 29,554,000 | $ | 24,889,000 | $ | 54,443,000 | $ | -- | $ | 54,443,000 |
2019
On January 11, 2017,Effective April 17, 2019, the Company receivedentered into a purchase sales agreement (“PSA”) with an unsolicited offerunrelated third party to purchase the Houston Jefferson lot for approximately $2.0 million, with a 90-day due diligence period. The property was purchased for a long-term hold; however, our advisor and board of directors believe that the offer received justified the sale of the property.
December 31, 2016 | December 31, 2015 | |||||||
Revenues from continuing operations | $ | 4,081,000 | $ | 1,695,000 | ||||
Net loss available to common stockholders | $ | (2,081,000 | ) | $ | (1,273,000 | ) | ||
Net loss available to common stockholders per share – basic | $ | (1.89 | ) | $ | 152.11 | |||
Net loss available to common stockholders per share – diluted | $ | (1.89 | ) | $ | 152.11 |
The following is summary of $2.8 million in cash plus closing costs,San Jose 88 Garage, LLC net assets held for sale as of which our portion was $560,000. We hold a 20% ownership interest in Houston Preston, while MVP REIT holds an 80% ownership interest in Houston Preston. The parking lot is under a 10 year lease with iPark Services LLC ("iPark"), a regional parking operator, under a modified net lease agreement where MVP Preston is responsible for property taxes above a $38,238 threshold, and iPark pays for insurance and maintenance costs. iPark pays annual rent of $228,000. In addition, the lease provides revenue participation with MVP Preston receiving 65% of gross receipts over $300,000. The term of the lease is for 10 years.
December 31, 2019 | ||
Assets: | ||
Prepaid expenses | $ | 42,000 |
Property and equipment, net of accumulated depreciation | 3,288,000 | |
Total assets | $ | 3,330,000 |
Liabilities: | ||
Notes payable | $ | 2,500,000 |
Accounts payable and accrued liabilities | 47,000 | |
Total liabilities |
| 2,547,000 |
Net assets held for sale | $ | 783,000 |
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The following is a summary of the Company's portionresults of operations related to MVP San Jose 88 Garage for the purchase peryears ended December 31, 2019:
2019 | ||
Revenue | $ | 450,000 |
Expenses * |
| 842,000 |
Income/(loss) from assets held for sale, net of income taxes | $ | (392,000) |
*Includes $343,000 impairment for the agreement:
Ownership | |||||||||||||
Property Name | Purchase Date | Purchase Price | MVP REIT II | MVP REIT | |||||||||
MVP Denver 1935 Sherman | 02/12/2016 | $ | 600,000 | 24.49 | % | 75.51 | % | ||||||
MVP Houston Preston | 11/22/2016 | 560,000 | 20.00 | % | 80.00 | % | |||||||
Total | $ | 1,160,000 |
Note KJ – InvestmentDisposition of Investments in Cost Method Investee
2020
On January 6, 2016,May 26, 2020, the Company, along with MVP REIT closed on the purchase of two parking lots located in Minneapolis for a purchase price of approximately $15.5 million in cash plus closing costs. The purchase was accomplished through Minneapolis Venture, LLC, a limited liability company (the "Minneapolis Venture")an entity wholly owned jointly by the Company, and MVP REIT,sold a parking garage in San Jose, California for cash consideration of which the$4.1 million to UC 88 Garage Owner LLC, a third-party buyer. The Company owns 12.91%. The Company's shareused $2.5 million of the purchase priceproceeds to pay off the existing promissory note secured by the MVP San Jose 88 Garage, LLC. The property was approximately $2.0 million plus the Company's share of the closing costs.
The following is a summary of the Company's portionresults of operations related to the initial investments:
Ownership | |||||||||||||
Property Name | Purchase Date | Purchase Price | MVP REIT | MVP REIT II | |||||||||
MVP Bridgeport Fairfield | 03/30/2016 | 792,000 | 90.00 | % | 10.00 | % | |||||||
Minneapolis City Parking | 01/06/2016 | 1,178,000 | 87.09 | % | 12.91 | % | |||||||
Total | $ | 1,970,000 |
For the Year Ended December 31, | ||||
2020 |
| 2019 | ||
Revenue | $ | 113,000 | $ | 450,000 |
Expenses * | 191,000 | 842,000 | ||
Income/(Loss) from assets held for sale, net of income taxes | $ | (78,000) | $ | (392,000) |
*Includes $343,000 impairment in 2019
2019
Ft Lauderdale
On January 6, 2016,September 23, 2019 the Company, along with MVP REIT closed on the purchase of two parking lots located in Minneapolis for a purchase price of approximately $15.5 million in cash plus closing costs. The purchase was accomplished through Minneapolis Venture, LLC, a limited liability company (the "Minneapolis Venture")an entity wholly owned jointly by the Company, sold a surface parking lot and office building in Ft. Lauderdale for cash consideration of $6.1 million to Fort Lauderdale Properties Management, LLC, a third-party buyer. The Company used $2.0 million of the proceeds to pay off the existing promissory note secured by the MVP PF Ft. Lauderdale 2013, LLC. The property was originally purchased in July 2013 by MVP REIT, Inc., and the property was later acquired by The Parking REIT, Inc. for approximately $3.4 million based upon original purchase price and the allocation of the merger consideration for the merger of MVP REIT, Inc. and MVP REIT of which the Company owns 12.91%.II, Inc. in December 2017. The Company's share of the purchase price wasgain on sale is approximately $2.0 million plus the Company's share of the closing costs. The first parking lot is located at 1022 Hennepin Avenue (the "Hennepin lot"). The Hennepin lot consists of approximately 90,658 square feet and has approximately 270 parking spaces. The second parking lot is located at 41 10th Street North (the "10th Street lot"). The 10th street lot consists of approximately 107,952 square feet and has approximately 185 parking spaces. SP Plus Corporation will lease the Hennepin lot and 10th Street lot under a net lease agreement pursuant to which the Minneapolis Venture will be responsible for property taxes and SP Plus Corporation will pay for all insurance and maintenance costs. SP Plus Corporation will pay a cumulative annual rent of $800,000. In addition, the lease provides revenue participation with Minneapolis Venture receiving 70.0% of gross receipts over $1,060,000 but not in excess of $1,300,000 plus 80.0% of annual gross receipts in excess of $1,300,000. The term of the lease is for 5 years. During April 2016, the Hennepin lot was put into a new entity Minneapolis City Park. During June 2016, Minneapolis Venture entered into a PSA to sell the 10th Street lot to a third party for approximately $6.1$2.3 million. The property is being sold as is and there can be no assurance that the PSA will close.
The following is a summary of the Company's portionresults of the initial investments:
Ownership | |||||||||||||
Property Name | Purchase Date | Purchase Price | MVP REIT | MVP REIT II | |||||||||
MVP Minneapolis Venture | 01/06/2016 | $ | 822,000 | 87.09 | % | 12.91 | % | ||||||
Total | $ | 822,000 |
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For the Year Ended December 31, 2019 | ||
Revenue | $ | 136,000 |
Expenses | (116,000) | |
Income (loss) from disposed assets, net of income taxes | $ | 20,000 |
Memphis Court
On October 29, 2019, the Company, through an entity wholly owned by the Company, sold a surface parking lot and office building in Memphis for cash consideration of $675,000 to KNM Development Group, LLC, a third-party buyer. The property was $39,000. Total loan amortization costoriginally purchased in August 2013 by MVP REIT, Inc., and the property was later acquired by The Parking REIT, Inc. for approximately $1.0 million based upon the original purchase price and the allocation of the merger consideration for the merger of MVP REIT, Inc. and MVP REIT II, Inc. in December 2017. The gain on sale is approximately $0.2.
For the Year Ended December 31, 2019 | ||
Revenue | $ | 4,000 |
Expenses * | 563,000 | |
Income/(loss) from assets held for sale, net of income taxes | $ | (559,000) |
*Includes $558,000 impairment for the year ended December 31, 2016 was $2,800. The Company did not have any notes payable during the period from May 4, 2015 (Inception) through December 31, 2015.
Note K — Notes Payable and Paycheck Protection Program Loan
2020
As of December 31, 2016, future principal payments on the notes payable are as follows:
2017 | $ | 231,000 | ||
2018 | 124,000 | |||
2019 | 129,000 | |||
2020 | 135,000 | |||
2021 | 142,000 | |||
Thereafter | 4,632,000 | |||
Total | $ | 5,393,000 |
Property | Location | Current Loan Balance | Interest Rate | Loan Maturity |
D&O Financing | N/A | $ 112,000 | 3.81% | 8/3/2017 |
West 9th Properties II, LLC | Cleveland, OH | 5,281,000 | 4.50% | 10/25/2026 |
Less unamortized loan issuance costs | (75,000) | |||
Total | $ 5,318,000 |
Property | Original Debt Amount | Monthly Payment | Balance as of 12/31/20 | Lender | Term | Interest Rate | Loan Maturity |
MVP Cincinnati Race Street, LLC | $2,550,000 | Interest Only | $2,550,000 | Multiple | 1 Year | 7.50% | 4/30/2021 |
MVP Wildwood NJ Lot, LLC | $1,000,000 | Interest Only | $1,000,000 | Tigges Construction Co. | 1 Year | 7.50% | 4/30/2021 |
The Parking REIT D&O Insurance | $1,185,000 | $150,000 | $299,000 | MetaBank | 1 Year | 3.60% | 2/28/2021 |
Minneapolis Venture | $2,000,000 | Interest Only | $4,000,000 | Multiple | 1 Year | 9.00% | 04/30/2021 |
MVP Raider Park Garage, LLC (4) | $7,400,000 | Interest Only | $7,400,000 | LoanCore | 1 Year | Variable | 12/9/2021 |
MVP New Orleans Rampart, LLC (4) | $5,300,000 | Interest Only | $5,300,000 | LoanCore | 1 Year | Variable | 12/9/2021 |
MVP Hawaii Marks Garage, LLC (4) | $13,500,000 | Interest Only | $13,500,000 | LoanCore | 1 Year | Variable | 12/9/2021 |
MVP Milwaukee Wells, LLC (4) | $2,700,000 | Interest Only | $2,700,000 | LoanCore | 1 Year | Variable | 12/9/2021 |
MVP Indianapolis City Park, LLC (4) | $7,200,000 | Interest Only | $7,200,000 | LoanCore | 1 Year | Variable | 12/9/2021 |
MVP Indianapolis WA Street, LLC (4) | $3,400,000 | Interest Only | $3,400,000 | LoanCore | 1 Year | Variable | 12/9/2021 |
MVP Clarksburg Lot | $476,000 | Interest Only | $476,000 | Multiple | 1 Year | 7.50% | 5/21/2021 |
MCI 1372 Street | $574,000 | Interest Only | $574,000 | Multiple | 1 Year | 7.50% | 5/27/2021 |
MVP Milwaukee Old World | $771,000 | Interest Only | $771,000 | Multiple | 1 Year | 7.50% | 5/27/2021 |
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MVP Milwaukee Clybourn | $191,000 | Interest Only | $191,000 | Multiple | 1 Year | 7.50% | 5/27/2021 |
SBA PPP Loan | $348,000 | $14,700 | $348,000 | Small Business Administration | 2 Year | 1.00% | 10/22/2022 |
MVP Memphis Poplar (3) | $1,800,000 | Interest Only | $1,800,000 | LoanCore | 5 Year | 5.38% | 3/6/2024 |
MVP St. Louis (3) | $3,700,000 | Interest Only | $3,700,000 | LoanCore | 5 Year | 5.38% | 3/6/2024 |
Mabley Place Garage, LLC | $9,000,000 | $44,000 | $8,007,000 | Barclays | 10 year | 4.25% | 12/6/2024 |
MVP Houston Saks Garage, LLC | $3,650,000 | $20,000 | $3,164,000 | Barclays Bank PLC | 10 year | 4.25% | 8/6/2025 |
Minneapolis City Parking, LLC (6) | $5,250,000 | $29,000 | $4,659,000 | American National Insurance, of NY | 10 year | 4.50% | 5/1/2026 |
MVP Bridgeport Fairfield Garage, LLC (5) | $4,400,000 | $23,000 | $3,933,000 | FBL Financial Group, Inc. | 10 year | 4.00% | 8/1/2026 |
West 9th Properties II, LLC (6) | $5,300,000 | $30,000 | $4,774,000 | American National Insurance Co. | 10 year | 4.50% | 11/1/2026 |
MVP Fort Worth Taylor, LLC (6) | $13,150,000 | $73,000 | $11,873,000 | American National Insurance, of NY | 10 year | 4.50% | 12/1/2026 |
MVP Detroit Center Garage, LLC | $31,500,000 | $194,000 | $29,042,000 | Bank of America | 10 year | 5.52% | 2/1/2027 |
MVP St. Louis Washington, LLC (1) | $1,380,000 | $8,000 | $1,334,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
St. Paul Holiday Garage, LLC (1) | $4,132,000 | $24,000 | $3,992,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
Cleveland Lincoln Garage, LLC (1) | $3,999,000 | $23,000 | $3,863,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Denver Sherman, LLC (1) | $286,000 | $2,000 | $275,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Milwaukee Arena Lot, LLC (1) | $2,142,000 | $12,000 | $2,069,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Denver 1935 Sherman, LLC (1) | $762,000 | $4,000 | $736,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Louisville Broadway Station, LLC (2) | $1,682,000 | Interest Only | $1,682,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Whitefront Garage, LLC (2) | $6,454,000 | Interest Only | $6,454,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Houston Preston Lot, LLC (2) | $1,627,000 | Interest Only | $1,627,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Houston San Jacinto Lot, LLC (2) | $1,820,000 | Interest Only | $1,820,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
St. Louis Broadway, LLC (2) | $1,671,000 | Interest Only | $1,671,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
St. Louis Seventh & Cerre, LLC (2) | $2,057,000 | Interest Only | $2,057,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Indianapolis Meridian Lot, LLC (2) | $938,000 | Interest Only | $938,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Preferred Parking, LLC | $11,330,000 | Interest Only | $11,330,000 | Key Bank | 10 year ** | 5.02% | 8/1/2027 |
Less unamortized loan issuance costs |
|
| ($1,165,000) |
|
|
|
|
|
|
| $159,344,000 |
|
|
|
|
(1) | The Company issued a promissory note to KeyBank for $12.7 million secured by a pool of properties, including (i) MVP Denver Sherman, LLC, (ii) MVP Denver 1935 Sherman, LLC, (iii) MVP Milwaukee Arena, LLC, (iv) MVP St. Louis Washington, LLC, (v) St. Paul Holiday Garage, LLC and (vi) Cleveland Lincoln Garage, LLC. |
(2) | The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by a pool of properties, including (i) MVP Indianapolis Meridian Lot, LLC, (ii) MVP Louisville Station Broadway, LLC, (iii) MVP White Front Garage Partners, LLC, (iv) MVP Houston Preston Lot, LLC, (v) MVP Houston San Jacinto Lot, LLC, (vi) St. Louis Broadway Group, LLC, and (vii) St. Louis Seventh & Cerre, LLC. |
(3) | On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”), and MVP PF Memphis Poplar 2013 (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis and MVP Memphis Poplar $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis and MVP Memphis Poplar. |
(4) | On November 30, 2018, subsidiaries of the Company, consisting of MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Park Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, and MVP Milwaukee Wells LLC (the “Borrowers”) entered into a loan agreement, dated as of November 30, 2018 (the “Loan Agreement”), with LoanCore Capital Credit REIT LLC (the “LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan the Borrowers $39.5 million to repay and discharge the outstanding KeyBank Revolving Credit Facility. On July 9, 2020, the Company entered into a loan modification agreement with LoanCore Capital Credit REIT, LLC for the following notes payable: (i) MVP Raider Park Garage, LLC, (ii) MVP New Orleans Rampart, LLC, (iii) MVP Hawaii Marks Garage, LLC, (iv) MVP Milwaukee Wells, LLC, (v) MVP Indianapolis City Park, LLC, (vi) MVP Indianapolis WA Street, LLC. The Agreement defers a portion of the required monthly interest payments from June 2020 through November 2020 and reduces the LIBOR Floor from 1.95% to 0.50%, the Modified LIBOR Floor. |
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(5) | Due to the impact of COVID-19, on May 12, 2020, the Company entered into a Loan Modification Agreement with Farm Bureau Life Insurance Company providing for a ninety-day interest-only period commencing with the payment due June 1, 2020 and continuing through the payment due August 1, 2020. During the interest only period, the monthly installments due under the Note were modified to provide for payment of accrued interest only in the amount of $13,384. |
(6) | On July 31, 2020, the Company entered into three loan modification agreements with American National Insurance Company (“ANICO”) for the following three loans: (i) Minneapolis City Parking, LLC, (ii) West 9th Properties II, LLC and (iii) MVP Fort Worth Taylor, LLC. The Company has entered into an Escrow Agreement with ANICO in which $950,000 in condemnation proceeds from the City of Minneapolis was used to pay the monthly principal and interest due each note, beginning with the payment due May 1, 2020, until the termination date. As December 31, 2020, these loans had reverted back to normal payment terms. |
* 2 Year Interest Only
** 10 Year Interest Only
Total interest expense incurred for the years ended December 31, 2020 and 2019, was approximately $8.5 million and $8.6 million, respectively. Total loan amortization cost for the years ended December 31, 2020 and 2019, was approximately $0.8 million and $0.9 million, respectively.
