UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

(Mark one)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20172020

Or

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 333-205893000-55760


MVPTHE PARKING REIT, II, INC.
(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 RD9130 WEST POST ROAD SUITE 340,200, LAS VEGAS, NV 89148
(Address (Address of Principal Executive Offices) (Zip Code)
Registrant's
Registrant’s Telephone Number:Number, including Area Code: (702) 534-5577

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading symbols(s)
Name of each exchange on which registered
N/A
N/A
N/A

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 ]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 an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" andfiler," "smaller reporting company"company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ]
Accelerated filer [   ]
Non-accelerated filer [  ][X]
Smaller reporting company [ X ][X]
Emerging growth company [ X ][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 bib-212b-2 of the Act).

Yes [   ] No [ X ]

As of November 14, 2017,16, 2020, the registrant had 2,612,182 7,327,696 shares of common stock outstanding.
TABLE OF CONTENTS

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MVP REIT II, Inc.
PART I
ITEM 1.FINANCIAL STATEMENTS

THE PARKING REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 As of September 30,  As of December 31, 
 September 30, 2017  December 31, 2016  2020  2019 
 (unaudited)     (unaudited)    
ASSETSASSETS ASSETS 
Investments in real estate            
Land and improvements $60,358,000  $28,854,000  
$
128,284,000
  
$
136,607,000
 
Buildings and improvements  78,104,000   24,889,000  
163,668,000
  
170,276,000
 
Construction in progress  1,263,000   --  
1,151,000
  
714,000
 
Intangible assets  
2,107,000
   
2,288,000
 
  139,725,000   53,743,000  
295,210,000
  
309,885,000
 
Accumulated depreciation  (1,599,000)  (195,000)  
(15,789,000
)
  
(12,049,000
)
Total investments in real estate, net  138,126,000   53,548,000  
279,421,000
  
297,836,000
 
              
Investment in equity method investee  465,000   1,150,000 
Investments in cost method investee – held for sale  838,000   836,000 
Investments in cost method investee  902,000   936,000 
Assets held for sale  --   700,000 
Fixed Assets, net of accumulated depreciation of $69,000 and $42,000 as of September 30, 2020 and December 31, 2019, respectively
 
72,000
  
21,000
 
Assets held for sale, net of accumulated depreciation of $212,000
 
--
  
3,288,000
 
Cash  2,589,000   4,885,000  
3,466,000
  
7,707,000
 
Cash - restricted  5,348,000   100,000 
Cash – restricted
 
3,428,000
  
3,937,000
 
Prepaid expenses  223,000   283,000  
1,746,000
  
1,679,000
 
Accounts receivable  115,000   208,000 
Accounts receivable, net
 
2,832,000
  
929,000
 
Investment in DST
 
2,931,000
  
2,836,000
 
Right of use leased asset
 
1,309,000
  
--
 
Due from related parties  1,589,000   --  
1,000
  
--
 
Investments in MVP REIT, Inc.  3,121,000   3,034,000 
Investment in DST  2,821,000   -- 
Other assets  101,000   4,575,000   
190,000
   
111,000
 
Total assets $156,238,000  $70,255,000  
$
295,396,000
  
$
318,344,000
 
LIABILITIES AND EQUITYLIABILITIES AND EQUITY LIABILITIES AND EQUITY 
Liabilities              
Notes payable, net of unamortized loan issuance costs of approximately $0.9 million and $0.1 million as of September 30, 2017 and December 31, 2016, respectively $76,734,000  $5,318,000 
Notes payable - related party  2,100,000   -- 
Lines of credit, net of unamortized loan issuance costs of approximately $0.2 million as of September 30, 2017 and December 31, 2016, respectively  1,445,000   7,957,000 
Notes payable, net of unamortized loan issuance costs of approximately $1.3 million and $1.8 million as of September 30, 2020 and December 31, 2019, respectively
 
$
158,191,000
  
$
159,120,000
 
Accounts payable and accrued liabilities  1,527,000   485,000  
10,551,000
  
10,883,000
 
Security Deposit  130,000   2,000 
Right of use lease liability
 
1,309,000
  
--
 
Deferred management internalization
 
17,800,000
  
17,800,000
 
Security deposits
 
138,000
  
138,000
 
Due to related parties  --   575,000  
--
  
54,000
 
Deferred revenue  253,000   45,000   
122,000
   
104,000
 
Total liabilities  82,189,000   14,382,000   
188,111,000
   
188,099,000
 
Commitments and contingencies  --   --  
--
  
--
 
Equity              
MVP REIT II, 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 $2,876,000 as of September 30, 2017 and none as of December 31, 2016)  --   -- 
Preferred stock Series 1; $0.0001 par value, 97,000 shares authorized, 13,445 shares issued and outstanding (stated liquidation value of $13,504,000 as of September 30, 2017 and none as of December 31, 2016)  --   -- 
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, 2,601,537 and 2,301,828 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively  --   -- 
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 September 30, 2020 and December 31, 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 September 30, 2020 and December 31, 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, 7,327,696 and 7,332,811 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 
--
  
--
 
Additional paid-in capital  76,769,000   56,875,000  
191,759,000
  
194,137,000
 
Accumulated deficit  (11,574,000)  (5,126,000)  
(86,520,000
)
  
(66,511,000
)
Total MVP REIT II, Inc. Shareholders' Equity  65,195,000   51,749,000 
Non-controlling interest – related party  8,854,000   4,124,000 
Total The Parking REIT, Inc. Shareholders’ Equity 
105,239,000
  
127,626,000
 
Non-controlling interest
  
2,046,000
   
2,619,000
 
Total equity  74,049,000   55,873,000   
107,285,000
   
130,245,000
 
Total liabilities and equity $156,238,000  $70,255,000  
$
295,396,000
  
$
318,344,000
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MVPTHE PARKING REIT, II, Inc.INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)(UNAUDITED)

 For the Three Months Ended September 30  
For the Nine Months Ended September 30
  For the Three Months Ended September 30,  
For the Nine Months Ended
September 30,
 
 2017  2016  2017  2016  2020  2019  2020  2019 
Revenues                     
Base rent income $2,206,000  $607,000  $6,258,000  $676,000  
$
3,132,000
 
$
5,036,000
 
$
11,525,000
 
$
15,126,000
 
Management income
 
303,000
 
--
 
596,000
 
--
 
Percentage rent income  16,000   --   523,000   --   
75,000
  
1,045,000
  
402,000
  
1,756,000
 
Total revenues  2,222,000   607,000   6,781,000   676,000  
3,510,000
 
6,081,000
 
12,523,000
 
16,882,000
 
                         
Operating expenses                         
Property taxes  90,000   22,000   279,000   24,000  
955,000
 
734,000
 
2,460,000
 
2,254,000
 
Property operating expense  273,000   220,000   608,000   238,000  
263,000
 
421,000
 
1,374,000
 
1,157,000
 
Asset management expense – related party  345,000   51,000   839,000   66,000  
--
 
--
 
--
 
854,000
 
General and administrative  400,000   267,000   1,051,000   602,000  
1,452,000
 
1,625,000
 
4,681,000
 
3,737,000
 
Merger costs  824,000   --   1,596,000   -- 
Professional fees, net of reimbursement of insurance proceeds
 
384,000
 
3,869,000
 
592,000
 
5,598,000
 
Management Internalization
 
--
 
--
 
--
 
32,004,000
 
Acquisition expenses  113,000   529,000   2,156,000   748,000  
--
 
1,000
 
3,000
 
251,000
 
Acquisition expenses – related party  --   1,011,000   1,710,000   1,427,000 
Seminar  --   --   --   6,000 
Depreciation  508,000   43,000   1,404,000   46,000 
Depreciation and amortization
 
1,305,000
 
1,285,000
 
3,948,000
 
3,876,000
 
Impairment
  
6,475,000
  
500,000
  
14,115,000
  
1,452,000
 
Total operating expenses  2,553,000   2,143,000   9,643,000   3,157,000   
10,834,000
  
8,435,000
  
27,173,000
  
51,183,000
 
                         
Loss from operations  (331,000)  (1,536,000)  (2,862,000)  (2,481,000)  
(7,324,000
)
  
(2,354,000
)
  
(14,650,000
)
  
(34,301,000
)
                         
Other income (expense)                         
Interest expense  (1,297,000)  --   (3,146,000)  (1,000) 
(2,326,000
)
 
(2,375,000
)
 
(6,910,000
)
 
(7,164,000
)
Distribution income – related party  75,000   --   174,000   -- 
Gain from sale of investment in real estate  1,200,000   --   1,200,000   --  
--
 
2,294,000
 
694,000
 
2,294,000
 
Income from investment in equity method investee  2,000   5,000   19,000   9,000 
Other Income
 
--
 
50,000
 
151,000
 
81,000
 
Income from DST
  
44,000
  
52,000
  
143,000
  
170,000
 
Total other income (expense)  (20,000)  5,000   (1,753,000)  8,000   
(2,282,000
)
  
21,000
  
(5,922,000
)
  
(4,619,000
)
                         
Net loss  (351,000)  (1,531,000)  (4,615,000)  (2,473,000) 
(9,606,000
)
 
(2,333,000
)
 
(20,572,000
)
 
(38,920,000
)
Net income attributable to non-controlling interest – related party  41,000   58,000   
269,000
   
61,000
 
Net loss attributable to MVP REIT II, Inc.'s stockholders $(392,000) $(1,589,000) $(4,884,000) $(2,534,000)
Less net income (expense) attributable to non-controlling interest
  
(530,000
)
  
62,000
  
(563,000
)
  
62,000
 
Net loss attributable to The Parking REIT, Inc.’s stockholders
 
$
(9,076,000
)
 
$
(2,395,000
)
 
$
(20,009,000
)
 
$
(38,982,000
)
                         
Preferred stock distributions declared - Series A  (55,000)  --   (101,000)  --  
(54,000
)
 
(54,000
)
 
(162,000
)
 
(162,000
)
Preferred stock distributions declared - Series 1  (157,000)  --   (172,000)  --   
(696,000
)
  
(696,000
)
  
(2,088,000
)
  
(2,088,000
)
Net loss attributable to MVP REIT II, Inc.'s common stockholders  (604,000)  (1,589,000)  (5,157,000)  (2,534,000)
Net loss attributable to The Parking REIT, Inc.’s common stockholders 
$
(9,826,000
)
 
$
(3,145,000
)
 
$
(22,259,000
)
 
$
(41,232,000
)
                         
Basic and diluted loss per weighted average common share:                         
Net loss per share attributable to MVP REIT II, Inc.'s common stockholders - basic and diluted $(0.24) $(1.18) $(2.00) 
$
(3.30)
Net loss per share attributable to The Parking REIT, Inc.’s common stockholders - basic and diluted 
$
(1.34
)
 
$
(0.45
)
 
$
(3.04
)
 
$
(6.06
)
Distributions declared per common share $0.25  $0.27  $0.62  $0.47  
$
--
 
$
--
 
$
--
 
$
--
 
Weighted average common shares outstanding, basic and diluted  2,577,514   1,341,769   2,516,496   
766,902
   
7,327,697
  
6,933,520
  
7,329,499
  
6,804,228
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MVPTHE PARKING REIT, II, Inc.INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended SeptemberFOR THE NINE MONTHS ENDED SEPTEMBER 30, 20172020
 (Unaudited)(UNAUDITED)
  Preferred stock  Common stock             
  Number of Shares  Par Value  Number of Shares  Par Value  Additional Paid-in Capital  Accumulated Deficit  Non-controlling Interest -Related Party  Total 
Balance, December 31, 2016  --  $--   2,301,828  $--  $56,875,000  $(5,126,000) $4,124,000  $55,873,000 
                                 
Distributions to non-controlling interest  --   --   --   --   --   --   (1,809,000)  (1,809,000)
                                 
Issuance of common stock  --   --   196,985   --   4,925,000   --   --   4,925,000 
                                 
Issuance of common stock – DRIP  --   --   40,153   --   901,000   --   --   901,000 
                                 
Issuance of preferred Series A  2,862   --   --   --   2,573,000   --   --   2,573,000 
                                 
Issuance of preferred Series 1  13,445   --   --   --   11,768,000   --   --   11,768,000 
                                 
Contributions  --   --   --   --   --   --   6,264,000   6,264,000 
                                 
Consolidation of Houston Preston  --   --   --   --   --   --   6,000   6,000 
                                 
Distributions - Common  --   --   --   --   (1,564,000)  --   --   (1,564,000)
                                 
Distributions – Series A  --   --   --   --   (101,000)  --   --   (101,000)
                                 
Distributions – Series 1  --   --   --   --   (172,000)  --   --   (172,000)
                                 
Stock dividend  --   --   62,571   --   1,564,000   (1,564,000)  --   -- 
                                 
Net income (loss)  --   --   --   --   --   (4,884,000)  269,000   (4,615,000)
Balance, September 30, 2017  16,307  $--   2,601,537  $--  $76,769,000  $(11,574,000) $8,854,000  $74,049,000 

  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, 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
)
Redeemed Shares
  
--
   
--
   
(2,741
)
  
--
   
(68,000
)
  
--
   
--
   
(68,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net loss
  
--
   
--
   
--
   
--
   
--
   
(1,150,000
)
  
(5,000
)
  
(1,155,000
)
Balance, March 31, 2020  
42,673
  
$
--
   
7,330,070
  
$
--
  
$
193,319,000
  
$
(67,661,000
)
 
$
2,604,000
  
$
128,262,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Issuance of common stock
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Redeemed Shares
  
--
   
--
   
(2,374
)
  
--
   
(60,000
)
  
--
   
--
   
(60,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net (loss)
  
--
   
--
   
--
   
--
   
--
   
(9,783,000
)
  
(28,000
)
  
(9,811,000
)
Balance, June 30, 2020  
42,673
  
$
--
   
7,327,696
  
$
--
  
$
192,509,000
  
$
(77,444,000
)
 
$
2,576,000
  
$
117,641,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Issuance of common stock
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Redeemed Shares
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
  ��
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net (loss)
  
--
   
--
   
--
   
--
   
--
   
(9,076,000
)
  
(530,000
)
  
(9,606,000
)
Balance, September 30, 2020  
42,673
  
$
--
   
7,327,696
  
$
--
  
$
191,759,000
  
$
(86,520,000
)
 
$
2,046,000
  
$
107,285,000
 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MVP

THE PARKING REIT, II, Inc.INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSCHANGES IN EQUITY
(Unaudited)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(UNAUDITED)

  For the Nine Months Ended September 30 
  2017  2016 
Cash flows from operating activities:      
Net Loss $(4,615,000) $(2,473,000)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation expense  1,404,000   46,000 
Gain on sale of investment in real estate  (1,200,000)  -- 
Income from investment in equity method investee  (19,000)  (9,000)
Distribution from MVP REIT  (122,000)  -- 
Distribution from DST  (52,000)  -- 
Amortization of loan costs  335,000   -- 
Changes in operating assets and liabilities        
Cash - Restricted  (5,248,000)  -- 
Due to related parties  (2,164,000)  9,000 
Accounts payable  1,028,000   593,000 
Security deposits  298,000   -- 
Other assets  258,000   -- 
Deferred revenue  --   17,000 
Accounts receivable  93,000   (71,000)
Prepaid expenses  60,000   138,000 
Net cash used in operating activities  (9,944,000)  (1,750,000)
         
Cash flows from investing activities:        
Purchase of investment in real estate  (81,200,000)  (36,642,000)
Security deposits  --   (957,000)
Investment for 20% ownership Houston Preston, net of cash in bank account  (1,015,000)  -- 
Investment in DST  (2,821,000)  -- 
Building improvements  (1,962,000)  -- 
Assets held for sale, net of liabilities  623,000   -- 
Proceeds from Investments  87,000   -- 
Proceeds from sale of investment in real estate  1,577,000   -- 
Deposits applied to purchase of investment in real estate  4,216,000   -- 
Distribution received from investments  237,000   -- 
Investment in cost method investee  (8,000)  (1,353,000)
Investment in cost method investee – held for sale  (2,000)  (836,000)
Investment in equity method investee  (50,000)  (600,000)
Proceeds from non-controlling interest  5,075,000   -- 
Net cash used in investing activities  (75,243,000)  (40,388,000)
         
Cash flows from financing activities        
Proceeds from note payable  75,752,000   434,000 
Payments on note payable  (1,388,000)  (106,000)
Proceeds from line of credit  32,643,000   -- 
Loan fees paid  (1,111,000)  -- 
Payments made on line of credit  (39,526,000)  -- 
Distribution to non-controlling interest  (1,809,000)  (17,000)
Distribution from investment in equity method investee  --   7,000 
Proceeds from issuance of common stock  5,826,000   42,564,000 
Proceeds from issuance of preferred stock  14,341,000   -- 
Dividends paid to stockholders  (1,837,000)  (142,000)
Net cash provided by financing activities  82,891,000   42,740,000 
Net change in cash  (2,296,000)  602,000 
Cash, beginning of period  4,885,000   2,268,000 
Cash, end of period $2,589,000  $2,870,000 
  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
  
--
   
--
   
--
   
--
   
--
   
--
   
(11,000
)
  
(11,000
)
Redeemed shares
  
--
   
--
   
(2,433
)
  
--
   
(60,000
)
  
--
   
--
   
(60,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net loss
  
--
   
--
   
--
   
--
   
--
   
(1,753,000
)
  
(1,000
)
  
(1,754,000
)
Balance, March 31, 2019  
42,673
  
$
--
   
6,540,364
  
$
--
  
$
182,572,000
  
$
(25,706,000
)
  
2,679,000
  
$
159,545,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
(15,000
)
  
(15,000
)
Issuance of common stock
  
--
   
--
   
400,000
   
--
   
7,000,000
   
--
   
--
   
7,000,000
 
Redeemed shares
  
--
   
--
   
(6,430
)
  
--
   
(157,000
)
  
--
   
--
   
(157,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net income (loss)
  
--
   
--
   
--
   
--
   
--
   
(34,834,000
)
  
1,000
   
(34,833,000
)
Balance, June 30, 2019  
42,673
  
$
--
   
6,933,934
  
$
--
  
$
188,665,000
  
$
(60,540,000
)
 
$
2,665,000
  
$
130,790,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
(16,000
)
  
(16,000
)
Issuance of common stock
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Redeemed shares
  
--
   
--
   
(681
)
  
--
   
(17,000
)
  
--
   
--
   
(17,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net income (loss)
  
--
   
--
   
--
   
--
   
--
   
(2,395,000
)
  
62,000
   
(2,333,000
)
Balance, September 30, 2019  
42,673
  
$
--
   
6,933,253
  
$
--
  
$
187,898,000
  
$
(62,935,000
)
 
$
2,711,000
  
$
127,674,000
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MVPTHE PARKING REIT, II, Inc.INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CASH FLOWS (Continued)
(Unaudited)(UNAUDITED)

 For the Nine Months Ended September 30  For The Nine Months Ended September 30, 
 2017  2016  2020  2019 
Cash flows from operating activities:     
Net Loss 
$
(20,572,000
)
 
$
(38,920,000
)
Adjustments to reconcile net loss to net cash used in operating activities:     
Depreciation and amortization expense 
3,948,000
 
3,876,000
 
Amortization of loan costs 
614,000
 
688,000
 
Amortization of right of use lease assets 
84,000
 
--
 
Gain from sale of investment in real estate 
(694,000
)
 
(2,294,000
)
Deferred management internalization consideration 
--
 
31,800,000
 
Impairment 
14,115,000
 
1,452,000
 
Income from DST 
(143,000
)
 
(170,000
)
Changes in operating assets and liabilities     
Due to/from related parties 
(55,000
)
 
3,000
 
Accounts payable 
(1,786,000
)
 
2,638,000
 
Lease liability 
(84,000
)
 
--
 
Loan fees 
(44,000
)
 
(275,000
)
Assets held for sale 
--
 
(54,000
)
Security deposits 
--
 
--
 
Other assets 
(79,000
)
 
(33,000
)
Deferred revenue 
18,000
 
106,000
 
Accounts receivable 
(603,000
)
 
(305,000
)
Prepaid expenses  
(67,000
)
  
(1,715,000
)
Net cash used in operating activities  
(5,348,000
)
  
(3,203,000
)
Cash flows from investing activities:     
Building improvements 
(921,000
)
 
(1,324,000
)
Fixed asset purchase 
(78,000
)
 
--
 
Proceeds from Investments 
48,000
 
152,000
 
Proceeds from sale of investment in real estate 
1,436,000
 
3,674,000
 
Payment of deposit made 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  
485,000
  
2,502,000
 
Cash flows from financing activities     
Proceeds from notes payable 
3,545,000
 
9,181,000
 
Payments on notes payable 
(2,544,000
)
 
(5,666,000
)
Distribution to non-controlling interest 
(10,000
)
 
(42,000
)
Redeemed shares 
(128,000
)
 
(234,000
)
Preferred dividends paid to stockholders  
(750,000
)
  
(2,250,000
)
Net cash provided by financing activities  
113,000
  
989,000
 
Net change in cash and cash equivalents and restricted cash  
(4,750,000
)
  
288,000
 
Cash and cash equivalents and restricted cash, beginning of period  
11,644,000
  
9,435,000
 
Cash and cash equivalents and restricted cash, end of period 
$
6,894,000
 
$
9,723,000
 
Reconciliation of Cash and Cash Equivalents and Restricted Cash:     
Cash and 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 and cash equivalents and restricted cash at beginning of period 
$
11,644,000
 
$
9,435,000
 
Cash and cash equivalents at end of period 
$
3,466,000
 
$
6,358,000
 
Restricted cash at end of period 
3,428,000
 
3,365,000
 
Cash and cash equivalents and restricted cash at end of period 
$
6,894,000
 
$
9,723,000
 
Supplemental disclosures of cash flow information:           
Interest Paid $2,737,000  $--  
$
6,297,000
 
$
6,477,000
 
Non-cash investing and financing activities:             
Distributions - DRIP $901,000  $217,000 
Dividend shares $1,402,000  $-- 
Dividends declared not yet paid $235,000  $143,000  
$
1,751,000
 
$
250,000
 
Deposits applied to purchase of investment in real estate $4,216,000  $-- 
Conversion from debt to preferred shares $2,000,000  $-- 
Deposits applied to purchase of investment in real estate or financing 
$
--
 
$
(97,000
)
Deferred management internalization 
$
--
 
$
24,800,000
 
Issuance of common stock – internalization 
$
--
 
$
7,000,000
 
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 unaudited condensed consolidated financial statements

MVPTHE PARKING REIT, II, Inc.INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberSEPTEMBER 30, 20172020
(Unaudited)(UNAUDITED)

Note A — Organization and 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 uponbeginning with the filing of the federal tax return for thetaxable year ended December 31, 2017. 2017 through December 31, 2019.  As a result of the COVID-19 pandemic, the Company has entered into temporary lease amendments with some of its tenants. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests, and, as a result, the Company believeswas not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020.  These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters.  If implemented, these options and strategies, may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of these options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful  or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it has been organized and has operated inis highly likely that the Company will no longer qualify as a manner that has enabled itREIT for the year ending December 31, 2020.  If we fail to qualify as a REIT commencing with thefor our taxable year endingended December 31, 2017; however, if2020, we would no longer be required to make distributions of our annual taxable income in order to maintain our REIT status and any distributions we make would not be deductible.  Moreover, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for the company is unablefour taxable years following 2020.  We believe that we may not be entitled to meet the REIT qualification for 2017this statutory relief, and there can be no assurances that we will continuebe able to operate as a C corporation for U.S. federal income tax purposes. As of December 31, 2016, the Company ceased all selling efforts for the initial public offering (the "Common Stock Offering") of its common stock, $0.0001 par value per share, at $25.00 per share, pursuant to a registration statement on Form S-11 filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended.  The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering.  As of September 30, 2017, the Company had raised approximately $67.7 million in the Common Stock 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 $0.6 million. The Company has also registered $50 million in shares of common stock for issuance pursuant to a distribution reinvestment plan (the "DRIP") under which common stockholders may elect to have their distributions reinvested in additional shares of common stock at the current price of $25.00 per share.obtain such relief.

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 Common Stock 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.sources of rental income, potentially including office, retail, storage, residential, billboard or cell towers.

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 intends 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's Operating 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.

As part of the Company's initial capitalization, we sold 8,000 shares of common stock for $200,000 to MVP Capital Partners II, LLC (the "Sponsor"), the sponsor of the Company. The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc., a Maryland corporation and OTC pink sheet company ("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 wholly owned by Michael Shustek.  The Company also sold 5,000 shares of common stock to VRM II in the Common Stock Offering.

The Company'sCompany’s former advisor is MVP Realty Advisors, LLC, dba The Parking REIT Advisors (the "Advisor"“former Advisor”), a Nevada limited liability company, which is owned 60% by Vestin Realty Mortgage II, Inc. (“VRM IIII”) and 40% by Vestin Realty Mortgage I, Inc. (“VRM I.  TheI”). Prior to the Internalization (as defined below), the former Advisor iswas responsible for managing the Company'sCompany’s affairs on a day-to-day basis and for identifying and making investments on the Company'sCompany’s behalf pursuant to ana second amended and restated advisory agreement betweenamong the Company, the Operating Partnership and the former Advisor (the "Advisory Agreement"“Amended and Restated Advisory Agreement”), which became effective upon consummation of the Merger (as such term is defined below). The Company has no paid employees. VRM II and VRM I are Maryland corporations that trade on the OTC pink sheets and were managed by Vestin Mortgage, LLC, an affiliate of the former Advisor, prior to being internalized in January 2018.

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).


From inception through September 30, 2017, the Company has paid approximately $2.1 million in distributions, including issuing 54,336 sharesMerger of its common stock as DRIP shares, issuing 85,358 shares of its common stock as dividend in distributions to the Company's common stockholders and approximately $200,000 in distributions for preferred stockholders, all of which have been paid from offering proceeds and constituted a return of capital.  The Company may continue to pay distributions from sources other than cash flow from operations, including proceeds from the Common Stock Offering and other stock sales, 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.MVP REIT with Merger Sub, LLC

In October 2016 the Board of Directors appointed a special committee to evaluate liquidity options. After consideration, in January 2017 the special committee of the Board of Directors decided to explore a merger with MVP REIT, Inc. ("MVP REIT"). 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"Sub”), and MVP Realty Advisors, LLC, the Company's and MVP REIT's external advisor (the "Advisor"),former Advisor entered into an agreement and plan of merger (the "Merger Agreement"“Merger Agreement”). Subject, pursuant to the terms and conditions of the Merger Agreement,which MVP REIT willI would merge with and into Merger Sub (the "Merger"“Merger”), with. On December 15, 2017, the Merger was consummated. Following the Merger, the Company contributed 100% of its equity interests in Merger Sub survivingto 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 "Surviving Entity"“MVP I Common Stock”), such thatwas 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, the Surviving Entity will continue as a wholly owned subsidiaryapproximately 59.7% of the Company.  On September 27, 2017, the stockholders of MVPCompany's common stock. The Company was subsequently renamed “The Parking REIT, approved the Merger Agreement and the parties are currently in the process of satisfying the remaining conditions to completion of the merger.

See Note P- Merger for additional information.Inc.”

