UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q10-Q/A
Amendment No. 1
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,September 30, 2018
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: 333-205893
THE PARKING REIT, 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.) |
2965 S. Jones #C1-100, Las Vegas,8880 W. SUNSET RD SUITE 240, LAS VEGAS, NV 8914689148
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (702) 534-5577
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [ X ] |
Emerging growth company [ X ] | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule bib-2 of the Act).
Yes [ ] No [ X ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of July 13,November 9, 2018, the registrant had 6,550,2006,545,366 shares of common stock outstanding.
EXPLANATORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q (the "Amended Form 10-Q") of The Parking REIT, Inc. (the "Company") amends the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018, filed with the Securities and Exchange Commission on November 9, 2018 (the "Original Form 10-Q"), to delete duplicative disclosures relating to the Company's partial sale of a Minneapolis property in October 2018 that were inadvertently included in "Note Q-Subsequent Events" to the financial statements set forth in Item 1 of the Original Form 10-Q.
Except for the amendments to "Note Q-Subsequent Events" to delete the duplicative disclosures as described above, no other amendments have been made to the Original Form 10-Q. This Amended Form 10-Q does not reflect events occurring after the filing of the Original Form 10-Q, or modify or update the disclosure contained therein in any other way other than as required to reflect the amendments described above.
The Company has attached to this Amended Form 10-Q updated certifications executed as of the date of this Amended Form 10-Q by the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002. These updated certifications are attached as Exhibits 31.1 / 31.2 and 32 to this Amended Form 10-Q.
THE PARKING REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | March 31, 2018 | | | December 31, 2017 | | | September 30, 2018 | | | December 31, 2017 | |
| | (UNAUDITED) | | | | | | (UNAUDITED) | | | | |
ASSETS | ASSETS | | ASSETS | |
Investments in real estate and fixed assets | | | | | | | | | | | | |
Land and improvements | | $ | 139,284,000 | | | $ | 131,169,000 | | | $ | 143,202,000 | | | $ | 131,169,000 | |
Buildings and improvements | | | 153,521,000 | | | | 153,456,000 | | | | 166,158,000 | | | | 153,456,000 | |
Construction in progress | | | 2,004,000 | | | | 750,000 | | | | 4,121,000 | | | | 750,000 | |
Intangible Assets | | | 2,427,000 | | | | 2,427,000 | | |
Intangible assets | | | | 2,288,000 | | | | 2,427,000 | |
Software | | | 63,000 | | | | -- | | | | 63,000 | | | | -- | |
| | | 297,299,000 | | | | 287,802,000 | | | | 315,832,000 | | | | 287,802,000 | |
Accumulated depreciation | | | (3,426,000 | ) | | | (2,231,000 | ) | |
Accumulated depreciation and amortization | | | | (5,847,000 | ) | | | (2,231,000 | ) |
Total investments in real estate, net | | | 293,873,000 | | | | 285,571,000 | | | | 309,985,000 | | | | 285,571,000 | |
| | | | | | | | | | | | | | | | |
Assets held for sale | | | 6,543,000 | | | | 6,543,000 | | | | 2,531,000 | | | | 6,543,000 | |
Cash | | | 4,938,000 | | | | 8,501,000 | | | | 5,284,000 | | | | 8,501,000 | |
Cash – restricted | | | 6,841,000 | | | | 8,229,000 | | | | 3,929,000 | | | | 8,229,000 | |
Prepaid expenses | | | 706,000 | | | | 184,000 | | | | 705,000 | | | | 184,000 | |