As of December 31, 2016,2020, future principal payments on notes payable are as follows:
2021 | $ | 51,656,000 |
2022 |
| 2,398,000 |
2023 |
| 2,498,000 |
2024 |
| 15,283,000 |
2025 |
| 5,112,000 |
Thereafter |
| 83,562,000 |
Less unamortized loan issuance costs |
| (1,165,000) |
Total | $ | 159,344,000 |
The following table shows notes payable paid in full during the Company had no financial assets and liabilities utilizing Level 1 or Level 2. year ended December 31, 2020:
Property | Original Debt Amount | Monthly Payment | Balance as of 12/31/20 | Lender | Term | Interest Rate | Loan Maturity |
MVP San Jose 88 Garage, LLC | $1,645,000 | Interest Only | -- | Multiple | 1 Year | 7.50% | 6/30/2020 |
The Parking REIT D&O Insurance | $1,681,000 | $171,000 | -- | MetaBank | 1 Year | 8.00% | 4/30/2020 |
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2019
As of December 31, 2019, the principal balances on notes payable are as follows:
Property | Original Debt Amount | Monthly Payment | Balance as of 12/31/2019 | Lender | Term | Interest Rate | Loan Maturity |
MVP San Jose 88 Garage, LLC (5) | $1,645,000 | Interest Only | $2,500,000 | Multiple | 1 Year | 7.50% | 6/30/2020 |
MVP Cincinnati Race Street, LLC | $2,550,000 | Interest Only | $2,550,000 | Multiple | 1 Year | 7.50% | 4/19/2020 |
MVP Wildwood NJ Lot, LLC | $1,000,000 | Interest Only | $1,000,000 | Tigges Construction Co. | 1 Year | 7.50% | 4/29/2020 |
The Parking REIT D&O Insurance | $1,681,000 | $171,000 | $679,000 | MetaBank | 1 Year | 3.60% | 4/30/2020 |
Minneapolis Venture | $2,000,000 | Interest Only | $2,000,000 | Multiple | 1 Year | 8.00% | 10/22/2020 |
MVP Raider Park Garage, LLC (4) | $7,400,000 | Interest Only | $7,400,000 | LoanCore | 2 Year | Variable | 12/9/2020 |
MVP New Orleans Rampart, LLC (4) | $5,300,000 | Interest Only | $5,300,000 | LoanCore | 2 Year | Variable | 12/9/2020 |
MVP Hawaii Marks Garage, LLC (4) | $13,500,000 | Interest Only | $13,500,000 | LoanCore | 2 Year | Variable | 12/9/2020 |
MVP Milwaukee Wells, LLC (4) | $2,700,000 | Interest Only | $2,700,000 | LoanCore | 2 Year | Variable | 12/9/2020 |
MVP Indianapolis City Park, LLC (4) | $7,200,000 | Interest Only | $7,200,000 | LoanCore | 2 Year | Variable | 12/9/2020 |
MVP Indianapolis WA Street, LLC (4) | $3,400,000 | Interest Only | $3,400,000 | LoanCore | 2 Year | Variable | 12/9/2020 |
MVP Memphis Poplar (3) | $1,800,000 | Interest Only | $1,800,000 | LoanCore | 5 Year | 5.38% | 3/6/2024 |
MVP St. Louis (3) | $3,700,000 | Interest Only | $3,700,000 | LoanCore | 5 Year | 5.38% | 3/6/2024 |
Mabley Place Garage, LLC | $9,000,000 | $44,000 | $8,188,000 | Barclays | 10 year | 4.25% | 12/6/2024 |
MVP Houston Saks Garage, LLC | $3,650,000 | $20,000 | $3,262,000 | Barclays Bank PLC | 10 year | 4.25% | 8/6/2025 |
Minneapolis City Parking, LLC | $5,250,000 | $29,000 | $4,797,000 | American National Insurance, of NY | 10 year | 4.50% | 5/1/2026 |
MVP Bridgeport Fairfield Garage, LLC | $4,400,000 | $23,000 | $4,025,000 | FBL Financial Group, Inc. | 10 year | 4.00% | 8/1/2026 |
West 9th Properties II, LLC | $5,300,000 | $30,000 | $4,909,000 | American National Insurance Co. | 10 year | 4.50% | 11/1/2026 |
MVP Fort Worth Taylor, LLC | $13,150,000 | $73,000 | $12,208,000 | American National Insurance, of NY | 10 year | 4.50% | 12/1/2026 |
MVP Detroit Center Garage, LLC | $31,500,000 | $194,000 | $29,717,000 | Bank of America | 10 year | 5.52% | 2/1/2027 |
MVP St. Louis Washington, LLC (1) | $1,380,000 | $8,000 | $1,362,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
St. Paul Holiday Garage, LLC (1) | $4,132,000 | $24,000 | $4,078,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
Cleveland Lincoln Garage, LLC (1) | $3,999,000 | $23,000 | $3,946,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Denver Sherman, LLC (1) | $286,000 | $2,000 | $282,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Milwaukee Arena Lot, LLC (1) | $2,142,000 | $12,000 | $2,114,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Denver 1935 Sherman, LLC (1) | $762,000 | $4,000 | $752,000 | KeyBank | 10 year * | 4.90% | 5/1/2027 |
MVP Louisville Broadway Station, LLC (2) | $1,682,000 | Interest Only | $1,682,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Whitefront Garage, LLC (2) | $6,454,000 | Interest Only | $6,454,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Houston Preston Lot, LLC (2) | $1,627,000 | Interest Only | $1,627,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Houston San Jacinto Lot, LLC (2) | $1,820,000 | Interest Only | $1,820,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
St. Louis Broadway, LLC (2) | $1,671,000 | Interest Only | $1,671,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
St. Louis Seventh & Cerre, LLC (2) | $2,057,000 | Interest Only | $2,057,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Indianapolis Meridian Lot, LLC (2) | $938,000 | Interest Only | $938,000 | Cantor Commercial Real Estate | 10 year ** | 5.03% | 5/6/2027 |
MVP Preferred Parking, LLC | $11,330,000 | Interest Only | $11,330,000 | Key Bank | 10 year ** | 5.02% | 8/1/2027 |
Less unamortized loan issuance costs |
|
| ($1,828,000) |
|
|
|
|
|
|
| $159,120,000 |
|
|
|
|
(1) | The Company issued a promissory note to KeyBank for $12.7 million secured by a pool of properties, including (i) MVP Denver Sherman, LLC, (ii) MVP Denver 1935 Sherman, LLC, (iii) MVP Milwaukee Arena, LLC, (iv) MVP St. Louis Washington, LLC, (v) St. Paul Holiday Garage, LLC and (vi) Cleveland Lincoln Garage Owners, LLC. |
(2) | The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by a pool of properties, including (i) MVP Indianapolis Meridian Lot, LLC, (ii) MVP Louisville Station Broadway, LLC, (iii) MVP White Front Garage Partners, LLC, (iv) MVP Houston Preston Lot, LLC, (v) MVP Houston San Jacinto Lot, LLC, (vi) St. Louis Broadway Group, LLC, and (vii) St. Louis Seventh & Cerre, LLC. |
(3) | On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”), and MVP PF Memphis Poplar 2013 (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis and MVP Memphis Poplar $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis and MVP Memphis Poplar. |
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(4) | On November 30, 2018, subsidiaries of the Company, consisting of MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Park Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, and MVP Milwaukee Wells LLC (the “Borrowers”) entered into a loan agreement, dated as of November 30, 2018 (the “Loan Agreement”), with LoanCore Capital Credit REIT LLC (the “LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan the Borrowers $39.5 million to repay and discharge the outstanding KeyBank Revolving Credit Facility. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by the Borrowers (the “Properties”). The loan bears interest at a floating rate equal to the sum of one-month LIBOR plus 3.65%, subject to a LIBOR minimum of 1.95%. Additionally, the Borrowers were required to purchase an Interest Rate Protection Agreement which caps its maximum LIBOR at 3.50% for the duration of the loan. Payments are interest-only for the duration of the loan, with the $39.5 million principal repayment due in a balloon payment due on December 9, 2020, with an option to extend the term until December 9, 2021 subject to certain conditions and payment obligations. The Borrowers have the right to prepay all or any part of the loan, subject to payment of any applicable Spread Maintenance Premium and Exit Fee (as defined in the Loan Agreement). The loan is also subject to mandatory prepayment upon certain events of Insured Casualty or Condemnation (as defined in the Loan Agreement). The Borrowers made customary representations and warranties to LoanCore and agreed to maintain certain covenants under the Loan Agreement, including but not limited to, covenants involving their existence; property taxes and other charges; access to properties, repairs, maintenance and alterations; performance of other agreements; environmental matters; title to properties; leases; estoppel statements; management of the Properties; special purpose bankruptcy remote entity status; change in business or operation of the Properties; debt cancellation; affiliate transactions; indebtedness of the Borrowers limited to Permitted Indebtedness (as defined in the Loan Agreement); ground lease reserve relating to MVP New Orleans’ Property; property cash flow allocation; liens on the Properties; ERISA matters; approval of major contracts; payments upon a sale of a Property; and insurance, notice and reporting obligations as set forth in the loan agreement. The Loan Agreement contains customary events of default and indemnification obligations. The loan proceeds were used to repay and discharge the KeyBank Credit Agreement, dated as of December 29, 2017, as amended, per the terms outlined in the third amendment to the Credit Agreement dated September 28, 2018, as previously filed on Form 8-K on October 2, 2018 and incorporated herein by reference. |
(5) | Loan in the amount of $2,500,000 was originated on June 5, 2018 of which $1,645,000 was funded. Remaining balance available of $855,000 was funded on December 11, 2018. |
* 2 Year Interest Only
** 10 Year Interest Only
The Company had assets and liabilities utilizing Level 3 inputs including investmentsfollowing table shows notes payable paid in equityfull during the year ended December 31, 2019.
Property | Original Debt Amount | Monthly Payment | Balance as of 12/31/2019 | Lender | Term | Interest Rate | Loan Maturity |
MVP PF Ft. Lauderdale 2013, LLC | $2,000,000 | -- | -- | Multiple | 1 Year | 8.00% | 6/24/2020 |
MVP PF Ft. Lauderdale 2013, LLC (1) | $4,300,000 | $25,000 | -- | Key Bank | 5 Year | 4.94% | 2/1/2019 |
The Parking REIT D&O Insurance | $390,000 | $29,000 | -- | First Insurance Funding | 1 Year | 3.70% | 4/30/2019 |
(1) | Secured by four properties, including (i) MVP PF Ft. Lauderdale 2013, LLC, (ii) MVP PF Memphis Court 2013, LLC, (iii) MVP PF Memphis Poplar 2013, LLC and (iv) MVP PF St. Louis 2013, LLC |
Total interest expense incurred for the years ended December 31, 2019, was approximately $8.6 million. Total loan amortization cost method investees.
As of December 31, 2019, future principal payments on notes payable are as follows:
2020 | $ | 50,183,000 |
2021 |
| 2,058,000 |
2022 |
| 2,252,000 |
2023 |
| 2,498,000 |
2024 |
| 15,283,000 |
Thereafter |
| 88,674,000 |
Less unamortized loan issuance costs |
| (1,828,000) |
Total | $ | 159,120,000 |
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Note L — Fair Value
A fair value measurement is based on modelsthe assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs that are less observable or unobservableused in the market, the determination ofmeasuring fair value requires more judgment. Accordingly, our degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. are as follows:
1. | Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
2. | Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable. |
3. | Level 3 – Model-derived valuations with unobservable inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability will be classified in its entiretyfor disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level of input that is significant to the measurement of fair value.
The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation, such as the recent illiquidity in the auction rate securities market. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition may cause ourCompany's financial instruments include cash and cash equivalents, restricted cash, accounts payable and accrued expenses. Due to be reclassified from Level 1 to Level 2 or Level 3 and/or vice versa.
Assets and liabilities measured at fair value Level 3 on a recurringnon-recurring basis by input levels:
Quoted Prices in Active Markets For Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at 12/31/16 | Carrying Value on Balance Sheet at 12/31/16 | ||||||||||||||||
Assets Investment in equity method investee | $ | -- | $ | -- | $ | 1,150,000 | $ | 1,150,000 | $ | 1,150,000 | ||||||||||
Investment in cost method investee – held for sale | $ | -- | $ | 836,000 | $ | 836,000 | $ | 836,000 | ||||||||||||
Investment in cost method investee | $ | -- | $ | -- | $ | 936,000 | $ | 936,000 | $ | 936,000 |
Note P — Assets held for sale
On May 31, 2017, the Company, through a wholly owned subsidiary of December 31, 2016, we hadits Operating Partnership, purchased a 100% ownership51.0% beneficial interest in one property thatMVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”), for approximately $2.8 million. MVP St. Louis is the owner of a 2.56-acre, 376-vehicle commercial parking lot located at 500 South Broadway, St. Louis, Missouri 63103, known as the Cardinal Lot (the “Property”), which is adjacent to Busch Stadium, the home of the St. Louis Cardinals major league baseball team. The Property was listed as heldpurchased by MVP St. Louis from an unaffiliated seller for sale,a purchase price of $11,350,000, plus payment of closing costs, financing costs, and related transactional costs.