Capitalization

As of September 30, 2017,2020, the Company had 2,601,537 7,327,696 shares of common stock issued and outstanding. During the nine months ended September 30, 2017,On December 31, 2016, the Company had received consideration of approximately $4.9 millionceased all selling efforts for the issuanceinitial public offering of its common stock in connection with(the “Common Stock Offering”). The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering. In connection with its formation, the Company sold 8,000 shares of common stock to the SponsorMVP Capital Partners II, LLC (the “Sponsor”) for $200,000.

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, par value $0.0001 per share (the "Series A"“Series A”). The Company commenced a private placement of the shares of Series A, together with warrants to acquire the Company'sCompany’s common stock, to accredited investors on November 1, 2016 and closed the offering on March 24, 2017. The Company raised approximately $2.6$2.5 million, net of offering costs, in the Series A private placement and hashad 2,862 Series A shares issued and outstanding.outstanding as of September 30, 2020.

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 par value $0.0001 per share (the "Series 1"“Series 1”). On April 7, 2017, the Company commenced a private placement of shares of Series 1, together with warrants to acquire the Company'sCompany’s common stock to accredited investors.  As of September 30, 2017,investors and closed the offering on January 31, 2018. The Company had raised approximately $11.8$36.0 million, net of offering costs, in the Series 1 private placements and had 13,44539,811 Series 1 shares issued and outstanding. The Company continues to raise additional funds through a private placement of Series 1 Convertible Redeemable Preferred Stock.

Stockholders may elect to reinvest distributions received from the Company in common shares by participating in the Company's DRIP. The stockholder may enroll in the DRIP by completing the distribution change form. The stockholder may also withdraw at any time, without penalty, by delivering written notice to the Company.  Participants will acquire DRIP shares at a fixed price of $25.00 per share until (i) all such shares registered in the Common Stock Offering are issued, (ii) the Common Stock Offering terminates and the Company elects to deregister any unsold shares under the DRIP, or (iii) the Company's board decides to change the purchase price for DRIP shares or terminate the DRIP for any reason. Commencing no later than May 29, 2018 (the "Valuation Date"), which is 150 days following the second anniversary of the date to satisfy the minimum offering requirement in the Offering, if the DRIP is ongoing, the Company will adjust the price of shares offered in the DRIP to equal the net asset value ("NAV") per share. The Company will update the NAV per share at least annually following the Valuation Date and further adjust the per share price in the Company's DRIP accordingly. The Company has registered $50,000,000 in shares for issuance under the DRIP.

The Company may amend, suspend or terminate the DRIP for any reason, except that the Company may not amend the DRIP to eliminate a participant's ability to withdraw from the DRIP, without first providing 10 days prior written notice to participants.

In addition, the Company has a Share Repurchase Program ("SRP") that may provide stockholders who generally have held their shares for at least two years an opportunity to sell their shares to the Company, subject to certain restrictions and limitations.  Prior to the date that the Company establishes an estimated value per share of common stock, the purchase price will be 95.0% of the purchase price paid for the shares if redeemed at any time between the second and third anniversaries of the purchase date, and 97.0% of the purchase price paid if redeemed after the third anniversary.  After the Company establishes an estimated NAV per share of common stock, the purchase price will be 95.0% of the NAV per share for the shares if redeemed at any time between the second and third anniversaries of the purchase date, 97.0% of the NAV per share if redeemed at any time between the third and fifth anniversaries, and 100.0% of the NAV per share if redeemed after the fifth anniversary.

The number of shares to be repurchased during a calendar quarter is limited to the lesser of: (i) 5.0% of the weighted average number of shares of common stock outstanding during the prior calendar year, and (ii) those repurchases that can be funded from the net proceeds of the sale of shares under the DRIP in the prior calendar year plus such additional funds as may be reserved for that purpose by the Company's board of directors; provided however, that the above volume limitations shall not apply to repurchases requested in connection with the death or qualifying disability of a stockholder.  The board of directors may also limit the amounts available for repurchase at any time at its sole discretion. The SRP will terminate if the shares of common stock are listed on a national securities exchange.  Redemption requests other than those made in connection with the death or disability (as defined in the Internal Revenue Code of 1986, as amended (the "Code") of a stockholder will continue to be repurchased as of March 31st, June 30th, September 30th and December 31st of each year in accordance with the terms of the SRP.  As of September 30, 2017, there were no shares eligible for redemption (other than in connection with a death or disability of a stockholder).2020.

Note B — Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited condensed consolidated financial statements of the Company are prepared by management on the accrual basis of accounting and in accordance with principles generally accepted in the United States of America ("GAAP"(“GAAP”) for interim financial information as contained in the Financial Accounting Standards Board ("FASB"(“FASB”) Accounting Standards Codification ("ASC"(“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. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements include accounts and related adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of the Company'sCompany’s financial position, results of operations and cash flows for the interim period. Operating results for the three and nine months ended September 30, 20172020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2020. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.2019.

The condensed consolidated balance sheet as of December 31, 20162019 contained herein has been derived from the audited financial statements as of December 31, 2016,2019 but does not include all disclosures required by GAAP.

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 nine months ended September 30, 2020, the Company had a net loss of $20.6 million and had $6.9 million in cash, cash equivalents and restricted cash. In connection with preparing the condensed consolidated financial statements for the three and nine months ended September 30, 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 November 16, 2021.

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 Quarterly Report:

The Company completed the sale of the San Jose, California garage on May 26, 2020 at the contract price of $4.1 million. See Note I – Disposition of Investment in Real Estate of this Quarterly Report for additional information.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A Preferred stock, however, such distributions will continue to accrue in accordance with the terms of the Series A.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1 Preferred Stock, however, such distributions will continue to accrue in accordance 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.
The Company is continuing to have discussions with its lenders in light of the current economic conditions and entered into one loan modification during the quarter ended June 30, 2020 and five loan modifications during the quarter ended September 30, 2020.
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 September 30, 2020, the Company has entered into thirty-five 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 (iii) extension of the lease.
The Company applied for the Paycheck Protection Program loan, guaranteed by the Small Business Administration (“SBA”), through Key Bank National Association, Inc., on April 3, 2020. This loan program is for companies with 500 or less employees, under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed by President Trump on March 27, 2020. On April 23, 2020 the Company received the funding for its CARES Act loan of approximately $348,000. Because these funds were used exclusively for employee payroll management expects this loan will not be required to be paid back under the terms of the CARES Act.
The Company is in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of this loan on terms the Company can satisfy; however, there can be no assurance this option will be exercised.  If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral. See Company Indebtedness in Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
The Company has plans to dispose of an asset within the next twelve months. Management disposed of two assets in 2019 and one asset during the nine - months ended September 30, 2020.

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 September 30, 2020 financial statements.


Consolidation

The Company'sCompany’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. The following list includes the subsidiaries that are included in the Company’s consolidated financial statements, not the number of properties owned by the Company at September 30, 2020 and 2019.

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 Sherman 1935, 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
Cleveland Lincoln Garage,
St. Louis Seventh & Cerre, LLC
MVP Milwaukee Wells, LLC
MVP San Jose 88 Garage, LLC
MVP Houston Jefferson Lot, LLC**Preferred Parking, LLC
MVP Wildwood NJ Lot, LLC
MCI 1372 Street, LLC
MVP Houston Preston Lot,Raider Park Garage, LLC *
MVP Indianapolis City Park, LLC
MVP Cincinnati Race Street, LLC
MVP Houston San JacintoNew Orleans Rampart, LLC
MVP Indianapolis WA Street Lot, LLC
MVP St. Louis Washington, LLC
MVP Detroit CenterHawaii Marks Garage, LLC
Minneapolis City Parking, LLC
MVP St. Paul Holiday Garage, LLC
St Louis Broadway, LLC
MVP Minneapolis Venture, LLC
MVP Louisville Station Broadway, LLC
St Louis Seventh & Cerre, LLC
White Front Garage Partners, LLCMVP Preferred Parking, LLC

* Entity is consolidated with the Company starting May 1, 2017.  See Note E Related Party Transactions for additional information.

** See Note M – Gain on Sale of Investment in Real Estate for additional information

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 unaudited condensed 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.

Use of Estimates

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

DuringThe Company had fourteen and sixteen parking tenants/operators during the last weeknine months ended September 30, 2020 and 2019, respectively. One tenant/operator, SP Plus Corporation (Nasdaq: SP) (“SP+”), represented 61.0% of August 2017, Houston Texas experienced major flooding due to Hurricane Harvey.  This resultedthe Company’s base parking rental revenue for the nine months ended September 30, 2020.

SP+ is one of the largest providers of parking management in limited access to the Houston area and a shutdown of most business and government operations.  Our parking garage and parking lots located in Houston, TX experienced minimal damage during this time; however, the company is still assessing the long-term impact.United States. As of September 30, 2017, we have not seen a reduction2020, SP+ managed approximately 3,200 locations in the base rent from our operator, who will continue to operate these locations under the terms of the current leases.North America.


The Company had eight parking tenants as of September 30, 2017 and four parking tenants as of September 30, 2016. One tenant, Standard Parking + ("SP+"), represented a 61.3% concentration for the nine months ended September 30, 2017, in regards to parking rental revenue.  Below is a table that summarizes parking rent by tenant:tenant/operator as a percentage of the Company’s total base parking rental revenue for the periods presented:

 For the Nine Months Ended September 30,  For The Nine Months Ended September 30, 
Parking Tenant 2017  2016  2020  2019 
SP +  61.3%  60.3% 
61.0
%
 
58.1
%
iPark Services  10.3%  0.0%
Premier Parking
  8.1%  0.0% 
15.9
%
 
16.3
%
Denison
 
6.4
%
 
2.4
%
ISOM Management
 
5.1
%
 
4.1
%
Interstate Parking  6.0%  17.3% 
2.8
%
 
2.9
%
342 N Rampart
 
2.0
%
 
3.1
%
TNSH, LLC
 
1.5
%
 
1.2
%
Best Park
 
1.4
%
 
0.3
%
St. Louis Parking  4.1%  0.0% 
1.3
%
 
2.1
%
Lanier Parking  4.0%  0.0%
Lanier
 
1.0
%
 
2.6
%
ABM  3.9%  17.4% 
0.7
%
 
4.3
%
Riverside Parking  2.3%  5.0% 
0.6
%
 
1.0
%
Grand Total  100.0%  100.0%
Denver School
 
0.2
%
 
0.2
%
Secure
 
0.1
%
 
0.1
%
Premium Parking
 
--
  
1.3
%

In addition, the Company had concentrations in various cities based on parking rental revenue for the nine months ended September 30, 20172020 and 2016,2019, as well as concentrations in various cities based on the real estate wethe Company owned as of September 30, 20172020 and December 31, 2016.2019. The below tables summarize this information by city.

City Concentration for Parking Rent 
  For the Nine Months Ended September 30, 
  2017  2016 
Detroit  49.5%  0.0%
Cleveland  12.0%  47.4%
Nashville  8.5%  0.0%
St Paul  6.3%  17.3%
St Louis  6.2%  9.8%
Houston  6.1%  0.0%
San Jose  4.4%  10.8%
Cincinnati  3.9%  6.6%
Louisville  2.4%  5.0%
Canton  0.7%  3.1%
Grand Total  100.0%  100.0%

Real Estate Concentration by City 
Based on the Company's Ownership % 
City Concentration for Parking Rental RevenueCity Concentration for Parking Rental Revenue 
 As of  For the Nine Months Ended September 30, 
 September 30, 2017  December 31, 2016  2020 2019 
Detroit  34.1%  0.0% 
24.3
%
 
17.4
%
Houston  20.2%  10.5% 
12.2
%
 
12.8
%
St Louis  11.2%  5.7%
Fort Worth 
10.1
%
 
7.8
%
Cincinnati 
8.2
%
 
8.9
%
Indianapolis 
6.4
%
 
6.2
%
Lubbock 
5.1
%
 
4.1
%
Cleveland  9.1%  22.2% 
4.5
%
 
6.9
%
Honolulu 
4.4
%
 
4.8
%
Milwaukee 
3.7
%
 
3.2
%
Nashville  7.1%  17.4% 
3.7
%
 
3.5
%
St. Louis 
3.6
%
 
5.2
%
Minneapolis 
2.9
%
 
4.1
%
St Paul  6.4%  15.5% 
2.8
%
 
2.9
%
Cincinnati  3.5%  8.5%
New Orleans 
2.0
%
 
3.1
%
Bridgeport 
1.4
%
 
2.1
%
Memphis 
1.4
%
 
1.6
%
San Jose  2.8%  6.8% 
1.0
%
 
2.3
%
Denver 
0.7
%
 
0.8
%
Louisville  2.4%  5.8% 
0.6
%
 
1.0
%
Minneapolis  1.6%  3.8%
Bridgeport  0.6%  1.4%
Clarksburg 
0.4
%
 
0.3
%
Wildwood 
0.3
%
 
0.4
%
Canton  0.5%  1.3% 
0.3
%
 
0.2
%
Denver  0.5%  1.1%
Grand Total  100.0%  100.0%
Ft. Lauderdale 
--
 
0.4
%

Real Estate Investment Concentration by City 
    
  As of September 30, 2020  As of December 31, 2019 
Detroit  
18.9
%
  
17.6
%
Houston  
11.6
%
  
12.0
%
Fort Worth  
9.3
%
  
8.8
%
Cincinnati  
8.1
%
  
8.7
%
Honolulu  
6.7
%
  
6.7
%
Indianapolis  
6.1
%
  
5.8
%
Cleveland  
5.7
%
  
6.2
%
Lubbock  
4.5
%
  
3.7
%
St Louis  
4.2
%
  
4.4
%
Minneapolis  
3.9
%
  
4.4
%
Nashville  
3.9
%
  
3.7
%
Milwaukee  
3.8
%
  
3.8
%
St Paul  
2.8
%
  
2.7
%
Bridgeport  
2.8
%
  
2.6
%
New Orleans  
2.6
%
  
2.6
%
Memphis  
1.2
%
  
1.3
%
San Jose  
1.2
%
  
1.1
%
Denver  
1.1
%
  
1.0
%
Louisville  
1.0
%
  
1.0
%
Clarksburg  
0.2
%
  
0.2
%
Canton  
0.2
%
  
0.2
%
Wildwood  
0.2
%
  
0.4
%
Fort Lauderdale  
--
   
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. Costs directly associated with all operating property acquisitions and those development and redevelopment acquisitions that meet the accounting criteria to be accounted for as business combinations are expensed as incurred within operating expenses in the consolidated statement of operations.During the three months and nine months ended September 30, 2017, the Company expensed approximately $0 and $1.7 million in related party acquisition costs, respectively. The Company also had $0.1 million and $2.1 million of non-related party acquisition costs, respectively, for the purchase of an interest in four properties (see Note I – Acquisitions). During the three and nine months ended September 30, 2016, the Company expensed approximately $1.0 million and $1.4 million, respectively, in related party acquisition costs. The Company also expensed $0.5 million and $0.7 million in non-related party acquisition costs for the three and nine months ended September 30, 2016.  The Company's acquisition expenses are directly related to the Company's acquisition activity and if the Company's acquisition activity was to increase or decrease, so would the Company's acquisition costs.

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 $6.5 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively.  The Company recorded impairment charges of approximately $14.1 million and $1.5 million for the nine months ended September 30, 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 nine months ended September 30, 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 nine months ended September 30, 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

Cash includes cash in bank accounts. The Company deposits cash with high quality financial institutions with the majoritymaintains a significant portion of its cash deposits at KeyBank,. These deposits 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 September 30, 20172020, and December 31, 2016,2019, the Company had approximately $1.2$0.7 million and $3.4$2.7 million, respectively, in excess of the federally insured limits. limits. As of September 30, 2017,the date of this filing, the Company has not experienced any losses on cash deposits.

Restricted Cash

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. Percentage rents will be recorded when earned and certain thresholds have been met.

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 three and nine months ended September 30, 20172020 and 2016,2019, 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 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's analysis of comparable properties in the Company'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.
-12-

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.


Organization, Offering and Related Costs

Certain organization and offering costs will be incurred by the former Advisor. Pursuant to the terms of the Amended and Restated Advisory Agreement, the Company will not reimburse the Advisor 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'sformer Advisor’s employees and employees of the Advisor'sformer Advisor’s affiliates and others.

All direct offering costs incurred and or paid by usthe Company that are directly attributable to a proposed or actual offering, including sales commissions, if any, were charged against the gross proceeds of the Common Stock Offering and recorded as an offset to additional paid-in-capital. All indirect costs will be expensed as incurred.

Stock-Based Compensation

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).

-13-

Income Taxes

TheCommencing with its 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 is organized and conducts operationshas operated in a manner to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the "Code") and to comply with the provisions of the Internal Revenue Code with respect thereto.Code. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, ("Taxable Income"), which is distributed to its stockholders, provided that at least 90% of Taxable Incomesuch taxable income is distributed and provided that certain other requirements are met. Our Taxable IncomeThe Company’s REIT taxable income may substantially exceed or be less than ourthe income calculated according to GAAP. In addition, the Company will be subjected to corporate income tax to the extent that less than 100% of the net taxable income as determined based on GAAP, because, differences in GAAP and taxableis distributed, including any 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.gain.

If theThe Company does not qualify asuses a REIT fortwo-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax year ended December 31, 2017, we will file as a C corporation and deferred tax assets and liabilities will be establishedposition for recognition by determining if the temporary differences between the financial reporting basis and the tax basisweight of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for the deferred tax assets is provided if we believeavailable evidence indicates that it is more likely than not that wethe position will not realizebe 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 September 30, 2020.

A full valuation allowance for deferred tax assets based on the available evidence at the time the determination is made. For the tax year ended December 31, 2016,was provided since the Company didbelieves that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets ashould 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 was recorded against our netthrough its income statement in the period in which such changes in circumstances occur. As long as the Company continues to qualify as a REIT, it will generally not be subject to corporate level federal income taxes on earnings distributed to its stockholders and therefore may not realize any benefit from deferred tax assets.assets arising during 2019 or any prior period in which the Company maintained its status as a REIT. The Company intends to distribute at least 100% of its taxable income annually for every year in which the Company is a REIT.

As of September 30, 2020, as a result of the COVID-19 pandemic, the Company has entered into temporary lease amendments with some of its tenants. The Company was compelled to make certain of these amendments in response to challenging market conditions faced by its lessees and operating partners due to the significant negative impact of COVID-19 on demand for parking in many of the markets in which the Company owns properties, particularly in major population centers.  At the time the leases were amended, the Company intended for the amendments to be temporary and did not believe that the amendments would cause the Company to fail its REIT income tests for the 2020 year.  Because the COVID-19 pandemic has continued to negatively impact the Company and its operating partners and lessees longer than anticipated, the Company has not yet been able to amend all of its agreements back to their original form. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests.  As a result, the Company was not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020.   These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters.  If implemented, these options and strategies may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of these options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful  or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020.  If we fail to qualify as a REIT for our taxable year ended December 31, 2020, we would no longer be required to make distributions of our annual taxable income in order to maintain our REIT status and any distributions we make would not be deductible by us.  Moreover, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for the four taxable years following 2020.  We believe that we may not be entitled to this statutory relief, and there can be no assurances that we will be able to obtain such relief.
-14-

Given projected losses in 2020, as well as the potential tax benefit of net operating loss carryforwards that the Company does not anticipate utilizing as long as it maintains its status as a REIT, the Company will continue to evaluate its current and deferred income tax situation (including the appropriateness of recording a deferred tax asset for net operating losses) throughout the year as there is additional clarity about the impact of the COVID-19 pandemic to the Company’s ongoing operations, including whether the Company can maintain its REIT status for the 2020 year.

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 three and nine months ended September 30, 20172020 and 2016.2019.

There is a potential for dilution from the Company'sCompany’s Series A Convertible Redeemable Preferred Stock which may be converted into the Company'sCompany’s common stock 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 offering (whether or not a listing event has occurred).time. As of September 30, 2017,2020, 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'sCompany’s Series 1 Convertible Redeemable Preferred Stock which may be converted upon a holder’s election into the Company'sCompany’s common stock 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).time. As of September 30, 2017,2020, there were 13,44539,811 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.

Each share of Series A preferred stock and Series 1 preferred stock will convert into the number of shares of the Company'sCompany’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 100% or,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 notice is received before December 1, 2017 (for Series 1 shares) or December 31, 2017 (for Series A shares), 110%price will be 100% of the volume weighted average price per share of the Company'sCompany’s common stock for the 20 trading days prior to the delivery date of the conversion notice; provided that if the Company's common stock is not then traded on a national securities exchange, the conversion price will be equal to the net asset value per share of the Company's common stock.notice. The Company will have the right (but not the obligation) to redeem any Series A or Series 1 shares that are subject to a conversion notice on the terms set forth in the applicable articles supplementary.

Reportable Segments

We currently operate one reportable segment.

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Reclassifications

Amounts listed in connection with certain expense accounts on the condensed consolidated statements of operations in the 2016 have been reclassified to conform to the September 30, 2017 presentation.

Accounting and Auditing Standards Applicable to "Emerging“Emerging Growth Companies"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.

Share Repurchase Program

The Company has a 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.

Prior to the time that the Company's shares are listed on a national securities exchange, the repurchase price per share will depend on the length of time investors have held such shares as follows: no repurchases for the first two years unless shares are being repurchased in connection with a stockholder's death or disability (as defined in the Code).  Repurchase requests made in connection with the death or disability of a stockholder will be repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once we have established an estimated NAV per share, 100% of such amount as determined by the Company's board of directors, subject to any special distributions previously made to the Company's stockholders. With respect to all other repurchases, prior to the date that we establish an estimated value per share of common stock, the purchase price will be 95.0% of the purchase price paid for the shares, if redeemed at any time between the second and third anniversaries of the purchase date, and 97.0% of the purchase price paid if redeemed after the third anniversary.  After we establish an estimated NAV per share of common stock, the purchase price will be 95.0% of the NAV per share for the shares, if redeemed at any time between the second and third anniversaries of the purchase date, 97.0% of the NAV per share if redeemed at any time between the third and fifth anniversaries, and 100.0% of the NAV per share if redeemed after the fifth anniversary. In the event that the Company does not have sufficient funds available to repurchase all of the shares for which repurchase requests have been submitted in any quarter, we will repurchase the shares on a pro rata basis on the repurchase date. The SRP will be terminated if the Company's shares become listed for trading on a national securities exchange or if the Company's board of directors determines that it is in the Company's best interest to terminate the SRP.

The Company is not obligated to repurchase shares of common stock under the share repurchase program. The number of shares to be repurchased during the calendar quarter is limited to the lesser of: (i) 5% of the weighted average number of shares outstanding during the prior calendar year, and (ii) those repurchases that could be funded from the net proceeds of the sale of shares under the DRIP in the prior calendar year plus such additional funds as may be reserved for that purpose by the Company's board of directors; provided, however, that the above volume limitations shall not apply to repurchases requested in connection with the death or qualifying disability of a stockholder. Because of these limitations, the Company cannot guarantee that the Company will be able to accommodate all repurchase requests.
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The Company will repurchase shares as of March 31st, June 30th, September 30th, and December 31st of each year.  Each stockholder whose repurchase request is approved will receive the repurchase payment approximately 30 days following the end of the applicable quarter, effective as of the last day of such quarter.  The Company refers to the last day of such quarter as the repurchase date.  If funds available for the Company's share repurchase program are not sufficient to accommodate all requests, shares will be repurchased as follows: (i) first, repurchases due to the death of a stockholder, on the basis of the date of the request for repurchase; (ii) next, in the discretion of the Company's board of directors, repurchases because of other involuntary exigent circumstances, such as bankruptcy; (iii) next, repurchases of shares held by stockholders subject to a mandatory distribution requirement under the stockholder's IRA; and (iv) finally, all other repurchase requests based upon the postmark of receipt. If the Stockholder's repurchase request is not honored during a repurchase period, the Stockholder will be required to resubmit the request to have it considered in a subsequent repurchase period.

On October 27, 2016, the Company filed a Form 8-K announcing, among other things, an amendment to the SRP providing for participation in the SRP by any holder of the Company's Series A Convertible Redeemable Preferred Stock, or any future board-authorized series or class of preferred stock that is convertible into common stock of the Company.  Under the amendment, which became effective on November 26, 2016, a preferred stock holder may participate in the SRP by converting its preferred stock into common stock of the Company, and submitting such common shares for repurchase. The time period, for purposes of determining how long such stockholder has held the common shares submitted for repurchase, begins as of the date such preferred stockholder acquired the underlying preferred shares that were converted into common shares and submitted for repurchase.

The board of directors may, in its sole discretion, terminate, suspend or further amend the share repurchase program upon 30 days' written notice without stockholder approval if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the stockholders.  Among other things, we may amend the plan to repurchase shares at prices different from those described above for the purpose of ensuring the Company's dividends are not "preferential" for incomes tax purposes.  Any notice of a termination, suspension or amendment of the share repurchase program will be made via a report on Form 8-K filed with the SEC at least 30 days prior to the effective date of such termination, suspension or amendment.  The board of directors may also limit the amounts available for repurchase at any time in its sole discretion.  Notwithstanding the foregoing, the share repurchase program will terminate if the shares of common stock are listed on a national securities exchange.  As of September 30, 2017, no shares are eligible for redemption (other than in connection with a death or disability of a stockholder).

Distribution Reinvestment Plan

Pursuant to the DRIP stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving cash. No dealer manager fees or selling commissions are paid with respect to shares purchased pursuant to the DRIP. Participants purchasing shares pursuant to the DRIP have the same rights and are treated in the same manner as if such shares were issued pursuant to the Offering. The board of directors may designate that certain cash or other distributions be excluded from the DRIP. The Company has the right to amend any aspect of the DRIP or terminate the DRIP with ten days' notice to participants. Shares issued under the DRIP are recorded to equity in the accompanying balance sheets in the period distributions are declared. We have issued a total of 54,336 shares of common stock under the DRIP as of September 30, 2017. The DRIP program is currently suspended in connection with the merger.

Non-controlling Interests

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.

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Note C — Commitments and Contingencies

Litigation

The nature of our business exposes our properties, us and our operating partnership to the risk of claims and litigation in the normal course of business. Other than routine litigation arising out of the ordinary course of business, we are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us.

Environmental Matters

Investments in real property create the potential for environmental liability on the part of 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 has 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 an ownera result, the Company retained a local environmental engineer to seek a closure letter or similar certificate of real estate, we are subjectno further action from the State of Wisconsin due to variousthe Company’s use of the property as a parking lot. As of September 30, 2020, management has not received the closure letter, however the Company does not anticipate a material adverse effect related to this environmental laws ofmatter.