Accounts receivable | | | 551,000 | | | | 409,000 | | | | 1,269,000 | | | | 409,000 | |
Investment in DST | | | 2,821,000 | | | | 2,821,000 | | | | 2,821,000 | | | | 2,821,000 | |
Deposits | | | 3,435,000 | | | | -- | | | | 419,000 | | | | 675,000 | |
Other assets | | | 34,000 | | | | 685,000 | | | | 64,000 | | | | 10,000 | |
Total assets | | $ | 319,742,000 | | | $ | 312,943,000 | | | $ | 327,007,000 | | | $ | 312,943,000 | |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | LIABILITIES AND EQUITY | |
Liabilities | | | | | | | | | | | | | | | | |
Notes payable, net of unamortized loan issuance costs of approximately $1.8 million and $1.9 million as of March 31, 2018 and December 31, 2017, respectively | | $ | 123,373,000 | | | $ | 123,770,000 | | |
Lines of credit, net of unamortized loan issuance costs of approximately $0.7 million and $0.5 million as of March 31, 2018 and December 31, 2017, respectively | | | 23,065,000 | | | | 22,302,000 | | |
Notes payable, net of unamortized loan issuance costs of approximately $1.5 million and $1.9 million as of September 30, 2018 and December 31, 2017, respectively | | | $ | 117,082,000 | | | $ | 123,770,000 | |
Lines of credit, net of unamortized loan issuance costs of approximately $0.6 million and $0.5 million as of September 30, 2018 and December 31, 2017, respectively | | | | 38,511,000 | | | | 22,302,000 | |
Accounts payable and accrued liabilities | | | 5,830,000 | | | | 3,913,000 | | | | 5,542,000 | | | | 3,913,000 | |
Security Deposit | | | 161,000 | | | | 202,000 | | |
Security deposit | | | | 141,000 | | | | 202,000 | |
Due to related parties | | | 233,000 | | | | 385,000 | | | | 258,000 | | | | 385,000 | |
Deferred revenue | | | 138,000 | | | | 195,000 | | | | 509,000 | | | | 195,000 | |
Total liabilities | | | 152,800,000 | | | | 150,767,000 | | | | 162,043,000 | | | | 150,767,000 | |
Commitments and contingencies | | | -- | | | | -- | | | | -- | | | | -- | |
Equity | | | | | | | | | | | | | | | | |
The Parking REIT, Inc. Stockholders' Equity | | | | | | | | | | | | | | | | |
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000) as of March 31, 2018 and as of December 31, 2017. | | | -- | | | | -- | | |
Preferred stock Series 1; $0.0001 par value, 97,000 shares authorized, 39,811 and 29,789 shares issued and outstanding (stated liquidation value of $ 39,811,000 and $29,789,000) as of March 31, 2018 and December 31, 2017, respectively. | | | -- | | | | -- | | |
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, 2018 and December 31, 2017, respectively. | | | | -- | | | | -- | |
Preferred stock Series 1; $0.0001 par value, 97,000 shares authorized, 39,811 and 29,789 shares issued and outstanding (stated liquidation value of $ 39,811,000 and $29,789,000) as of September 30, 2018 and December 31, 2017, respectively. | | | | -- | | | | -- | |
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, 6,568,378 and 6,532,009 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | | | -- | | | | -- | | |
Common stock, $0.0001 par value, 98,999,000 shares authorized, 6,547,977 and 6,532,009 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | | | | -- | | | | -- | |
Additional paid-in capital | | | 186,214,000 | | | | 177,598,000 | | | | 184,260,000 | | | | 177,598,000 | |
Accumulated deficit | | | (22,012,000 | ) | | | (18,173,000 | ) | | | (22,058,000 | ) | | | (18,173,000 | ) |
Total The Parking REIT, Inc. Shareholders' Equity | | | 164,202,000 | | | | 159,425,000 | | | | 162,202,000 | | | | 159,425,000 | |