Concurrently with the acquisition of the Property, MVP St. Louis obtained a first mortgage loan from Cantor Commercial Real Estate Lending, L.P (“St. Louis Lender”), in the principal amount of $6,000,000, with a carrying value10-year, interest-only term at a fixed interest rate of approximately $700,000. This property5.25%, resulting in an annual debt service payment of $315,000 (the “St. Louis Loan”). MVP St. Louis used the Company’s investment to fund a portion of the purchase price for the Property. The remaining equity portion was acquired on November 22, 2016. This property is accounted for atfunded through short-term investments by VRM II, an affiliate of the fair value based on an appraisal.
Also, concurrently with the acquisition of the Property, MVP St. Louis, as landlord, entered into a PSA10-year master lease (the “St. Louis Master Lease”), with MVP St. Louis Cardinal Lot Master Tenant, LLC, an affiliate of the former Advisor, as tenant, (the “St. Louis Master Tenant”). St. Louis Master Tenant, in turn, concurrently entered into a 10-year sublease with Premier Parking of Missouri, LLC. The St. Louis Master Lease provides for annual rent payable monthly to sellMVP St. Louis, consisting of base rent in an amount to pay debt service on the property "as is"St. Louis Loan, stated rent of $414,000 and potential bonus rent equal to a third party for approximately $2.0 million.
The Company conducted an analysis and concluded that the 51% investment in the DST should not be consolidated. As a DST, the entity is subject to the assets held for sale f
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As stated in ASC 810: “A controlling financial interest in the VIE model requires both of the following:
a. The power to direct the activities that most significantly impact the VIE’s economic performance
b. The obligation to absorb losses of the VIE that could potentially be significant to the VIE or periodthe right to receive benefits from November 22, 2016 (acquisition)the VIE that could potentially be significant to December 31, 2016:
For period of November 22, 2016 (acquisition) to December 31, 2016 | ||||
Revenue | $ | 5,000 | ||
Expenses | (22,000 | ) | ||
Net loss | $ | (19,000 | ) |
As a REIT, it generally willVIE, the DST is governed in a manner similar to a limited partnership (i.e., there are trustees and there is no board) and the Company, as a beneficial owner, lacks the power through voting rights or otherwise to direct the activities of the DST that most significantly impact the entity’s economic performance. Specifically, the beneficial interest owners do not be subject to federal income tax on taxable income distributedhave the rights set forth in ASC 810-10-15-14(b)(1)(ii) – the beneficial owners can only remove the trustees if the trustees have engaged in fraud or gross negligence with respect to the stockholders.trust and the beneficial owners have no substantive participating rights over the trustees.
The former Advisor was the advisor to the Company. The Company is controlled by its independent board of directors and its shareholders. In 2016,addition, the former Advisor is the 100% direct/indirect owner of the MVP Parking DST, LLC (“DST Sponsor”), the MVP St. Louis Cardinal Lot Signature Trustee, LLC (“Signature Trustee”) and MVP St. Louis Cardinal Lot Master Tenant, LLC (the “Master Tenant”), who have no direct or indirect ownership in the Company. The Signature Trustee and the Master Tenant can direct the most significant activities of the DST.
The former Advisor controls and consolidates the Signature Trustee, the Master Tenant, and the DST Sponsor. The Company concluded the Master Tenant/property management agreement exposes the Master Tenant to funding operating losses of the Property. As such, that agreement should be considered a variable interest in DST (ASC 810-10-55-37 and 810-10-55-37C). Accordingly, the former Advisor has a variable interest in the DST (through the master tenant/property manager) and has power over the significant activities of the DST (through the Signature Trustee and the master tenant/property manager). Accordingly, the Company has no distributable taxable income.believes that the Master Tenant is the primary beneficiary of the DST, which is ultimately owned and controlled by the former Advisor. In addition, the Company does not have the power to direct or change the activities of the Trust and shares income and losses pari passu with the other owners. As such, the Company accounts for its investment under the equity method and does not consolidate its investment in the DST.
Summarized Balance Sheets—Unconsolidated Real Estate Affiliates—Equity Method Investments
December 31, 2020 |
| December 31, 2019 | ||
(Unaudited) |
| (Unaudited) | ||
ASSETS | ||||
Investments in real estate and fixed assets | $ | 11,512,000 | $ | 11,512,000 |
Cash | 1,000 |
| 28,000 | |
Cash – restricted | 34,000 |
| 24,000 | |
Due from related parties |
| -- |
| -- |
Prepaid expenses |
| 17,000 |
| 10,000 |
Total assets | $ | 11,564,000 | $ | 11,574,000 |
LIABILITIES AND EQUITY | ||||
Liabilities |
|
| ||
Notes payable, net of unamortized loan issuance costs of approximately $45,000 and $46,000 as of December 31, 2020 and 2019, respectively | $ | 5,953,000 | $ | 5,954,000 |
Accounts payable and accrued liabilities |
| 239,000 |
| 93,000 |
Due to related party |
| 88,000 |
| 57,000 |
Total liabilities | 6,280,000 |
| 6,104,000 | |
Equity |
|
| ||
Member’s equity | 6,129,000 |
| 6,129,000 | |
Offering costs | (574,000) |
| (574,000) | |
Accumulated earnings | 832,000 |
| 952,000 | |
Distributions to members |
| (1,103,000) |
| (1,037,000) |
Total equity | 5,284,000 |
| 5,470,000 | |
Total liabilities and equity | $ | 11,564,000 | $ | 11,574,000 |
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Summarized Statements of Operations—Unconsolidated Real Estate Affiliates—Equity Method Investments
For the Years Ended December 31, | ||||
2020 |
| 2019 | ||
Revenue | $ | 668,000 | $ | 738,000 |
Expenses | (788,000) | (392,000) | ||
Net income (loss) | $ | (120,000) | $ | 346,000 |
Note N – Right of Use Leased Asset and Lease Liability
The Company executed a lease agreement for its office space at 9130 W. Post Rd., Suite 200, Las Vegas, NV 89148 with a commencement date of January 10, 2020. The lease has a ten-year term with an annual payment of $180,480 per annum during the lease term. The lease is accounted for as an operating lease under ASU 2016-02, Leases – (Topic 842). The Company recognized a Right of Use (“ROU”) Leased Asset and a Right of Use (“ROU”) Lease Liability on the lease commencement date. Through the discounting of the remaining lease payments at the Company’s incremental borrowing rate of 5.382%, the value of both the ROU asset and ROU liability, at December 31, 2020, was approximately $1,282,000. The Company recognized approximately $112,000 of operating lease expense during the year ended December 31, 2020. This expense is included in general and administrative expense.
As of December 31, 2020, future lease liability is as follows:
2021 | $ | 114,000 |
2022 |
| 121,000 |
2023 |
| 127,000 |
2024 |
| 134,000 |
2025 |
| 142,000 |
Thereafter |
| 644,000 |
Total | $ | 1,282,000 |
Note O — Legal
Federal Action
On March 12, 2019, stockholder SIPDA Revocable Trust (“SIPDA”) filed a purported class action complaint in the United States District Court for the District of Nevada, against the Company and certain of its current and former officers and directors. SIPDA filed an Amended Complaint on October 11, 2019. The Amended Complaint purports to assert class action claims on behalf of all public shareholders of the Company and MVP I between August 11, 2017 and April 1, 2019 in connection with the (i) August 2017 proxy statements filed with the SEC to obtain shareholder approval for the merger of the Company and MVP I (the “proxy statements”), and (ii) August 2018 proxy statement filed with the SEC to solicit proxies for the election of certain directors (the “2018 proxy statement”). The Amended Complaint alleges, among other things, that the 2017 proxy statements failed to disclose that two major reasons for the merger and certain charter amendments implemented in connection therewith were (i) to facilitate the execution of an amended advisory agreement that allegedly was designed to benefit Mr. Shustek financially in the event of an internalization and (ii) to give Mr. Shustek the ability to cause the Company to internalize based on terms set forth in the amended advisory agreement. The Amended Complaint further alleges, among other things, that the 2018 proxy statement failed to disclose the Company’s purported plan to internalize its management function.
The Amended Complaint alleges, among other things, (i) that all defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, by disseminating proxy statements that allegedly contain false and misleading statements or omit to state material facts; (ii) that the director defendants violated Section 20(a) of the Exchange Act; and (iii) that the director defendants breached their fiduciary duties to the members of the class and to the Company.
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The Amended Complaint seeks, among other things, unspecified damages; declaratory relief; and the payment of reasonable attorneys' fees, accountants' and experts' fees, costs and expenses.
On June 13, 2019, the court granted SIPDA’s motion for Appointment as Lead Plaintiff. The litigation is still at a preliminary stage. On January 9, 2020, the Company and the Board of Directors moved to dismiss the Amended Complaint. Upon being advised by the parties that they are engaged in on-going, active settlement efforts, on November 30, 2020, the court denied the pending motions to dismiss without prejudice as moot and subject to refiling of the settlement efforts are not successful. The Company and the Board of Directors have reviewed the allegations in the Amended Complaint and believe the claims asserted against them in the Amended Complaint are without merit and intend to vigorously defend this action if the parties cannot agree on settlement terms (which would include the Maryland Actions described below).
Maryland Actions
On May 31, 2019, and June 27, 2019, alleged stockholders filed class action lawsuits alleging direct and derivative claims against the Company, certain of our officers and directors, MVP Realty Advisors, Vestin Realty Mortgage I, and Vestin Realty Mortgage II in the Circuit Court for Baltimore City, captioned Arthur Magowski v. The Parking REIT, Inc., et. al, No. 24-C-19003125 (filed on May 31, 2019) (the “Magowski Complaint”) and Michelle Barene v. The Parking REIT, Inc., et. al, No. 24-C-19003527 (filed on June 27, 2019) (the “Barene Complaint”).
The Magowski Complaint asserts purportedly direct claims on behalf of all stockholders (other than the defendants and persons or entities related to or affiliated with any subsidiaries electeddefendant) for breach of fiduciary duty and unjust enrichment arising from the Company’s decision to internalize its advisory function. In this Complaint, Plaintiff Magowski asserts that the stockholders have allegedly been directly injured by the internalization and related transactions. The Barene Complaint asserts both direct and derivative claims for breach of fiduciary duty arising from substantially similar allegations as those contained in the Magowski Complaint. The purportedly direct claims are asserted on behalf of the same class of stockholder as the purportedly direct claims in the Magowski Complaint, and the derivative claims in the Barene Complaint are asserted on behalf of the Company.
On September 12 and 16, 2019, the defendants filed motions to dismiss the Magowski and Barene complaints, respectively. The Magowski and Barene Complaints seek, among other things, damages; declaratory relief; equitable relief to reverse and enjoin the internalization transaction; and the payment of reasonable attorneys' fees, accountants' and experts' fees, costs and expenses. The actions are at a preliminary stage. The parties have requested that these two cases be consolidated and stayed while the parties pursue settlement efforts. The Company and the board of directors intend to vigorously defend against these lawsuits if the parties cannot agree on settlement terms (which would include the Federal Action described above).
The Magowski Complaint also previewed that a stockholder demand would be made on the Board to take action with respect to claims belonging to the Company for the alleged injury to the Company. On June 19, 2019, Magowski submitted a formal demand letter to the Board asserting the same alleged wrongdoing as alleged in the Magowski Complaint and demanding that the Board investigate the alleged wrongdoing and take action to remedy the alleged injury to the Company. The demand includes that claims be initiated against the same defendants as are named in the Magowski Complaint. In response to this stockholder demand letter, on July 16, 2019, the Board established a demand review committee of one independent director to investigate the allegations of wrongdoing made in the letter and to make a recommendation to the Board for a response to the letter. On September 27, 2019, the Board replaced the demand review committee with a special litigation committee. The special litigation committee is responsible for investigating the allegations of wrongdoing made in the letter and making a final determination regarding the response for the Company to the demand. The work of the special litigation committee is on-going.
SEC Investigation
The SEC is conducting an investigation relating to the Parking REIT. On March 11, 2021, the SEC sent counsel for the Parking REIT a letter stating the following: “We have conducted an investigation involving The Parking REIT, Inc. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against The Parking REIT, Inc. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice ‘must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.’ (The full text of Release No. 5310 can be found at: sec.gov/divisions/enforce/wells-release.pdf).” The SEC investigation also relates to the conduct of the Company’s chairman and chief executive officer, Michael V. Shustek. The Company has an obligation to indemnify Mr. Shustek for certain expenses relating to the investigation, subject to certain limits specified in the agreements relating to the Bombe transaction. The Company cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies, if any, that may be imposed on Mr. Shustek, any other entity arising out of the SEC investigation, nor can it estimate the amount of the Company’s indemnification obligation (except to the extent such obligation is capped).
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Nasdaq Notification Regarding Company’s Common Stock
Further, Nasdaq has informed the Company that (i) the Company’s common stock will not be approved for listing currently on the Nasdaq Global Market, and (ii) it is highly unlikely that the Company’s common stock would be approved for listing while the SEC investigation is ongoing. There can be no assurance that the Company’s common stock will ever be approved for listing on the Nasdaq Global Market or any other stock exchange, even if the SEC investigation referred to above is completed and no wrongdoing is found and no action is taken in connection therewith against the Company, Mr. Shustek or any other person.
Note P — Income Taxes and Critical Accounting Policy
Income Taxes and Distributions
As a REIT, the Company was generally not subject to tax on its taxable income in periods from inception through December 31, 2019. Assuming the Company is unable to pursue relief to retain its REIT status, or chooses not to, it is taxable as a C-Corporation effective January 1, 2020. Accordingly, the Company now expects to be treated as TRSs pursuant to the Code to participate in services that would otherwise be considered impermissible for REITS and are subject to federal and state income tax at regular federal and state corporate tax rates.
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For federal income tax purposes, distributions to stockholders of a C-Corporation are generally characterized as ordinary income,dividends to the extent such distributions are paid out of corporate earnings and profits, or as a return of capital gainif such distributions or nontaxable distributions. Nontaxableexceed the Company’s earnings and profits. Return of capital distributions will reduce U.S. stockholders' basis (but not below zero) in their shares, and stockholders would recognize a taxable gain to the extent that return of capital distributions exceed their adjusted tax basis in such shares. The income tax treatment for distributions reportable for the yearyears ended December 31, 2020 and 2019 is as follows:
2020 | 2019 | |||
Return of Capital - Preferred | $ | 750,000 | $ | 3,001,000 |
Capital Gain | -- | -- | ||
Return of Capital - Common | -- | -- | ||
$ | 750,000 | $ | 3,001,000 |
Note Q —Preferred Stock and Warrants
The Company reviewed the relevant ASC’s, specifically ASC 480 – Distinguishing Liabilities from Equity and ASC 815 – Derivatives and Hedging, in connection with the presentation of the Series A and Series 1 preferred stock. Below is a summary of the Company’s preferred stock offerings.