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 September 30, 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

As of September 30, 2017,2020, the Company had the following Investments in Real Estate that were consolidated on ourthe Company’s balance sheet:

PropertyLocationDate Acquired
Investment
Amount
Parking TenantLease Commencement Date
MVP San Jose 88 Garage, LLCSan Jose, CA6/15/2016$3,824,000Lanier Parking3/01/2017
MCI 1372 Street, LLCCanton, OH7/8/2016$700,000ABM7/8/2016
MVP Cincinnati Race Street Garage, LLCCincinnati, OH7/8/2016$5,408,000SP +9/1/2016
MVP St. Louis Washington, LLCSt Louis, MO7/18/2016$3,000,000SP +7/21/2016
MVP St. Paul Holiday Garage, LLCSt Paul, MN8/12/2016$8,310,000Interstate Parking8/12/2016
MVP Louisville Station Broadway, LLCLouisville, KY8/23/2016$3,107,000Riverside Parking8/23/2016
Cleveland Lincoln Garage Owners, LLCCleveland, OH10/19/2016$7,412,000SP +10/25/2016
MVP Houston San Jacinto Lot, LLCHouston, TX11/22/2016$3,250,000iPark Services12/1/2016
MVP Houston Preston Lot, LLCHouston, TX11/22/2016** $2,820,000iPark Services12/1/2016
White Front Garage Partners, LLCNashville, TN9/30/2016$11,672,000Premier Parking10/1/2016
West 9th Street Properties II, LLC**
Cleveland, OH5/11/2016$5,733,000SP +5/11/2016
33740 Crown Colony, LLC**Cleveland, OH5/17/2016$3,050,000SP +5/17/2016
MVP Detroit Center Garage, LLCDetroit, MI01/10/2017$55,139,000SP +2/1/2017
St Louis Broadway, LLCSt Louis, MO02/01/2017$2,400,000St Louis Parking Co2/1/2017
St Louis Seventh & Cerre, LLCSt Louis, MO02/01/2017$3,300,000St Louis Parking Co2/1/2017
MVP Preferred Parking, LLCHouston, TX6/29/2017$20,600,000iPark Services8/01/2017
$139,725,000

* During April 2017, MVP REIT reduced its ownership interest in MVP Houston Preston Lot from 80% to 40%, by selling a portion of its ownership to the Company for $1.12 million. This transaction was completed at par value with no fees paid and no gain or loss recorded by MVP REIT or the Company. Our ownership interest in MVP Houston Preston Lot increased from 20% to 60% and we have been considered the controlling party starting May 1, 2017.

** In November 2016, these properties merged into one holding company called West 9th Street Properties II, LLC, for the purposes of debt financing.
Property NameLocationDate AcquiredProperty Type # Spaces  Property Size (Acres)  Retail Sq. Ft  Investment Amount Parking Tenant / Operator
MVP Cleveland West 9th (1)Cleveland, OH5/11/2016Lot  260   2   N/A  $5,845,000 SP +
33740 Crown Colony (1)Cleveland, OH5/17/2016Lot  82   0.54   N/A  $2,954,000 SP +
MCI 1372 StreetCanton, OH7/8/2016Lot  66   0.44   N/A  $700,000 ABM
MVP Cincinnati Race Street GarageCincinnati, OH7/8/2016Garage  350   0.63   N/A  $5,848,000 SP +
MVP St. Louis WashingtonSt Louis, MO7/18/2016Lot  63   0.39   N/A  $1,637,000 SP +
MVP St. Paul Holiday GarageSt Paul, MN8/12/2016Garage  285   0.85   N/A  $8,396,000 Interstate Parking
MVP Louisville Station BroadwayLouisville, KY8/23/2016Lot  165   1.25   N/A  $3,007,000 Riverside Parking
White Front Garage PartnersNashville, TN9/30/2016Garage  155   0.26   N/A  $11,672,000 Premier Parking
Cleveland Lincoln GarageCleveland, OH10/19/2016Garage  536   1.14   45,272  $8,272,000 SP +
MVP Houston Preston LotHouston, TX11/22/2016Lot  46   0.23   N/A  $2,820,000 Premier Parking
MVP Houston San Jacinto LotHouston, TX11/22/2016Lot  85   0.65   240  $3,250,000 Premier Parking
MVP Detroit Center GarageDetroit, MI2/1/2017Garage  1,275   1.28   N/A  $55,477,000 SP +
St. Louis BroadwaySt Louis, MO5/6/2017Lot  161   0.96   N/A  $2,400,000 St. Louis Parking
St. Louis Seventh & CerreSt Louis, MO5/6/2017Lot  174   1.06   N/A  $3,300,000 St. Louis Parking
MVP Preferred Parking (4)Houston, TX8/1/2017Garage/Lot  528   0.98   784  $20,479,000 Premier Parking
MVP Raider Park GarageLubbock, TX11/21/2017Garage  1,495   2.15   20,536  $13,517,000 ISOM Management
MVP PF Memphis PoplarMemphis, TN12/15/2017Lot  127   0.87   N/A  $3,669,000 Best Park
MVP PF St. LouisSt Louis, MO12/15/2017Lot  183   1.22   N/A  $5,041,000 SP +
Mabley Place Garage (2)Cincinnati, OH12/15/2017Garage  775   0.9   8,400  $18,210,000 SP +
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MVP Denver ShermanDenver, CO12/15/2017Lot  28   0.14   N/A  $705,000  Denver School 
MVP Fort Worth TaylorFort Worth, TX12/15/2017Garage  1,013   1.18   11,828  $27,663,000  SP + 
MVP Milwaukee Old WorldMilwaukee, WI12/15/2017Lot  54   0.26   N/A  $2,044,000  SP + 
MVP Houston Saks GarageHouston, TX12/15/2017Garage  265   0.36   5,000  $7,923,000  Premier Parking 
MVP Milwaukee WellsMilwaukee, WI12/15/2017Lot  148   1.07   N/A  $4,463,000  Symphony 
MVP Wildwood NJ Lot 1 (3)Wildwood, NJ12/15/2017Lot  29   0.26   N/A  $278,000  SP + 
MVP Wildwood NJ Lot 2 (3)Wildwood, NJ12/15/2017Lot  45   0.31   N/A  $419,000  SP+ 
MVP Indianapolis City ParkIndianapolis, IN12/15/2017Garage  370   0.47   N/A  $10,934,000  Denison 
MVP Indianapolis WA StreetIndianapolis, IN12/15/2017Lot  141   1.07   N/A  $5,749,000  Denison 
MVP Minneapolis VentureMinneapolis, MN12/15/2017Lot  195   1.65   N/A  $4,013,000   N/A 
Minneapolis City ParkingMinneapolis, MN12/15/2017Lot  268   1.98   N/A  $7,718,000  SP + 
MVP Indianapolis MeridianIndianapolis, IN12/15/2017Lot  36   0.24   N/A  $1,551,000  Denison 
MVP Milwaukee ClybournMilwaukee, WI12/15/2017Lot  15   0.06   N/A  $262,000  Secure 
MVP Milwaukee Arena LotMilwaukee, WI12/15/2017Lot  75   1.11   N/A  $4,631,000  SP + 
MVP Clarksburg LotClarksburg, WV12/15/2017Lot  94   0.81   N/A  $625,000  ABM 
MVP Denver Sherman 1935Denver, CO12/15/2017Lot  72   0.43   N/A  $2,533,000  SP + 
MVP Bridgeport FairfieldBridgeport, CT12/15/2017Garage  878   1.01   4,349  $8,268,000  SP + 
MVP New Orleans RampartNew Orleans, LA2/1/2018Lot  78   0.44   N/A  $7,835,000  342 N. Rampart 
MVP Hawaii Marks GarageHonolulu, HI6/21/2018Garage  311   0.77   16,205  $19,951,000  SP + 
Construction in progress               $1,151,000     
Total Investment in real estate and fixed assets              $295,210,000     

(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.

Note E — Related Party Transactions and Arrangements

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

During May 2017, VRM II acquired approximately 35,000 shares of our stock from third party investors in exchange for various trust deed investments. During the nine months ended September 30, 2017, VRM II received approximately $11,900 in distributions in accordance with the Company's DRIP program.

As of September 30, 2017,2020, the Company's Sponsor owned 8,8399,108 shares, VRM II owned 844,960 shares and VRM III owned 41,435456,834 shares of the Company'sCompany’s outstanding common stock.

Ownership of MVP REIT

On November 5, 2016, the Company purchased 338,409 shares of MVP REIT common stock from an unrelated third party for $3.0 million or $8.865 per share.  During the three and nine months ended September 30, 2017, MVP REIT paid the Company, approximately $23,000 and $122,000, respectively, in stock distributions and in addition the Company received 2,544 common shares of MVP REIT common shares in accordance with their DRIP program.

During April 2017, MVP REIT reduced its ownership interest in MVP Houston Preston Lot from 80% to 40%, by selling a portion of its ownership to the Company for $1.12 million. This transaction was completed at par value with no gain or loss recorded by MVP REIT or the Company. Our ownership interest in MVP Houston Preston Lot increased from 20% to 60% and we will be considered the controlling party starting May 1, 2017.

As of September 30, 2017 MVP REIT owed the Company $1.5 million, related to various acquisitions and ongoing operations.

Ownership of theFormer Advisor

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 agreed to be responsible for its proportionate share of future expenses of the former Advisor. The operating agreement of the Advisor provides that once 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, and once they have received an annualized return on their capital investment of 7.5%, then Michael Shustek will receive 40% of the net profits of the Advisor.

Note Payable to the Advisor

On June 29, 2017, the Advisor entered into an agreement with the Company to loan the principal amount of $2.1 million to the Company ("Loan Agreement") for the purchase of the Houston Systems Lot.  The terms of this 1-year Loan Agreement includes an annual interest rate of 5% with no penalty for prepayment. Interest and principal are due upon maturity.

Fees Paid in Connection with the Offering – Common Stock

Various affiliates of the Company are involved in the Common Stock offering and the Company's operations including MVP American Securities, LLC, or ("MVP American Securities"), which is a broker-dealer and member of the Financial Industry Regulatory Authority, Inc., or FINRA.  MVP American Securities is owned by MS MVP Holdings, LLC which is owned and managed by Mr. Shustek. Additionally, the Company's board of directors, including a majority of the Company's independent directors, may engage an affiliate of the Advisor to perform certain property management services for us.

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The Company's Sponsor or its affiliates paid selling commissions of up to 6.5% of gross offering proceeds from the sale of shares in the Common Stock Offering without any right to seek reimbursement from the Company.

The Company's sponsor or its affiliates also paid non-affiliated selling agents a one-time fee separately negotiated with each selling agent for due diligence expenses, subject to the total underwriting compensation limitation set forth below.  Such due diligence expenses were approximately 1.25% to 2.00% of total offering proceeds. Such commissions and fees were paid by the Company's sponsor or its affiliates (other than the Company) without any right to seek reimbursement from the Company.

Fees Paid in Connection with the Offering – Preferred Stock

In connection with the private placement of the Series A and Series 1 preferred stock, the Company may pay selling commissions of up to 6.0% of gross offering proceeds from the sale of shares in the private placements, including sales by affiliated and non-affiliated selling agents.  During the three and nine months ended September 30, 2017, the Company paid approximately $0.7 million and $1.3 million, respectively, in selling commissions, of which 0.2 million and $0.3 million, respectively, were paid to affiliated selling agents.

The Company may pay non-affiliated selling agents a one-time fee separately negotiated with each selling agent for due diligence expenses of up to 2.0% of gross offering proceeds. The Company may also pay a dealer manager fee to MVP American Securities of up to 2.0% of gross offering proceeds from the sale of the shares in the private placements as compensation for acting as dealer manager.  During the three and nine months ended September 30, 2017, the Company paid approximately $0.2 million and $0.3 million, respectively, to MVP American Securities as compensation.

Fees Paid in Connection with the Operations of the Company

The Advisor or its affiliates will receive 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 three and nine months ended September 30, 2017, approximately zero and $1.7 million, respectively, in acquisition fees had been earned by the Advisor. During the three and nine months ended September 30, 2016, approximately $1.0 million and $1.4 million, respectively, in acquisition fees had been earned by the Advisor.

The Advisor or its affiliates can be reimbursed for actual expenses paid or incurred in the investment.  During the three and nine months ended September 30, 2017 and 2016, no acquisition expenses had been reimbursed to the Advisor.

The Advisor or its affiliates will receive a monthly asset management fee at an annual rate equal to 1.0% of the cost of all assets then held by the Company, or the Company's proportionate share thereof in the case of an investment made through a joint venture or other co-ownership arrangement. The Company will determine the Company's NAV, on a date not later than the Valuation Date.  Following the Valuation Date, the asset management fee will be based on the value of the Company's assets rather than their historical cost. Asset management fees for the three and nine months ended September 30, 2017 were approximately $0.3 million and $0.8 million, respectively. Asset management fees for the three and nine months ended September 30, 2016 were approximately $51,000 and $66,000, respectively.

The Company will reimburse the Advisor or its affiliates for costs of providing administrative services, subject to the limitation that we will not reimburse the Advisor for any amount by which the Company's operating expenses, at the end of the four preceding fiscal quarters (commencing after the quarter in which we make the Company's first investment), exceed the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income 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's independent directors.  We will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives a separate fee, such as an acquisition fee, disposition fee or debt financing fee, or for the salaries and benefits paid to the Company's executive officers. In addition, we will not reimburse the Advisor for rent or depreciation, utilities, capital equipment or other costs of its own administrative items.  During the three and nine months ended September 30, 2017 and 2016, no operating expenses have been reimbursed to the Advisor.
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In connection with the merger, the Advisory Agreement with MVP Realty Advisor will be amended effective at the closing of the merger to eliminate all fees except a 1.1% asset management fee, which will be limited to $2.0 million per year until the merged company:
·holds assets with an Appraised Value equal to or in excess of $500,000,000 or,
·the Company reports AFFO per share of Company Common Stock equal to or greater than the $0.3125 per share for two consecutive quarters, on a fully diluted basis at which time all fees subordinated will be paid.

In connection with the merger, pursuant to the Termination Agreement, at the effective time of the Merger, the Advisory Agreement, dated September 25, 2012, as amended, among MVP REIT and the Advisor will be terminated and the Company will pay the Advisor an Advisor Acquisition Payment (as such term is defined in the Termination Agreement) of approximately $3.6 million, subject to adjustment in the event that additional properties are acquired by MVP REIT prior to closing, which shall be the only fee payable to the Advisor in connection with the Merger.

Fees Paid in Connection with the Liquidation or Listing of the Company's Real Estate Assets

For substantial assistance in connection with the sale of investments, as determined by the independent directors, we will pay the Advisor or its affiliate the lesser of (i) 3.0% of the contract sale price of each real estate-related secured loan or other real estate investment or (ii) 50% of the customary commission which would be paid to a third-party broker for the sale of a comparable property. The amount paid, when added to the sums paid to unaffiliated parties, may not exceed either the customary commission or an amount equal to 6.0% of the contract sales price. The disposition fee will be paid concurrently with the closing of any such disposition of all or any portion of any asset.  During the three and nine months ended September 30, 2017 and 2016, no disposition fees have been earned by the Advisor.

After the Company's stockholders have received a return of their net capital invested and a 6.0% annual cumulative, non-compounded return, then the Company's Advisor will be entitled to receive 15.0% of the remaining proceeds. We will pay this subordinated performance fee only upon one of the following events: (i) if the Company's shares are listed on a national securities exchange; (ii) if the Company's assets are sold or liquidated; (iii) upon a merger, share exchange, reorganization or other transaction pursuant to which the Company's investors receive cash or publicly-traded securities in exchange for their shares; or (iv) upon termination of the Company's advisory agreement. During the three and nine months ended September 30, 2017 and 2016, no subordinated performance fees have been earned by the Company's Advisor.

Upon completion of the merger of MVP REIT and the Company these fees will be terminated.

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, including loan guaranties, the Company willmay be required to find alternative providers of these services.

-20--17-

Note G — Stock-Based Compensation

Long-Term Incentive Plan

The Company'sCompany’s board of directors has adopted a long-term incentive plan which wethe 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.

OurThe 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.

We haveThe 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.

OurThe 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 three and nine months ended September 30, 20172020 and 2016,2019, no grants have beenwere made under the long-term incentive plan.

-21-

Note H – Recent Accounting Pronouncements

In May 2014, Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The standard requires expanded disclosure surrounding revenue recognition. Early application is not permitted. The standard was initially to be effective for fiscal periods beginning after December 15, 2016 and allows for either full retrospective or modified retrospective adoption. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, Deferral of Effective Date, which delays the effective date of ASU 2014-09 by one year to fiscal periods beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as requirements in ASU 2015-14. The Company does not expect adoption of ASU 2014-09 to have a material effect on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value with changes in fair value recognized in net income. The ASU also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet has been eliminated by this ASU. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect adoption of ASU 2016-01 to have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases – (Topic 842). This update will require lessees to recognize all leases with terms greater than 12 months on their balance sheet as lease liabilities with a corresponding right-of-use asset. This update maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees will classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease will be split between amortization and interest expense, with a single lease expense reported for operating leases. This update also will require both qualitative and quantitative disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; however, early adoption is permitted. We haveThe Company has determined that the provisions of ASU 2016-02 may result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities for leases. Theleases in the future however the Company is currently evaluating whether orwas not a lessee on any lease agreements at December 31, 2018. During the adoptionfirst quarter 2019, the Company adopted ASU 2016-02.  See Note M – Right of Use Leased Asset and Lease Liability for discussion of the impact of ASU 2014-09 will have a material effect2016-02 on the Company'sCompany’s unaudited condensed consolidated financial statements.
-18-

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. The Company is currently evaluatingDuring the impact that ASU No. 2016-13 will have on the Company's consolidated financial statements.

-22-

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash. The new guidance requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statements of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will be required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. This update will become effective forfirst quarter 2020, the Company for fiscal years beginning after December 15, 2017,adopted ASU 2016-13 and interim periods within those fiscal years, with earlysuch adoption permitted.  The Company will adopt ASU 2016-18 starting first quarter 2018.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. This update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This update will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those years.  The Company will adopt ASU 2016-18 starting first quarter 2018.

In May 2017, the FASB issued Accounting Standards Update ASU 2017-09, Compensation-Stock Compensation: Scope of Stock Compensation Modification Accounting.  The ASU was issued to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The update is effective for annual periods beginning after December 15, 2017, and interim periods thereafter. Early adoption is permitted, including adoption in any interim period. The Company doesdid not expect adoption of ASU 2017-09 to have a material effectimpact on ourthe Company’s unaudited condensed 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. TheDuring the first quarter 2019, the Company is in the process of determining the impact that the implementation ofadopted ASU 2017-12 willand such adoption did not have a material impact on the Company's unaudited condensed consolidated financial statements.

Note I – Acquisitions— Disposition of Investment in Real Estate

On May 26, 2020, the Company, through an entity wholly owned by the Company, sold a parking garage in San Jose, California 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.

The following table is a summary of the acquisitions for the nine months ended September 30, 2017.

PropertyLocationDate AcquiredProperty Type# SpacesSize / AcreageRetail /Office Square Ft.Cash ConsiderationOwnership %
MVP Detroit Center GarageDetroit, MI01/10/2017Garage1,2758.78N/A$55,000,00080%
St Louis Broadway, LLCSt Louis, MO02/01/2017Lot1610.96N/A$2,400,000100%
St Louis Seventh & Cerre, LLCSt Louis, MO02/01/2017Lot1741.20N/A$3,300,000100%
MVP Preferred Parking, LLCHouston, TX06/29/2017Garage & Lot5211.0784$20,500,000100%

  Assets 
  Land and Improvements  Building and improvements  Total assets acquired 
MVP Detroit Center Garage $7,000,000  $48,000,000  $55,000,000 
St Louis Broadway, LLC  2,400,000   --   2,400,000 
St Louis Seventh & Cerre, LLC  3,300,000   --   3,300,000 
MVP Preferred Parking, LLC  15,800,000   4,700,000   20,500,000 
  $28,500,000  $52,700,000  $81,200,000 

-23-


The following table of results of operations ofrelated to the acquired propertiesparking garage in San Jose for the three and nine months ended September 30, 2017:2020:

  Three Month Ended 9/30/2017  Nine Month Ended 9/30/2017 
  Total Revenues  Net Income  Total Revenues  Net Income 
2017 acquisitions $1,271,000  $263,000  $3,743,000  $664,000 
  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2020  2019  2020  2019 
Revenue
 
$
--
  
$
113,000
  
$
113,000
  
$
338,000
 
Expenses *
  
--
   
102,000
   
191,000
   
705,000
 
Income/(Loss) from assets held for sale, net of income taxes
 
$
--
  
$
11,000
  
$
(78,000
)
 
$
(367,000
)

*Includes $343,000 impairment in 2019
Pro forma results of the Company

The following table of pro forma consolidated results of operations of the Company for the three and nine months ended September 30, 2017 and 2016, and assumes that the acquisitions were completed as of January 1, 2016.

  For the three months ended September 30,  For the nine months ended September 30, 
  2017  2016  2017  2016 
Revenues from continuing operations $2,222,000  $1,933,000  $7,693,000  $4,653,000 
Net income (loss) available to common stockholders $(392,000) $(307,000) $(4,104,000) $1,311,000 
Net income (loss) available to common stockholders per share – basic $(0.15) $(0.23) $(1.63) $1.71 
Net income (loss) available to common stockholders per share – diluted $(0.15) $(0.23) $(1.63) $1.71 

Note J — Line of Credit

On October 5, 2016, the Company, through its Operating Partnership, and MVP REIT, (the "REITs") through a wholly owned subsidiary (the "Borrowers"), entered into a credit agreement (the "Unsecured Credit Agreement") with KeyBank, National Association ('KeyBank") as the administrative agent and KeyBank Capital Markets ("KeyBank Capital Markets") as the lead arranger.  Pursuant to the Unsecured Credit Agreement, the Borrowers were provided with a $30 million unsecured credit facility (the "Unsecured Credit Facility"), which may be increased up to $100 million, in minimum increments of $10 million.  The Unsecured Credit Facility has an initial term of two years, maturing on October 5, 2018, and may be extended for a one-year period if certain conditions are met and upon payment of an extension fee.  The Unsecured Credit Facility has an interest rate calculated based on LIBOR Rate plus 2.25% or Base Rate plus 1.25%, both as provided in the Unsecured Credit Agreement.  The Base Rate is calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%.  Payments under the Unsecured Credit Facility are interest only and are due on the first day of each quarter.  The obligations of the Borrowers of the Unsecured Credit Agreement are joint and several.  The REITs have entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement. As of September 30, 2017 the interest rate was 3.49%.Notes Payable

As of September 30, 2017, the Borrowers had one property listed on the line of credit, which provided an available draw of approximately $2.2 million, and had drawn approximately $2.0 million, of which our portion of the current draw was approximately $0, based on our pro-rata ownership of the properties listed on the line of credit. Based on the one property on the line of credit as of September 30, 2017, the REITs had an additional available draw of approximately $0.2 million. For the three and nine months ended September 30, 2017, we expensed approximately $34,000 and $220,000, respectively, in interest expense. For the three and nine months ended September 30, 2017, we expensed approximately $9,000 and $18,400, respectively, in unused line fees associated with our draw. Total loan amortization cost for the three and nine months ended September 30, 2017 were $62,000 and $189,000, respectively.
-24-

On June 26, 2017, the Company and MVP REIT (together, the "REITs"), each through a wholly owned subsidiary, MVP REIT II Operating Partnership, LP and MVP Real Estate Holdings, LLC (together, the "Borrowers"), entered into a credit agreement (the "Working Capital Credit Agreement") with KeyBank, National Association ("KeyBank") as the administrative agent and KeyBanc Capital Markets ("KeyBanc Capital Markets") as the lead arranger.  Pursuant to the Working Capital Credit Agreement, the Borrowers were provided with a $6.0 million credit facility (the "Total Commitment"), which may be increased up to $10 million, in minimum increments of $1 million.  The Total Commitment had an initial term of six months, maturing on December 26, 2017. In October 2017, this was extended to March 31, 2018.  The Working Capital Credit Agreement has an interest rate calculated based on LIBOR Rate plus 4.5% or Base Rate plus 3.5%, both as provided in the Working Capital Credit Agreement.  The Base Rate is calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%.  Payments under the Working Capital Credit Facility require 100% of the net proceeds of all capital events and equity issuances by the REITs within 5 business days of receipt.  The obligations of the Borrowers of the Unsecured Credit Agreement are joint and several.  The REITs have entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement. As of September 30, 2017 the interest rate was 5.73%.

As of September 30, 2017, the balance on the Working Capital Credit Facility was approximately $1.5 million (net of unamortized loan costs), of which our portion of the current draw was approximately $1.5 million. As of September 30, 2017, the REITs had an additional available draw of approximately $4.4 million. The Company used net proceeds from the private placement of the Series 1 Convertible Redeemable Preferred Stock to paydown the $1.5 million in October 2017. For the three and nine months ended September 30, 2017, we expensed approximately $49,000 in interest expense. For the three and nine months ended September 30, 2017, we expensed approximately $1,600 in unused line fees associated with our draw. Total loan amortization cost for the three and nine months ended September 30, 2017 were $50,000 and $53,000, respectively.