Non-controlling interest | | | 2,740,000 | | | | 2,751,000 | | | | 2,762,000 | | | | 2,751,000 | |
Total equity | | | 166,942,000 | | | | 162,176,000 | | | | 164,964,000 | | | | 162,176,000 | |
Total liabilities and equity | | $ | 319,742,000 | | | $ | 312,943,000 | | | $ | 327,007,000 | | | $ | 312,943,000 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | For The Three Months Ended March 31, | | | For the Three Months Ended September 30 | | | For the Nine Months Ended September 30 | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Revenues | | | | | | | | | | | | | | | | | | |
Base rent income | | $ | 4,716,000 | | | $ | 2,024,000 | | | $ | 4,992,000 | | | $ | 2,206,000 | | | $ | 14,511,000 | | | $ | 5,740,000 | |
Management agreement | | | | -- | | | | -- | | | | -- | | | | 518,000 | |
Percentage rent income | | | 375,000 | | | | -- | | | | 1,010,000 | | | | 16,000 | | | | 1,776,000 | | | | 523,000 | |
Total revenues | | | 5,091,000 | | | | 2,024,000 | | | | 6,002,000 | | | | 2,222,000 | | | | 16,287,000 | | | | 6,781,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Property taxes | | | 636,000 | | | | 92,000 | | | | 668,000 | | | | 90,000 | | | | 1,963,000 | | | | 279,000 | |
Property operating expense | | | 308,000 | | | | 275,000 | | | | 305,000 | | | | 273,000 | | | | 1,041,000 | | | | 608,000 | |
Asset management expense – related party | | | 832,000 | | | | 237,000 | | | | 313,000 | | | | 345,000 | | | | 2,000,000 | | | | 839,000 | |
General and administrative | | | 3,028,000 | | | | 328,000 | | | | 1,246,000 | | | | 400,000 | | | | 6,092,000 | | | | 1,051,000 | |
Merger costs | | | -- | | | | 125,000 | | | | -- | | | | 824,000 | | | | -- | | | | 1,596,000 | |
Acquisition expenses | | | 217,000 | | | | 1,766,000 | | | | 7,000 | | | | 113,000 | | | | 411,000 | | | | 2,156,000 | |
Acquisition expenses – related party | | | -- | | | | 1,118,000 | | | | -- | | | | -- | | | | -- | | | | 1,710,000 | |
Depreciation | | | 1,194,000 | | | | 425,000 | | |
Depreciation and amortization | | | | 1,262,000 | | | | 508,000 | | | | 3,653,000 | | | | 1,404,000 | |
Total operating expenses | | | 6,215,000 | | | | 4,366,000 | | | | 3,801,000 | | | | 2,553,000 | | | | 15,160,000 | | | | 9,643,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Loss from operations | | | (1,124,000 | ) | | | (2,342,000 | ) | |
Income (loss) from operations | | | | 2,201,000 | | | | (331,000 | ) | | | 1,127,000 | | | | (2,862,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | (1,948,000 | ) | | | (796,000 | ) | | | (2,170,000 | ) | | | (1,297,000 | ) | | | (6,337,000 | ) | | | (3,146,000 | ) |
Distribution income – related party | | | -- | | | | 52,000 | | | | -- | | | | 75,000 | | | | -- | | | | 174,000 | |
Gain from sale of investment in real estate | | | | 962,000 | | | | 1,200,000 | | | | 1,971,000 | | | | 1,200,000 | |
Other income | | | | 7,000 | | | | -- | | | | 62,000 | | | | -- | |
Income from DST | | | 52,000 | | | | -- | | | | 52,000 | | | | -- | | | | 154,000 | | | | -- | |
Income from investment in equity method investee | | | -- | | | | 14,000 | | | | -- | | | | 2,000 | | | | -- | | | | 19,000 | |
Total other expense | | | (1,896,000 | ) | | | (730,000 | ) | | | (1,149,000 | ) | | | (20,000 | ) | | | (4,150,000 | ) | | | (1,753,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | (3,020,000 | ) | | | (3,072,000 | ) | |
Net income (loss) | | | | 1,052,000 | | | | (351,000 | ) | | | (3,023,000 | ) | | | (4,615,000 | ) |
Net income attributable to non-controlling interest | | | 2,000 | | | | 28,000 | | | | 40,000 | | | | 41,000 | | | | 45,000 | | | | 269,000 | |