Series A Preferred Stock
On November 1, 2016, the Company commenced an offering of up to $50 million in shares of the Company’s Series A Convertible Redeemable Preferred Stock (“Series A”), par value $0.0001 per share, together with warrants to acquire the Company’s common stock, in a Regulation D 506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company closed the offering on March 24, 2017 and raised approximately $2.5 million, net of offering costs, in the Series A private placements.
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The holders of the Series A Preferred Stock are entitled to receive, when and as authorized by the board of directors and declared by the Company out of funds legally available for the period May 4, 2015 (Datepayment of inception) throughdividends, cash dividends at the rate of 5.75% per annum of the initial stated value of $1,000 per share. Since a Listing Event, as defined in the charter, did not occur by March 31, 2018, the cash dividend rate has been increased to 7.50%, until a Listing Event at which time, the annual dividend rate will be reduced to 5.75% of the Stated Value. Based on the number of Series A shares outstanding at December 31, 20152020, the increased dividend rate costs the Company approximately $13,000 more per quarter in Series A dividends.
Subject to the Company’s redemption rights as described below, each Series A share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series A Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 90 days after the occurrence of a Listing Event or (ii) the second anniversary of the final closing of the Series A offering (whether or not a Listing Event has occurred). Each Series A share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series A Conversion Price”) determined as follows:
If the Amended Charter becomes effective, the date by which holders of Series A must provide notice of conversion will be changed from the day immediately preceding the first anniversary of the issuance of such share to December 31, 2017. This change will conform the terms of the Series A with the terms of the Series 1 with respect to conversions.
At any time, from time to time, after the 20th trading day after the date of a Listing Event, the Company (or its successor) will have the right (but not the obligation) to redeem, in whole or in part, the Series A at the redemption price equal to 100% of the Stated Value, initially $1,000 per share, plus any accrued but unpaid dividends if any, to and including the date fixed for redemption. If the Company (or its successor) chooses to redeem any Shares, the Company (or its successor) has the right, in its sole discretion, to pay the redemption price in cash or in equal value of common stock of the Company (or its successor), based on the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the redemption, in exchange for the Series A. The Company (or its successor) also will have the right (but not the obligation) to redeem all or any portion of the Series A subject to a Series A Conversion Notice for a cash payment to the holder thereof equal to the applicable redemption price, by delivering a redemption notice to the holder of such Shares on or prior to the 10th trading day prior to the close of trading on the applicable Conversion Date.
Each investor in the Series A received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of December 31, 2020 is immaterial. As of December 31, 2020, there were detachable warrants that could be exercised for 84,510 shares of the Company’s common stock, if a listing event occurs on or before March 22, 2022, after the 90th day following the occurrence of a listing event. If a listing event does occur before the anniversary date, these potential warrants will then expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at December 31, 2020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to the Company would be approximately $2.1 million and the Company would as a result issue an additional 84,510 shares of common stock.
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On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A, however, such distributions will continue to accrue in accordance with the terms of the Series A.
Series 1 Preferred Stock
On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock (“Series 1”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1, together with warrants to acquire the Company’s common stock, to accredited investors. On January 31, 2018 the Company closed this offering.
The holders of the Series 1 Preferred Stock are entitled to receive, when and as authorized by the Company’s board of directors and declared by us out of legally available funds, cumulative, cash dividends on each Share at an annual rate of 5.50% of the Stated Value pari passu with the dividend preference of the Series A Preferred Stock and in preference to any payment of any dividend on the Company’s common stock; provided, however, that Qualified Purchasers (who purchased $1.0 million or more in a single closing) are entitled to receive, when and as authorized by the Company’s board of directors and declared by us out of legally available funds, cumulative, cash dividends on each Series 1 share held by such Qualified Purchaser at an annual rate of 5.75% of the Stated Value (instead of the annual rate of 5.50% for all other holders of the Series 1 shares) until April 7, 2018, at which time, the annual dividend rate will be reduced to 5.50% of Stated Value; provided further, however, that since a Listing Event has not occurred by April 7, 2018, the annual dividend rate on all Series 1 shares (without regard to Qualified Purchaser status) has been increased to 7.00% of the Stated Value until the occurrence of a Listing Event, at which time, the annual dividend rate will be reduced to 5.50% of the Stated Value. Based on the number of Series 1 shares outstanding at December 31, 2020, the increased dividend rate costs the Company approximately $150,000 more per quarter in Series 1 dividends.
Subject to the Company’s redemption rights as described below, each Series 1 share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series 1 Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 45 days after the occurrence of a Listing Event or (ii) April 7, 2019 (whether or not a Listing Event has occurred). Each Series 1 share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series 1 Conversion Price”) determined as follows:
2016 | 2015 | |||||||
Ordinary | $ | -- | $ | -- | ||||
Capital Gain | - | - | ||||||
Return of Capital | 732,000 | -- | ||||||
$ | 732,000 | $ | -- |
At any time, from time to time, on and after the later of (i) the 20th trading day after the date of a Listing Event, if any, or (ii) April 7, 2018, the Company (or its successor) will have the right (but not the obligation) to redeem, in whole or in part, the Series 1 Preferred Stock at the redemption price equal to 100% of the Stated Value, initially $1,000 per share, plus any accrued but unpaid dividends if any, to and including the date fixed for redemption. In case of any redemption of less than all of the shares by the Company, the shares to be redeemed will be selected either pro rata or in such other manner as the board of directors may determine. If the Company (or its successor) chooses to redeem any shares, the Company (or its successor) has the right, in its sole discretion, to pay the redemption price in cash or in equal value of common stock of the Company (or its successor), based on the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the redemption, in exchange for the shares. The Company (or its successor) also will have the right (but not the obligation) to redeem all or any portion of the Series 1 Preferred Stock subject to a Series 1 Conversion Notice for a cash payment to the holder thereof equal to the applicable redemption price, by delivering a Redemption Notice to the holder of such Shares on or prior to the 10th trading day prior to the close of trading on the Conversion Date for such Shares.
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Each investor in the Series 1 received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series 1 offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before January 31, 2023, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of December 31, 2020 is immaterial. As of December 31, 2020, there were detachable warrants that may be exercised for 1,382,675 shares of the Company’s common stock after the 90th day following the occurrence of a listing event. If all the potential warrants outstanding at December 31, 2020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to the Company would be approximately $34.6 million and as a result the Company would issue an additional 1,382,675 shares of common stock.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in accordance with the terms of the Series 1.
Note R — Subsequent Events
Management Internalization
On March 29, 2019, the Company and the former Advisor entered into definitive agreements to internalize the Company’s management function effective April 1, 2019 (the “Internalization”). Since their formation, under the supervision of the board of directors (the “Board of Directors”), the former Advisor has been evaluated throughresponsible for managing the dateoperations of this filing with the SEC.
Contribution Agreement
On March 29, 2019, the Company entered into a $31.5 million loan agreementContribution Agreement (the “Contribution Agreement”) with Bankthe former Advisor, Vestin Realty Mortgage I, Inc. (“VRTA”) (solely for purposes of America, N.A.Section 1.01(c) thereof), with a termVestin Realty Mortgage II, Inc. (“VRTB”) (solely for purposes of 10 years, amortized over 25 years, with monthly principalSection 1.01(c) thereof) and interest payments totaling approximately $194,000, bearing an annual interest rateShustek (solely for purposes of 5.52%Section 4.03 thereof). In exchange for the Contribution, the Company agreed to issue to the former Advisor 1,600,000 shares of Common Stock as consideration (the “Consideration”), securedissuable in four equal installments. The first three installments of 400,000 shares of Common Stock per installment were issued on April 1, 2019, December 31, 2019 and December 31, 2020, respectively. See Note R —Deferred Management Internalization in Part II, Item 8 Notes to the Consolidated Financial Statements of this Annual Report for additional information. The remaining installment was due to be issued on December 31, 2021; however, pursuant to the Purchase Agreement, the Advisor has agreed to surrender its claim to such shares. If requested by the parking garage, and maturingCompany in February 2027. In connection with thisany contemplated capital raise by the Company, the former Advisor has agreed not to sell, pledge or otherwise transfer or dispose of any of the Internalization Consideration for a period not to exceed the lock-up period that otherwise would apply to other stockholders of the Company in connection with such capital raise. See the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2019 for more information regarding the Management Internalization.
The Internalization transaction closed on April 1, 2019, and the following table shows the Internalization Consideration to be paid in aggregate to the former Advisor. The first three installments of 400,000 shares of Common Stock per installment were issued to the former Advisor on April 1, 2019 and December 31, 2019 and December 31, 2020, respectively.
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Number of shares | Internalization Contribution | ||||
Internalization consideration in common stock at $17.50 | 1,100,000 | (1) | $ | 19,250,000 | |
Internalization consideration in common stock at $25.10 | 500,000 | (2) | 12,550,000 | ||
Total internalization consideration |
| 1,600,000 | $ | 31,800,000 | |
|
|
|
|
|
|
Internalization consideration issued April 1, 2019 at $17.50 | (400,000) | (7,000,000) | |||
Shares issued December 31, 2019 at $17.50 |
| (400,000) |
|
| (7,000,000) |
Shares issued December 31, 2020 at $17.50 |
| (300,000) |
|
| (5,250,000) |
Shares issued December 31, 2020 at $25.10 |
| (100,000) |
|
| (2,510,000) |
Deferred management internalization at December 31, 2020 |
| 400,000 | $ | 10,040,000 |
1) The Company has the right to purchase 1,100,000 of these shares at $17.50 per share which potentially limits the company paidcost to the Company.
2) $25.10 is the Company's stated NAV as of May 28, 2019.
Note S— Employee Benefit Plan
Effective July 1, 2019, the Company began participating in a broker commission totalingmulti-employer 401(k) Safe Harbor Plan (the “Plan”), which is a defined contribution plan covering all eligible employees. Under the provisions of the Plan, participants may direct the Company to defer a portion of their compensation to the Plan, subject to Internal Revenue Code limitations. The Company provides for an employer matching contribution equal to 100% of the first 3% of eligible compensation and 50% of the next 2% of eligible compensation contributed by each employee, which is funded in cash. All contributions vest immediately.
Total expense recorded for the purchase price.
Note T — Subsequent Events
On February 1, 2017,January 8, 2021, the Company, through MVP St. Louis Broadway,entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Michael V. Shustek (“Mr. Shustek”), VRMI, VRMII and together with VRMI and Mr. Shustek, the former Advisor and Color Up, LLC, a Delaware limited liability company ("Broadway"(the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). See the Form 8-K Current Report filed on January 14, 2021 for additional information
On February 8, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into an Amended and Restated Promissory Note Agreement (the “agreement”) with multiple lenders. The agreement increased the interest rate from 8% to 9%, an entity wholly ownedadditional $845,000 was funded increasing the note balance to $1,807,000 and the maturity date of the note was extended to December 31, 2021.
On February 22, 2021, the Company circulated a letter to its stockholders setting forth the reasons for the recommendation by the Company, closed on the purchaseBoard of a parking lot consistingDirectors (the “Board”) of approximately 161 parking spaces, located in St. Louis, Missouri, for a purchase price of $2.4 million in cash plus closing costs. The parking lot is under a 5 year lease with St. Louis Parking Co, ("St. Louis Parking"), a regional parking operator, under a modified net lease agreement where Broadway is responsible for property taxes above a $19,600 threshold, and St. Louis Parking pays for insurance and maintenance costs. St. Louis Parking pays annual rent of $180,000. In addition, the lease provides revenue participation with Broadway receiving 75% of gross receipts over $270,000.