Note K — Notes Payable and Notes Payable Related Party

As of September 30, 2017,2020, the principal balances on notes payable are as follows:

PropertyOriginal Debt AmountMonthly PaymentBalance as of 9/30/2017LenderTermInterest RateLoan Maturity
MVP Realty Advisors$2,100,000--$2,100,000MVP Realty Advisors1 Year (I/O)5.00%6/30/2018
West 9th Properties II, LLC
$5,300,000$30,000$5,192,000American National Insurance Co.10 year4.50%11/1/2026
MVP Detroit Center Garage, LLC$31,500,000$194,000$31,112,000Bank of America10 year5.52%2/1/2027
MVP San Jose 88 Garage, LLC$2,200,000Interest Only$2,200,000Owens Realty Mortgage, Inc.2 year (I/O)7.75%1/15/2019
MVP Cincinnati Race Street Garage, LLC$3,000,000Interest Only$3,000,000Moonshell, LLC3 Months (I/O)9.00%1/10/2018
MVP St Louis Washington, LLC$1,380,000Interest Only$1,380,000KeyBank10 year (2 year I/O)4.90%5/1/2027
St Paul Holiday Garage, LLC$4,132,000Interest Only$4,132,000KeyBank10 year (2 year I/O)4.90%5/1/2027
Cleveland Lincoln Garage, LLC$3,999,000Interest Only$3,999,000KeyBank10 year (2 year I/O)4.90%5/1/2027
Louisville Broadway Station, LLC$1,682,000Interest Only$1,682,000Cantor Commercial Real Estate (CCRE)10 year (I/O)5.03%5/6/2027
Whitefront Garage, LLC$6,454,000Interest Only$6,454,000Cantor Commercial Real Estate (CCRE)10 year (I/O)5.03%5/6/2027
MVP Houston Preston Lot, LLC$1,627,000Interest Only$1,627,000Cantor Commercial Real Estate (CCRE)10 year (I/O)5.03%5/6/2027
MVP Houston San Jacinto Lot, LLC$1,820,000Interest Only$1,820,000Cantor Commercial Real Estate (CCRE)10 year (I/O)5.03%5/6/2027
St. Louis Broadway, LLC$1,671,000Interest Only$1,671,000Cantor Commercial Real Estate (CCRE)10 year (I/O)5.03%5/6/2027
St. Louis Seventh & Cerre, LLC$2,058,000Interest Only$2,058,000Cantor Commercial Real Estate (CCRE)10 year (I/O)5.03%5/6/2027
MVP Preferred Parking, LLC$11,330,000Interest Only$11,330,000Key Bank10 year5.02%8/1/2027
Less unamortized loan issuance costs  ($923,000)     
   $78,834,000    

Property Original Debt Amount  Monthly Payment  Balance as of 09/30/20 LenderTerm Interest Rate Loan Maturity
MVP Cincinnati Race Street, LLC (6) $2,550,000  Interest Only  $2,550,000 Multiple1 Year  7.50%4/30/2021
MVP Wildwood NJ Lot, LLC (6) $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  $744,000 MetaBank1 Year  3.60%2/28/2021
Minneapolis Venture (6) $2,000,000  Interest Only  $2,000,000 Multiple1 Year  8.00%04/30/2021
MVP Raider Park Garage, LLC (4) $7,400,000  Interest Only  $7,400,000 LoanCore2 Year Variable 12/9/2020
MVP New Orleans Rampart, LLC (4) $5,300,000  Interest Only  $5,300,000 LoanCore2 Year Variable 12/9/2020
MVP Hawaii Marks Garage, LLC (4) $13,500,000  Interest Only  $13,500,000 LoanCore2 Year Variable 12/9/2020
MVP Milwaukee Wells, LLC (4) $2,700,000  Interest Only  $2,700,000 LoanCore2 Year Variable 12/9/2020
MVP Indianapolis City Park, LLC (4) $7,200,000  Interest Only  $7,200,000 LoanCore2 Year Variable 12/9/2020
MVP Indianapolis WA Street, LLC (4) $3,400,000  Interest Only  $3,400,000 LoanCore2 Year Variable 12/9/2020
MVP Clarksburg Lot (6) $476,000  Interest Only  $476,000 Multiple1 Year  7.50%5/21/2021
MCI 1372 Street (6) $574,000  Interest Only  $574,000 Multiple1 Year  7.50%5/27/2021
MVP Milwaukee Old World (6) $771,000  Interest Only  $771,000 Multiple1 Year  7.50%5/27/2021
-25--19-

MVP Milwaukee Clybourn (6) $191,000  Interest Only  $191,000 Multiple1 Year  7.50%5/27/2021
SBA PPP Loan $348,000  $14,700  $348,000 Small Business Administration2 Year  1.00%10/22/2022
MVP Memphis Poplar (3) $1,800,000  Interest Only  $1,800,000 LoanCore5 Year  5.38%3/6/2024
MVP St. Louis (3) $3,700,000  Interest Only  $3,700,000 LoanCore5 Year  5.38%3/6/2024
Mabley Place Garage, LLC (8) $9,000,000  $44,000  $8,052,000 Barclays10 year  4.25%12/6/2024
MVP Houston Saks Garage, LLC $3,650,000  $20,000  $3,189,000 Barclays Bank PLC10 year  4.25%8/6/2025
Minneapolis City Parking, LLC (7) $5,250,000  $29,000  $4,694,000 American National Insurance, of NY10 year  4.50%5/1/2026
MVP Bridgeport Fairfield Garage, LLC (5) $4,400,000  $23,000  $3,965,000 FBL Financial Group, Inc.10 year  4.00%8/1/2026
West 9th Properties II, LLC (7)
 $5,300,000  $30,000  $4,808,000 American National Insurance Co.10 year  4.50%11/1/2026
MVP Fort Worth Taylor, LLC (7) $13,150,000  $73,000  $11,959,000 American National Insurance, of NY10 year  4.50%12/1/2026
MVP Detroit Center Garage, LLC $31,500,000  $194,000  $29,212,000 Bank of America10 year  5.52%2/1/2027
MVP St. Louis Washington, LLC (1) $1,380,000  $8,000  $1,341,000 KeyBank10 year *  4.90%5/1/2027
St. Paul Holiday Garage, LLC (1) $4,132,000  $24,000  $4,013,000 KeyBank10 year *  4.90%5/1/2027
Cleveland Lincoln Garage, LLC (1) $3,999,000  $23,000  $3,884,000 KeyBank10 year *  4.90%5/1/2027
MVP Denver Sherman, LLC (1) $286,000  $2,000  $277,000 KeyBank10 year *  4.90%5/1/2027
MVP Milwaukee Arena Lot, LLC (1) $2,142,000  $12,000  $2,081,000 KeyBank10 year *  4.90%5/1/2027
MVP Denver Sherman 1935, LLC (1) $762,000  $4,000  $740,000 KeyBank10 year *  4.90%5/1/2027
MVP Louisville Broadway Station, LLC (2) $1,682,000  Interest Only  $1,682,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Whitefront Garage, LLC (2) $6,454,000  Interest Only  $6,454,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Houston Preston Lot, LLC (2) $1,627,000  Interest Only  $1,627,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Houston San Jacinto Lot, LLC (2) $1,820,000  Interest Only  $1,820,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
St. Louis Broadway, LLC (2) $1,671,000  Interest Only  $1,671,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
St. Louis Seventh & Cerre, LLC (2) $2,057,000  Interest Only  $2,057,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Indianapolis Meridian Lot, LLC (2) $938,000  Interest Only  $938,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Preferred Parking, LLC $11,330,000  Interest Only  $11,330,000 Key Bank10 year **  5.02%8/1/2027
Less unamortized loan issuance costs         $ (1,257,000)          
          $158,191,000           
(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 Sherman 1935, 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.
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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. The Company is in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of this loan; however, there can be no assurance this option will be exercised.  If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral. 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.
(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 are modified to provide for payment of accrued interest only in the amount of $13,384.
(6)Loan agreement provides automatic six-month extensions.
(7)
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 shall be used to pay the monthly principal and interest due each note, beginning with the payment due May 1, 2020, until the termination date.
(8)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 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.
 * 2 Year Interest Only
** 10 Year Interest Only

Total interest expense incurred for each of the three and nine months ended September 30, 20172020 and 2019 was approximately $1.1 million$2.1 million. Total loan amortization cost for each of the three months ended September 30, 2020 and $2.7 million, respectively.2019, was approximately $0.2 million. Total interest expense incurred for the nine months ended September 30, 20162020 and 2019, was approximately $1,000.  There was no interest expense for the three months ended September 30, 2016.

$6.3 million and $6.5 million, respectively. Total loan amortization cost for the three and nine months ended September 30, 20172020 and 2019, was approximately $0.2$0.6 million and $0.4$0.7 million, respectively. During the three and nine months ended September 30, 2010 there were no loan amortization cost.

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As of September 30, 2017,2020, future principal payments on the notes payable are as follows:

2017 $173,000 
2018  8,032,000 
2019  882,000 
2020  1,008,000  
$
48,654,000
 
2021  1,068,000   
2,087,000
 
2022
  
2,252,000
 
2023
  
2,498,000
 
2024
  
15,283,000
 
Thereafter  68,594000   
88,674,000
 
Less unamortized loan issuance costs  (923,000)  
(1,257,000
)
Total $78,834,000  
$
158,191,000
 

The following table shows notes payable paid in full during the nine months ended September 30, 2020:

Property Original Debt Amount  Monthly Payment  Balance as of 09/30/20 LenderTerm Interest Rate Loan Maturity
MVP San Jose 88 Garage, LLC
 
$
1,645,000
  Interest Only   
--
 Multiple1 Year  
7.50
%
6/30/2020
The Parking REIT D&O Insurance
 
$
1,681,000
  
$
171,000
   
--
 MetaBank1 Year  
8.00
%
4/30/2020

Note LK — Fair Value

A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:

1.Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilitiesliabilities.
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, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The Company's financial instruments include cash and cash equivalents, restricted cash, accounts payable and accrued expenses. Due to their short maturities, the carrying amounts of these assets and liabilities approximate fair value.

Assets and liabilities measured at fair value levelLevel 3 on a non-recurring basis may include Assets Held for Sale.

Note M — Gain on Sale of Investment in Real Estate

During September 2017, we sold one property listed as held for sale for $2.0 million. The Company acquired the property on November 22, 2016 and recorded at the fair value based on an appraisal.  During March 2017, Houston Jefferson entered into a purchase and sale agreement to sell the property "as is" to a third party for approximately $2.0 million.  During May 2017, this purchase and sale agreement was cancelled.  During May and June, another unsolicited third party expressed interest in purchasing the property for $2.0 million and during July 2017, the Company entered into a purchase and sale agreement with this third party which closed on September 20, 2017. As a result of the sale the Company recorded a gain of approximately $1.2 million.

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Note NL – Investment In DST

On May 31, 2017, the Company, through a wholly-ownedwholly owned subsidiary of its operating partnership,Operating Partnership, purchased a 51.0% beneficial interest in MVP St. Louis Cardinal Lot, DST, a Delaware statutory trust, or Statutory Trust (“MVP St Louis,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 or the Property,(the “Property”), which is adjacent to Busch Stadium, the home of the St. Louis Cardinals major league baseball team. The Property was purchased by MVP St. Louis from an unaffiliated seller for 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 or (“St. Louis Lender,Lender”), in the principal amount of $6,000,000, with a 10-year, interest-only term at a fixed interest rate of 5.25%, resulting in an annual debt service payment of $315,000 or St.(the “St. Louis Loan.Loan”). MVP St. Louis used the Company'sCompany’s investment to fund a portion of the purchase price for the Property. The remaining equity portion was funded through short-term investments by Vestin Realty Mortgage I, Inc. and Vestin Realty MortgageVRM II, Inc., bothan affiliate of which are affiliates of MVP Realty Advisors, LLC, the external advisor to the Company, or MVP Realty,former Advisor, pending the private placements of additional beneficial interest in MVP St. Louis exempt from registration under the Securities Act of 1933, as amended. Vestin Realty MortgageAct. VRM II Inc. and Michael V. Shustek, ourthe Company’s Chairman and Chief Executive Officer, provided non-recourse carveout guaranties of the loan and environmental indemnities of St. Louis Lender.

-22-

Also, concurrently with the acquisition of the Property, MVP St. Louis, as landlord, entered into a 10-year master lease or St.(the “St. Louis Master Lease,Lease”), with MVP St. Louis Cardinal Lot Master Tenant, LLC, an affiliate of MVP Realty,the former Advisor, as tenant, or St.(the “St. Louis Master Tenant.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 MVP St. Louis, consisting of base rent in an amount to pay debt service on the St. Louis Loan, stated rent of $414,000 and potential bonus rent equal to a share of the revenues payable under the sublease in excess of a threshold. The Company will be entitled to its proportionate share of the rent payments based on its ownership interest. Under the St. Louis Master Lease, MVP St. Louis is responsible for capital expenditures and the St. Louis Master Tenant is responsible for taxes, insurance and operating expenses.  Distributions toFor the Company, for the 3three months ended September 30, 2017, totaled $52,000.2020 and 2019, distributions received were none and $52,000 respectively.  For the nine months ended September 30, 2020 and 2019, distributions received were $34,000 and $170,000, respectively.

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 Variable Interest Entity (“VIE”) Model under ASC 810-10.

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 the right to receive benefits from the VIE that could potentially be significant to the VIE.”

As a VIE, 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 have 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 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 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 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

  September 30, 2017 
  (Unaudited) 
ASSETS 
Investments in real estate and fixed assets $11,350,000 
Cash  37,000 
Cash - restricted  3,000 
Due from related party  9,000 
Total assets $11,399,000 
LIABILITIES AND EQUITY 
Liabilities    
Notes payable, net of unamortized loan issuance cost of $65,734.77 $5,934,000 
Accounts payable and accrued liabilities  27,000 
Total liabilities  5,961,000 
Equity    
Shareholders' Equity    
Member's equity  6,547,000 
Unsold equity (bridged by Vestin Realty Mortgage II, Inc)  203,000 
    Offering costs  (1,312,000)
    Accumulated earnings  138,000 
    Distributions to members  (138,000)
Total equity  5,438,000 
Total liabilities and equity $11,399,000 
  September 30, 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
  
31,000
   
24,000
 
Due from related parties
  
158,000
   
--
 
Prepaid expenses
  
12,000
   
10,000
 
Total assets 
$
11,714,000
  
$
11,574,000
 

-27--23-

LIABILITIES AND EQUITY 
Liabilities      
Notes payable, net of unamortized loan issuance costs of approximately $47,000 and $46,000 as of September 30, 2020 and December 31, 2019, respectively
 
$
5,953,000
  
$
5,954,000
 
Accounts payable and accrued liabilities  
303,000
   
93,000
 
Due to related party  
--
   
57,000
 
Total liabilities  
6,256,000
   
6,104,000
 
Equity        
Member’s equity  
6,129,000
   
6,129,000
 
  Offering costs
  
(574,000
)
  
(574,000
)
  Accumulated earnings
  
1,220,000
   
952,000
 
  Distributions to members
  
(1,317,000
)
  
(1,037,000
)
Total equity  
5,458,000
   
5,470,000
 
Total liabilities and equity 
$
11,714,000
  
$
11,574,000
 
Summarized Statements of Operations—Unconsolidated Real Estate Affiliates—Equity Method Investments

  For the three months ended September 30, 2017  For the period from May 31, 2017 (inception) to September 30, 2017 
Revenu $182,000  $243,000 
Expenses  79,000   105,000 
Net income $103,000  $138,000 

Note O – Investment in Equity Method Investee

Denver 1935 Sherman

On February 12, 2016, the Company along with MVP REIT, through MVP Denver 1935 Sherman, LLC ("MVP Denver"), a Nevada limited liability company owned 24.49% by the Company and 75.51% by MVP REIT, closed on the purchase of a parking lot for approximately $2.4 million in cash, of which the Company's share was approximately $0.6 million.  The parking lot is located at 1935 Sherman Avenue, Denver, Colorado (the "Denver parking lot").  The Denver parking lot consists of approximately 18,765 square feet and has approximately 72 parking spaces.  The Denver parking lot is leased by SP Plus Corporation, a national parking operator, under a net lease agreement where MVP Denver is responsible for property taxes and SP Plus Corporation pays for all insurance and maintenance costs.  SP Plus Corporation pays annual rent of $120,000.  In addition, the lease provides percentage rent with MVP Denver receiving 70% of gross receipts over $160,000. The term of the lease is for 10 years.

Houston Preston Lot

On November 22, 2016, the Company and MVP REIT, through MVP Houston Preston Lot, LLC, a Delaware limited liability company ("MVP Preston"), an entity wholly owned by the Company, closed on the purchase of a parking lot consisting of approximately 46 parking spaces, located in Houston, Texas, for a purchase price of $2.8 million in cash plus closing costs, 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 percentage rent with MVP Preston receiving 65% of gross receipts over $300,000. The term of the lease is for 10 years.

During April 2017, the company increased their ownership interest in the MVP Houston Preston Lot from 20% to 60%, by purchasing $1.12 million of MVP REIT ownership and will now be considered the controlling party.

Summarized Balance Sheets—Unconsolidated Real Estate Affiliates—Equity Method Investments

  September 30, 2017  December 31, 2016 
  (Unaudited)  (Unaudited) 
ASSETS 
Investments in real estate and fixed assets $2,438,000  $2,438,000 
Cash  234,000   51,000 
Cash - restricted  337,000   -- 
Total assets $3,009,000  $2,489,000 
LIABILITIES AND EQUITY 
Liabilities        
Notes payable, net of unamortized loan issuance cost $735,000  $-- 
Due to related party  318,000   -- 
Accounts payable and accrued liabilities  117,000   36,000 
Total liabilities  1,170,000   36,000 
Equity        
Shareholders' Equity        
Additional paid-in capital  1,294,000   1,802,000 
Retained Earnings  103,000   64,000 
Total Shareholders' Equity  1,397,000   1,866,000 
Non-controlling interest  442,000   587,000 
Total equity  1,839,000   2,453,000 
Total liabilities and equity $3,009,000  $2,489,000 

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Summarized Statements of Operations—Unconsolidated Real Estate Affiliates—Equity Method Investments

  
For the Three Months
Ended September 30,
  
For the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
             
Rental revenue $30,000  $30,000  $90,000  $76,000 
Expenses  (22,000)  (9,000)  (52,000)  (32,000)
Net income $8,000  $21,000  $38,000  $44,000 
 For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2020  2019  2020  2019 
Revenue
 
$
182,000
  
$
183,000
  
$
547,000
  
$
556,000
 
Expenses
  
(99,000
)
  
(91,000
)
  
(279,000
)
  
(269,000
)
  Net income
 
$
83,000
  
$
92,000
  
$
268,000
  
$
287,000
 

Note PM – Merger

As previously announced, on May 26, 2017, the Company, MVP REIT Inc., a Maryland corporation ("MVP REIT"), MVP Merger Sub, LLC, a Delaware limited liability companyRight of Use Leased Asset and a wholly-owned subsidiary of the Company ("Merger Sub"), and MVP Realty Advisors, LLC, the Company's and MVP REIT's external advisor (the "Advisor"), entered into an agreement and plan of merger (the "Merger Agreement"). Subject to the terms and conditions of the Merger Agreement, MVP REIT will merge with and into Merger Sub (the "Merger"), with Merger Sub surviving the Merger (the "Surviving Entity"), such that following the Merger, the Surviving Entity will continue as a wholly owned subsidiary of the Company. The Merger is intended to qualify as a "reorganization" under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").  The combined company will be renamed "The Parking REIT, Inc."

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each outstanding share of MVP REIT's common stock, $0.001 par value per share (the "MVP REIT Common Stock"), will be automatically cancelled and retired, and converted into the right to receive 0.365 shares of common stock, $0.0001 par value per share, of the Company (the "Company Common Stock") (such ratio, as it may be adjusted pursuant to the Merger Agreement, the "Exchange Ratio").  Holders of shares of MVP REIT Common Stock will receive cash in lieu of fractional shares.

At the effective time of the Merger each share of MVP REIT Common Stock, if any, then held by any wholly owned subsidiary of MVP REIT or by the Company or any of its wholly owned subsidiaries will no longer be outstanding and will automatically be retired and will cease to exist, and no consideration will be paid, nor will any other payment or right inure or be made with respect to such shares of MVP REIT Common Stock in connection with or as a consequence of the Merger.  In addition, each share of MVP REIT's Non-Participating, Non-Voting Convertible Stock, $0.001 par value per share ("MVP REIT Convertible Stock"), all 1,000 of which are held by the Advisor, will automatically be retired and will cease to exist, and no consideration will be paid, nor will any other payment or right inure or be made with respect to such shares of MVP REIT Convertible Stock in connection with or as a consequence of the Merger.

The Merger Agreement contains customary covenants, including covenants prohibiting MVP REIT and its subsidiaries and representatives from soliciting, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. However, under the terms of the Merger Agreement, during the period beginning on the date of the Merger Agreement and continuing until 11:59 p.m. New York City time on July 10, 2017 (the "Go Shop Period End Time"), MVP REIT (through the MVP REIT special committee and its representatives) was permitted to initiate, solicit, provide information and enter into discussions concerning proposals relating to alternative business combination transactions.  From May 30, 2017, through July 10, 2017, in connection with the ''go shop'' process provided for under the Merger Agreement, Robert A. Stanger & Co., Inc., ("Stanger") contacted approximately 78 parties, which the MVP I Special Committee and Stanger believed had the financial ability and potential strategic interest in reviewing the opportunity, to solicit their interest in a possible alternative transaction with MVP REIT. Stanger and Venable, LLP negotiated with 12 parties with regard to signing a confidentiality agreement of which 8 confidentiality agreements were executed. No bids were received prior to the July 10, 2017 Go Shop Period End Time.
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TABLE OF CONTENTS

Pursuant to the Merger Agreement, the board of directors of the Company (the "Company Board") will, effective as of the effective time of the Merger, increase the number of directors comprising the Company Board to eight and Nicholas Nilsen, Robert J. Aalberts and Shawn Newson, previous Directors of MVP REIT, will be elected to the Company Board.

As previously announced, the stockholders of MVP REIT have approved the Merger and the Merger Agreement at the special meeting of stockholders of MVP REIT held on September 27, 2017.  The completion of the Merger remains subject to receipt of certain third party consents and satisfaction of other customary closing conditions.

Amended and Restated Advisory Agreement

Concurrently with the entry into the Merger Agreement, on May 26, 2017, the Company, MVP REIT II Operating Partnership, LP and the Advisor entered into the Second Amended and Restated Advisory Agreement (the "Second Amended and Restated Advisory Agreement"), which will become effective at the effective time of the Merger.  The Second Amended and Restated Advisory Agreement will amend the Company's existing advisory agreement, dated October 5, 2015 (the "Original Agreement"), to provide for, among other amendments, (i) elimination of acquisition fees, disposition fees and subordinated performance fees and (ii) the payment of an asset management fee by the Company to the Advisor calculated and paid monthly in an amount equal to one-twelfth of 1.1% of the (a) cost of each asset then held by the Company, without deduction for depreciation, bad debts or other non-cash reserves, or (b) the Company's proportionate share thereof in the case of an investment made through a joint venture or other co-ownership arrangement excluding (only for clause (b)) debt financing on the investment.  Pursuant to the Second Amended and Restated Advisory Agreement, the asset management fee may not exceed $2,000,000 per annum (the "Asset Management Fee Cap") until the earlier of such time, if ever, that (i) the Company holds assets with an Appraised Value (as defined Second Amended and Restated Advisory Agreement) equal to or in excess of $500,000,000 or (ii) the Company reports AFFO (as defined in the Second Amended and Restated Advisory Agreement) equal to or greater than $0.3125 per share of Company Common Stock (an amount intended to reflect a 5% or greater annualized return on $25.00 per share of the Company Common Stock) (the "Per Share Amount") for two consecutive quarters, on a fully diluted basis.  All amounts of the asset management fee in excess of the Asset Management Fee Cap, plus interest thereon at a rate of 3.5% per annum, will be due and payable by the Company no later than ninety (90) days after the earlier of the date that (i) the Company holds assets with an Appraised Value equal to or in excess of $500,000,000 or (ii) the Company reports AFFO per share of Company Common Stock equal to or greater than the Per Share Amount for two consecutive quarters, on a fully diluted basis.
In the event that the Merger Agreement is terminated prior to the consummation of the Merger, the Second Amended and Restated Advisory Agreement will automatically terminate and be of no further effect and the Company, MVP REIT II Operating Partnership, LP and the Advisor will have the rights and obligations set forth in the Original Agreement.

Termination Agreement
Concurrently with the entry into the Merger Agreement, on May 26, 2017, the Company, MVP REIT, the Advisor and MVP REIT II Operating Partnership, LP entered into a termination and fee agreement (the "Termination Agreement"). Pursuant to the Termination Agreement, at the effective time of the Merger, the Advisory Agreement, dated September 25, 2012, as amended, among MVP REIT and the Advisor will be terminated and the Company will pay the Advisor an Advisor Acquisition Payment (as such term is defined in the Termination Agreement) of approximately $3.6 million, subject to adjustment in the event that additional properties are acquired by MVP REIT prior to closing, which shall be the only fee payable to the Advisor in connection with the Merger. In the event that the Merger Agreement is terminated prior to the consummation of the Merger, the Termination Agreement will automatically terminate and be of no further effect and no Advisor Acquisition Payment will be owed and payable.

The foregoing description of the Merger Agreement, the Amended and Restated Advisory Agreement and the Termination Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the applicable agreements, each of which is filed with as a Form 8-K exhibit with the SEC on May 31, 2017.
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Amended Charter

In connection with the Merger, at the Company annual stockholders' meeting held on September 27, 2017, the Company's stockholders approved, among other matters, the amendment and restatement of its charter (the "Amended Charter").  As described in more detail in the final proxy statement distributed to our stockholders for the annual meeting, the Amended Charter is primarily intended to accomplish two objectives in connection with the possible listing of the Company's Common Stock after the closing of the Merger: (1) to remove provisions of our charter that we believe may unnecessarily restrict our ability to take advantage of further opportunities for liquidity events or are redundant with or otherwise addressed or permitted to be addressed under Maryland law and (2) to amend certain provisions in a manner that we believe would be more suitable for becoming a publicly-traded REIT.

The Amended Charter will become effective upon its filing with the State Department of Assessments and Taxation of Maryland. We expect to file the proposed Amended Charter immediately before the Company's Common Stock becomes listed for trading on a national securities exchange. This means that the changes to the charter will not be effective unless and until we complete an exchange listing.

Note Q — Income Taxes and Critical Accounting Policy

The Company will be electing to be treated as a REIT for the tax year beginning January 1, 2017 and ending December 31, 2017, and believes that it has been organized and has operated during 2017 in such a manner to meet the qualifications to be treated as a REIT for federal and state income tax purposes.  During 2016, the Company was subject to U.S. federal and state income taxes as it filed income tax returns as a C corporation.  As such, we account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.Lease Liability

The Company usesexecuted a two-step approach to recognize and measure uncertain tax positions.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 first steplease has a ten-year term with an annual payment of $180,480 per annum during the lease term. The lease is to evaluate the tax positionaccounted 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.an operating lease under ASU 2016-02, Leases – (Topic 842). The Company believes that its income tax filing positionsrecognized a Right of Use (“ROU”) Leased Asset and deductions would be sustained upon examination; thus,a Right of Use (“ROU”) Lease Liability on the Company has not recorded any uncertain tax positions aslease commencement date. The value of both the ROU asset and ROU liability, at September 30, 2017.

A full valuation allowance for deferred tax assets2020, was provided since the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets will more likely than not be realized.approximately $1,309,000. 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.

As a REIT, the Company will generally not be subject to corporate level federal income taxes on earnings distributed to our stockholders,recognized approximately $45,000 and therefore may not realize deferred tax assets arising$135,000 of operating lease expense during the Company's pre-2017 periods before the Company became a REIT.  The Company intends to distribute at least 100% of its taxable income annually and intends to do so for the tax year ending December 31, 2017 and future periods.  Accordingly, the Company has not included any provisions for federal income taxes in the accompanying consolidated financial statements for the three and nine months ended September 30, 2017.  The Company owns2020, respectively. This expense is included in general and rents real estateadministrative expense.

As of September 30, 2020, future lease liability is as follows:

2020
 
$
37,000
 
2021
  
114,000
 
2022
  
121,000
 
2023
  
127,000
 
2024
  
134,000
 
Thereafter
  
776,000
 
Total 
$
1,309,000
 

Note N — Legal

Federal Action

On March 12, 2019, stockholder SIPDA Revocable Trust (“SIPDA”) filed a purported class action complaint in various states and municipalities within the United States and, as a result,District Court for the District of Nevada, against the Company or one or moreand certain of its subsidiaries may have income orcurrent 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 tax return filing requirements,things, that the 2017 proxy statements failed to disclose that two major reasons for the merger and may be subjectcertain charter amendments implemented in connection therewith were (i) to income or franchise taxes,facilitate the execution of an amended advisory agreement that allegedly was designed to benefit Mr. Shustek financially in statethe event of an internalization and municipal jurisdictions.(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.
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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 hasand the Board of Directors moved to dismiss the Amended Complaint.  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.

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 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 net deferred tax assetpreliminary stage. The Company and the board of $1.6 million which is subjectdirectors intend to vigorously defend against these lawsuits.