Net loss attributable to The Parking REIT, Inc.'s stockholders | | $ | (3,022,000 | ) | | $ | (3,100,000 | ) | |
Net income (loss) attributable to The Parking REIT, Inc.'s stockholders | | | $ | 1,012,000 | | | $ | (392,000 | ) | | $ | (3,068,000 | ) | | $ | (4,884,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Preferred stock distributions declared - Series A | | | (43,000 | ) | | | (19,000 | ) | | | (54,000 | ) | | | (55,000 | ) | | | (151,000 | ) | | | (101,000 | ) |
Preferred stock distributions declared - Series 1 | | | (523,000 | ) | | | -- | | | | (697,000 | ) | | | (157,000 | ) | | | (1,908,000 | ) | | | (172,000 | ) |
Net loss attributable to The Parking REIT, Inc.'s common stockholders | | | (3,588,000 | ) | | | (3,119,000 | ) | |
Net income (loss) attributable to The Parking REIT, Inc.'s common stockholders | | | | 261,000 | | | | (604,000 | ) | | | (5,127,000 | ) | | | (5,157,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted loss per weighted average common share: | | | | | | | | | |
Net loss per share attributable to The Parking REIT, Inc.'s common stockholders - basic and diluted | | $ | (0.55 | ) | | $ | (1.29 | ) | |
Basic and diluted income (loss) per weighted average common share: | | | | | | | | | | | | | | | | | |
Net income (loss) per share attributable to The Parking REIT, Inc.'s common stockholders - basic and diluted | | | $ | 0.04 | | | $ | (0.23 | ) | | $ | (0.78 | ) | | $ | (2.05 | ) |
Distributions declared per common share | | $ | 0.12 | | | $ | 0.19 | | | $ | -- | | | $ | 0.19 | | | $ | 0.12 | | | $ | 0.56 | |
Weighted average common shares outstanding, basic and diluted | | | 6,550,728 | | | | 2,425,200 | | | | 6,549,512 | | | | 2,577,514 | | | | 6,552,203 | | | | 2,516,496 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For Thethe ThreeNine Months Ended March 31,September 30, 2018
(UNAUDITED)
| | Preferred stock | | | Common stock | | | | | | | | | | | | | | | Preferred stock | | Common stock | | | | | | | | |
| | Number of Shares | | | Par Value | | | Number of Shares | | | Par Value | | | Additional Paid-in Capital | | | Accumulated Deficit | | | Non-controlling interest | | | Total | | | Number of Shares | | Par Value | | Number of Shares | | Par Value | | Additional Paid-in Capital | | Accumulated Deficit | | Non-controlling interest | | Total |
Balance, December 31, 2017 | | | 32,651 | | | | | | $ | 6,532,009 | | | $ | -- | | | $ | 177,598,000 | | | $ | (18,173,000 | ) | | $ | 2,751,000 | | | $ | 162,176,000 | | | 32,651 | $ | -- | | 6,532,009 | $ | -- | $ | 177,598,000 | $ | (18,173,000) | $ | 2,751,000 | $ | 162,176,000 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions to non-controlling interest | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | (13,000 | ) | | | (13,000 | ) | | -- | | -- | | -- | | -- | | -- | | -- | | (34,000) | | (34,000) |
Issuance of common stock – DRIP | | | -- | | | | -- | | | | 11,326 | | | | -- | | | | 283,000 | | | | -- | | | | -- | | | | 283,000 | | | -- | | -- | | 11,326 | | -- | | 307,000 | | -- | | -- | | 307,000 |
Issuance of preferred Series 1 | | | 10,022 | | | | -- | | | | -- | | | | -- | | | | 9,090,000 | | | | -- | | | | -- | | | | 9,090,000 | | | 10,022 | | -- | | -- | | -- | | 9,089,000 | | -- | | -- | | 9,089,000 |
Redeemed Shares | | | | | | | | | | | (7,636 | ) | | | | | | | (191,000 | ) | | | | | | | -- | | | | (191,000 | ) | | -- | | -- | | (28,037) | | -- | | (685,000) | | -- | | -- | | (685,000) |