On March 12, 2021, MVP Cincinnati Race St. Louis Seventh & Cerre,, LLC, a Delaware limited liability company ("7th & Cerre"), an entity wholly owned bysubsidiary of the Company, closed onentered into an Amended and Restated Promissory Note Agreement (the “agreement”) with multiple lenders. In which an additional $900,000 was funded, increasing the purchasenote balance to $3,450,000 and the maturity date of a parking lot consisting of approximately 174 parking spaces, located in St. Louis, Missouri, for a purchase price of $3.3 million in cash plus closing costs. The parking lot is under a 5 year lease with St. Louis Parking, a regional parking operator, under a modified net lease agreement where 7th & Cerre is responsible for property taxes above a $14,885 threshold, and St. Louis Parking pays for insurance and maintenance costs. St. Louis Parking pays annual rent of $225,000. In addition, the lease provides revenue participation with 7th & Cerre receiving 75% of gross receipts over $345,000.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2016
Initial Cost | Gross Carrying Amount at December 31, 2016 | ||||||||||||
Description | ST | Encumbrance | Land | Buildings and Improvements | Total | Cost Capitalized Subsequent to Acquisition | Land | Building and Improvements | Total | Accumulated Depreciation (1) | Date Acquired | Rentable Square Feet | |
West 9th Street | -- | $5,675,000 | -- | $5,675,000 | -- | $5,675,000 | -- | $5,675,000 | -- | 2016 | n/a | ||
Crown Colony | -- | $3,030,000 | -- | $3,030,000 | -- | $3,030,000 | -- | $3,030,000 | -- | 2016 | n/a | ||
San Jose | -- | $1,073,000 | $2,503,000 | $3,576,000 | -- | $1,073,000 | $2,503,000 | $3,576,000 | 35,000 | 2016 | n/a | ||
MCI 1372 Street | -- | $700,000 | -- | $700,000 | -- | $700,000 | -- | $700,000 | -- | 2016 | n/a | ||
Cincinnati Race Street | -- | $2,142,000 | $2,358,000 | $4,500,000 | -- | $2,142,000 | $2,358,000 | $4,500,000 | 29,000 | 2016 | n/a | ||
St Louis Washington | -- | $3,000,000 | -- | $3,000,000 | -- | $3,000,000 | -- | $3,000,000 | -- | 2016 | n/a | ||
St Paul Holiday Garage | -- | $1,673,000 | $6,527,000 | $8,200,000 | -- | $1,673,000 | $6,527,000 | $8,200,000 | 62,000 | 2016 | n/a | ||
Louisville Station | -- | $3,050,000 | -- | $3,050,000 | -- | $3,050,000 | -- | $3,050,000 | -- | 2016 | n/a | ||
Whitefront Garage | -- | $3,116,000 | $8,379,000 | $11,495,000 | -- | $3,116,000 | $8,379,000 | $11,495,000 | 45,000 | 2016 | n/a | ||
Cleveland Lincoln Garage | -- | $2,195,000 | $5,122,000 | $7,317,000 | -- | $2,195,000 | $5,122,000 | $7,317,000 | 24,000 | 2016 | n/a | ||
Houston San Jacinto | -- | $3,200,000 | -- | $3,200,000 | -- | $3,200,000 | -- | $3,200,000 | -- | 2016 | n/a | ||
-- | $28,854,000 | $24,889,000 | $53,743,000 | $- | $28,854,000 | $24,889,000 | $53,743,000 | $195,000 | |||||
(1) | The initial costs of buildings are depreciated over 39 years using a straight-line method of accounting; improvements capitalized subsequent to acquisition are depreciated over the shorter of the lease term or useful life, generally ranging from one to 20 years. |
Initial Cost | Cost Capitalized Subsequent to Acquisition |
Gross Carrying Amount at December 31, 2020 | |||||||||||||||||||
Description |
ST |
Encumbrance |
Land |
Buildings and Improvements |
Improvements |
Carrying Costs |
Land |
Building and Improvements |
Total |
Accumulated Depreciation (1) |
Date Acquired | Life on which depr in latest statement is computed | |||||||||
West 9th Street (2) | OH | $ | 4,774,000 | $ | 5,675,000 | $ | -- | $ | 170,000 | $ | -- | $ | 5,844,000 | $ | -- | $ | 5,844,000 | $ | 36,000 | 2016 | 15 |
Crown Colony (2) | OH | -- | 3,030,000 | -- | 18,000 | -- | 2,954,000 | -- | 2,954,000 | 5,000 | 2016 | 15 | |||||||||
MCI 1372 Street | OH | 574,000 | 700,000 | -- | -- | -- | 700,000 | -- | 700,000 | -- | 2016 | N/A | |||||||||
Cincinnati Race Street | OH | 2,550,000 | 2,142,000 | 2,358,000 | 1,832,000 | -- | 1,904,000 | 3,944,000 | 5,848,000 | 590,000 | 2016 | 39,15 | |||||||||
St Louis Washington | MO | 1,334,000 | 3,000,000 | -- | 7,000 | -- | 1,637,000 | -- | 1,637,000 | 1,000 | 2016 | 15 | |||||||||
St Paul Holiday Garage | MN | 3,992,000 | 1,673,000 | 6,527,000 | 196,000 | -- | 1,673,000 | 6,723,000 | 8,396,000 | 774,000 | 2016 | 39,15 | |||||||||
Louisville Station | KY | 1,682,000 | 3,050,000 | -- | -- | -- | 3,007,000 | -- | 3,007,000 | 14,000 | 2016 | 15 | |||||||||
Whitefront Garage | TN | 6,454,000 | 3,116,000 | 8,380,000 | -- | -- | 3,116,000 | 8,557,000 | 11,673,000 | 953,000 | 2016 | 39,15 | |||||||||
Cleveland Lincoln Garage | OH | 3,863,000 | 2,195,000 | 5,122,000 | 3,332,000 | -- | 1,377,000 | 6,894,000 | 8,271,000 | 1,010,000 | 2016 | 39,15 | |||||||||
Houston Preston | TX | 1,627,000 | 2,800,000 | -- | -- | -- | 2,820,000 | -- | 2,820,000 | 5,000 | 2016 | 15 | |||||||||
Houston San Jacinto | TX | 1,820,000 | 3,200,000 | -- | -- | -- | 3,250,000 | -- | 3,250,000 | 11,000 | 2016 | 15 | |||||||||
MVP Detroit Center Garage | MI | 29,042,000 | 7,000,000 | 48,000,000 | 477,000 | -- | 7,000,000 | 48,477,000 | 55,477,000 | 4,961,000 | 2017 | 39,15 | |||||||||
St. Louis Broadway | MO | 1,671,000 | 2,400,000 | -- | -- | -- | 2,400,000 | -- | 2,400,000 | -- | 2017 | N/A | |||||||||
St. Louis Seventh & Cerre | MO | 2,057,000 | 3,300,000 | -- | -- | -- | 3,300,000 | -- | 3,300,000 | -- | 2017 | N/A | |||||||||
MVP Preferred Parking | TX | 11,330,000 | 15,800,000 | 4,700,000 | 710,000 | -- | 15,230,000 | 5,250,000 | 20,480,000 | 529,000 | 2017 | 39,15 | |||||||||
MVP Raider Park Garage | TX | 7,400,000 | 1,960,000 | 9,040,000 | 2,517,000 | -- | 2,006,000 | 11,634,000 | 13,640,000 | 930,000 | 2017 | 39,15 | |||||||||
MVP PF Memphis Poplar 2013 | TN | 1,800,000 | 3,735,000 | -- | 13,000 | -- | 3,670,000 | -- | 3,670,000 | 10,000 | 2017 | 15 | |||||||||
MVP PF St. Louis 2013 | MO | 3,700,000 | 5,145,000 | -- | -- | -- | 5,041,000 | -- | 5,041,000 | 22,000 | 2017 | 15 | |||||||||
Mabley Place Garage | OH | 8,007,000 | 1,585,000 | 19,557,000 | 43,000 | -- | 1,360,000 | 16,850,000 | 18,210,000 | 1,721,000 | 2017 | 39,15 | |||||||||
MVP Denver Sherman | CO | 276,000 | 705,000 | -- | -- | -- | 705,000 | -- | 705,000 | -- | 2017 | N/A | |||||||||
MVP Fort Worth Taylor | TX | 11,873,000 | 2,845,000 | 24,813,000 | 5,000 | -- | 2,845,000 | 24,818,000 | 27,663,000 | 2,082,000 | 2017 | 39,15 | |||||||||
MVP Milwaukee Old World | WI | 771,000 | 2,044,000 | -- | -- | -- | 2,044,000 | -- | 2,044,000 | 55,000 | 2017 | 15 | |||||||||
MVP Houston Saks Garage | TX | 3,164,000 | 4,931,000 | 5,460,000 | 37,000 | -- | 3,712,000 | 4,211,000 | 7,923,000 | 499,000 | 2017 | 39,15 | |||||||||
MVP Milwaukee Wells | WI | 2,700,000 | 4,873,000 | -- | -- | -- | 4,463,000 | -- | 4,463,000 | 84,000 | 2017 | 15 | |||||||||
MVP Wildwood NJ Lot | NJ | 1,000,000 | 1,631,000 | -- | -- | -- | 696,000 | -- | 696,000 | -- | 2017 | N/A | |||||||||
MVP Indianapolis City Park | IN | 7,200,000 | 2,055,000 | 8,764,000 | 114,000 | -- | 2,056,000 | 8,878,000 | 10,934,000 | 895,000 | 2017 | 39,15 | |||||||||
MVP Indianapolis WA Street Lot | IN | 3,400,000 | 5,749,000 | -- | -- | -- | 5,749,000 | -- | 5,749,000 | 67,000 | 2017 | 15 | |||||||||
MVP Minneapolis Venture | MN | 4,000,000 | 6,543,000 | -- | -- | -- | 4,013,000 | -- | 4,013,000 | -- | 2017 | N/A | |||||||||
MVP Indianapolis Meridian Lot | IN | 938,000 | 1,601,000 | -- | -- | -- | 1,551,000 | -- | 1,551,000 | 15,000 | 2017 | 15 | |||||||||
MVP Milwaukee Clybourn | WI | 191,000 | 262,000 | -- | -- | -- | 262,000 | -- | 262,000 | 7,000 | 2017 | 15 | |||||||||
MVP Milwaukee Arena | WI | 2,069,000 | 4,632,000 | -- | -- | -- | 4,631,000 | -- | 4,631,000 | -- | 2017 | N/A | |||||||||
MVP Clarksburg Lot | WV | 476,000 | 715,000 | -- | -- | -- | 625,000 | -- | 625,000 | 16,000 | 2017 | 15 | |||||||||
MVP Denver 1935 Sherman | CO | 736,000 | 2,534,000 | -- | -- | -- | 2,533,000 | -- | 2,533,000 | -- | 2017 | N/A | |||||||||
MVP Bridgeport Fairfield Garage | CT | 3,933,000 | 498,000 | 7,758,000 | -- | -- | 498,000 | 7,770,000 | 8,268,000 | 693,000 | 2017 | 39,15 | |||||||||
Minneapolis City Parking | MN | 4,659,000 | 9,838,000 | -- | -- | -- | 7,718,000 | -- | 7,718,000 | 265,000 | 2017 | 15 | |||||||||
MVP New Orleans Rampart | LA | 5,300,000 | 8,105,000 | -- | -- | -- | 7,835,000 | -- | 7,835,000 | -- | 2018 | N/A | |||||||||
MVP Hawaii Marks | HI | 13,500,000 | 9,118,000 | 11,716,000 | 294,000 | -- | 8,571,000 | 11,381,000 | 19,952,000 | 789,000 | 2018 | 39,15 | |||||||||
$ | 159,863,000 | $ | 140,185,000 | $ | 162,195,000 | $ | 9,765,000 | $ | -- | $ | 128,796,000 | $ | 165,387,000(3) | $ | 294,183,000 | $ | 17,039,000 |
(1) The aggregate gross costinitial costs of property included above for federal income tax purposes approximated $53.7 million asbuildings are depreciated over 39 years using a straight-line method of December 31, 2016.
(2) These properties are held by West 9th St. Properties II, LLC
(3) This amount does not include CIP of approximately $1.3 million.
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The following table reconciles the historical cost of total real estate held for investment for the years ended December 31, 20162020 and for the period May 4, 2015 (Date of inception) through December 31, 2015:
2016 | 2015 | |||||||
Total real estate held for investment, inception (prior) | $ | -- | $ | -- | ||||
Additions during period: | -- | -- | ||||||
Acquisitions | 53,743,000 | -- | ||||||
Total real estate held for investment, end of year | $ | 53,743,000 | $ | -- |
2020 | 2019 | |||
Total real estate held for investment, inception (prior) | $ | 312,670,000 | $ | 315,101,000 |
Additions during period: |
| |||
Acquisitions | -- |
| -- | |
Improvements |
| 687,000 |
| 2,895,000 |
Deductions during period: |
|
|
|
|
Dispositions |
| (5,059,000) |
| (3,874,000) |
Impairments |
| (14,115,000) |
| (1,452,000) |
Total real estate held for investment, end of year (1) | $ | 294,183,000 | $ | 312,670,000 |
(1) | This amount does not include investments in software and construction in progress totaling approximately $1.3 million as of December 31, 2020 and approximately $0.7 million as of December 31, 2019. |
The following table reconciles the accumulated depreciation for the yearyears ended December 31, 20162020 and for the period May 4, 2015 (Date of inception) through December 31, 2015:
2016 | 2015 | |||||||
Accumulated depreciation, inception (prior) | $ | -- | $ | -- | ||||
Additions during period: | -- | -- | ||||||
Depreciation of real estate | 195,000 | -- | ||||||
Accumulated depreciation, end of year | $ | 195,000 | $ | -- |
2020 | 2019 | |||
Accumulated depreciation, inception (prior) | $ | 12,262,000 | $ | 7,110,000 |
Deductions during period: | (429,000) |
| -- | |
Depreciation and amortization of real estate | 5,206,000 |
| 5,152,000 | |
Accumulated depreciation, end of year (1) | $ | 17,039,000 | $ | 12,262,000 |
(1) | During 2019, San Jose was listed as Held for Sale and included approximately $0.2 million of accumulated depreciation. |
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None.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in ourthe Company’s reports under the Exchange Act is processed, recorded, processed, summarized, and reported within the time periods specified in the SEC'sSEC’s rules and forms, and that such information is accumulated and communicated to management, including ourthe Chief Executive Officer ("CEO") and Chief Financial Officer, ("CFO"), as appropriate, to allow for timely decisions regarding required financial disclosure. In connection withdesigning and evaluating the preparationdisclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of this Report on Form 10-K,achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of our CEOmanagement, including the Chief Executive Officer and CFO, as of December 31, 2016,Chief Financial Officer, of the effectiveness of the design and operation of ourthe disclosure controls and procedures as such term is defined under Rule 13a-15(e) under the Exchange Act. Based upon management's evaluation, our CEO and CFO concluded that, as of December 31, 2016, our2020, the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of that time, the disclosure controls and procedures are designedwere effective at athe reasonable assurance level and are effective to provide reasonable assurance that information we are required to discloselevel.
(b) Changes in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
There have been or will be detected. Even effectiveno changes in internal control over financial reporting can only provide reasonable assurance with respectduring the year ended 2020, that have materially affected, or are reasonably likely to financial statement preparation. Furthermore, because of changes in conditions,materially affect, the effectiveness ofcompany’s internal control over financial reporting.
During the Company's two most recent fiscal years ended December 31, 2020 and 2019 and the period from January 1, 2021 through filing date, the Company did not consult with RBSM on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company's consolidated financial statements, and RBSM did not provide either a written report or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting may vary over time. Our management, including our CEOissue; or (ii) any matter that was the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and CFO, does not expect that our controls and procedures will prevent all errors.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States,GAAP, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our Company's assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
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Management has conducted an assessment, including testing, of the effectiveness of our internal control over financial reporting as of December 31, 20162020. In making its assessment of internal control over financial reporting, management used the criteria in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"(“COSO”). Based on this assessment, management, with the participation of the Chief Executive and Chief Financial Officers, believesconcluded that, as of December 31, 2016,2020, the Company'sCompany’s internal control over financial reporting iswas effective at a reasonable assurance level based on those criteria.
Auditor Attestation
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management'sManagement’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange CommissionSEC that permit us to provide only management'smanagement’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There has evaluatednot been any change in our internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter of 2016three months ended December 31, 2020, that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the fourth fiscal quarter of 2016.
None.
The Company will relyrelied on the former Advisor to manage the day-to-day activities and to implement the Company'sCompany’s investment strategy, subject to the supervision of ourthe Company’s board of directors. The former Advisor performs its duties and responsibilities as the Company'sCompany’s fiduciary pursuant to an advisory agreement.Amended and Restated Advisory Agreement. The former Advisor is managed by Michael V. Shustek.
Directors and Executive Officers
The following table sets forth the names and ages as of March 24, 201730, 2021 and positions of the individuals who serve as ourthe Company’s directors and executive officers as of March 24, 2017:
Name | Age | Title | |
Michael V. Shustek | 62 | Chief Executive Officer and Director | |
J. Kevin Bland | 57 | Chief Financial Officer | |
Dan Huberty | 52 | President & Chief Operating Officer | |
John E. Dawson (1) | 63 | Independent Director | |
Robert J. Aalberts (1) | 69 | Independent Director | |
Shawn Nelson | 54 | Independent Director |
(1) | Member of the audit committee |
The following table sets forth the names and ages as of March 24, 201730, 2021 and positions of the individuals who serve as directors, executive officers and certain significant employees of MVP Realty Advisors (the Advisor) or ourthe Company’s affiliates:
Name | Age | Title | |
Michael V. Shustek | 62 | Chief Executive Officer | |
Dan Huberty | 52 | President & Chief | |
J. Kevin Bland | 57 | Chief Financial Officer |
Michael V. Shustek
In 2003, Mr. Shustek became the Chief Executive Officer of Vestin Originations, Inc. In 1995, Mr. Shustek founded Del Mar Mortgage, and has been involved in various aspects of the real estate industry in Nevada since 1990. In 1993, he founded Foreclosures of Nevada, Inc., a company specializing in non-judicial foreclosures. In 1997, Mr. Shustek was involved in the initial founding of Nevada First Bank, with the largest initial capital base of any new state charter in Nevada's history. In 1993, Mr. Shustek also started Shustek Investments, a companyNevada’s history at that originally specialized in property valuations for third-party lenders or investors.