The Magowski Complaint also previewed that a full valuation allowance and thus is not recordedstockholder demand would be made on the Company's balance sheet. The deferred tax asset is primarily made up of net operating losses and capitalized acquisition costs which are deducted for books but capitalized for tax. IfBoard to take action with respect to claims belonging to the Company makesfor the alleged injury to the Company. On June 19, 2019, Magowski submitted a REIT election, generallyformal demand letter to the net operating lossesBoard 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 Securities and Exchange Commission (“SEC”) is conducting an investigation relating to the Parking REIT. In June 2019, the SEC issued subpoenas to the Company and its chairman and chief executive officer Michael V. Shustek, and since then has requested more information. 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, the Company or any other entity arising out of the SEC investigation.

Nasdaq Notification Regarding Company’s Common Stock

Further, Nasdaq has informed the Company that (i) the Company’s common stock will not be availableapproved 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 offset future income. Due toabove is completed and no wrongdoing is found and no action is taken in connection therewith against the valuation allowance, the Company's effective rate is approximately 0%.Company, Mr. Shustek or any other person.

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Note R —PreferredO — Preferred Stock and Warrants

The Company reviewed the relevant ASC's,ASC’s, specifically ASC 480 – Distinguishing Liabilities Fromfrom Equity and ASC 815 – DerivatesDerivatives 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 StockCompany’s preferred stock offerings.

Series A Preferred Stock

TheOn November 1, 2016, the Company offeredcommenced an offering of up to $50 million in shares of the Company'sCompany’s Series A Convertible Redeemable Preferred Stock ("(“Series A"A”), par value $0.0001 per share, together with warrants to acquire the Company'sCompany’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 commenced the private placement of the Shares to accredited investors on November 1, 2016 and closed the offering on March 24, 2017.  As of September 30, 2017 the Companyand raised approximately $2.6$2.5 million, net of offering costs, in the Series A private placements.

The holders of the Series A Preferred Stock shall beare entitled to receive, when and as authorized by the board of directors and declared by the Company out of funds legally available for the payment of dividends, cash dividends at the rate of 5.75% per annum of the initial stated value of $1,000 per share. IfSince a Listing Event, as defined in the offering, hascharter, did not occurredoccur by March 31, 2017,2018, the cash dividend rate shall increasehas been increased to 7.50%, until a Listing Event has occurred.  Baseat 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 September 30, 2017,2020, the increased dividend rate would costcosts the Company approximately $12,000$13,000 more per quarter in Series A dividends.

Subject to the Company'sCompany’s redemption rights as described below, each ShareSeries A share will be convertible into shares of ourthe Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a "Conversion Notice"“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 Closingclosing of this Offeringthe Series A offering (whether or not a Listing Event has occurred). Each ShareSeries A share will convert into a number of shares of ourthe 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 ourthe Company’s common stock (the "Conversion Price"“Series A Conversion Price”) determined as follows:

·Provided there has been a Listing Event, if a Conversion Notice with respect to any Share
Provided there has been a Listing Event, if a Series A Conversion Notice with respect to any Series A share is received on or prior to the day immediately preceding the first anniversary of the issuance of such Share, the day immediately preceding the first anniversary of the issuance of such share, the Series A Conversion Price for such Share will be equal to 110% of 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 delivery date of the Series A Conversion Notice.

·Provided there has been a Listing Event, if a Conversion Notice with respect to any Share is received on or after the first anniversary of the issuance of such Share, the Conversion Price for such Share will be equal to 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 delivery date of the Conversion Notice.

·If a Conversion Notice with respect to any Share is received on or after the second anniversary of the final Closing of this Offering, and at the time of receipt of such Conversion Notice, a Listing Event has not occurred, the Conversion Price for such Share will be equal to 100% of our net asset value per share, or NAV per share, if then established, and until we establish a NAV per share, the Conversion Price will be equal to $25.00, or the initial offering price per share of our common stock in our initial public offering.
Provided there has been a Listing Event, if a Series A Conversion Notice with respect to any Series A share is received after the first anniversary of the issuance of such share, the Series A Conversion Price will be equal to 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 delivery date of the Series A Conversion Notice.
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If a Series A Conversion Notice with respect to any Series A share is received on or after the second anniversary of the final closing of the Series A offering, and at the time of receipt of such Series A Conversion Notice, a Listing Event has not occurred, the Series A Conversion Price will be equal to 100% of the Company’s net asset value per share.

If and when 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.

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Each investor in the Series A shall receive,received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company'sCompany’s common stock par value $0.0001 per share, if the Company'sCompany’s common stock is listed on a national securities exchange. The warrants'warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company'sCompany’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. As of September 30, 2017,2020, there were detachable warrants that may be exercised for 85,74084,510 shares of the Company'sCompany’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at September 30, 20172020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to usthe Company would be approximately $2.1 million and wethe Company would as a result issue an additional 85,74084,510 shares of common stock. As of March 31, 2017, June 30, 2017 and September 30, 2017,the date of this filing the Company had an estimated fair market value of potential warrants that was immaterial.

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 be immaterial.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"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'sCompany’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 ourthe 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 ourthe 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 ourthe Company’s board of directors and declared by us out of legally available funds, cumulative, cash dividends on each ShareSeries 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 Shares)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 ifsince a Listing Event has not occurred by April 7, 2018, the annual dividend rate on all SharesSeries 1 shares (without regard to Qualified Purchaser status) will behas 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. BaseBased on the number of Series 1 shares outstanding at September 30, 2017,2020, the increased dividend rate would costcosts the Company approximately $50,000$150,000 more per quarter in Series 1 dividends.

Subject to the Company'sCompany’s redemption rights as described below, each ShareSeries 1 share will be convertible into shares of ourthe Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a "Conversion Notice"“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 ShareSeries 1 share will convert into a number of shares of ourthe 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 ourthe Company’s common stock (the "Conversion Price"“Series 1 Conversion Price”) determined as follows:

·Provided there has been a Listing Event, if a Conversion Notice with respect to any Share is received prior to December 1, 2017, the Conversion Price for such Share will be equal to 110% of 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 delivery date of the Conversion Notice.
Provided there has been a Listing Event, if a Series 1 Conversion Notice is received prior to December 1, 2017, the Series 1 Conversion Price will be equal to 110% of 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 delivery date of the Series 1 Conversion Notice.
Provided there has been a Listing Event, if a Series 1 Conversion Notice is received on or after December 1, 2017, the Series 1 Conversion Price will be equal to 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 delivery date of the Series 1 Conversion Notice.
If a Series 1 Conversion Notice is received on or after April 7, 2019, and at the time of receipt of such Series 1 Conversion Notice, a Listing Event has not occurred, the Series 1 Conversion Price for such Share will be equal to 100% of the Company’s net asset value per share, or NAV per share.

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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·Provided there has been a Listing Event, if a Conversion Notice with respect to any Share is received on or after December 1, 2017, the Conversion Price for such Share will be equal to 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 delivery date of the Conversion Notice.

·If a Conversion Notice with respect to any Share is received on or after April 7, 2019, and at the time of receipt of such Conversion Notice, a Listing Event has not occurred, the Conversion Price for such Share will be equal to 100% of our net asset value per share, or NAV per share, if then established, and until we establish a NAV per share, the Conversion Price will be equal to $25.00, or the initial offering price per share of our common stock in our initial public offering.

Each investor in the Series 1 shall receive,received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company'sCompany’s common stock par value $0.0001 per share, if the Company'sCompany’s common stock is listed on a national securities exchange. The warrants'warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company'sCompany’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. As of September 30, 2017,2020, there were detachable warrants that may be exercised for 175,8051,382,675 shares of the Company'sCompany’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at September 30, 20172020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to usthe Company would be approximately $4.4$34.6 million and we would as a result the Company would issue an additional 175,8051,382,675 shares of common stock. As of March 31, 2017, June 30, 2017 and September 30, 2017,the date of this filing the Company had an estimated fair market value of potential warrants to bethat was immaterial.

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 SP — Subsequent EventsDeferred Management Internalization

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 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. 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 (the “Operating Partnership”); (ii) extend employment to the executives and other employees of the former Advisor; (iii) arrange for the former Advisor to continue to provide certain services with respect to outstanding indebtedness of the Company and its subsidiaries; and (iv) lease the employees of the former Advisor for a limited period of time prior to the time that such employees become employed by the Company.

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 “Internalization Consideration”), issuable in four equal installments. The first and second installments of 400,000 shares of Common Stock per installment were issued on April 1, 2019 and December 31, 2019, respectively. The remaining installments will be issued on December 31, 2020 and December 31, 2021 (or if December 31st is not a business day, the day that is the last business day of such year). 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 Current Report on Form 8-K filed with the SEC on April 3, 2019 and Contribution Agreement in Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the Management Internalization.

The Internalization transaction closed on April 1, 2019, and the following subsequent events have been evaluated throughtable shows the dateInternalization Consideration to be paid in aggregate to the former Advisor. The first and second installment of this filing with400,000 shares of Common Stock per installment were issued to the SEC.former Advisor on April 1, 2019 and December 31, 2019, respectively.

  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
)
Deferred management internalization at September 30, 2020
  
800,000
      
$
17,800,000
 
On October 17, 20171) The Company has the Company made a paymentright to purchase 1,100,000 of $1.0 million to MVP Realty Advisors towards the principal balance of the outstanding $2.1 million note payable.

During October 2017, the balance on our Working Capital Credit Facility was paid in full; however, on November 7, 2017, MVP REIT took a draw of $1.5 million to mainly pay acquisition fees and merger costs.

In November 2017, the Company acquired approximately 118,932these shares of MVP REIT's stock at $8.56$17.50 per share from an unrelated third party.which potentially limits the cost to the Company.

2) $25.10 is the Company's stated NAV as of May 28, 2019.
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Note Q— Employee Benefit Plan

Effective July 1, 2019, the Company began participating in a multi-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 matching 401(k) contribution in the three and nine months ended September 30, 2020 was approximately $10,000 and $25,000, respectively. Total expense for the matching 401 (k) contribution in the three and nine months ended September 30, 2019 was $5,000.

Note R — Subsequent Events
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 November 13, 2020, the Company entered into a settlement agreement with ABM Industry Groups, LLC.  The settlement is in consideration for the release of ABM for any and all issues arising out of disputes related to the leases for MVP Indianapolis City Park Garage, LLC, MCI 1372 Street, LLC and MVP Clarksburg Lot, LLC.
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ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a financial review and analysis of ourthe Company’s financial condition and results of operations for the three and nine months ended September 30, 20172020 and 2016.  2019. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Conditions and Results of Operations in ourthe Company’s annual report on Form 10-K for the year ended December 31, 2016.2019. As used herein, the terms "we," "our" and "us" refer to MVPThe Parking REIT, II, Inc., and, as required by context, MVP REIT II Operating Partnership, LP,, which we referthe Company refers to as ourthe "operating limited partnership," and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this quarterly report on Form 10-Q (this "Quarterly 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:
·the fact that we have a limited operating history, as our property operations began in 2016;
·the fact that we have experienced net losses since inception and may continue to experience additional losses;
·our ability to effectively raise and deploy the proceeds raised in our offerings;
·the performance of properties the Company has acquired or may acquire or loans the Company has made or may make that are secured by real property;
·changes in economic conditions generally and the real estate and debt markets specifically;
·legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);
·potential damage and costs arising from natural disasters, terrorism and other extraordinary events, including extraordinary events affecting parking facilities included in our portfolio;
·
risks inherent in the real estate business, including ability to secure leases or parking management contracts at favorable terms, tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;
·competitive factors that may limit our ability to make investments or attract and retain tenants;
·our ability to generate sufficient cash flows to pay distributions to our stockholders;
·our failure to maintain our status as a REIT;
·our ability and the timing  to obtain third party consents required to consummate the Merger;
·the risk that the Merger or the other transactions contemplated by the Merger Agreement may not be completed in the time frame expected by the parties or at all;
·our ability to successfully integrate pending transactions and implement our operating strategy, including the Merger;
·our ability to list our shares of common stock on a national securities exchange;
·the availability of capital and debt financing generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt;
·interest rates; and
·changes to generally accepted accounting principles, or GAAP.

the fact that the Company has a limited operating history, as property operations began in 2016;
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TABLE OF CONTENTSthe fact that the Company has experienced net losses since inception and may continue to experience additional losses;
the performance of properties the Company has acquired or may acquire or loans the Company has made or may make that are secured by real property;
changes in economic conditions generally and the real estate and debt markets specifically;
legislative or regulatory changes, including changes to the laws governing the taxation of real estate investment trusts (“REITs”);
the outcome of pending litigation or investigations;
potential damage and costs arising from natural disasters, terrorism and other extraordinary events, including extraordinary events affecting parking facilities included in the Company’s portfolio;
risks inherent in the real estate business, including ability to secure leases or parking management contracts at favorable terms, tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;
competitive factors that may limit the Company’s ability to make investments or attract and retain tenants;
the Company’s ability to generate sufficient cash flows to pay distributions to the Company’s stockholders;
the Company’s failure to maintain its status as a REIT for the year ending December 31, 2020;
the Company’s ability to successfully integrate pending transactions and implement an operating strategy;
the Company’s ability to list shares of common stock on a national securities exchange or complete another liquidity event;
the availability of capital and debt financing generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions, covenants and requirements of that debt;
changes in interest rates;
changes to generally accepted accounting principles, or GAAP;
the Company’s ability to negotiate amendments or extensions to existing debt agreements.
the impact on our business and those of our tenants from epidemics, pandemics or outbreaks of an illness, disease or virus (including COVID-19); and
potential adverse impacts from changes to the U.S. tax laws.

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 Quarterly 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 – looking statements made after the date of this Quarterly 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 – looking statements included in this Quarterly Report, 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 Quarterly Report will be achieved.

This report may include market data and forecasts with respect to the REIT industry. Although we arethe Company is responsible for all of the disclosure contained in this report, in some cases we relythe Company relies on and referrefers 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 we believeare believed to be reliable.

Overview

MVPCommencing with its taxable year ended December 31, 2017 through December 31, 2019, the Company has operated in a manner to qualify as a REIT. However, for the quarters ended June 30, 2020 and September 30, 2020, the Company does not appear to be in compliance with the REIT II, Inc. (income tests. These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the "Company," "we," "us,"past two quarters.  If implemented, these options and strategies, may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of these options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful  or "our")that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020. If we fail to qualify as a REIT for our taxable year ended December 31, 2020, we would no longer be required to make distributions of our annual taxable income in order to maintain our REIT status.  Moreover, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for the four taxable years following 2020.  We believe that we may not be entitled to this statutory relief, and there can be no assurances that we will be able to obtain such relief.

The Company was incorporated in Maryland corporation formed on May 4, 2015 and intendsis 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 qualifythe 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 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 quarter ended September 30, 2020. For further information regarding the impact of COVID-19 on the Company’s see Results of operations for the three months ended September 30, 2020 compared to the three months ended September 30, 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 November 16, 2020, the Company had entered into thirty five 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 (iii) extension of the lease. 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 R — Subsequent Events in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report and Part II, Item 1A titled “Risk Factors.”

In January of 2019, we were notified by the City of Minneapolis that a portion of our 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, we were able to settle on the City taking approximately 6,000 sq. ft. of frontage on Hennepin Avenue, where we 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.
Objectives

The Company’s primary objectives are to:

preserve capital;
generate current income; and
explore strategic alternatives to provide liquidity to stockholders, including sales of assets, potential liquidation of the Company, a sale of the Company or a portion thereof or a strategic business combination.

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. The Company is currently exploring certain 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. However, there can be no assurance that the Board’s exploration of potential strategic alternatives will result in any change of strategy or transaction being entered into or consummated or, if a transaction is undertaken, as to its terms, structure or timing. In addition, the value received in any potential strategic alternative would likely be less than the NAV most recently estimated by the Company’s board of directors. Our assets have been valued based upon appraisal standards and the values of our assets using these methods are not required to reflect market value under those standards and will not necessarily result in a reflection of fair value under generally accepted accounting principles. Further, different parties using different property-specific and general real estate investment trust ("REIT")and capital market assumptions, estimates, judgments and standards could derive a different estimated NAV per share, which could be significantly different from the estimated NAV per share determined by our board of directors. The estimated NAV per share is not a representation or indication that, among other things a stockholder would ultimately realize distributions per share equal to the estimated NAV per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company or a third party would offer the estimated NAV per share in an arms-length transaction to purchase all or substantially all of our shares of common stock.

For example, we expect to incur additional costs in connection with ongoing litigation, the SEC investigation discussed in Note N - Legal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q 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 on May 28, 2019 for U.S. federal income tax purposes uponadditional information regarding the filingNAV calculation, as well as “Item 1A. Risk Factors—Risks Related to an Investment in the Company–Stockholders should not rely on the estimated NAV per share as being an accurate measure of the federal tax returncurrent value of our shares of common stock” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The Company believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT commencing with the taxable year ending December 31, 2017; however, if the company is unable to meet the REIT qualification for 2017 we will continue to operate as a C corporation for U.S. federal income tax purposes. As of December 31, 2016, the Company ceased all selling efforts for the initial public offering (the "Common Stock Offering") of its common stock, $0.0001 par value per share, at $25.00 per share, pursuant to a registration statement on Form S-11 filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended.  The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering.  As of September 30, 2017, the Company raised approximately $67.7 million in the Common Stock 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 $0.6 million. The Company has also registered $50 million in shares of common stock for issuance pursuant to a distribution reinvestment plan (the "DRIP") under which common stockholders may elect to have their distributions reinvested in additional shares of common stock at the current price of $25.00 per share.2019.

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 commenced the private placement of the shares of Series A, together with warrants to acquire the Company's common stock, to accredited investors on November 1, 2016 and closed the offering on March 24, 2017.  As of September 30, 2017, the Company raised approximately $2.6 million, net of offering costs, in the Series A private placements and has 2,862 shares of Series A issued and outstanding.

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 private placement of shares of Series 1, together with warrants to acquire the Company's common stock, to accredited investors.  As of September 30, 2017, the Company had raised approximately $11.8 million, net of offering costs, in the Series 1 private placements and had 13,445 shares of Series 1 issued and outstanding.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:

Downtown core
Government buildings and courthouses
Sporting venues
Hospitals
Hotels

However, as a result of the Common Stock Offering willcurrent 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.see Part II, Item 1A titled “Risk Factors.”

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Prior Investment Criteria

The Company historically focused on acquiring properties that met the following criteria:

properties that were expected to generate current cash flow;
properties that were expected to be located in populated metropolitan areas; and
properties were expected to produce income within 12 months of the Company’s acquisition.

As noted above, the Company does not currently expect to make any additional acquisitions unless and until it is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the "Operating Partnership"). The Company plansable to own substantially allsell some of its existing assets, and conduct its operations throughthen only after ensuring that it has sufficient liquidity resources.  In the Operating Partnership. The Company's wholly owned subsidiary, MVP REIT II Holdings, LLC, is the sole limited partnerevent of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated in a manner that enablesfuture acquisition, the Company would expect the foregoing criteria to (1) satisfyserve as guidelines, however, Management and 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 purposesCompany’s board of Section 7704 of the Internal Revenue Code,directors may vary from these guidelines to acquire properties which classification could result in the Operating Partnership being taxed as a corporation.they believe represent value opportunities.

The Company utilizes an Umbrella Partnership Real Estate Investment Trust ("UPREIT") structure to enable us to acquire real property in exchange for limited partnership interests in the Company's Operating 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 us in exchange for shares of the Company's common stock or cash.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 Company's initial capitalization,Internalization, among other things, the Company sold 8,000 shares of common stock for $200,000 to MVP Capital Partners II, LLC (the "Sponsor"), the sponsor of the Company. The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc., a Maryland corporation and OTC pink sheet listed company ("VRM II"), and 40% by Vestin Realty Mortgage I, Inc., a Maryland corporation and OTC pink sheet listed company ("VRM I"), both which are managed by Vestin Mortgage, LLC, a Nevada limited liability company in which Michael Shustek wholly owns.  The Company also sold 5,000 shares of common stock directly to VRM II.

The Company's advisor is MVP Realty Advisors, LLC (the "Advisor"), a Nevada limited liability company, which is owned sixty percent (60%) by VRM II and forty percent (40%) by VRM I.  The Advisor is responsible for managing the Company's affairs on a day-to-day basis and for identifying and making investments on the Company's behalf pursuant to an advisory agreement between the Company and the Advisor (the "Advisory Agreement"). The Company has no paid employees.  The Advisor also advises MVP REIT, Inc. ("MVP REIT"), a real estate investment trust registeredagreed with the SEC with substantially the same investment strategy as the Company in that MVP REIT also invests primarily in parking facilities.

From inception through September 30, 2017, the Company has paid approximately $2.1 million in distributions, including issuing 54,336 shares of its common stock as DRIP, issuing 85,358 shares of its common stock as dividend in distributionsformer Advisor to the Company's common stockholders and $200,000 in distributions for preferred stockholders, all of which have been paid from offering proceeds and constituted a return of capital.  All of the cash distributions have been paid from offering proceeds and constituted a return of capital.  The Company may pay distributions from sources other than cash flow from operations, including proceeds from the Offering, 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.

The following table is a summary of the acquisitions for the nine months ended September 30, 2017.

PropertyLocationDate AcquiredProperty Type# SpacesSize / AcreageRetail /Office Square Ft.Investment AmountOwnership %
MVP Detroit Center GarageDetroit, MI01/10/2017Garage1,2758.78N/A$55,000,00080.00%
St Louis Broadway, LLCSt Louis, MO02/01/2017Lot1610.96N/A$2,400,000100.00%
St Louis Seventh & Cerre, LLCSt Louis, MO02/01/2017Lot1741.20N/A$3,300,000100.00%
MVP Preferred Parking, LLCHouston, TX06/29/2017Garage & Lot5211.0784$20,500,000100.00%

During April 2017, MVP REIT reduced its ownership interest in MVP Houston Preston Lot from 80% to 40%, by selling a portion of its ownership to the Company for $1.12 million. This transaction was completed at par value with no gain or loss recorded by MVP REIT or the Company. Our ownership interest in MVP Houston Preston Lot increased from 20% to 60% and we will be considered the controlling party starting May 1, 2017.

As of September 30, 2017 the Company had investments in the following facilities:

Parking FacilityDate AcquiredTypeZoningHeight RestrictionMVP REIT I % OwnedMVP REIT II % Owned3rd Party % OwnedProperty Purchase Price
MVP Minneapolis Venture1/6/2016LotB4C-1Unlimited87%13%0%$6,100,000
MVP Denver Sherman 19352/12/2016LotCMX-16200 Feet76%24%0%$2,437,500
MVP Bridgeport Fairfield Garage3/30/2016GarageDVD-CORE65 Feet90%10%0%$7,800,000
Minneapolis City Parking1/6/2016LotB4C-1Unlimited87%13%0%$9,395,000
MVP Cleveland West 9th5/11/2016LotCBD LLR-B4175 Feet49%51%0%$5,675,000
33740 Crown Colony5/17/2016LotLLR-D5250 Feet49%51%0%$3,030,000
MVP San Jose 88 Garage6/15/2016GarageDCN/A0%100%0%$3,575,500
MCI 1372 Street7/8/2016LotB-5375 Feet0%100%0%$700,000
MVP Cincinnati Race Street Garage7/8/2016GarageDD-A500 Feet0%100%0%$4,500,000
MVP St. Louis Washington7/18/2016LotCBD I100 Feet0%100%0%$3,000,000
MVP St. Paul Holiday Garage8/12/2016GarageB-5Unlimited0%100%0%$8,200,000
MVP Louisville Station Broadway8/23/2016LotCBD IUnlimited0%100%0%$3,050,000
White Front Garage Partners9/30/2016GarageCBD IUnlimited20%80%0%$11,496,000
Cleveland Lincoln Garage Owners10/19/2016GarageSI / GR-E5250 Feet0%100%0%$7,316,950
MVP Houston Jefferson Lot11/22/2016LotNONEUnlimited0%100%0%$700,000
MVP Houston Preston Lot11/22/2016LotNONEUnlimited40%60%0%$2,800,000
MVP Houston San Jacinto Lot11/22/2016LotNONEUnlimited0%100%0%$3,200,000
MVP Detroit Center Garage1/10/2017GaragePDUnlimited20%80%0%$55,000,000
St. Louis Broadway Group2/1/2017LotCBD I200 Feet0%100%0%$2,400,000
St. Louis Seventh & Cerre2/1/2017LotCBD I200 Feet0%100%0%$3,300,000
MVP St. Louis Cardinal Lot, DST *5/31/2017Lot----0%51%49%$11,350,000
MVP Preferred Parking (Preston)6/29/2017GarageNONEUnlimited0%100%0%$16,500,000
MVP Preferred Parking (Congress)6/29/2017LotNONEUnlimited0%100%0%$4,000,000

* The Company acquired a 51.0% beneficial interest in MVP St. Louis Cardinal Lot, DST, a Delaware statutory trust, or MVP St Louis, for approximately $2.8 million. MVP St. Louis purchased the St. Louis parking lot from an unaffiliated seller for a purchase price of $11,350,000, plus payment of closing costs, financing costs, and related transactional costs. MVP St. Louis used the Company's investment to fund a portion of the purchase price for the property. The remaining equity portion was funded through short-term investments by the Advisor pending the private placements of additional beneficial interest in MVP St. Louis exempt from registration under the Securities Act.

The Company intends to operate as a REIT for the year ended December 31, 2017. The Company is not a mutual fund or an investment company within the meaning of the Investment Company Act of 1940, nor is the Company subject to any regulation thereunder. As a REIT, the Company is required to have a December 31 fiscal year end. As a REIT, the Company will not be subject to federal income tax on income that is distributed to stockholders. Among other requirements, REITs are required to satisfy certain gross income and asset tests, which may affect the composition of assets the Company acquires with the proceeds of the offering. In addition, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).

If the Company does not qualify as a REIT for the tax year ended December 31,2017, we will file as a C corporation and deferred tax assets and liabilities will be established for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for the deferred tax assets is provided if we believe that it is more likely than not that we will not realize the tax benefit of deferred tax assets based on the available evidence at the time the determination is made. For the tax year ended December 31, 2016, we concluded that due to our cumulative book losses, a valuation allowance should be recorded against our net deferred tax assets.

The Company's board of directors will at all times have ultimate oversight and policy-making authority over the Company, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to the Company's advisory agreement, however, the Company's board has delegated to MVP Realty Advisors, LLC, the Company's advisor, authority to manage the Company's day-to-day business, in accordance with the Company's investment objectives, strategy, guidelines, policies and limitations. Vestin Realty Mortgage II, Inc., ("VRM II") owns 60% of the Advisor, and the remaining 40% is owned by Vestin Realty Mortgage I, Inc. ("VRM I"); both are managed by Vestin Mortgage, LLC. The Company's sponsor is MVP Capital Partners II, LLC (" the "Sponsor").  The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc., a Maryland corporation and OTC pink sheet listed company ("VRM II"), and 40% by Vestin Realty Mortgage I, Inc., a Maryland corporation and OTC pink sheet listed company ("VRM I"), both which are managed by Vestin Mortgage, LLC, a Nevada limited liability company in which Michael Shustek wholly owns.  The Company also sold 5,000 shares of common stock directly to VRM II.