Distributions - Common | | | -- | | | | -- | | | | -- | | | | -- | | | | (817,000 | ) | | | -- | | | | | | | | (817,000 | ) | | -- | | -- | | -- | | -- | | (807,000) | | -- | | -- | | (807,000) |
Distributions – Series A | | | -- | | | | -- | | | | -- | | | | -- | | | | (43,000 | ) | | | -- | | | | -- | | | | (43,000 | ) | | -- | | -- | | -- | | -- | | (151,000) | | -- | | -- | | (151,000) |
Distributions – Series 1 | | | -- | | | | -- | | | | -- | | | | -- | | | | (523,000 | ) | | | -- | | | | -- | | | | (523,000 | ) | | -- | | -- | | -- | | -- | | (1,908,000) | | -- | | -- | | (1,908,000) |
Stock dividend | | | -- | | | | -- | | | | 32,679 | | | | -- | | | | 817,000 | | | | (817,000 | ) | | | -- | | | | -- | | | -- | | -- | | 32,679 | | -- | | 817,000 | | (817,000) | | -- | | -- |
Net income (loss) | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | (3,022,000 | ) | | | 2,000 | | | | (3,020,000 | ) | | -- | | -- | | -- | | -- | | -- | | (3,068,000) | | 45,000 | | (3,023,000) |
Balance, March 31, 2018 | | | 42,673 | | | | | | | $ | 6,568,378 | | | $ | -- | | | $ | 186,214,000 | | | $ | (22,012,000 | ) | | $ | 2,740,000 | | | $ | 166,942,000 | | |
Balance, September 30, 2018 | | | 42,673 | $ | -- | | 6,547,977 | $ | -- | $ | 184,260,000 | $ | (22,058,000) | $ | 2,762,000 | $ | 164,964,000 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)(UNAUDITED)
| | For The Three Months Ended March 31, | | | For the Nine Months Ended September 30, | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Cash flows from operating activities: | | | | | | | | | | | | |
Net Loss | | $ | (3,020,000 | ) | | $ | (3,072,000 | ) | | $ | (3,023,000 | ) | | $ | (4,615,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | | | | |
Depreciation expense | | | 1,194,000 | | | | 425,000 | | |
Depreciation and amortization expense | | | | 3,653,000 | | | | 1,404,000 | |
Amortization of loan costs | | | | 646,000 | | | | 335,000 | |
Gain from sale of investment in real estate | | | | (1,971,000 | ) | | | (1,200,000 | ) |
Income from investment in equity method investee | | | -- | | | | (14,000 | ) | | | -- | | | | (19,000 | ) |
Distribution from MVP REIT | | | -- | | | | (52,000 | ) | | | -- | | | | (122,000 | ) |
Distribution from DST | | | (52,000 | ) | | | -- | | | | (154,000 | ) | | | (52,000 | ) |
Amortization of loan costs | | | 81,000 | | | | 96,000 | | |
Changes in operating assets and liabilities | | | | | | | | | | | | | | | | |
Due to/from related parties | | | (152,000 | ) | | | 354,000 | | | | (127,000 | ) | | | (2,164,000 | ) |
Accounts payable | | | 1,917,000 | | | | 278,000 | | | | 1,704,000 | | | | 1,028,000 | |
Loan Fees | | | (197,000 | ) | | | (183,000 | ) | | | (368,000 | ) | | | -- | |
Security deposits | | | (98,000 | ) | | | 44,000 | | | | 253,000 | | | | 298,000 | |
Other assets | | | (24,000 | ) | | | -- | | | | (54,000 | ) | | | 258,000 | |
Assets held for sale | | | -- | | | | (4,000 | ) | | | -- | | | | 623,000 | |
Deferred revenue | | | -- | | | | 37,000 | | |
Accounts receivable | | | (142,000 | ) | | | (143,000 | ) | | | (860,000 | ) | | | 93,000 | |
Prepaid expenses | | | (522,000 | ) | | | (413,000 | ) | | | (557,000 | ) | | | 60,000 | |
Net cash used in operating activities | | | (1,015,000 | ) | | | (2,647,000 | ) | | $ | (858,000 | ) | | $ | (4,073,000 | ) |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Purchase of investment in real estate | | | (8,105,000 | ) | | | (56,700,000 | ) | | | (28,938,000 | ) | | | (81,200,000 | ) |
Investment in assets held for sale | | | | -- | | | | (1,015,000 | ) |
Investment in DST | | | | -- | | | | (2,821,000 | ) |