Mr. Shustek received a Bachelor of Science degree in Finance at the University of Nevada, Las Vegas. As our founder and CEO, Mr. Shustek
J. Kevin Bland is highly knowledgeable with regard to our business operations. In addition, his participation on our board of directors is essential to ensure efficient communication between the Board and management.
Dan Huberty is President and Chief Operating Officer. Prior to joining the AssistantCompany as Vice President of Finance for Western FundingParking Operations, Mr. Huberty spent nearly 25 years in various roles in and from October, 2010supporting the parking industry. Most recently, Mr. Huberty served as an Executive Vice President of SP Plus, where he oversaw the southern division of the company. He was named to this position after successfully overseeing the transition of his team through January, 2013, he was the corporate controllerintegration of Western Funding. PreviousCentral Parking and Standard Parking. SP Plus's clients included some of the nation's largest owners and operators of mixed-use projects, office buildings, hotels, stadiums and arenas, as well as, airports, hospitals and municipalities.
Prior to his experience at Western Funding,role with SP Plus, he served as a Vice President for Clean Energy Fuels, the largest provider of Compressed Natural Gas in the Country focusing on the parking industry, from June 2009 through September 2011. However, the majority of his career was spent with ABM Industries. During his nearly 17 years with ABM, Mr. BentzenHuberty served in the capacityvarious roles starting as a Facility Manager, working his way up to Regional Manager, Regional Vice President, and finally Vice President of Financial AnalystSales for ABM's Parking Division. Mr. Huberty earned his BBA from January 2006 to April 2007Cleveland State University in 1991, and then as corporate controller from April 2007 to October 2010 of Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc., which are the owners of MVP Realty Advisors, LLC, the Advisor to the Company. Mr. Bentzen received his BS in Hotel AdministrationMBA from the University of Nevada Las VegasPhoenix in 19991998.
Mr. Huberty is active in political affairs, serving as a State Representative for Texas House District 127, representing a constituency of more than 160,000 residents. Elected in 2010, he travels to the Capitol in Austin, Texas, every other year to represent them during the legislative session. Mr. Huberty also served as a Trustee for the Humble Independent School District from 2006 to 2010.
Mr. Huberty serves on the Board for the Be an Angel Fund, which is a non-profit board that supports profoundly deaf and his Mastershandicapped children in Texas. Mr. Huberty is also a Board Member of Sciencethe Lake Houston Chamber of Commerce in AccountancyHarris County Texas, which has over 1,500 members focusing on growing the North East Region of Harris County. Mr. Huberty also served as a Trustee for the Humble Independent School District which has 42,000 students, from the University of Nevada Las Vegas in 2007. In 2005 he passed the Certified Internal Auditor's exam and received his CIA Certification2006 to 2010, serving as its President from the Institute of Internal Auditors (currently inactive status).
Independent Directors of MVP REIT II, Inc.
John E. Dawson
is one of our independent directors. He has also been a director of MVP REIT, Inc. since its inception. He was a director of Vestin Group from March 2000 to December 2005, was a director of-93-
Robert J. AalbertsDavid Chavez is one of our independent directors. Since 2009, Mr. Chavez has served as Chief Executive Officeran independent director of Assured Strategies, LLC, a strategic consulting, coachingMVP I, and advisory firm. From 1996 to 2007, Mr. Chavez served as Chief Executive Officer of the Chavez & Koch, a Professional Corporation, Certified Public Accountants (CPA's), Ltd., certified public accounting firm, and from 1995 to 1996, he was a private business and financial consultant. From 1991director of Vestin Group, Inc., from April 1999 to 1995 Mr. Chavez worked with Arthur Andersen's Las Vegas office, taking several companies public, and working on auditing as well as consulting. Mr. Chavez received a Bachelor of Science in Business Administration Degree, with a concentration in Accounting, from the University of Nevada, Las Vegas.
Shawn Nelson served as an independent director of MVP I. Effective January 7, 2019, Mr. Nelson became the Chief Assistant District Attorney of Orange County, California. Mr. Nelson had served as a member of the Orange County Board of Supervisors in Orange County, California, from June 2010 to December 2018, serving as chairman in 2013 and 2014. Mr. Nelson served on the board of the Southern California Regional Rail Authority (Metrolink) and was the former Chairman. He also was a director of the Orange County Transportation Authority having served as the chair in 2014 and was a director of the South Coast Air Quality Management District, Southern California Association of Governments, Transportation Corridor Agency, Foothill/Eastern, Southern California Water Committee, Orange County Council of Governments and Orange County Housing Authority Board of Commissioners. From 1994 to 2010, Mr. Nelson was the managing partner of the law firm of Rizio & Nelson. From 1992 to 1994, he was the Leasing Director/Project Manager of S&P Company. Prior to that, from 1989 to 1992 Mr. Nelson served as the Leasing Director/Acquisitions Analyst for IDM Corp and from 1988 to 1989 he served as a Construction Superintendent for Pulte Homes. Mr. Nelson has a Bachelor of Science degree in business with a certificate in real property development from the University of Southern California and a Juris Doctor Degree from Western State University College of Law.
CORPORATE GOVERNANCE
Board of Directors
The Company operates under the direction of ourthe Company’s board of directors, the members of which are accountable to usthe Company and ourthe stockholders as fiduciaries. The board of directors is responsible for directing the management of ourthe Company’s business and affairs.
The board of directorsCompany has retained the Advisor to manage our day-to-day affairs and to implement our investment strategy, subject to the board of directors' direction, oversight and approval.
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The Company refers to ourthe directors who are not independent as our "affiliatedthe “affiliated directors."” Currently, ourthe only affiliated director is Michael V. Shustek
The Company’s charter provides that the number of independent directors shall be fiveis currently four, which number may be increased or decreased as set forth in the bylaws. OurThe Company’s charter also provides that a majority of the directors must be independent directors and that at least one of the independent directors must have at least three years of relevant real estate experience. The independent directors will nominate replacements for vacancies among the independent directors.
The Company’s board of directors is elected by ourthe Company’s common stockholders on an annual basis. Any director may resign at any time and may be removed with or without cause by the stockholders upon the affirmative vote of stockholders entitled to cast at least a majority of all the votes entitled to be cast generally in the election of directors. The notice of any special meeting called to remove a director will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director will be removed.
At such time as we arethe Company is subject to Subtitle 8 of the MGCL, we havethe Company has elected to provide that a vacancy following the removal of a director or a vacancy created by an increase in the number of directors or the death, resignation,
Responsibilities of Directors
The responsibilities of the members of the board of directors include:
The directors are accountable to us the Company and our the Company’s stockholders as fiduciaries. This means that the directors must perform their duties in good faith and in a manner each director believes to be in our the Company’s best interests. Further, our the Company’s directors must act with such care as an ordinarily prudent person in a like position would use under similar circumstances, including exercising reasonable inquiry when taking actions. Our directors and executive officers will serve until their successors are elected and qualify. The directors are not required to devote all of their time to ourthe Company’s business and are only required to devote such time to ourthe Company’s affairs as their duties require. The directors meet quarterly or more frequently as necessary.
The Company will follow investment guidelines adopted by ourthe Company’s board of directors and the investment and borrowing policies described in this reportAnnual Report unless they are modified by our directors. OurThe Company’s board of directors may establish further written policies on investments and borrowings and shall monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled and are in the best interests of our stockholders. Any change in our investment objectives as set forth in ourthe Company’s charter must be approved by the stockholders.
In order to reduce or eliminate and address certain potential conflicts of interest, ourthe Company’s charter requires that a majority of ourthe Company’s board of directors (including a majority of the independent directors) not otherwise interested in the transaction approve any transaction with any of ourthe Company’s directors, ourthe Sponsor, the former Advisor, or any of their affiliates. The independent directors will also be responsible for reviewing from time to time but at least annually (1) the performance of the Advisormanagement and determining that the compensation to be paid to the Advisormanagement is reasonable in relation to the nature and quality of services performed; (2) that ourthe Company’s total fees and expenses are otherwise reasonable in light of ourthe Company’s investment performance, our net assets, our net income, the fees and expenses of other comparable unaffiliated REITs and other factors deemed relevant by our independent directors; and (3) that the provisions of the advisory agreement are being carried out.directors. Each such determination shall be reflected in the applicable board minutes.
The board of directors may establishhas delegated various responsibilities and authority to three standing committees it deems appropriateand one special committee. Each committee regularly reports on its activities to address specific areas in more depth than may be possible at athe full board of directors meeting, provided thatdirectors. The Audit Committee, the majorityCompensation Committee, the Nominating and Governance Committee and the Special Committee are composed entirely of independent directors. The table below sets forth the current membership of the membersthree standing committees of each committee are independentthe board of directors.
Name | Audit | Compensation | Nominating and Corporate Governance | ||||
John Dawson | Chair | X | X | ||||
Robert J. Aalberts | X | Chair | X | ||||
Shawn Nelson | X | Chair |
Audit Committee
The audit committee will meetAudit Committee meets on a regular basis, at least quarterly and more frequently as necessary. The audit committee'sAudit Committee’s primary function will beis to assist the board of directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of internal controls which management has established and the audit and financial reporting process. The audit committeeAudit Committee is comprised of threetwo directors, all of whom are independent directors, and one of whom iswhich have been deemed an audit committeeas Audit Committee financial expert. Our audit committeeexperts. The Company’s Audit Committee consists of John Dawson David Chavez and Allen Wolff.Robert Aalberts. The Boardboard of directors also determined that Mr. Aalberts and Mr. Dawson meetsmet the audit committeeAudit Committee financial expert requirements. For the years ended December 31, 20162020 and 2015,2019, the audit committeeAudit Committee held __five and zerofour meetings, respectively.
Compensation Committee
The Company’s board of directors is qualified to perform the functions typically delegated tomaintains a nominating and corporate governance committee and that the formation of a separate committee is not necessary at this time. Instead, our full board of directors performs functions similar to those which might otherwise normally be delegated to such a committee, including, among other things, developing a set of corporate governance principles, adopting a code of ethics, adopting objectives with respect to conflicts of interest, monitoring our compliance with corporate governance requirements of state and federal law, establishing criteria for prospective members of our board of directors, conducting candidate searches and interviews, overseeing and evaluating our board of directors and our management, evaluating from time to time the appropriate size and composition of our board of directors and recommending, as appropriate, increases, decreases and changes to the composition of our board of directors and formally proposing the slate of directors to be elected at each annual meeting of our stockholders.
The Company’s independent directors receive certain compensation from us,the Company, which is described in more detail under "Item“Item 11. Executive Compensation."
Nominating and Corporate Governance Committee
The Nominating and Governance Committee is responsible for establishing the requisite qualifications for directors, identifying and recommending the nomination of individuals qualified to serve as directors and recommending directors for each board committee. The Nominating and Governance Committee also establishes corporate governance practices in compliance with applicable regulatory requirements and consistent with the highest standards and recommends to the board of directors the corporate governance guidelines applicable to the Company. The Company’s Nominating and Corporate Governance Committee consists of Shawn Nelson as Nominating and Corporate Governance Committee Chair, with Shawn Nelson and John Dawson as committee members. For the years ended December 31, 2020 and 2019, the Nominating and Corporate Governance Committee held three meetings and two meetings, respectively.
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Special Committees
On July 16, 2019, the Board established a demand review committee of two independent directors to investigate the allegations of wrongdoing made in the Magowski Complaint and to make a recommendation to the Board for a response to the stockholder demand letter. On September 27, 2019, the Board replaced the demand review committee with a special litigation committee of one independent director. The special litigation committee is responsible for investigating the allegations of wrongdoing made in the letter and making a final determination regarding the response for the Company to the demand. The work of the special litigation committee is on-going.
On August 19, 2020, the Company formed a special committee of the board of directors, consisting solely of independent directors of the Company, to conduct a review of the Transaction described above in Note T Subsequent Events.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics or the Code(the “Code of Ethics,Ethics”), which contains general guidelines for conducting ourthe Company’s business and is designed to help directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. The Code of Ethics applies to all of ourthe Company’s officers, including ourthe Company’s principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions, andas well as all members of ourthe Company’s board of directors. The Code of Ethics covers topics including, but not limited to, conflicts of interest, record keeping and reporting, payments to foreign and U.S. government personnel and compliance with laws, rules and regulations. WeThe Company will provide to any person without charge a copy of ourthe Company’s Code of Ethics, including any amendments or waivers, upon written request delivered to ourthe Company’s principal executive office at the address listed on the cover page of this annual report.
Board Meetings and Annual Stockholder Meeting
The board of directors held one meeting18 meetings and 23 meetings during the fiscal yearyears ended December 31, 2016.2020 and 2019, respectively. Each director attended at least 75% of his board and committee meetings in 2016.2020 and 2019. Although we dothe Company does not have a formal policy regarding attendance by members of our the Company’s board of directors at our the Company’s Annual Meeting of Stockholders, we encouragethe Company encourages all of our directors to attend.
Communication with Directors
The Company has established procedures for stockholders or other interested parties to communicate directly with our the Company’s board of directors. Such parties can contact the board by mail at: John Dawson, Chairman of the MVPThe Parking REIT II Audit Committee, c/o Corporate Secretary, 88809130 W. Sunset Road,Post Rd Suite 240,200, Las Vegas, NevadaNV 89148.
The chairman of the audit committeeAudit Committee will receive all communications made by these means and will distribute such communications to such member or members of our the Company’s board of directors as he or she deems appropriate, depending on the facts and circumstances outlined in the communication received. For example, if any questions regarding accounting, internal controls and auditing matters are received, they will be forwarded by the chairmanco-chairmen of the audit committeeAudit Committee to the members of the audit committeeAudit Committee for review.
Executive Officers
Prior to hire any employees who will be compensated directly by us.the Internalization, effective April 1, 2019, and during the fiscal year ended December 31, 2018, the Company had no employees. Each of ourthe Company’s executive officers including each executive officer who serves as a director, iswere employed or compensated by our Sponsor and also serves as an executive officer of the former Advisor. Each of these individuals receives compensation from our Sponsor for his or her services, including services performed for us and forAlthough the Advisor. As executive officers ofCompany reimbursed the Advisor, these individuals will manage our day-to-day affairs and carry out the directives of our board of directors in the review and selection of investment opportunities and will oversee and monitor our acquired investments to ensure they are consistent with our investment objectives. The duties that these executive officers will perform on our behalf will also serve to fulfill the corporate governance obligations of these persons as our appointed officers pursuant to our charter and bylaws. As such, these duties will involve the performance of corporate governance activities that require the attention of one of our corporate officers, including signing certifications required under the Sarbanes-Oxley Act of 2002, as amended, for filing with our periodic reports. Although we will reimburse theformer Advisor for certain expenses incurred in connection with providing these services to us, we dothe Company, prior to the Internalization, the Company did not intend to pay any compensation directly to ourthe Company’s executive officers.