VRM I, an OTC Pink Sheet-listed company, and VRM II, an OTC Pink Sheet -listed company, are engaged primarily in the business of investing in commercial real estate and loans secured by commercial real estate. As the owners of the Advisor, VRM I and VRM II may benefit from any fees and other compensation that the Company pays to the Advisor under the Advisor Agreement. In this regard, the Company notes that the Advisor has agreed to waive certain fees and expenses it otherwise would be entitled under the Advisory Agreement.  Please refer to Note E – Related Party Transactions and Arrangements – Fees and Expenses Paid in Connection With the Operations of the Company in Part I, Item 1 Financial Statements of this Quarterly Report on Form 10-Q for more information.  If the owners of the Advisor determine that such waivers are no longer in the best interests of their stockholders or otherwise refuse to grant future waivers of fees or expenses if requested by the Company, then the Company's operating expenses could increase significantly, which could adversely affect the Company's results of operations and the amount of distributions to stockholders.

In addition, the Company may compete against MVP REIT, VRM I and VRM II, all of whom are managed by affiliates of the Company's sponsor, for the acquisition of investments. The Company believes this potential conflict with respect to VRM I and VRM II, 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. MVP REIT has substantially the same investment strategy as the Company, in that MVP REIT is also focused primarily on investments in parking facilities. For additional discussion regarding potential conflicts of interests, please see "Risk Factors—Risks Related to Conflicts of Interest" and "Item 13 – Certain Relationships and Related Transactions, and Director Independence" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

In October 2016 the Board of Directors appointed a special committee to evaluate liquidity options. After consideration, in January 2017 the special committee of the Board of Directors decided to explore a merger with MVP REIT.

On May 26, 2017, the Company, MVP REIT Inc., a Maryland corporation ("MVP REIT"), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company ("Merger Sub"), and MVP Realty Advisors, LLC, the Company's and MVP REIT's external advisor (the "Advisor"), entered into an agreement and plan of merger (the "Merger Agreement"). Subject to the terms and conditions of the Merger Agreement, MVP REIT will merge with and into Merger Sub (the "Merger"), with Merger Sub surviving the Merger (the "Surviving Entity"), such that following the Merger, the Surviving Entity will continue as a wholly owned subsidiary of the Company. The Merger is intended to qualify as a "reorganization" under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").  The combined company will be renamed "The Parking REIT, Inc."

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each outstanding share of MVP REIT's common stock, $0.001 par value per share (the "MVP REIT Common Stock"), will be automatically cancelled and retired, and converted into the right to receive 0.365 shares of common stock, $0.0001 par value per share, of the Company (the "Company Common Stock") (such ratio, as it may be adjusted pursuant to the Merger Agreement, the "Exchange Ratio").  Holders of shares of MVP REIT Common Stock will receive cash in lieu of fractional shares.

At the effective time of the Merger each share of MVP REIT Common Stock, if any, then held by any wholly owned subsidiary of MVP REIT or by the Company or any of its wholly owned subsidiaries will no longer be outstanding and will automatically be retired and will cease to exist, and no consideration will be paid, nor will any other payment or right inure or be made with respect to such shares of MVP REIT Common Stock in connection with or as a consequence of the Merger.  In addition, each share of MVP REIT's Non-Participating, Non-Voting Convertible Stock, $0.001 par value per share ("MVP REIT Convertible Stock"), all 1,000 of which are held by the Advisor, will automatically be retired and will cease to exist, and no consideration will be paid, nor will any other payment or right inure or be made with respect to such shares of MVP REIT Convertible Stock in connection with or as a consequence of the Merger.

The Merger Agreement contains customary covenants, including covenants prohibiting MVP REIT and its subsidiaries and representatives from soliciting, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. However, under the terms of the Merger Agreement, during the period beginning on the date of the Merger Agreement and continuing until 11:59 p.m. New York City time on July 10, 2017 (the "Go Shop Period End Time"), MVP REIT (through the MVP REIT special committee and its representatives) was permitted to initiate, solicit, provide information and enter into discussions concerning proposals relating to alternative business combination transactions.  From May 30, 2017, through July 10, 2017, in connection with the ''go shop'' process provided for under the Merger Agreement, Robert A. Stanger & Co., Inc., ("Stanger") contacted approximately 78 parties, which the MVP I Special Committee and Stanger believed had the financial ability and potential strategic interest in reviewing the opportunity, to solicit their interest in a possible alternative transaction with MVP REIT. Stanger and Venable, LLP negotiated with 12 parties with regard to signing a confidentiality agreement of which 8 confidentiality agreements were executed. No bids were received prior to the July 10, 2017 Go Shop Period End Time.

Pursuant to the Merger Agreement, the board of directors of the Company (the "Company Board") will, effective as of the effective time of the Merger, increase the number of directors comprising the Company Board to eight and Nicholas Nilsen, Robert J. Aalberts and Shawn Newson, previous Directors of MVP REIT, will be elected to the Company Board.

As previously announced, the stockholders of MVP REIT have approved the Merger and the Merger Agreement at the special meeting of stockholders of MVP REIT held on September 27, 2017.  The completion of the Merger remains subject to receipt of certain third party consents and satisfaction of other customary closing conditions.


Amended and Restated Advisory Agreement

Concurrently with the entry into the Merger Agreement, on May 26, 2017, the Company, MVP REIT II Operating Partnership, LP and the Advisor entered into(i) terminate the Second Amended and Restated Advisory Agreement, (the "Second Amendeddated as of May 26, 2017 and, Restated Advisory Agreement"), which will become effective atfor the effective timeavoidance of doubt, the Merger.  The SecondThird Amended and Restated Advisory Agreement, will amenddated as of September 21, 2018, which by its terms would have become effective only upon a listing of the Company's existing advisory agreement, dated October 5, 2015 (the "Original Agreement"Company’s common stock on a national securities exchange (collectively, the “Management Agreements”), to provide for,each entered into among other amendments, (i) elimination of acquisition fees, disposition fees and subordinated performance fees and (ii) the payment of an asset management fee by the Company, to the Advisor calculated and paid monthly in an amount equal to one-twelfth of 1.1% of the (a) cost of each asset then held by the Company, without deduction for depreciation, bad debts or other non-cash reserves, or (b) the Company's proportionate share thereof in the case of an investment made through a joint venture or other co-ownership arrangement excluding (only for clause (b)) debt financing on the investment.  Pursuant to the Second Amended and Restated Advisory Agreement, the asset management fee may not exceed $2,000,000 per annum (the "Asset Management Fee Cap") until the earlier of such time, if ever, that (i) the Company holds assets with an Appraised Value (as defined Second Amended and Restated Advisory Agreement) equal to or in excess of $500,000,000 or (ii) the Company reports AFFO (as defined in the Second Amended and Restated Advisory Agreement) equal to or greater than $0.3125 per share of Company Common Stock (an amount intended to reflect a 5% or greater annualized return on $25.00 per share of the Company Common Stock) (the "Per Share Amount") for two consecutive quarters, on a fully diluted basis.  All amounts of the asset management fee in excess of the Asset Management Fee Cap, plus interest thereon at a rate of 3.5% per annum, will be due and payable by the Company no later than ninety (90) days after the earlier of the date that (i) the Company holds assets with an Appraised Value equal to or in excess of $500,000,000 or (ii) the Company reports AFFO per share of Company Common Stock equal to or greater than the Per Share Amount for two consecutive quarters, on a fully diluted basis.
In the event that the Merger Agreement is terminated prior to the consummation of the Merger, the Second Amended and Restated Advisory Agreement will automatically terminate and be of no further effect and the Company, MVP REIT II Operating Partnership, LP and the Advisor will have the rights and obligations set forth in the Original Agreement.

Termination Agreement
Concurrently with the entry into the Merger Agreement, on May 26, 2017, the Company, MVP REIT, theformer Advisor and MVP REIT II Operating Partnership, LP (the “Operating Partnership”); (ii) extend employment to the executives and other employees of the former Advisor; (iii) arrange for the former Advisor to continue to provide certain services with respect to outstanding indebtedness of the Company and its subsidiaries; and (iv) lease the employees of the former Advisor for a limited period of time prior to the time that such employees become employed by the Company.


Contribution Agreement

On March 29, 2019, the Company entered into a terminationContribution 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 fee agreement (the "Termination Agreement")Shustek (solely for purposes of Section 4.03 thereof). PursuantIn exchange for the Contribution, the Company agreed to issue to the Termination Agreement, atformer Advisor 1,600,000 shares of Common Stock as consideration (the “Consideration”), issuable in four equal installments. The first and second installments of 400,000 shares of Common Stock per installment were issued on the effective time April 1, 2019 and December 31, 2019, respectively. See Note P — Deferred Management Internalization in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of the Merger, the Advisory Agreement, dated September 25, 2012, as amended, among MVP REIT and the Advisorthis Quarterly Report for additional information. The remaining installments will be terminatedissued on December 31, 2020 and December 31, 2021 (or if December 31st is not a business day, the day that is the last business day of such year). If requested by the Company will pay the Advisor an Advisor Acquisition Payment (as such term is defined in the Termination Agreement) of approximately $3.6 million, subject to adjustment in the event that additional properties are acquired by MVP REIT prior to closing, which shall be the only fee payable to the Advisor in connection with any contemplated capital raise by the Merger. InCompany, the event that the Merger Agreement is terminated priorformer Advisor has agreed not to the consummationsell, pledge or otherwise transfer or dispose of any of the Merger,Internalization Consideration for a period not to exceed the Termination Agreement will automatically terminate and be of no further effect and no Advisor Acquisition Payment will be owed and payable.

The foregoing descriptionlock-up period that otherwise would apply to other stockholders of the Merger Agreement,Company in connection with such capital raise. See the Amended and Restated Advisory Agreement and the Termination Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the applicable agreements, each of which is filed with as aCompany’s Current Report on Form 8-K exhibitfiled with the SEC on May 31, 2017.

Amended Charter

In connection with the Merger, at the Company annual stockholders' meeting held on September 27, 2017, the Company's stockholders approved, among other matters, the amendment and restatement of its charter (the "Amended Charter").  As described inApril 3, 2019 for more detail in the final proxy statement distributed to our stockholders for the annual meeting, the Amended Charter is primarily intended to accomplish two objectives in connection with the possible listing of the Company's Common Stock after the closing of the Merger: (1) to remove provisions of our charter that we believe may unnecessarily restrict our ability to take advantage of further opportunities for liquidity events or are redundant with or otherwise addressed or permitted to be addressed under Maryland law and (2) to amend certain provisions in a manner that we believe would be more suitable for becoming a publicly-traded REIT.

The Amended Charter will become effective upon its filing with the State Department of Assessments and Taxation of Maryland. We expect to file the proposed Amended Charter immediately before the Company's Common Stock becomes listed for trading on a national securities exchange. This means that the changes to the charter will not be effective unless and until we complete an exchange listing.

Please see Note P- Merger for additional information regarding the Merger, the Merger Agreement, the Second Amended and Restated Advisory Agreement, the Termination Agreement and the Amended Charter.

Review of the Company's Policies

The Company's board of directors, including the independent directors, have reviewed the policies described in this Quarterly 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 to acquire a diversified portfolio of income producing properties, thereby reducing risk in its portfolio; (2) the Company's executive officers, directors and affiliates of the advisor have expertise with the type of real estate investments the Company seeks; and (3) borrowings should enable the Company to purchase assets and earn rental income more quickly, thereby increasing the likelihood of generating income for the Company's stockholders and preserving stockholder capital.Management Internalization.

Results of Operations for the three and nine months ended September 30, 20172020 compared to the three and nine months ended September 30, 2016.2019.

  For the Three Months Ended September 30, 
  2020  2019  $ Change  % Change 
Revenues            
Base rent income
 
$
3,132,000
  
$
5,036,000
  
$
(1,904,000
)
  
(38
%)
Management income
  
303,000
   
--
   
303,000
   
100
%
Percentage rent income
  
75,000
   
1,045,000
   
(970,000
)
  
(93
%)
Total revenues
 
$
3,510,000
  
$
6,081,000
  
$
(2,571,000
)
  
(42
%)

Rental revenue

On January 1, 2020 the operating lease of MVP PF Memphis Poplar 2013, LLC (“MVP Memphis Poplar”) by Premium Parking was terminated.  According to the terms of the termination agreement a termination fee of $144,000 is due from Premium Parking to MVP Memphis Poplar. This fee will be paid monthly in the amount of $3,000 commencing March 1, 2020 and continuing through February 1, 2024.

Upon the termination of the operating lease MVP Memphis Poplar entered into a Modified NNN lease agreement with Best Park Tennessee, LLC (“Best Park”).  The term of the lease is 50 months.  Best Park will pay annual rent of $270,000.  In addition, the lease provides percentage rent with MVP Memphis Poplar receiving 65% of gross receipts over $370,000 per lease year.  The tenant is responsible for paying property taxes.

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 place and implementing social distancing measures, which has in some cases eliminated or 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 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. 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.

For additional information see Note D – Investments in Real Estate in the notes to the condensed consolidated financial statements included in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report.


During the three months ended September 30, 2020 and 2019 the Company received percentage rent on the following properties:

  For the Three Months Ended September 30 
  2020  2019  $ Change  % Change 
Percentage rent income            
MVP PF Ft. Lauderdale(a)
 
$
--
  
$
33,000
  
$
(33,000
)
  
(100
%)
Mabley Place Garage
  
--
   
316,000
   
(316,000
)
  
(100
%)
MVP Indianapolis Washington
  
--
   
36,000
   
(36,000
)
  
(100
%)
MVP Milwaukee Arena
  
--
   
16,000
   
(16,000
)
  
(100
%)
MVP St Paul Holiday
  
--
   
57,000
   
(57,000
)
  
(100
%)
MVP Detroit Center Garage (d)
  
--
   
566,000
   
(566,000
)
  
(100
%)
St. Louis Broadway
  
--
   
4,000
   
(4,000
)
  
(100
%)
MVP Raider Park Garage
  
75,000
   
17,000
   
58,000
   
341
%
    Total revenues
 
$
75,000
  
$
1,045,000
  
$
(970,000
)
  
(92.8
%)

Decrease in percentage rent is due to lease amendments entered into due to COVID-19. The Company does not expect to receive any additional percentage rent for the remainder of 2020.

  For the Three Months Ended September 30, 
  2020  2019  $ Change  % Change 
Operating expenses            
Property taxes
 
$
955,000
  
$
734,000
  
$
221,000
   
30
%
Property operating expense
  
263,000
   
421,000
   
(158,000
)
  
(38
%)
General and administrative
  
1,452,000
   
1,625,000
   
(173,000
)
  
(11
%)
Professional fees
  
384,000
   
3,869,000
   
(3,485,000
)
  
(90
%)
Acquisition expenses
  
--
   
1,000
   
(1,000
)
  
(100
%)
Depreciation and amortization expenses
  
1,305,000
   
1,285,000
   
20,000
   
2
%
Impairment
  
6,475,000
   
500,000
   
5,975,000
   
1195
%
Total operating expenses
  
10,834,000
   
8,435,000
   
2,770,000
   
33
%
Loss from operations
 
$
(7,324,000
)
 
$
(2,354,000
)
 
$
(4,970,000
)
  
211
%

The Company began purchasing propertiesis 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 September 30, 2020, the Company has entered into thirty-five lease amendments with eight tenants/operators that became effective during the second quarter. The terms of such lease amendments generally provide for one of (i) a reduction in May 2016rent 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 (iii) extension of the lease.  Although the Company is and the results of operations below reflect start-up costswill continue to be actively engaged in rent collection efforts related to uncollected rent, as well as acquisition expenses incurred in connectionworking with purchasing properties ascertain tenants who have requested rent relief, the Company seekscan 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 deploy the Company's offering proceeds.prevent its spread continue for a prolonged period. The Company expects thatdecrease in base rent income and expenses relatedpercentage rent income during the quarter ended September 30, 2020 is primarily due to these lease amendments and the impact of the COVID-19 pandemic during the third quarter of 2020. In particular, many of the Company’s properties are located in urban centers, near government buildings and sporting venues, which depend 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. See Part II, Item 1A titled “Risk Factors” for more information on the effect of COVID-19 on our business.

Property taxes

The increase in property taxes in 2020 compared to 2019 is attributable primarily to the Company's portfolio will increase in future years as a result of owninglease amendments which have decreased the properties acquiredproperty tax burden on the Company’s tenants for a full year2020.

General and as a result of anticipated future acquisitions of real estate and real estate-related assets.  The results of operations described below may not be indicative of future results of operations.

  For the three months  For the nine months 
  ended September 30,  ended September 30, 2016 
  2017  2016  2017  2016 
Revenue                        
Parking Base rent $2,180,000   98% $406,000   67% $5,719,000   84% $451,000   67%
Retail rent  26,000   1%  --   0%  57,000   1%  1,000   0%
Management Agreement (a)  --   0%  201,000   33%  482,000   7%  224,000   33%
Percentage rent (b)  16,000   1%  --   0%  523,000   8%  --   0%
Total revenues $2,222,000   100% $607,000   100% $6,781,000   100% $676,000   100%

administrative

a)Through February 28, 2017, the San Jose 88 Garage was subject to a parking management agreement and the rental income represents the gross revenues generated by the property. Operating expenses for this property are included in Operations and Maintenance.  Starting on March 1, 2017, this property was leased to a national parking operator, with an annual base rent of $450,000 per year.

During January 2017, MVP Detroit Center Garage receivedThe decrease in general and administrative expenses from 2019 to 2020 of $173,000 was primarily attributable to (i) a settlement amountdecrease in director and officer insurance expense of approximately $345,000$151,000, (ii) a decrease in payroll expense of approximately $92,000 and (iii) a decrease in investor services expense of approximately $31,000. The decrease in the director and officer insurance expense is due to the fact that the premium paid for the operationssix-year tail policy, purchased on June 30, 2019, was fully expensed during the twelve months ended June 30, 2020. These decreases were partially offset by increases in taxes & licenses expense of the garage until SP+ assumed operations under a longer-term lease agreement.

b)During May 2017, MVP Detroit Center Garage, LLC amended their lease with SP+ to set the percentage rent trigger amount and periods from 80% of $5,000,000 over the first 12 months to the following:
·80% over $833,333 from February 2017 to March 2017
·80% over $1,250,000 from April 2017 to June 2017
·80% over $2,916,667 from July 2017 to January 2018
approximately $77,000 and office rent expense of approximately $25,000.

As a result Professional fees

The decrease in professional fees was primarily due to lower legal fees incurred during the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019 and $0.8 million of insurance proceeds received, during the quarter ended September 30, 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 was initiated in June of 2019.

See Note N – Legal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this amendment, MVP Detroit Center Garage, LLC earnedQuarterly Report for additional information.

Management internalization

The Company was externally managed by the Advisor prior to the management Internalization that became effective on April 1, 2019.  These expenses include (i) the Internalization Consideration to be paid in aggregate to the Manager and (ii) professional fees incurred to complete the Internalization of the Company’s management. See Note A — Organization and Business Operations and Note P – Subsequent Events and Note O – Deferred Management Internalization in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

Acquisition expenses

Acquisition expenses related to purchased properties are capitalized with the investment in real estate. Acquisition expenses incurred during the three months ended September 30, 2020 and 2019 relate solely to dead deals.

Depreciation and amortization expenses

The increase in depreciation and amortization expenses was due to assets placed in service following the completion of construction projects or general improvements on properties already held.

Impairment

During the three months ended September 30, 2020 and 2019, the Company recorded approximately $498,000$6.5 million and $0.5 million, respectively, of asset impairment charges. These charges were recorded to write down the carrying value of these assets to their current appraised values net of estimated closing costs. See Note B — Summary of Significant Accounting Policies in percentage rent from February 2017Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

  For the Three Months Ended September 30, 
  2020  2019  $ Change  % Change 
Other income (expense)            
Interest expense
 
$
(2,326,000
)
 
$
(2,375,000
)
 
$
49,000
   
(2
%)
Gain from sale of investment in real estate
  
--
   
2,294,000
   
(2,294,000
)
  
(100
%)
Other income
  
--
   
50,000
   
(50,000
)
  
(100
%)
Income from DST
  
44,000
   
52,000
   
(8,000
)
  
(15
%)
Total other expense
 
$
(2,282,000
)
 
$
21,000
  
$
(2,303,000
)
  
(1096
%)

Interest expense

The decrease in interest expense for the period ended September 2017.30, 2020, as compared to the same period in 2019, is primarily attributable to principal amortization of existing debt, a slight reduction of interest rates on the variable rate loan and the net paydown of certain private loans.

In September 2017, White Front Garage Partners received approximately $16,000the past, to maximize the use of cash, the Company sought opportunities to utilize debt financing in percentage rent in accordanceacquisitions, including the use of long-term debt. The interest expense will vary based on the amount of the Company’s borrowings and current interest rates at the time of financing. Historically, the Company’s intent was to secure appropriate leverage with the lease agreement between White Front Garage Partnerslowest 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 Premier Parking.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 on favorable terms or at all.

Interest expense recorded for the three months ended September 30, 2020 and 2019 includes amortization of loan issuance costs. Total rental revenue earned, including percentage rent,amortization of loan issuance cost for the three months ended September 30, 2020 and 2019 was approximately $0.2 million and $0.2 million, respectively.

For additional information see Note J – Notes Payable in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

Gain on sale of investment in real estate

During September 2019, the Company sold the surface parking lot and office building in Fort Lauderdale for $6.1 million, which resulted in a gain from our 18 consolidated parking facilities (held by 16 different subsidiaries), which have continued operations, totaledsale of investments of approximately $6.8 million$2.3 million.

Results of Operations for the nine months ended September 30, 2017,2020 compared to the nine months ended September 30, 2019.

  For the Nine Months Ended September 30, 
  2020  2019  $ Change  % Change 
Revenues            
Base rent income
 
$
11,525,000
  
$
15,126,000
  
$
(3,601,000
)
  
(24
%)
Management income
  
596,000
   
--
   
596,000
   
100
%
Percentage rent income
  
402,000
   
1,756,000
   
(1,354,000
)
  
(77
%)
Total revenues
 
$
12,523,000
  
$
16,882,000
  
$
(4,359,000
)
  
(26
%)

Rental revenue

On January 1, 2020 the operating lease of MVP PF Memphis Poplar 2013, LLC (“MVP Memphis Poplar”) by Premium Parking was terminated.  According to the terms of the termination agreement a termination fee of $144,000 is due from Premium Parking to MVP Memphis Poplar. This fee will be paid monthly in the amount of $3,000 commencing March 1, 2020 and continuing through February 1, 2024.

Upon the termination of the operating lease MVP Memphis Poplar entered into a Modified NNN lease agreement with Best Park Tennessee, LLC (“Best Park”).  The term of the lease is 50 months.  Best Park will pay annual rent of $270,000.  In addition, the lease provides percentage rent with MVP Memphis Poplar receiving 65% of gross receipts over $370,000 per lease year.  The tenant is responsible for paying property taxes.

Due to the COVID-19 pandemic the Company temporarily transitioned fourteen leases to management agreements due to the fact that 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. This reduced demand for parking is 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. 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.

For additional information see Note D – Investments in Real Estate in the notes to the condensed consolidated financial statements included in Part I, Item 1 - Notes to the Condensed Consolidated Financial Statements of this Quarterly Report.

During the nine months ended September 30, 2020 and 2019 the Company received percentage rent on the following properties:


  For the Nine Months Ended September 30 
  2020  2019  $ Change  % Change 
Percentage rent income            
MVP PF Ft. Lauderdale (a)
 
$
--
  
$
33,000
  
$
(33,000
)
  
(100
%)
Mabley Place Garage (b)
  
--
   
316,000
   
(316,000
)
  
(100
%)
MVP Ft Worth Taylor
  
94,000
   
8,000
   
86,000
   
1075
%
MVP Indianapolis Washington (b)
  
--
   
36,000
   
(36,000
)
  
(100
%)
MVP Milwaukee Arena (b)
  
31,000
   
47,000
   
(16,000
)
  
(34
%)
MVP Denver 1935 Sherman (b)
  
--
   
9,000
   
(9,000
)
  
(100
%)
MVP Cleveland West 9th (b)
  
--
   
11,000
   
(11,000
)
  
(100
%)
MVP St. Paul Holiday (b)
  
--
   
82,000
   
(82,000
)
  
(100
%)
MVP Detroit Center Garage (b)
  
153,000
   
1,155,000
   
(1,002,000
)
  
(87
%)
St. Louis Broadway
  
5,000
   
4,000
   
1,000
   
25
%
MVP Raider Park
  
75,000
   
17,000
   
58,000
   
341
%
MVP New Orleans Rampart
  
44,000
   
38,000
   
6,000
   
16
%
 Total revenues
 
$
402,000
  
$
1,756,000
  
$
(1,354,000
)
  
(77
%)

a)Property was sold in September 2019.
b)Lost transient business as a result of restrictions intended to slow the spread of COVID-19.

  For the Nine Months Ended September 30, 
  2020  2019  $ Change  % Change 
Operating expenses            
Property taxes
 
$
2,460,000
  
$
2,254,000
  
$
206,000
   
9
%
Property operating expense
  
1,374,000
   
1,157,000
   
217,000
   
19
%
Asset management expense – related party
  
--
   
854,000
   
(854,000
)
  
(100
%)
General and administrative
  
4,681,000
   
3,737,000
   
944,000
   
25
%
Professional fees
  
592,000
   
5,598,000
   
(5,006,000
)
  
(89
%)
Management internalization
  
--
   
32,004,000
   
(32,004,000
)
  
(100
%)
Acquisition expenses
  
3,000
   
251,000
   
(248,000
)
  
(99
%)
Depreciation and amortization expenses
  
3,948,000
   
3,876,000
   
72,000
   
2
%
Impairment
  
14,115,000
   
1,452,000
   
12,663,000
   
872
%
Total operating expenses
  
27,173,000
   
51,183,000
   
(24,010,000
)
  
(47
%)
Loss from operations 
$
(14,650,000
)
 
$
(34,301,000
)
 
$
19,651,000
   
(57
%)

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 September 30, 2020, the Company has entered into thirty-five lease amendments with eight tenants/operators that became effective during the second quarter. 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 (iii) extension of the lease.  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 nine months ended September 30, 2020 is primarily due to these lease amendments and the impact of the COVID-19 pandemic during the second quarter of 2020. In particular, many of the Company’s properties are located in urban centers, near government buildings and sports centers, which depend 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. See Item 1A titled “Risk Factors” in Part II of this report. For more information on the effect of COVID-19 on our business, see Part II, Item 1A titled “Risk Factors.”

Property taxes

The increase in property taxes in 2020 compared to 2019 is attributable primarily to the lease amendments which have decreased the property tax burden on the Company’s tenants for 2020.

Asset management expense – related party

The decrease in asset management expense is due to the Internalization, as a result of which the Company no longer incurred an asset management expense beginning April 1, 2019.