Building improvements | | | (1,329,000 | ) | | | (14,000 | ) | | | (4,602,000 | ) | | | (1,962,000 | ) |
Fixed asset purchase | | | (63,000 | ) | | | -- | | | | (63,000 | ) | | | -- | |
Proceeds from Investments | | | 52,000 | | | | -- | | | | 154,000 | | | | 87,000 | |
Payments made for future acquisitions | | | (2,760,000 | ) | | | (227,000 | ) | |
Proceeds from sale of investment in real estate | | | | 7,487,000 | | | | 1,577,000 | |
Deposits applied to purchase of investment in real estate | | | | 256,000 | | | | 4,216,000 | |
Investment in cost method investee | | | | -- | | | | (8,000 | ) |
Investment in cost method investee – held for sale | | | | -- | | | | (2,000 | ) |
Investment in equity method investee | | | | -- | | | | (50,000 | ) |
Proceeds from non-controlling interest | | | -- | | | | 5,075,000 | | | | -- | | | | 5,075,000 | |
Net cash used in investing activities | | | (12,205,000 | ) | | | (51,866,000 | ) | | | (25,706,000 | ) | | | (76,103,000 | ) |
| | | | | | | | | |
Cash flows from financing activities | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Proceeds from note payable | | | -- | | | | 36,415,000 | | | | 5,488,000 | | | | 75,752,000 | |
Payments on note payable | | | (477,000 | ) | | | (173,000 | ) | | | (1,512,000 | ) | | | (1,388,000 | ) |
Proceeds from line of credit | | | 4,400,000 | | | | 11,968,000 | | | | 23,100,000 | | | | 32,643,000 | |
Payments made on line of credit | | | (3,440,000 | ) | | | (284,000 | ) | | | (13,840,000 | ) | | | (39,526,000 | ) |
Loan fees paid | | | | -- | | | | (1,111,000 | ) |
Distribution to non-controlling interest | | | (13,000 | ) | | | (50,000 | ) | | | (34,000 | ) | | | (1,809,000 | ) |
Distribution from investment in cost method investee | | | -- | | | | 13,000 | | |
Distribution from investment in equity method investee | | | -- | | | | 14,000 | | | | -- | | | | 237,000 | |
Proceeds from issuance of common stock | | | -- | | | | 5,035,000 | | | | -- | | | | 5,826,000 | |
Proceeds from issuance of preferred stock | | | 9,090,000 | | | | 2,556,000 | | | | 9,089,000 | | | | 14,341,000 | |
Redeemed shares | | | (191,000 | ) | | | -- | | | | (685,000 | ) | | | -- | |
Dividends paid to stockholders | | | (1,100,000 | ) | | | (166,000 | ) | | | (2,559,000 | ) | | | (1,837,000 | ) |
Net cash provided by financing activities | | | 8,269,000 | | | | 55,328,000 | | | | 19,047,000 | | | | 83,128,000 | |
| | | | | | | | | |
Net change in cash and cash equivalents and restricted cash | | | (4,951,000 | ) | | | 815,000 | | | | (7,517,000 | ) | | | 2,952,000 | |
Cash cash and cash equivalents and restricted cash, beginning of period | | | 16,730,000 | | | | 4,985,000 | | |
Cash cash and cash equivalents and restricted cash, end of period | | $ | 11,779,000 | | | $ | 5,800,000 | | |
| | | | | | | | | |
Reconciliation of Cash and Cash Equivalents and Restricted Cash: | | | | | | | | | |
Cash and cash equivalents at beginning of period | | $ | 8,501,000 | | | $ | 4,885,000 | | |
Restricted cash at beginning of period | | | 8,229,000 | | | | 100,000 | | |
Restricted cash included in discontinued operations at beginning of period | | | -- | | | | -- | | |
Cash and cash equivalents and restricted cash at beginning of period | | $ | 16,730,000 | | | $ | 4,985,000 | | |
| | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 4,938,000 | | | $ | 4,675,000 | | |
Restricted cash at end of period | | | 6,841,000 | | | | 1,125,000 | | |
Restricted cash included in discontinued operations at end of period | | | -- | | | | -- | | |