In connection with the Internalization, effective April 1, 2019, the Company entered into employment agreements (collectively, the “Employment Agreements”) with Michael V. Shustek, Chief Executive Officer (the “CEO”); Daniel Huberty, President and Chief Operating Officer (the “COO”); and James Kevin Bland, Chief Financial Officer (the “CFO” and together with the CEO and COO, the “Executives” or the “Named Executive Officers”).
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Employment Agreements
Following is a brief summary and discussion of the terms of the Employment Agreements.
Term. Each of the Employment Agreements provides for a three-year initial term that will commence on June 30, 2019 and ends on the third anniversary of such date. Thereafter, the employment term extends automatically for successive one-year periods unless either the Executive or the Company provides notice of non-renewal to the other party at least ninety (90) days before the end of the then-existing term.
Duties. The Employment Agreements provide that the CEO, the COO and the CFO will perform duties and provide services to us that are customarily associated with the duties, authorities and responsibilities of persons in similar positions as well as such other duties as may be assigned from time to time. The Employment Agreements also provide that the Executives generally will devote substantially all of their business time and attention to the business and affairs of the Company, except that the Executives may engage in certain outside activities that do not materially interfere with the performance of their duties.
Compensation. The Employment Agreements provide that the CEO, the COO and the CFO will receive an annual initial base salary of $550,000, $300,000 and $250,000, respectively. The CEO, COO and CFO will be eligible to receive a target annual incentive award of not more than $250,000, $153,000 and $50,000, respectively, and each will be eligible to receive an annual target equity award of not more than $1,000,000, $153,000 and $130,000 in the form of restricted shares of common stock, respectively. Each annual equity award shall vest equally in annual installments over a three-year period. The amounts and conditions for the payment and vesting (as applicable) of each target annual incentive award and each annual target equity award will be determined by the Compensation Committee. The Company at its discretion may pay any target annual incentive awards payable to the COO or the CFO in cash or shares of common stock. Each of the Executives will be eligible to participate in employee benefit programs made available to the Company’s employees from time to time and to receive certain other perquisites, each as set forth in their respective Employment Agreements.
Severance Payments. The CEO Employment Agreement provides that, subject to the execution of a release and other conditions set forth in the CEO Employment Agreement, upon a “qualifying termination” (as defined in the CEO Employment Agreement), the CEO will be entitled to severance based on a multiple of the total of the CEO’s then-current annual base salary plus the amount of the last annual incentive award earned by the CEO in the year prior to termination (referred to herein as “total cash compensation”). If the qualifying termination results from the death or disability of the CEO, the CEO will be entitled to severance equal to one times (1x) his total cash compensation. If the CEO is terminated by the Company without “cause” (as defined in the CEO Employment Agreement), or the CEO quits for “good reason” (as defined in the CEO Employment Agreement) or the Company elects not to renew the term of the CEO employment agreement, then the CEO will be entitled to severance equal to two times (2x) his total cash compensation. In the event that any qualifying termination occurs on or within 12 months after a change in control of the Company, the CEO will be entitled to severance equal to three times (3x) his total cash compensation.
The COO and CFO Employment Agreements provide that, subject to the execution of a release and other conditions set forth in the Employment Agreements, the COO and CFO will be entitled to receive severance based on a multiple of the sum of their annual base salary and target annual incentive award (referred to herein as “total cash compensation”). If the COO is terminated due to his death or disability or if the COO Employment Agreement is not renewed by the Company during the first five years of the term of such agreement, then the COO will be entitled to severance equal to one times (1x) his total cash compensation. Such severance is not payable if the COO Employment Agreement is not renewed by the Company after the first five years of the term. If the COO is terminated without “cause” or the COO quits for “good reason,” (each as defined in the COO Employment Agreement) he will be entitled to severance equal to two times (2x) his total cash compensation. If the CFO is terminated due to his death or disability, he is terminated by the Company without “cause” or he quits for “good reason,” (each as defined in the CFO Employment Agreement) then the CFO will be entitled to severance equal to one times (1x) his total cash compensation. If the CFO is terminated without “cause” or quits for “good reason”, in each case, on or within 12 months after a change in control of the Company, then the CFO will be entitled to severance equal to one and one-half times (1.5x) his total cash compensation.
Upon termination where severance is due and payable, the Employment Agreements also provide that the Executives will be entitled to receive (i) unpaid base salary earned through the termination date; (ii) any restricted shares of common stock that have vested as of the termination date; (iii) all other equity-based awards held by Executive (which, to the extent subject to time-based vesting, will vest in full at the termination date); (iv) health insurance coverage, including through COBRA, for an 18 month period following the termination date (other than, with respect to the COO and CFO in the event of a termination due to death, disability or non-renewal); and (v) reimbursements of unpaid business expenses.
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Non-Competition, Non-Solicitation and Confidentiality. Each Employment Agreement provides that for a two-year period following the termination of the Executive’s employment with us, the Executive will not solicit our employees or consultants or any of our customers, vendors or other parties doing business with us. Pursuant to the Contribution Agreement (as defined below), the CEO has agreed not to compete with us for a period of three years after the Effective Date. (as defined below) Pursuant to the COO and CFO Employment Agreements, each of the COO and CFO has agreed not to compete with us for a period of two years following the termination of their employment with us. Each Employment Agreement also contains covenants relating to the treatment of confidential information, Company property and certain other matters.
Savings and Health and Welfare Benefits
The CEO, the COO and the CFO are eligible to participate in the broad-based 401(k) retirement savings plan generally applicable to our employees, which includes an opportunity to receive employer matching contributions. The Company does not currently provide for pension plans, supplemental retirement plans or deferred compensation plans for the officers.
The CEO, the COO and the CFO are also eligible to participate in the health, life insurance, disability benefits and other welfare programs that are provided generally to the Company’s employees.
Perquisites and Other Personal Benefits
The Company do not currently provide our officers with any material perquisites or other personal benefits.
Summary Compensation Table
On October 14, 2020, the Compensation Committee approved the award of 4,225 shares to J. Kevin Bland, the Company’s CFO and the cost of these shares is included in the Company’s 2020 general and administrative expense. On February 16, 2021, the Board of Directors ratified and approved the issuance of the 4,225 non-restricted shares to J. Kevin Bland, the Company’s CFO.
The non-restricted shares were issued by the Company on March 1, 2021 at a price of $11.75 per share. This price equals the price agreed to in the Equity Purchase Agreement entered into between the Company and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). For additional information see the Current Report Form 8-K filed by the Company on January 14, 2021.
The shares awarded fully vested upon issuance and these shares are not related to the Company’s Incentive Plan.
Accordingly, the following Summary Compensation Table shows compensation (rounded to the nearest thousand) paid or accrued by us for services rendered from April 1, 2019 through December 31, 2020 to the Named Executive Officers.
Name and Principal Position | Year |
| Salary ($) |
| Bonus ($) |
| Stock Awards ($) |
| Option Awards ($) | Non-Equity Incentive Plan Compensation ($) |
| Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
| All Other Compensation ($) |
| Total ($) |
| |
Michael V Shustek, CEO | 2020 | $ | 550,000 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 550,000 |
|
| 2019 |
| 389,584 |
| 120,000 |
| -- |
| -- |
| -- |
| -- |
| -- |
| 509,584 |
|
Dan Huberty, President COO | 2020 |
| 300,000 |
| -- |
| -- |
| -- |
| -- |
| -- |
| -- |
| 300,000 |
|
| 2019 |
| 212,500 |
| -- |
| -- |
| -- |
| -- |
| -- |
| -- |
| 215,000 |
|
James Kevin Bland, CFO | 2020 |
| 250,000 |
| 50,000 |
| 50,000 |
| -- |
| -- |
| -- |
| -- |
| 350,000 |
|
| 2019 |
| 177,083 |
| 150,000 |
| -- |
| -- |
| -- |
| -- |
| -- |
| 327,083 |
|
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Independent Directors
Under the Company’s independent directorsdirector compensation program in effect as of June 5, 2019, each independent director will receive an annual retainer of $30,000 (to$70,000, pro-rated for any director with service less than a full year. An additional $20,000 in cash will also be prorated for a partial term), pluspaid to the audit committee chairperson receivesLead Independent Director and an additional $5,000$15,000 in cash will be paid to the chairman of the Audit Committee. Once the Company’s stock begins trading, each independent director will receive his or her compensation in stock until he or she holds shares of the Company's stock equal to $105,000 (i.e., three times the anticipated cash portion of his or her annual retainer), and once the threshold is met, each independent director will receive his or her annual retainer (to be prorated for a partial term). Each independent director also will receive $1,000 for each meetinghalf in shares of stock and half in cash.
Until the Company’s stock begins trading one half of the boardretainer that would otherwise have been paid in shares of stock will be accrued in a bookkeeping account for the benefit of the applicable Director, to be issued to the Director in shares when the Company’s stock begins trading. Since the Company’s stock did not begin trading before June 1, 2020, all amounts accrued for issuance as stock pursuant to the compensation instead have been paid in cash.
On October 14, 2020, the Compensation Committee approved the award of 2,000 shares to the four independent directors attended in-person orof the Company and the cost of these shares is included in the Company’s 2020 general and administrative expense. On February 16, 2021, the Board of Directors ratified and approved the issuance of the 2,000 non-restricted shares to the three current independent directors of the Company and to one former independent director.
The non-restricted shares were issued by telephone.
The shares awarded fully vested upon issuance and these shares are not related to the Company’s Incentive Plan.
All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attending meetings of the board of directors. If a director is also one of our officers, we will not pay any compensation to such person for services rendered as a director.
The following table sets forth information with respect to our independent director compensation paid during the fiscal year ended December 31,Name | Fees Earned or Paid in Cash | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | |||||||
John Dawson | $ | 87,500 | $ | 23,500 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 111,000 |
Robert J. Aalberts |
| 61,250 |
| 23,500 |
| -- |
| -- |
| -- |
| -- |
| 84,750 |
Nicholas Nilsen |
| 61,250 |
| 23,500 |
| -- |
| -- |
| -- |
| -- |
| 84,750 |
Shawn Nelson |
| 96,250 |
| 23,500 |
| -- |
| -- |
| -- |
| -- |
| 119,750 |
Total | $ | 306,250 | $ | 94,000 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 400,250 |
Name | Fees Earned or Paid in Cash | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation (1)($) | Total ($) | |||||||||||||||||||||
Allen Wolff | $ | 48,500 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 48,500 | ||||||||||||||
David Chavez | $ | 47,500 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 47,500 | ||||||||||||||
Erik Hart | $ | 46,500 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 46,500 | ||||||||||||||
John Dawson | $ | 54,750 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 54,750 | ||||||||||||||
Total | $ | 197,250 | -- | -- | -- | -- | -- | $ | 197,250 |
Compensation Committee Interlocks and Insider Participation
Other than Michael V. Shustek, no member of our the Company’s board of directors served as an officer, and no member of our the Company’s board of directors served as an employee, of the Company or any of its subsidiaries during the year ended December 31, 2016.2020. In addition, during the year ended December 31, 2016,2020, none of our the Company’s executive officers served as a member of a compensation committeethe Compensation Committee (or other committee of our the Company’s board of directors performing equivalent functions or, in the absence of any such committee, our entire board of directors) of any entity that has one or more executive officers serving as a member of our the Company’s board of directors or compensation committee.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership
Shown below is certain information asAs of March 21, 2017,30, 2021, with respect to beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act, of 1934, as amended (the "Exchange Act"), of shares of common stock by the only persons or entities known to us to be a beneficial owner of more than 5% of the outstanding shares of common stock. Unless otherwise noted, the percentage ownership is calculated based on 2,490,6857,739,952 shares of our common stock outstanding as of March 21, 2017.30, 2021.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||
Vestin Realty Mortgage II, Inc. 9130 W. Post Rd Suite 130 Las Vegas, NV 89148 | Sole voting and investment power of 1,084,960 shares | 14.01% | ||
Vestin Realty Mortgage I, Inc. 9130 W Post Rd Suite 130 Las Vegas, NV 89148 | Sole voting and investment power of 616,834 shares | 7.96% |
The following table sets forth the total number and percentage of our common stock beneficially owned as of March 21, 2017,30, 2021, by:
Unless otherwise noted, the percentage ownership is calculated based on 2,490,6857,739,952 shares of our total outstanding common stock and 2,67842,672 shares of our total outstanding preferred stock as of March 21, 2017:
Common Shares Beneficially Owned | Preferred Shares Beneficially Owned | |||||||||
Beneficial Owner | Address | Number | Percent | Number | Percent | |||||
Michael V. Shustek | 8880 W. Sunset Rd Las Vegas, NV 89148 | 8,579 | <1% | -- | -- | |||||
Ed Bentzen | 8880 W. Sunset Rd Las Vegas, NV 89148 | -- | -- | -- | -- | |||||
Allen Wolff | 7275 Sitio Lima Carlsbad, CA 92009 | -- | -- | *26.5 | 1.32% | |||||
David Chavez | 28 Strada Prinicipale Henderson, NV 89011 | -- | -- | -- | -- | |||||
Erik Hart | 4004 Murphy Rd. Memphis, IN 47143 | -- | -- | -- | -- | |||||
John E. Dawson | 1321 Imperia Drive Henderson, NV 89052 | ** 4,390 | <1% | -- | -- | |||||
All directors and executive officers as a group | 12,969 | <1% | 26.5 | 1.32% |
Common Shares Beneficially Owned | Preferred Shares Beneficially Owned | |||||||
Beneficial Owner | Address | Number | Percent | Number | Percent | |||
Michael V. Shustek | 9130 W. Post Rd Suite 200, Las Vegas, NV 89148 | 13,423 | <1% | -- | -- | |||
Dan Huberty | 9130 W. Post Rd Suite 200, Las Vegas, NV 89148 | 3,599 | <1% | -- | -- | |||
John E. Dawson | 8925 W. Post Rd Suite 210, Las Vegas, NV 89148 | 4,570 | <1% | *54 | <1% | |||
Robert J. Aalberts | 524 Via Del Capitano Ct | 2,000 | <1% | -- | <1% | |||
Shawn Nelson | Hall of Administration 333 W. Santa Ana Blvd. Santa Ana, CA 92701 | 2,000 | <1% | -- | <1% | |||
J. Kevin Bland | 9130 W. Post Rd Suite 200, Las Vegas, NV 89148 | 4,255 | <1% | -- | <1% | |||
All directors and officers | 29,847 | <1% | 54 | <1% |
* AlongMr. Dawson received 1,750 warrants with thehis purchase of these 26.554 shares Mr. Wolff received 750 warrants.of preferred stock. The Warrantswarrants may be exercised after the 90th day following the occurrence of a Listing Event, at an exercise price, per share, equal to 110% of the volume weighted average closing price during the 20 trading days ending on the 90th day after the occurrence of such Listing Event; however, in no event shall the exercise price of the Warrantswarrants be less than $25 per share.