See Note E — Related Party Transactions and Arrangements in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

General and administrative

During the nine months ended September 30, 2020, general and administrative expenses increased $944,000 compared to the nine months ended September 30, 2019. This increase is primarily attributable to an increase in (i) director and officer insurance expense of approximately $805,000, (ii) office rent of approximately $114,000 and (iii) taxes and licenses expense of approximately $51,000. As disclosed in Results of Operations for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, the Company purchased a six-year tail policy on June 30, 2019 and fully expensed this premium over the twelve months ended June 30, 2020. The Company also renewed its existing director and officer insurance policy on this date and the Company’s premiums for the current policy also increased over the prior year. As a result, total revenuesdirector and officer insurance expense increased during the nine months ended September 30, 2020. These increases were partially offset by decreases in other expenses.

Professional fees

The decrease in professional fees was primarily due to $4.1 million of $676,000 from 8insurance proceeds received 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 was initiated in June of our consolidated2019.


See Note N – Legal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

Management internalization

The Company was externally managed by the Advisor prior to the management Internalization that became effective on April 1, 2019.  These expenses include (i) the Internalization Consideration to be paid in aggregate to the Manager and (ii) professional fees incurred to complete the Internalization of the Company’s management. See Note A — Organization and Business Operations and Note P – Subsequent Events and Note O – Deferred Management Internalization in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

Acquisition expenses

Acquisition expenses related to purchased properties are capitalized with the investment in real estate. Acquisition expenses incurred during the nine months ended September 30, 2020 and 2019 relate solely to dead deals.

Depreciation and amortization expenses

The increase in depreciation and amortization expenses was due to assets placed in service following the completion of construction projects or general improvements on properties already held.

Impairment

During the nine months ended September 30, 2020 and 2019, the Company recorded approximately $14.1 million and $1.5 million of asset impairment charges, respectively. These charges were recorded to write down the carrying value of these assets to their current appraised values net of estimated closing costs. See Note B — Summary of Significant Accounting Policies in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

  For the Nine Months Ended September 30, 
  2020  2019  $ Change  % Change 
Other income (expense)            
Interest expense
 
$
(6,910,000
)
 
$
(7,164,000
)
 
$
254,000
   
(4
%)
Gain from sale of investment in real estate
  
694,000
   
2,294,000
   
(1,600,000
)
  
(70
%)
Other income
  
151,000
   
81,000
   
70,000
   
86
%
Income from DST
  
143,000
   
170,000
   
(27,000
)
  
(16
%)
Total other expense
 
$
(5,922,000
)
 
$
(4,619,000
)
 
$
(1,303,000
)
  
(28
%)

Interest expense

The decrease in interest expense for the nine months ended September 30, 2016.  All2020, as compared to the same period in 2019, is primarily attributable to lower interest rates for the variable rate loans and principal amortization of existing debt partially offset by net increase in long term debt.

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 will vary based on the amount of the properties held  asCompany’s borrowings and current interest rates at the time of September 30, 2016, were purchasedfinancing. Historically, the Company’s intent was to secure appropriate leverage with the lowest interest rate available. The terms of any loans, in May 2016 or later, not providing a full nine months' worththe future, will vary depending on the quality of rental income in 2016.  The increase in rental revenuesthe applicable property, the credit worthiness of the tenant and the numberamount of properties heldincome the property is a result of the Company's planned and continued growthable to generate through acquisitions of new properties.  In particular the acquisition of the $55.0 million garage in Detroit, which accounted for a majority of the increase, generating approximately $3.1 million in rental income toparking leases. There is no assurance, however, that the Company duringwill be acquiring additional properties in the future or will be able to secure additional financing on favorable terms or at all.

Interest expense recorded for the nine months ended September 30, 2017.  As2020 and 2019 includes amortization of loan issuance costs. Total amortization of loan issuance cost for the nine months ended September 30, 2020 and 2019 was approximately $0.6 million and $0.7 million, respectively.

For additional information see Note J – Notes Payable in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.


Gain from sale of investment in real estate

On May 26, 2020 the Company continuessold a parking garage in San Jose, CA for cash consideration of $4.1 million to acquire new properties,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 means of  equity raises, debt financing and a pending merger withthe MVP REIT, we expect to see our rental revenue to continue to grow year over year.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 last week of August 2017, Houston Texas experienced major flooding due to Hurricane Harvey.  ThisCompany sold the surface parking lot and office building in Fort Lauderdale for $6.1 million, which resulted in limited access toa gain from sale of investments of approximately $2.3 million.

Other income

During January 2020, the Houston area and a shutdown of most business and government operations.  Our parking garage and parking lots located in Houston, TX experienced minimal damage during this time; however, we are still assessingCompany earned $144,000 from Premium Parking for the long-term impact.  As of September 30, 2017, we have not seen a reduction in the base rent from our operator, who will continue to operate these locations under the termsearly termination of the current leases.parking lease at MVP Memphis Poplar.

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.

Rental Income and Property Gross Revenues

Since a majority of the Company'sCompany’s property leases call for additional percentage rent, the Company monitors the gross revenue generated by each property on a monthly basis. The higher the property'sproperty’s gross revenue the higher the Company'sCompany’s potential percentage rent. The graph below shows the comparison of the Company's monthlyCompany’s quarterly rental income to the gross revenue generated by the properties.


  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2017  2016  2017  2016 
Operating expenses            
Property taxes $90,000  $22,000  $279,000  $24,000 
Property operating expense  273,000   220,000   608,000   238,000 
Asset management expense  345,000   51,000   839,000   66,000 
General and administrative  400,000   267,000   1,051,000   602,000 
Merger costs  824,000   --   1,596,000   -- 
Acquisition expenses  113,000   529,000   2,156,000   748,000 
Acquisition expenses – related party  --   1,011,000   1,710,000   1,427,000 
Seminar  --   --   --   6,000 
Depreciation  508,000   43,000   1,404,000   46,000 
Total operating expenses $2,553,000  $2,143,000  $9,643,000  $3,157,000 

Operating expenses for the nine months ended September 30, 2017, increased $6.5 million,  As noted above under “Overview—Impact of COVID-19,” as compared to the nine months ended September 30, 2016.  Other than costs relating to the Merger, the increase in expenses is primarily attributable to the Company's growth in investments in parking facilities.  During the nine months ended September 30, 2017, the Company acquired a controlling interest in five parking facilities totaling approximately $81.2 million, as compared to 12 properties totaling approximately $56.5 million during the nine months ended September 30, 2016.  The majorityresult of the 2016 acquisitions occurred in the third and fourth quarters of 2016.  The increase in acquisitions resulted in increased property taxes, other property operating expense, asset management fees, acquisitions expenses and depreciation.  As the Company continues to acquire new properties, by means of the equity raises, debt financing and the pending merger with MVP REIT, we expect to see our operations and maintenance, asset management fees and depreciation grow.

In addition, the pending merger of the Company and MVP REIT resulted in approximately $0.8 million and $1.6 million in expenses during the three and nine months ended September 30, 2017, respectively.  There were no similar expenses incurred during the three and nine months ended September 30, 2016.  We estimated the total merger costs for the Company to continue to increase as we move closer to the completion of the merger, including a merger success fee of $3.6 million payable to our Advisor under the Termination Agreement.

  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2017  2016  2017  2016 
Other income (expense)            
Interest expense $(1,297,000) $--  $(3,146,000) $(1,000)
Distribution income – related party  75,000   --   174,000   -- 
Gain from sale of investment  1,200,000   --   1,200,000   -- 
Income (loss) from investment in equity method investee  2,000   5,000   19,000   9,000 
Total other income (expense) $(20,000) $5,000  $(1,753,000) $8,000 

The increase in interest expense for the three and nine months ended September 30, 2017, as compared to the same period in 2016, iscurrent economic conditions related to the Company's  increased use of debtCOVID-19 pandemic and restrictions intended to acquire properties.  To maximizeprevent its spread, percentage rent earned in the use of our cash,current period was significantly reduced compared to prior periods, and the Company will continue to look for opportunities to  utilize financing  on future acquisitions, including with the use of our line of credit with KeyBank or permanent debt at the time of acquisitions.  The interest expense will vary based onexpects that the amount of our borrowings and current interest rates at the time of financing.  The Company will seekpercentage rent to secure appropriate leverage with the lowest interest rate available to us.  The terms of the loans will greatly depend on the quality of the property, the credit worthiness of the tenant and the amount of income the property is able to generate through our parking leases.  There is no assurance, however, that the Companybe earned in future periods will be ablesignificantly reduced if restrictions intended to secure additional financing on favorable terms or at all.  Interest expense recorded forprevent the three and nine months ended September 30, 2017 includes loan amortization costs.  Total loan amortization cost for the three and nine months ended September 30, 2017 was approximately $0.2 million and $0.4 million, respectively.
-44-
spread of COVID-19 continue.

See Note J – Line of Credit and Note K – Notes Payable of the Notes to the Unaudited Condensed Consolidated

Non-GAAP Financial Statements included in Part I, Item 1 Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.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.
-45-

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 the Company'sCompany’s operations, it could be difficult to recover any impairment charges through operational net revenues or cash flows prior to any liquidity event. The Company adopted the IPA MFFO Guideline as management believes that MFFO is a helpful indicator of the Company'sCompany’s on-going portfolio performance. More specifically, MFFO isolates the financial results of the REIT'sREIT’s operations. MFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings.earnings in accordance with GAAP. Further, since the measure is based on historical financial information, MFFO for the period presented may not be indicative of future results or the Company'sCompany’s future ability to pay the Company'sCompany’s dividends. By providing FFO and MFFO, the Company presents information that assists investors in aligning their analysis with management'smanagement’s analysis of long-term operating activities. MFFO also allows for a comparison of the performance of the Company'sCompany’s portfolio with other REITs that are not currently engaging in acquisitions, as well as a comparison of the Company'sCompany’s performance with that of other non-traded REITs, as MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and the Company believebelieves it is often used by analysts and investors for comparison purposes. As explained below, management'smanagement’s evaluation of the Company'sCompany’s operating performance excludes items considered in the calculation of MFFO based on the following economic considerations:

·
Straight-line rent. Most of the Company's leases provide for periodic minimum rent payment increases throughout the term of the lease. In accordance with GAAP, these periodic minimum rent payment increases during the term of a lease are recorded to rental revenue on a straight-line basis in order to reconcile the difference between accrual and cash basis accounting. As straight-line rent is a GAAP non-cash adjustment and is included in historical earnings, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company's
Straight-line rent. Most of the Company’s leases provide for periodic minimum rent payment increases throughout the term of the lease. In accordance with GAAP, these periodic minimum rent payment increases during the term of a lease are recorded to rental revenue on a straight-line basis in order to reconcile the difference between accrual and cash basis accounting. As straight-line rent is a GAAP non-cash adjustment and is included in historical earnings, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company’s portfolio.
·
Amortization of in-place lease valuation. As this item is a cash flow adjustment made to net income in calculating the cash flows provided by (used in) operating activities, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company's
Amortization of in-place lease valuation. As this item is a cash flow adjustment made to net income in calculating the cash flows provided by (used in) operating activities, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company’s portfolio.
·
Acquisition-related costs. The Company was organized primarily with the purpose of acquiring or investing in income-producing real property in order to generate operational income and cash flow that will allow us to provide regular cash distributions to the Company's stockholders. In the process, the Company incurs non-reimbursable affiliated and non-affiliated acquisition-related costs, which in accordance with GAAP, are expensed as incurred and are included in the determination of income (loss) from operations and net income (loss). These costs have been and will continue to be funded with cash proceeds from the Offering or included as a component of the amount borrowed to acquire such real estate. If the Company acquires a property after all offering proceeds from the Offering have been invested, there will not be any offering proceeds to pay the corresponding acquisition-related costs. Accordingly, unless the Advisor determines to waive the payment of any then-outstanding acquisition-related costs otherwise payable to the Advisor, such costs will be paid from additional debt, operational earnings or cash flow, net proceeds from the sale of properties, or ancillary cash flows. In evaluating the performance of the Company's portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments' revenues and expenses. Acquisition-related costs may negatively affect the Company's operating results, cash flows from operating activities and cash available to fund distributions during periods in which properties are acquired, as the proceeds to fund these costs would otherwise be invested in other real estate related assets. By excluding acquisition-related costs, MFFO may not provide an accurate indicator of the Company's operating performance during periods in which acquisitions are made. However, it can provide an indication of the Company's on-going ability to generate cash flow from operations and continue as a going concern after the Company ceases to acquire properties on a frequent and regular basis, which can be compared to the MFFO of other non-listed REITs that have completed their acquisition activity and have similar operating characteristics to the Company. Management believes that excluding these costs from MFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management.
-46--41-


Acquisition-related costs. The Company was organized primarily with the purpose of acquiring or investing in income-producing real property in order to generate operational income and cash flow that will allow us to provide regular cash distributions to the Company’s stockholders. In the process, the Company incurs non-reimbursable affiliated and non-affiliated acquisition-related costs, which, in accordance with GAAP, are expensed as incurred and are included in the determination of income (loss) from operations and net income (loss). These costs have historically been funded with cash proceeds from the sale of common or preferred stock or included as a component of the amount borrowed to acquire such real estate. If the Company acquires a property in the future, such costs will be paid from additional debt, operational earnings or cash flow, net proceeds from the sale of properties, or ancillary cash flows. In evaluating the performance of the Company’s portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments’ revenues and expenses. Acquisition-related costs may negatively affect the Company’s operating results, cash flows from operating activities and cash available to fund distributions during periods in which properties are acquired, as the proceeds to fund these costs would otherwise be invested in other real estate related assets. By excluding acquisition-related costs, MFFO may not provide an accurate indicator of the Company’s operating performance during periods in which acquisitions are made. However, it can provide an indication of the Company’s on-going ability to generate cash flow from operations and continue as a going concern after the Company ceases to acquire properties on a frequent and regular basis, which can be compared to the MFFO of other non-listed REITs that have completed their acquisition activity and have similar operating characteristics to the Company. Management believes that excluding these costs from MFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management.

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 in assisting management and investors in assessing the Company's on-goingCompany’s ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods, and, in particular, after the Offeringsale of the Company’s common stock and acquisition stages are complete and net asset value ("NAV")NAV is disclosed. However, MFFO is not a useful measure in evaluating NAV because impairments are taken into accountconsidered in determining NAV but not in determining MFFO. Therefore, FFO and MFFO should not be viewed as a more prominent a measure of performance than income (loss) from operations, net income (loss) or to cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

NeitherNone 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 three and nine months ended September 30, 20172020 and 2016.2019:

  
For the Three Months
Ended September 30,
  
For the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
Net loss attributable to MVP REIT II, Inc. common shareholders $(604,000) $(1,589,000) $(5,157,000) $(2,534,000)
Add (Subtract):                
Gain on Sale of real estate  (1,200,000)  --    (1,200,000)  --  
Depreciation of real estate assets  508,000   43,000   1,404,000   46,000 
FFO $(1,296,000) $(1,546,000) $(4,953,000) $(2,488,000)
Add:                
Acquisition fees and expenses to non-affiliates  113,000   529,000   2,156,000   748,000 
Acquisition fees and expenses to affiliates  --   1,011,000   1,710,000   1,427,000 
Acquisition / Merger costs  824,000   --   1,596,000   -- 
MFFO attributable to MVP REIT II, Inc. shareholders $(359,000) $(6,000) $509,000  $(313,000)
Distributions paid to Common Shareholders $481,000  $221,000  $1,402,000  $359,000 
  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2020  2019  2020  2019 
Net loss attributable to The Parking REIT, Inc. common shareholders
 
$
(9,826,000
)
 
$
(3,145,000
)
 
$
(22,259,000
)
 
$
(41,232,000
)
Add (Subtract):
                
Gain on Sale of real estate
  
--
   
(2,294,000
)
  
(694,000
)
  
(2,294,000
)
Impairment of real estate
  
6,475,000
   
500,000
   
14,115,000
   
1,452,000
 
Depreciation and amortization expenses of real estate assets
  
1,305,000
   
1,285,000
   
3,948,000
   
3,876,000
 
FFO 
$
(2,046,000
)
 
$
(3,654,000
)
 
$
(4,890,000
)
 
$
(38,198,000
)
Add (subtract):                
Acquisition fees and expenses
  
--
   
1,000
   
3,000
   
251,000
 
Change in Deferred Rental Assets
  
(56,000
)
  
(10,000
)
  
(80,000
)
  
(32,000
)
MFFO attributable to The Parking REIT, Inc. shareholders 
$
(2,102,000
)
 
$
(3,663,000
)
 
$
(4,967,000
)
 
$
(37,979,000
)
Distributions paid to Common Shareholders 
$
--
  
$
--
  
$
--
  
$
--
 

Capital
-42-

Liquidity and LiquidityCapital Resources

The Company commenced operations on December 30, 2015.

The Company'sCompany’s principal demand for funds ishistorically was for the acquisition of real estate assets, 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.

-47-
On December 31, 2016, the Company ceased all selling efforts for its initial public offering of shares of its common stock at $25.00 per share, pursuant to a registration statement on Form S-11 (No. 333-205893). The Company accepted additional subscriptions through March 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 anticipates raising additional funds through equity financings, such as private placements of its preferred stock, as well as through additional debt financing.  As of September 30, 2017, the Company had raised approximately $2.6$2.5 million, net of offering costs, in funds from the private placements of Series A Convertible Redeemable Preferred Stock and approximately $11.8$36.0 million, net of offering costs, in funds from the private placements of Series 1 Convertible Redeemable Preferred Stock.  The Company continues to raise additional funds through private placements of Series 1 Convertible Redeemable Preferred Stock.

As disclosed in Note N - NetLegal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly 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.

As of September 30, 2020, the Company’s debt consisted of approximately $120.0 million in fixed rate debt and $39.5 million in variable rate debt, net of loan issuance costs and the Company’s cash usedand cash equivalents and restricted cash were approximately $6.9 million ($3.4 million of which was restricted cash). The Company’s unrestricted cash balance was approximately $3.1 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, the Company’s board of directors is exploring certain strategic alternatives, including sales of assets, a sale of the Company or a portion thereof or a strategic business combination. For additional information see Note B - Liquidity Matters in operating activitiesPart I, Item 1 Notes to the Consolidated Financial Statements of this Quarterly Report.

Sources and Uses of Cash

The following table summarizes our cash flows for the nine months ended September 30, 2017 totaled2020 and 2019:

  For the nine months Ended September 30, 
  2020  2019 
Net cash used in operating activities
 
$
(5,348,000
)
 
$
(3,203,000
)
Net cash provided by investing activities
  
485,000
   
2,502,000
 
Net cash provided by financing activities
  
113,000
   
989,000
 

Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019:

The Company’s cash and cash equivalents and restricted cash were approximately $9.0 million.  Operating cash flows were used for the payment$6.9 million as of normal operating expenses such as management fees, insurance, accounting fees and legal bills.  Net cash used in investing activities totaled approximately $76.2 million and mainly consisted of purchase of investments in real estate totaling $81.2 million (with proceeds from non-controlling interest totaling $5.1 million and use of deposits from prior periods totaling $4.5 million), building improvementsSeptember 30, 2020, which was a decrease of approximately $2.0$2.8 million additional investment in Houston Prestonfrom the balance at September 30, 2019.

-43-

Cash flows from operating activities totaled approximately $82.9 million and mainly consisted of proceeds from notes payable of approximately $75.8 million, proceeds from the Company's KeyBank line of credit of approximately $32.6 million, proceeds from issuance of preferred stock of approximately $14.3 million, proceeds from issuance of common stock of approximately $5.8 million, netted with payments on the KeyBank line of credit of approximately $39.5 million, distributions to non-controlling interests of approximately $1.8 million, payments on notes payable of approximately $1.4 million, distributions to stockholders of approximately $1.8 million and loan fees paid of approximately $1.1 million.  In addition, financing activities consisted of proceeds from issuance of common stock of approximately $5.8 million and issuance of preferred stock of approximately $14.3 million.

Net cash used in operating activities for the nine months ended September 30, 2016 totaled2020 was approximately $1.8 million.  Operating cash flows were used$5.3 million, compared to approximately $3.2 million for the paymentsame period in 2019. The increase in cash used was primarily due to an increase in accounts receivable and an increase in net loss adjusted for impairment recorded during the nine months ended September 30, 2020 compared to net loss adjusted for impairment and internalization expense during the nine months ended September 30, 2019. These increases were partially offset by a decrease in gain on sale of normal operating expenses.  investment and other assets and prepaids.

Cash flows from investing activities

Net cash used inprovided by investing activities totaledfor the nine months ended September 30, 2020 was approximately $40.4$0.5 million, and consistedcompared to approximately $2.5 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 $36.6 million, investment in equity method investee of approximately $0.6 million, investments in cost method investees of approximately $1.4 million, investment in cost method investees held for sale of approximately $0.8 million and security deposits on future acquisitions of approximately $1 million. estate.

Cash flows from financing activities

Net cash provided by financing activities totaledfor the nine months ended September 30, 2020 was approximately $42.7$0.1 million and consisted of proceeds from issuance of common stock ofcompared to approximately $42.6$1.0 million provided by financing activities during the same period in 2019. The decrease in cash provided by financing activities was primarily due to the fact that there were less proceeds from notes payable related to a cost method investment property of approximately $0.4 million, distributions of approximately $0.1 millionacquired during the period and payments on notes payable of approximately $0.1$3.0 million.

On October 5, 2016, the
Company through its Operating Partnership, and MVP REIT, through a wholly owned subsidiary (the "Borrowers"), entered into a credit agreement (the "Unsecured Credit Agreement") with KeyBank, National Association ('KeyBank") as the administrative agent and KeyBank Capital Markets ("KeyBank Capital Markets") as the lead arranger.  Pursuant to the Unsecured Credit Agreement, the Borrowers were provided with a $30 million unsecured credit facility (the "Unsecured Credit Facility"), which may be increased up to $100 million, in minimum increments of $10 million.  The Unsecured Credit Facility has an initial term of two years, maturing on October 5, 2018, and may be extended for a one-year period if certain conditions are met and upon payment of an extension fee.  The Unsecured Credit Facility has an annual interest rate calculated based on LIBOR Rate plus 2.25% or Base Rate plus 1.25%, both as provided in the Unsecured Credit Agreement.  The Base Rate is calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%.  Payments under the Unsecured Credit Facility are interest only and are due on the first day of each quarter.  The obligations of the Borrowers of the Unsecured Credit Agreement are joint and several.  The REITs have entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement.
-48-
TABLE OF CONTENTS
Indebtedness

On June 26, 2017,February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”), and MVP REIT (together, the "REITs"PF Memphis Poplar 2013 (“MVP Memphis Poplar”), each through a wholly owned subsidiary, MVP REIT II Operating Partnership, LP and MVP Real Estate Holdings, LLC (together, the "Borrowers"), entered into a creditloan agreement, (the "Workingdated as of February 8, 2019, with LoanCore Capital Credit Agreement"REIT LLC (“LoanCore”) with KeyBank, National Association ("KeyBank") as. Under the administrative agent and KeyBanc Capital Markets ("KeyBanc Capital Markets") as the lead arranger.  Pursuant to the Working Capital Credit Agreement, the Borrowers were provided with a $6.0 million credit facility (the "Total Commitment"), which may be increased up to $10 million, in minimum increments of $1 million.  The Total Commitment has an initial term of six months, maturing on December 26, 2017.  The Working Capital Credit Agreement has an interest rate calculated based on LIBOR Rate plus 4.5% or Base Rate plus 3.5%, both as provided in the Working Capital Credit Agreement.  The Base Rate is calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%.  Payments under the Working Capital Credit Facility require 100%terms of the net proceedsLoan 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 all capital eventsLeases and equity issuances by the REITs within 5 business days of receipt.  The obligationsRents, Security Agreement and Fixture Filing on each of the Borrowers of the Unsecured Credit Agreement are jointproperties owned by MVP St. Louis and several.  The REITs have entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement.MVP Memphis Poplar.

As of September 30, 2017, the balance on the Working Capital Credit Facility was approximately $1.5 million (net of unamortized loan costs), of which our portion of the current draw was approximately $1.5 million. As of September 30, 2017, the REITs had an additional available draw of approximately $4.4 million. The Company used net proceeds from the private placement of the Series 1 Convertible Redeemable Preferred Stock to paydown the $1.5 million in October 2017. For the three and nine months ended September 30, 2017, we expensed approximately $49,000 in interest expense. For the three and nine months ended September 30, 2017, we expensed approximately $1,600 in unused line fees associated with our draw. Total loan amortization cost for the three and nine months ended September 30, 2017 were $50,000 and $53,000, respectively.  As of November 14, 2017, the balance on the Working Capital Line of Credit was approximately zero.

In connection with our KeyBank Unsecured Credit Agreement, the Borrowers are required to maintain a minimum liquidity requirement of $2.0 million, which is defined as the sum of unencumbered cash and cash equivalents of the Borrower and its Subsidiaries.  In addition, the loan with Bank of America for the MVP Detroit Center Parking garage requires the Company and MVP REIT to maintain a combined $2.3 million in liquidity at all times, which is defined as unencumbered cash and cash equivalents. As of November 14, 2017,the date of this filing, the Company and MVP REIT werewas in compliance with boththis lender requirement.  However, if the Company is unable to sell assets it is likely the Company will be unable to meet this requirement by the end of these lender requirements.

the fourth quarter of 2020 or during the first quarter of 2021. The Company will experienceneed to obtain a relative decreasewaiver for this requirement and if it is unable to obtain a waiver, this could result in liquidityan event of default and acceleration of such loan if the lender is unwilling to waive the requirement.

The Company is in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of the $39.5 million loan, due December 9, 2020; however, there can be no assurance this option will be exercised. If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral.

The Company’s secured mortgage debt of approximately $53.8 million and $53.9 million as offering proceeds are usedof September 30, 2020 and December 31, 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 J – Notes Payable in liquidity if and when investments are sold,Part I, Item 1 Notes to the extent such sales generate proceeds that are availableCondensed Consolidated Financial Statements of this Quarterly 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; 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 aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting the Company's targeted portfolio, the U.S. parking facility industry, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of the Company's assets.

In additionThe ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributed to making investmentssignificant volatility and negative pressure in accordance with the Company's investment objectives,financial markets and resulted in unprecedented job losses causing many to fear an imminent global recession. Due to these factors, the Company expects to useentered into the following loan modification agreements with its capital resources to make certain payments to lenders during the Company's advisorquarters ended June 30 and September 2020.

On May 12, 2020, the selling agent(s).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 acquisition and development stage,Interest-Only Period, the monthly installments due under the Note are modified to provide for payment of accrued interest only in the amount of $13,384.

On July 9, 2020, the Company expectsentered into a loan modification agreement (the “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 make payments0.50%, the Modified LIBOR Floor. The Company is also in preliminary discussions with LoanCore to exercise the Company's advisorone-year extension option in connectionthe loan agreement to extend the maturity of the $39.5 million loan due December 9, 2020; however, there can be no assurance this option will be exercised.  If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral.
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 used to pay the monthly principal and interest due each note, beginning with the selection or purchasepayment due June 1, 2020, until the termination date. 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 investments,$596,000 from the managementcity of Minneapolis and funded the Company's assets and costs incurred by remaining $246,000 due to the Company's advisor in providing services to us. ForANICO escrow account on October 26, 2020.
On August 4, 2020, the Company’s wholly owned subsidiary (Mabley Place Garage, LLC) entered into a discussionloan modification agreement with Wells Fargo Bank, National Association, as Trustee for the Benefit of the compensation to be paid to Registered Holders of JPMBB Commercial Mortgage Securities Trust 2015-C27 (the “Lender”). Under the Company's advisor, see "Fees and Expenses Paid in Connection with the Operationsterms of the Company", includedagreement, the Lender will permit the Company to apply funds in Note E — Related Party Transactionsan 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 Arrangements Part I, Item 1 Financial Statements of this Quarterly Report on Form 10-Q for more information. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of the Company's advisor and the Company's board of directors.