Conflicts of Interests
The Company is subject to various conflicts of interest arising out of ourthe Company’s relationship with the former Advisor and other affiliates, including (1) conflicts related to the compensation arrangements between the former Advisor, certain affiliates and us,the Company, (2) conflicts with respect to the allocation of the time of the former Advisor and its key personnel and (3) conflicts with respect to the allocation of investment opportunities. OurThe Company’s independent directors have an obligation to function on ourthe Company’s behalf in all situations in which a conflict of interest may arise and will have a fiduciary obligation to act on behalf of the stockholders.
Please refer to Note E – Related Party Transactions and Arrangements in Part II, Item 8 Financial Statements of this Annual Report on Form 10-K, for information regarding our related party transactions, which are incorporated herein by reference. Please also see "Risk Factors – “Risk Factors–Risks Related to Conflict of Interests."” in Part I, Item 1A Financial Statements“Risk Factors” of this Annual Report on Form 10-K
In order to reduce or mitigate certain potential conflicts of interests, we havethe Company has adopted the procedures set forth below.
Independent Directors
The NASAA REIT Guidelines require ourthe Company’s charter to define an independent director as a director who is not and has not for the last two years been associated, directly or indirectly, with ourthe Sponsor or the former Advisor. A director is deemed to be associated with ourthe Sponsor or the former Advisor if he or she owns any interest in, is employed by, is an officer or director of, or has any material business or professional relationship with ourthe Sponsor, the former Advisor or any of their affiliates, performs services (other than as a director) for us, or serves as a director or trustee for more than three REITs sponsored by ourthe Sponsor or advised by the former Advisor. A business or professional relationship will be deemed material per se if the gross revenue derived by the director from ourthe Sponsor, the former Advisor or any of their affiliates exceeds five percent of (1) the director'sdirector’s annual gross revenue derived from all sources during either of the last two years or (2) the director'sdirector’s net worth on a fair market value basis. An indirect relationship is defined to include circumstances in which the director'sdirector’s spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is or has been associated with us, ourthe Company, the Sponsor, the former Advisor or any of its affiliates.
A majority of ourthe Company’s board of directors, including a majority of the independent directors, must determine the method used by the former Advisor for the allocation of the acquisition of investments by two or more affiliated programs seeking to acquire similar types of assets is fair and reasonable to us. OurThe Company’s independent directors, acting as a group, will resolve potential conflicts of interest whenever they determine that the exercise of independent judgment by the full board of directors or the former Advisor or its affiliates could reasonably be compromised. However, the independent directors may not take any action which, under Maryland law, must be taken by the entire board of directors or which is otherwise not within their authority. The independent directors, as a group, are authorized to retain their own legal and financial advisors. Among the matters we expect the independent directors to review and act upon are:
Those conflict of interest matters that cannot be delegated to the independent directors, as a group, under Maryland law must be acted upon by both the board of directors and the independent directors.
The Company’s Acquisitions
The Company will not purchase or lease assets in which ourthe Sponsor, the former Advisor, any of ourthe Company’s directors or any of their affiliates has an interest without a determination by a majority of ourthe Company’s directors (including a majority of the independent directors) not otherwise interested in the transaction that such transaction is fair and reasonable to us and at a price to us no greater than the cost of the asset to ourthe Sponsor, the former Advisor, the director or the affiliated seller or lessor, unless there is substantial justification for the excess amount and such excess is reasonable. In no event may wethe Company acquire any such asset at an amount in excess of its current appraised value.
The consideration we paythe Company pays for real property will ordinarily be based on the fair market value of the property as determined by a majority of the members of the board of directors or the members of a duly authorized committee of the board. In cases in which a majority of ourthe Company’s independent directors so determine, and in all cases in which real property is acquired from ourthe Sponsor, the former Advisor, any of ourthe Company’s directors or any of their affiliates, the fair market value shall be determined by an independent expert selected by ourthe Company’s independent directors not otherwise interested in the transaction.
The Company will not make any loans to ourthe Sponsor, ourthe former Advisor or ourthe Company’s directors or officers or any of their affiliates (other than mortgage loans complying with the limitations set forth in Section V.K.3 of the NASAA REIT Guidelines or loans to wholly owned subsidiaries). In addition, we the Company will not borrow from these affiliates unless a majority of ourthe Company’s board of directors (including a majority of the independent directors) not otherwise interested in the transaction
Other Transactions Involving Affiliates
A majority of ourthe Company’s directors, including a majority of the independent directors not otherwise interested in the transaction, must conclude that all other transactions between us the Company and ourthe Sponsor, the former Advisor, any of ourthe Company’s directors or any of their affiliates are fair and reasonable to us the Company and on terms and conditions not less favorable to us the Company than those available from unaffiliated third parties. To the extent that we contemplatethe Company contemplates any transactions with affiliates, members of ourthe Company’s board of directors who serve on the board of the affiliated entity will be deemed "interested directors"“interested directors” and will not participate in approving or making other substantive decisions with respect to such related party transactions.
Issuance of Options and Warrants to Certain Affiliates
Until ourthe Company’s shares of common stock are listed on a national securities exchange, wethe Company will not issue options or warrants to purchase our common stock to ourthe former Advisor, ourthe Sponsor, any of ourthe Company’s directors or any of their affiliates, except on the same terms as such options or warrants, if any, are sold to the general public. We may issue options or warrants to persons other than ourthe former Advisor, ourthe Sponsor, ourthe Company’s directors and their affiliates prior to listing ourthe Company’s common stock on a national securities exchange, but not at an exercise price less than the fair market value of the underlying securities on the date of grant and not for consideration (which may include services) that in the judgment of ourthe Company’s board of directors has a market value less than the value of such option or warrant on the date of grant. Any options or warrants we issue to ourthe former Advisor, ourthe Sponsor or any of their affiliates shall not exceed an amount equal to 10% of the outstanding shares of ourthe Company’s common stock on the date of grant.
Reports to Stockholders
The Company will prepare an annual report and deliver it to ourthe Company’s common stockholders within 120 days after the end of each fiscal year. OurThe Company’s directors are required to take reasonable steps to ensure that the annual report complies with ourthe Company’s charter provisions.provisions as applicable. Among the matters that must be included in the annual report or included in a proxy statement delivered with the annual report are:
| |||
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ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES; AUDIT COMMITTEE REPORT
Principal Accounting Fees and Services
For the yearyears ended December 31, 20162020 and during the period from May 4, 2015 (date of inception) through December 31, 20152019 RBSM LLP ("RBSM"(“RBSM”), our independent public accounting firm, billed the Company approximately $420,000 and $480,000, respectively, for their professional services rendered as follows:
December 31, 2016 | For the period May 4, 2015 (date of inception) December 31, 2015 | |||||||
Audit Fees | $ | 61,000 | $ | -- | ||||
Audit Related Fees | $ | 7,500 | $ | 34,000 | ||||
Tax Fees | $ | -- | $ | -- | ||||
All Other Fees | $ | -- | $ | -- |
For the year ended December 31, 20162020 and during2019, Armanino, LLP (“Armanino”) our independent accounting firm, billed the period May 4, 2015 (date of inception) December 31, 2015.
RBSM 12/31/2020 | RBSM 12/31/2019 | Armanino 12/31/2020 | Armanino 12/31/2019 | |||||
Audit Fees | $ | 420,000 | $ | 480,000 | $ | -- | $ | -- |
Audit Related Fees | $ | -- | $ | -- | $ | -- | $ | -- |
Tax Fees | $ | -- | $ | -- | $ | 110,000 | $ | 98,000 |
All Other Fees | $ | -- | $ | -- | $ | -- | $ | -- |
Total | $ | 420,000 | $ | 480,000 | $ | 110,000 | $ | 98,000 |
Audit fees. Consists of fees billed for the audit of ourthe Company’s annual financial statements, review of ourthe Company’s Form 10-K, review of ourthe Company’s interim financial statements included in ourthe Company’s Form 10-Q and services that are normally provided by the accountant in connection with year-end statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of ourthe Company’s financial statements and are not reported under "Audit Fees",“Audit Fees,” such as acquisition audit, and audit of ourthe Company’s financial statements, and review of our Form 8-K, review of the Company’s registration statement on Form S-11 and Form S-4 filings.
Tax fees. Consists of professional services rendered by a company aligned with ourthe Company’s principal accountant for tax compliance, tax advice and tax planning.
Other fees. The services provided by ourthe Company’s accountants within this category consisted of advice and other services.
Pre-Approval Policy
The Audit Committee has direct responsibility to review and approve the engagement of the independent auditors to perform audit services or any permissible non-audit services. All audit and non-audit services to be provided by the independent auditors must be approved in advance by the Audit Committee. The Audit Committee may not engage the independent auditors to perform specific non-audit services proscribed by law or regulation. All services performed by our independent auditors under engagements entered into were approved by ourthe Company’s Audit Committee, pursuant to ourthe Company’s pre-approval policy, and none was approved pursuant to the de minimis exception to the rules and regulations of the Securities Exchange Act, of 1934, Section 10A(i)(1)(B), on pre-approval.
The following are filed as part of this Report:
1. Financial Statements
The list of the financial statements contained herein are contained in Part II, Item 8. Financial Statements on this Annual Report, on Form 10-K, which is hereby incorporated by reference.
2. Financial Statement Schedules
Schedule III – Combined Real Estate and Accumulated Depreciation
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3. Exhibits
Reference is made to the Exhibit Index appearing immediately afterbefore the signature page to this report for a list of exhibits filed as part of this report.
EXHIBIT INDEX
2.1(1) | Agreement and Plan of Merger, dated May 26, 2017, among THE PARKING REIT, Inc., MVP Realty Advisors, LLC, MVP Merger Sub, LLC and MVP REIT, | |
2.2(9) | ||
3.1(2) | Articles of Amendment and Restatement of | |||||
3.2(3) | Articles of Amendment of THE PARKING REIT, Inc. | |||||
3.3(4) | Articles Supplementary for Series A Convertible Redeemable Preferred Stock of | |||||
3.4(5) | Articles Supplementary for Series 1 Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc. | |||||
3.5(6) | Bylaws of | |||||
4.1(4) | Form of | |||||
4.2 (7) | Form of Common Stock Warrants (issued to Series 1 Preferred Stockholders) | |||||
4.3(8) | Distribution Reinvestment Plan | |||||
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 | ||||||
10.1(2) | Agreement of Limited Partnership of MVP REIT II Operating Partnership, LP | |||||
THE PARKING REIT, | ||||||
THE PARKING REIT, | ||||||
10.4(2) | Form of Indemnification Agreement | |||||
10.5(10) | Purchase and Sale Agreement, dated as of October 31, 2016, by and between Center Parking Associates Limited Partnership and MVP Detroit Center Garage, LLC | |||||
10.6(11) | Loan Agreement, dated as of January 10, 2017, by and between MVP Detroit Center Garage, LLC and Bank of America, N.A. | |||||
10.7(12) | Loan Agreement, dated as of November 30, 2018, by and among certain subsidiaries of Parking REIT, Inc. as borrowers party thereto and LoanCore Capital Credit REIT LLC as lender. | |||||
10.8(9) | Contribution Agreement dated March 29, 2019 and effective as of April 1, 2019, among The Parking REIT, Inc., MVP Realty Advisors, LLC, dba The Parking REIT Advisors, Vestin Realty Mortgage I, Inc. (solely for purposes of Section 1.01(c) thereof), Vestin Realty Mortgage II, Inc, (solely for purposes of Section 1.01(c) thereof) and Michael V. Shustek (solely for purposes of Section 4.03 thereof) | |||||
10.9(9) | Employee Leasing Agreement dated as of March 29, 2019, by and between The Parking REIT, Inc. and MVP Realty Advisors, LLC, dba The Parking REIT Advisors | |||||
10.10(9) | Registration Rights Agreement dated as of March 29, 2019, by and among The Parking REIT, Inc. and the Holders |
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10.11(9) | Termination Agreement dated as of March 29, 2019, by and among The Parking REIT, Inc., MVP REIT II Operating Partnership, LP and MVP Realty Advisors, LLC, dba The Parking REIT Advisors | |
10.12(9) | Services Agreement, dated as of March 29, 2019, by and among The Parking REIT, Inc., MVP REIT II Operating Partnership, LP, Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc., MVP Realty Advisors, LLC, dba The Parking REIT Advisors, and Michael V. Shustek | |
10.13(9) | Employment Agreements, dated as of March 29, 2019 by and between the Company and Michael Shustek, Dan Huberty and J Kevin Bland | |
10.14 | First Amendment to Loan Agreement, dated July 9,2020, by and among certain subsidiaries of Parking REIT, Inc. as borrowers party thereto and LoanCore Capital Credit REIT LLC as lender | |
10.15 | Second Amendment to Loan Agreement, dated December 8, 2020, by and among certain subsidiaries of Parking REIT, Inc. as borrowers party thereto and LLC Warehouse V LLC as lender and successor-in-interest to LoanCore Capital Credit REIT LLC | |
21.1(*) | Subsidiaries of the Registrant. | |
23.1(*) | Consent of Independent Registered Public Accounting Firm | |
31.1(*) | Certification of Chief Executive Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2(*) | Certification of Chief Financial Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. | |
32(*) | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101(*) | The following materials from the | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed concurrently herewith. | |||||
(1) | Filed previously on Form 8-K on May 31, 2017 and incorporated herein by reference. | |||||
(2) | Filed previously with Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 on September 24, 2015 and incorporated herein by reference. | |||||
Filed previously on Form 8-K on December 18, 2017 and incorporated herein by reference. | ||||||
(4) | Filed previously on Form 8-K on October 28, 2016 and incorporated herein by reference. | |||||
(5) | Filed previously on Form 8-K on March 30, 2017 and incorporated herein by reference. | |||||
(6) | Filed previously with the Registration Statement on Form S-11 on July 28, 2015 and incorporated herein by reference. | |||||
Filed previously on Form 8-K on | ||||||
(8) | Filed previously | |||||
(9) | Filed previously on Form 8-K on | |||||
(10) | ||||||
Filed previously on Form 8-K on December 8, 2016 and incorporated herein by reference. | ||||||
Filed previously on Form 8-K on January 1, 2017 and incorporated herein by reference. | ||||||
(12) | Filed previously on Form 8-K on December 6, 2018 and incorporated herein by reference. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
The Parking REIT, Inc. | ||
By: | /s/ Michael V. Shustek | |
Michael V. Shustek | ||
Chief Executive Officer | ||
Date: | March 31, 2021 | |
By: | /s/ J. Kevin Bland | |
J. Kevin Bland | ||
Chief Financial Officer | ||
Date: | March 31, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Capacity | Date | ||
/s/ Michael V. Shustek | Chief Executive Officer and Director | March 31, 2021 | ||
Michael V. Shustek | (Principal Executive Officer) | |||
/s/ J. Kevin Bland | Chief Financial Officer | March 31, 2021 | ||
J. Kevin Bland | (Principal Financial and Accounting Officer) | |||
/s/ John E. Dawson | Director | March 31, 2021 | ||
John E. Dawson | ||||
/s/ Robert J. Aalberts | Director | March 31, 2021 | ||
Robert J. Aalberts | ||||
/s/ Shawn Nelson | Director | March 31, 2021 | ||
Shawn Nelson |
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