August 2020 payment dates.
Management Compensation Summary

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 organization operations for the three and nine months ended September 30, 20172020 and 2016.2019.

 
For the three months
ended September 30,
  
For the nine months
ended September 30,
  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
 2017  2016  2017  2016  2020  2019  2020  2019 
Acquisition Fees – related party $--  $1,011,000  $1,710,000  $1,427,000 
Asset Management Fees  345,000   51,000   839,000   66,000  
$
--
  
$
--
  
$
--
  
$
854,000
 
Total $345,000  $1,062,000  $2,549,000  $1,493,000  
$
--
  
$
--
  
$
--
  
$
854,000
 

The Company ceased payment of asset management fees effective April 1, 2019, as a result of the Internalization.

Distributions and Stock Dividends

The
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 and cash distributed to its Series A preferred stock and Series 1 preferred stock, 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.year (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). In addition, the Company will be subject to corporate income tax to the extent the Company distributes less than 100% of the net taxable income including any net capital gain.


The Company is not currently and may not in the future generate sufficient cash flow from operations to fully fund distributions. The Company does not currently anticipate that it will be able to resume the payment of distributions.  However, if distributions do resume, all or a portion of the distributions may be paid from other sources, such as cash flows from equity offerings, financing activities, borrowings, or by way of waiver or deferral of fees. The Company has not established any limit on the extent to which distributions could be funded from these other sources. Accordingly, the amount of distributions paid may not reflect current cash flow from operations and distributions may include a return of capital, (rather than a return on capital). If the Company pays 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. The level of distributions will be determined by the board of directors and depend on several factors including current and projected liquidity requirements, anticipated operating cash flows and tax considerations, and other relevant items deemed applicable by the board of directors.

Common Stock

On October 23, 2015, the Company announced that its board of directors has approved a plan for payment of initial monthly cash distributions of $0.0625 per share and monthly stock dividends $0.0625 per share, based on a purchase price of $25.00 per common share, commencing after the Company breaks escrow upon receiving subscriptions for the minimum offering amount of $2 million. The initial cash distribution 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 is 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. 

From inception through September 30, 2017,2020, the Company had paid approximately $0.8$1.8 million in cash, issued 54,33683,437 shares of its common stock as DRIP and issued 85,358153,826 shares of its common stock as dividend in distributions to the Company'sCompany’s stockholders. All of the cash distributions were paid from offering proceeds and constituted a return of capital. On March 22, 2018 the Company suspended payment of distributions and as such there are currently no distributions to invest in the DRIP.

The Company'sCompany’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 distribution reinvestment plan, orCompany’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 may represent a return of capital.

  Distributions paid in Cash  Distributions paid through DRIP  
Total
Distributions Paid
  Cash Flows Used in Operations (GAAP basis) 
1st Quarter, 2017
 $161,000  $285,000  $446,000  $(3,672,000)
2nd Quarter, 2017
  168,000   307,000   475,000   (3,943,000)
3rd Quarter, 2017
  172,000   309,000   481,000   (1,623,000)
Total 2017 $501,000  $901,000  $1,402,000  $(9,238,000)
  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
  
--
   
--
   
--
   
--
 
Total 2020 
$
--
  
$
--
  
$
--
  
$
(5,348,000
)

  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)

As of September 30, 2017, the Company issued 85,358 shares of its common stock as dividend distribution made to the Company's stockholders through the DRIP.
  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 offered up to $50 million in shares of the Company'sCompany’s Series A Convertible Redeemable Preferred Stock ("(“Series A"A”), par value $0.0001 per share, together with warrants to acquire the Company'sCompany’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 commenced the private placement of the Shares to accredited investors on November 1, 2016 and closed the offering on March 24, 2017. The Company raised approximately $2.6$2.5 million, net of offering costs, in the Series A private placements.

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 par value $0.0001 per share, of the Company if the Company'sCompany’s common stock is listed on a national securities exchange. The warrants'warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company'sCompany’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. As of November 14, 2017,September 30, 2020, there were potentially 85,74084,510 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after 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 accordance with the terms of the Series A.


For additional information see Note O — Preferred Stock and Warrants in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various related party transactions, agreements and fees.

From inceptioninitial issuance through September 30, 2017,2020, the Company hashad declared distributions of approximately $704,000 of which approximately $597,000 had been paid $87,000 in distributions forto Series A stockholders, all of which were paid from offering proceeds and constituted a return of capital.stockholders.

To date, all distributions were paid from offering proceeds and therefore may represent a return of capital.
  
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
  
--
   
--
 
Total 2020 
$
54,000
  
$
(5,348,000
)

  
Total Series A
Distributions Paid
  Cash Flows Used in Operations (GAAP basis) 
1st Quarter, 2017
 $5,000  $(3,672,000)
2nd Quarter, 2017
  41,000   (3,943,000)
3rd Quarter, 2017
  41,000   (1,623,000)
Total 2017 $87,000  $(9,238,000)
  
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 its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock ("(“Series 1"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'sCompany’s common stock, to accredited investors. On January 31, 2018, the Company closed this offering. As of November 14, 2017,September 30, 2020, the Company had raised approximately $21.6$36.0 million,, net of offering costs, in the Series 1 private placements and had 21,62839,811 shares of Series 1 issued and outstanding.

The offering price is $1,000 per share. In addition, each investor in the Series 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 par value $0.0001 per share, of the Company if the Company'sCompany’s common stock is listed on a national securities exchange. The warrants'warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company'sCompany’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. As of November 14, 2017,September 30, 2020, there were potentially 750,855 1,382,675 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after 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 O — Preferred Stock and Warrants in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various related party transactions, agreements and fees.

From inceptionissuance date through September 30, 2017,2020, the Company has paid $112,000 inhad declared distributions forSeries 1 stockholders, allof approximately $7.8 million of which wereapproximately $6.4 million had been paid from offering proceeds and constituted a return of capital.to Series 1 stockholders.

To date, all distributions were paid from offering proceeds and therefore may represent a return of capital.
  
Total Series 1
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2020 
$
696,000
  
$
(793,000
)
2nd Quarter, 2020
  
--
   
(1,899,000
)
3rd Quarter, 2020
  
--
   
(2,656,000
)
4th Quarter, 2020
  
--
   
--
 
Total 2020 
$
696,000
  
$
(5,348,000
)

  
Total Series 1
Distributions Paid
  Cash Flows Used in Operations (GAAP basis) 
1st Quarter, 2017
 $--  $(3,672,000)
2nd Quarter, 2017
  14,000   (4,883,000)
3rd Quarter, 2017
  98,000   (1,623,000)
Total 2017 $112,000  $(10,178,000)
  
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
)

The Company may not generate sufficient cash flow from operations to fully fund distributions. All or a portion of the distributions may be paid from other sources, such as cash flows from equity offerings, financing activities, borrowings, cash advances from the Advisor, or by way of waiver or deferral of fees. The Company has not established any limit on the extent to which distributions could be funded from these other sources. Accordingly, the amount of distributions paid may not reflect current cash flow from operations and distributions may include a return of capital, rather than a return on capital.  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.  The level of distributions will be determined by the board of directors and depend on a number of factors including current and projected liquidity requirements, anticipated operating cash flows and tax considerations, and other relevant items deemed applicable by the board of directors.

Related-Party Transactions and Arrangements

The Company hashad entered into agreements with affiliates of its Sponsor, whereby the Company will paypaid certain fees
or reimbursements to the former Advisor or its affiliates in connection with, among other things, acquisition and financing activities, asset management services and reimbursement of operating and offering related costs. Seeprior to the Internalization. For additional information see Note E — Related Party Transactions and Arrangements in in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.

On November 5, 2016, the Company purchased 338,409 shares of MVP REIT's common stock from an unrelated third party for $3.0 million or $8.865 per share.  During the three and nine months ended September 30, 2017, the Company received, approximately $23,000 and $122,000 in stock distributions, related to the Company's ownership 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

TheCommencing with the taxable year ended December 31, 2017 through December 31, 2019, the Company isbelieves it has been organized and conductsconducted 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 has entered into temporary lease amendments with some of its tenants. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests, and, as amended (the "Code") and to complya result, the Company was not in compliance with the provisions ofannual REIT income tests for the Internal Revenue Code with respect thereto.quarters ended June 30, 2020 and September 30, 2020.  As discussed below, unless the Company chooses and is able to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020.  A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, ("Taxable Income"), which is distributed to its stockholders, provided that at least 90% of Taxable Incomesuch taxable income is distributed and provided that certain other requirements are met. Our Taxable IncomeThe Company’s REIT taxable income may substantially exceed or be less than our netthe income as determined based on GAAP, because, differences in GAAP 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.

Ifcalculated according to GAAP. In addition, the Company does not qualify as a REIT for the tax year ended December 31,2017, we will file as a C corporation and deferred tax assets and liabilities will be established for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for the deferred tax assets is provided if we believe that it is more likely than not that we will not realize the tax benefit of deferred tax assets based on the available evidence at the time the determination is made. For the tax year ended December 31, 2016, the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets, a valuation allowance should be recorded against our net deferred tax assets.

The Company will be electingsubject to be treated as a REIT for the tax year beginning January 1, 2017 and ending December 31, 2017, and believes that it has been organized and has operated during 2017 in such a manner to meet the qualifications to be treated as a REIT for federal and statecorporate income tax purposes.  During 2016,to the Company was subject to U.S. federal and stateextent that less than 100% of the net taxable income taxes as it will file income tax returns as a C corporation.  As such, we account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
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distributed, including any net capital gain.

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 September 30, 2017.2020.

A full valuation allowance for deferred tax assets was provided since the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets willshould 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.

As To the extent the Company qualifies as a REIT, the Companyit will generally not be subject to corporate level federal income taxes on earningsits taxable income distributed to ourthe Company’s stockholders and therefore may not realize any benefit from deferred tax assets arising during the Company's pre-2017 periods before theany period in which a valid REIT election was in effect. The Company became a REIT.  The Companycurrently intends to distribute at least 100% of its taxable income annually and intends to do so for the tax year ending December 31, 2017 and future periods.  Accordingly, the Company has not included any provisions for federal income taxesall periods in the accompanying consolidated financial statements for the three and nine months ended September 30, 2017.  The Company owns and rents real estate in various states and municipalities within the United States, and,which it is taxable as a result, the Company or one or more of its subsidiaries may have income or other tax return filing requirements, and may be subject to income or franchise taxes, in state and municipal jurisdictions.

The Company has a net deferred tax asset of $1.6 million which is subject to a full valuation allowance and thus is not recorded on the Company's balance sheet. The deferred tax asset is primarily made up of net operating losses and capitalized acquisition costs which are deducted for books but capitalized for tax. If the Company makes a REIT election, the net operating losses will not be available to offset future income; however they may be used to offset any built-in gains. Due to the valuation allowance, the Company's effective rate is approximately 0%.REIT.

REIT Compliance

The Company intendselected to qualifybe treated as a REIT for federal income tax purposes for the year ended December 31, 2017 and has continued to operate in a manner to qualify as a REIT for federal income tax purposes for the years ended December 31, 2018 and therefore2019. As long as the Company continues to maintain REIT status, the Company generally will not be subject to federal income tax on income that the Company distributes to its stockholders.

As a result of the stockholders. IfCOVID-19 pandemic, the Company failshas entered into temporary lease amendments with some of its tenants which generate income that does not constitute qualifying REIT income for purposes of the REIT gross income tests.  As a result, the Company was not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020.  The REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters.  If implemented, these options and strategies, may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of these options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020.

If we fail to qualify as a REIT in anyfor our taxable year including and after the taxable year in which the Company initially electsended December 31, 2020, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be taxedtreated as a REIT for the four taxable years following 2020.  We believe that we may not be entitled to this statutory relief, and there can be no assurances that we will be able to obtain such relief.

Moreover, if we fail to qualify as a REIT, we would no longer be required to make distributions of our annual taxable income to our stockholders in order to maintain our REIT status and any distributions made to our stockholders 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. In addition, all distributions to stockholders would be taxable as regular corporate dividends to the extent of its current and accumulated earnings and profits.  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.

Given projected losses in 2020, as well as the potential tax benefit of net operating loss carryforwards that the Company does not anticipate utilizing as long as it maintains its status as a REIT, the Company will be subjectcontinue to federalevaluate its current and deferred income tax onsituation (including the taxable income at regular corporate rates and will not be permittedappropriateness of recording a deferred tax asset for net operating losses) throughout the 2020 year as there is additional clarity about the impact of the COVID-19 pandemic to qualify for treatment as a REIT for federal income tax purposes 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.

To qualify as a REIT for tax purposes,Company’s ongoing operations, including whether the Company will be required to distribute at least 90% ofcan maintain its REIT taxable income to status for the Company's stockholders. The Company must also meet certain asset and income tests, as well as other requirements. The Company will monitor the business and transactions that may potentially impact the Company's REIT status. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on the taxable income at regular corporate rates.

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2020 year.

Off-Balance Sheet Arrangements

Series A Preferred Stock

Each investor in the Series A shall receive,received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company'sCompany’s common stock par value $0.0001 per share, if the Company'sCompany’s common stock is listed on a national securities exchange. The warrants'warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company'sCompany’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. As of September 30, 2017,2020, there were detachable warrants that may be exercised for 85,74084,510 shares of the Company'sCompany’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential Warrantswarrants outstanding at September 30, 20172020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to usthe Company would be approximately $2.1 million and we would as a result issue an additional 85,74084,510 shares of common stock.stock and would receive gross proceeds of approximately $2.1 million.

SeeOn 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.

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 RO — Preferred Stock and Warrantsin in Part I, Item 1 Notes to the Condensed Consolidated Financial Statementsof this Quarterly Report on Form 10-Qfor a discussion of the various related party transactions, agreements and feesadditional information.

Series 1 Preferred Stock

Each investor in the Series 1 shall receive,received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company'sCompany’s common stock par value $0.0001 per share, if the Company'sCompany’s common stock is listed on a national securities exchange. The warrants'warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company'sCompany’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. As of September 30, 2017,2020, there were detachable warrants that may be exercised for 466,795approximately 1,382,675 shares of the Company'sCompany’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential Warrantswarrants outstanding at September 30, 20172020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to usthe Company would be approximately $11.7 million and we would as a result issue an additional 466,7951,382,675 shares of common stock.stock and would receive gross proceeds of approximately $34.6 million.

SeeOn 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.

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 RO — Preferred Stock and Warrantsin in Part I, Item 1 Notes to the Condensed Consolidated Financial Statementsof this Quarterly Report on Form 10-Qfor a discussionadditional information.

Critical Accounting Policies

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 are is 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 is required to present the operations related to properties that have been sold or properties that are intended to be sold, as discontinued operations in the statement of operations for all periods presented. Properties that are intended to be sold are to be designated as "held for sale" on the balance sheet.

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 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.

The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on the Company'sCompany’s evaluation of the specific characteristics of each tenant'stenant’s lease and the Company'sCompany’s overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of the Company'sCompany’s 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 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 method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Contractual Obligations

As of September 30, 2017, our contractual obligations consisted of the mortgage notes secured by our acquired properties and the Revolving Credit Facilities:

Contractual Obligations Total  Less than 1 year  1-3 years  3-5 years  More than 5 years 
Long-term debt obligations $79,757,000  $173,000  $8,914,000  $2,076,000  $68,594,000 
Lines of credit:  --   --   --   --   -- 
Interest  --   --   --   --   -- 
Principal  1,445,000   1,445,000   --   --   -- 
Total $81,202,000  $1,618,000  $8,914,000  $2,076,000  $68,594,000 

Contractual obligation table amount does not reflect the unamortized loan issuance costs of approximately $0.9 million for notes payable and approximately $0.2 million for the line of credit as of September 30, 2017.

Subsequent Events

See Note SR — Subsequent Eventsin in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a discussion of the various subsequent events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NotItem not required for a smaller reporting company.Smaller Reporting Companies.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have evaluated the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.
-57-

(b) Changes in Internal Control over Financial Reporting

During the third quarter 2017, the Company took additional steps to identify revenue from all sources to improve our quarterly REIT testing process.  In addition, numerous employees of the Advisor completed additional REIT compliance training as conducted by Morrison & Foerster LLP's REIT experts.  The Company believes these additional procedures and controls have been effective in regards to our REIT testing.  The Company will continue to monitor these controls on an on-going basis to evaluate their effectiveness.  There have been no other changes in internal control over financial reporting during the third quarter of 2017,2020, that have materially affected, or are reasonably likely to materially affect, the Company'scompany’s internal control over financial reporting.

On May 19, 2017, the Audit Committee of the Company's Board of Directors engaged RSM US LLP ("RSM") as the Company's independent registered public accounting firm.

During the Company's two most recent fiscal years ended December 31, 2015 and 2016 and the period from January 1, 2017 through November 14, 2017, the Company did not consult with RSM 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 RSM 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 issue; or (ii) any matter that was the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

PART II OTHER INFORMATION

None.

ITEM 1. LEGAL PROCEEDINGS

See Note N — Legal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a description of a purported class action lawsuit that was filed on March 12, 2019.

The nature of the Company'sCompany’s business exposes its properties, the Company, its Operating Partnership and its operating partnershipother 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 is not presently subject to any material legal proceedingslitigation nor, to the Company'sits knowledge, is any material legal proceedingslitigation threatened against the Company.

ITEM 1A. RISK FACTORS

There have been no material changes from theThe risk factors set forthdiscussed under the heading “Risk Factors” and elsewhere in ourthe Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2019, as updated by the risk factors in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 under the heading “Risk Factors”, continue to apply to our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for hardship repurchases in connection with a shareholder’s death. Repurchase requests made in connection with the death of a stockholder were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company had established an estimated NAV per share, 100% of such amount as determined by the Company’s board of directors, subject to any special distributions previously made to the Company’s stockholders. The Company repurchased 5,115 shares of common stock pursuant to the hardship exception under this program during the nine months ended September 30, 2020.

On May 28, 2019, the Company established an estimated NAV equal to $25.10 per common share.

As of the date of this filing, 48,318 shares have been redeemed of which 33,232 shares were hardship repurchases.

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

On March 29, 2017, theThe 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 sharesdid not sell any 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,equity securities during the Company commenced the private placement of shares of Series 1, and warrants to acquire the Company's common stock, to accredited investors.  During the third quarter of 2017, the Company had raised approximately $7.6 million, net of offering costs, in the Series 1 private placements and had issued 8,375 Series 1 shares and warrants to acquire 291,000 shares of our common stock issued and outstanding.

The Series 1 preferred stock and warrants have ended September 30, 2020 that were not been registered under the Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company is relying on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506(b) of Regulation D promulgated thereunder by the Securities and Exchange Commission (the "SEC"). The Company has filed file a Form D with the SEC in accordance with the requirements of Regulation D.

Use of Offering Proceeds

On October 22, 2015, the Company's registration statement on Form S-11 registering a public offering (No. 333-205893) of up to $550,000,000 in shares of the Company's common stock was declared effective under the Securities Act of 1933, as amended, or the Securities Act, and the Company commenced the initial public offering. The Company offered up to 20,000,000 shares of its common stock to the public in the primary offering at $25.00 per share and continues to offer up to 2,000,000 shares of its common stock pursuant to the distribution reinvestment plan at $25.00 per share. The Company entered into selling agreements with MVP American Securities, LLC ("MVP AS") and other non-affiliated selling agents to distribute shares of the Company's common stock to its clients. As of December 31, 2016, the Company ceased all selling efforts for the initial public offering but accepted additional subscriptions through March 31, 2017.

As of November 14, 2017,16, 2020, the Company had 2,612,182 7,327,696 shares of common stock issued and outstanding, 2,862 shares of preferred Series A stock outstanding and 21,629 39,811 shares of preferred Series 1 stock outstanding for a total gross proceeds of approximately $85.8 Million,$197.2 million, less offering costs.

The following is a table of summary of offering proceeds from inception through September 30, 2017:2020:

Type Number of Shares - Preferred  Number of Shares - Common  Value  Number of Shares Preferred  Number of Shares Common  Value 
Issuance of common stock  --   2,451,238   61,281,000  
--
  
3,251,238
  
$
75,281,000
 
Redeemed shares 
--
  
(48,318
)
 
(1,185,000
)
DRIP shares  --   58,464   --  
--
  
83,437
  
2,086,000
 
Issuance of preferred stock Series A  2,862   --   2,573,000 
Issuance of preferred stock Series 1  13,445   --   11,768,000 
Issuance of Series A preferred stock 
2,862
  
--
  
2,544,000
 
Issuance of Series 1 preferred stock 
39,811
  
--
  
35,981,000
 
Dividend shares  --   91,835   2,296,000  
--
  
153,826
  
3,845,000
 
Distributions  --   --   (1,210,000) 
--
  
--
  
(12,555,000
)
Deferred offering costs  --   --   (1,086,000) 
--
  
--
  
(1,086,000
)
Contribution from Advisor  --   --   1,147,000 
Contribution from advisor 
--
  
--
  
1,147,000
 
Shares added for merger  
--
   
3,887,513
   
85,701,000
 
Total  16,307   2,601,537  $76,769,000   
42,673
   
7,327,696
  
$
191,759,000
 

From October 22, 2015 through September 30, 2017,2020, 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 September 30, 2017,2020, the net proceeds to the Company from its offerings, after deducting the total expenses and deferred offering costs incurred and paid by the Company as described above, were $76.8approximately $192.5 million. A majority of these proceeds were used, along with other sources of debt financing, to make investments in parking facilities, and ourof which the Company’s portion of the total purchase price for these parking facilities was approximately $125.9$320.0 million, which includes ourits $2.8 million investment in the DST. In addition, a portion of these proceeds were used to make cash distributions of approximately $1.2$1.8 million to the Company's stockholders. The ratio of the costs of raising capital to the capital raised is approximately 1.5%0.6%.

Share Repurchase Program

As of September 30, 2017, the Company has not redeemed shares through the share repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE AND SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

During the third quarter of 2017, the Company is not aware of any information that was required to be disclosed in a report on Form 8-K that was not disclosed in a report on Form 8-K.None.

ITEM 6. EXHIBITS

Exhibit No.
3.1(1)
Description
2.1(8)Agreement and Plan of Merger, dated as of May 26, 2017, by and among MVP REIT, Inc., MVP REIT II, Inc., MVP Merger Sub, LLC and MVP Realty Advisors, LLC
3.1(1)Articles of Amendment and Restatement of MVPTHE PARKING REIT, II, Inc.
3.2(2)
BylawsArticles of MVPAmendment of THE PARKING REIT, II, Inc.
3.3(7)
3.3(3)
Articles Supplementary of MVP REIT II, Inc., designating 50,000 shares offor Series A Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc.
3.3(9)
3.4(4)
Articles Supplementary of MVP REIT II, Inc., designating 97,000 shares offor Series 1 Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc.
4.1(3)
3.5(5)
FormBylaws of Subscription AgreementTHE PARKING REIT, Inc.
4.2(4)
10.1
Distribution Reinvestment PlanFirst Amendment to Loan Agreement with LoanCore dated July 9,2020
4.3(5)
31.1(*)
Amended and Restated Escrow Agreement, dated October 5, 2015, between MVP REIT II, Inc. and UMB Bank, N.A.
4.4(6)Second Amended and Restated Escrow Agreement, dated November 30, 2015, by and among MVP REIT II, Inc., MVP American Securities, LLC, and UMB Bank, N.A.
4.5(7)Form of warrants to acquire the Company's common stock
10.1(8)Second Amended and Restated Advisory Agreement, dated as of May 26, 2017, by and among MVP REIT II, Inc., MVP REIT II Operating Partnership, LP and MVP Realty Advisors, LLC
10.2(8)Termination and Fee Agreement, dated as of May 26, 2017, by and among MVP REIT, Inc., MVP REIT II, Inc., MVP Realty Advisors, LLC and MVP REIT II Operating Partnership, LP
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 Company'sCompany’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017,2020, formatted in XBRL (eXtensible(extensible Business Reporting Language (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statement of Stockholder'sStockholder’s Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
104
CCover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 *
Filed concurrently herewith.
(1)
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.
(2)
Filed previously on Form 8-K on December 18, 2017 and incorporated herein by reference.
(3)
Filed previously on Form 8-K on October 28, 2016 and incorporated herein by reference.
(4)
Filed previously on Form 8-K on March 30, 2017 and incorporated herein by reference.
(5)
Filed previously with the Registration Statement on Form S-11 on July 28, 2015 and incorporated herein by reference.
(3)Filed previously as Exhibit A to Supplement No. 1 to the Registrant's prospectus filed December 3, 2015, and incorporated herein by reference.
(4)Filed previously as Appendix D to the Registrant's prospectus filed October 23, 2015, and incorporated herein by reference.
(5)Filed previously with Pre-Effective Amendment No. 3 to the Registration Statement on Form S-11 on October 6, 2015, and incorporated herein by reference.
(6)Filed previously on Form 8-K on December 3, 2015, and incorporated herein by reference.
(7)Filed previously on Form 8-K on October 27, 2016 and incorporated herein by reference.
(8)Filed previously on Form 8-K on January 11, 2016 and incorporated herein by reference.




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.

 MVPThe Parking REIT, II, Inc.
   
 By:/s/ Michael V. Shustek
  Michael V. Shustek
  Chief Executive Officer and PresidentChairman
 Date:
November 15, 2017
16, 2020
   
 By:/s/ Ed BentzenJ. Kevin Bland
  Ed BentzenJ. Kevin Bland
  Chief Financial Officer
 Date:
November 15, 2017


Exhibit 31.1
CERTIFICATIONS

I, Michael V. Shustek, certify that:

1. I have reviewed this Form 10-Q of MVP REIT II, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Intentionally omitted;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 15, 2017

/s/ Michael V. Shustek16, 2020
Michael V. Shustek
Chief Executive Officer and President
(Principal Executive Officer)
MVP REIT II, Inc.
Exhibit 31.2
CERTIFICATIONS

I, Ed Bentzen, certify that:

1. I have reviewed this Form 10-Q of MVP REIT II, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Intentionally omitted;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 15, 2017

/s/ Ed Bentzen
Ed Bentzen
Chief Financial Officer
(Principal Accounting Officer)
MVP REIT II, Inc.
Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350


Michael V. Shustek, as President and Chief Executive Officer of MVP REIT II, Inc. (the "Registrant"), and Ed Bentzen, as Chief Financial Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Registrant's Report on Form 10-Q for the nine months ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


Date: November 15, 2017

/s/ Michael V. Shustek
Michael V. Shustek
Chief Executive Officer and President
(Principal Executive Officer)
MVP REIT II, Inc.


Date: November 15, 2017

/s/ Ed Bentzen
Ed Bentzen
Chief Financial Officer
(Principal Accounting Officer)
MVP REIT II, Inc.


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