Cash and cash equivalents and restricted cash at end of period | | $ | 11,779,000 | | | $ | 5,800,000 | | |
Cash and cash equivalents and restricted cash, beginning of period | | | | 16,730,000 | | | | 4,985,000 | |
Cash and cash equivalents and restricted cash, end of period | | | $ | 9,213,000 | | | $ | 7,937,000 | |
Supplemental disclosures of cash flow information: | | | | | | |
Interest Paid | | $ | (1,867,000 | ) | | $ | (700,000 | ) |
Non-cash investing and financing activities: | | | | | | | | |
Distributions - DRIP | | $ | 283,000 | | | $ | 285,000 | |
Dividend shares | | $ | 817,000 | | | $ | 446,000 | |
Dividends declared not yet paid | | $ | 200,000 | | | $ | 156,000 | |
Deposits applied to purchase of investment in real estate | | $ | 150,000 | | | $ | 4,000,000 | |
THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
| | For the Nine Months Ended September 30, | |
| | 2018 | | | 2017 | |
Reconciliation of Cash and Cash Equivalents and Restricted Cash: | | | | | | |
Cash and cash equivalents at beginning of period | | $ | 8,501,000 | | | $ | 4,885,000 | |
Restricted cash at beginning of period | | | 8,229,000 | | | | 100,000 | |
Cash and cash equivalents and restricted cash at beginning of period | | $ | 16,730,000 | | | $ | 4,985,000 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 5,284,000 | | | $ | 2,589,000 | |
Restricted cash at end of period | | | 3,929,000 | | | | 5,348,000 | |
Cash and cash equivalents and restricted cash at end of period | | $ | 9,213,000 | | | $ | 7,937,000 | |
| | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | | | | |
Interest Paid | | $ | 5,692,000 | | | $ | 2,737,000 | |
Non-cash investing and financing activities: | | | | | | | | |
Distributions - DRIP | | $ | 307,000 | | | $ | 901,000 | |
Dividend shares | | $ | 817,000 | | | $ | 1,402,000 | |
Dividends declared not yet paid | | $ | 250,000 | | | $ | 235,000 | |
Deposits applied to purchase of investment in real estate | | $ | 2,260,000 | | | $ | 4,216,000 | |
Conversion from debt to preferred shares | | $ | -- | | | $ | 2,000,000 | |
Payments on note payable through sale of investment in real estate | | $ | (11,092,000 | ) | | $ | -- | |
Proceeds on line of credit through sale of investment in real estate | | $ | 7,103,000 | | | $ | -- | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
THE PARKING REIT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,SEPTEMBER 30, 2018
(UNAUDITED)
Note A — Organization and Business Operations
The Parking REIT, Inc., formerly known as MVP REIT II, Inc. (the "Company"), is a Maryland corporation formed on May 4, 2015 and has operated and intends to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes upon the filing of the federal tax return for the year ended December 31, 2017. The Company believes that it has been organized and has operatedcontinue to operate in a manner that has enabled itwill allow the Company to qualify as a REIT under the Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company is generally not subject to federal corporate income taxes on amounts that are distributed to stockholders, provided that, on an annual basis, the Company distributes at least 90% of REIT taxable income (excluding net capital gains) to the stockholders and meet certain other conditions. As such, in general, as long as we qualify as a REIT, no provision for federal income tax purposes commencingtaxes will be necessary, except for taxes on undistributed REIT taxable income.
Should the Company have any taxable income or loss in the future, any income taxes will be accounted for in accordance with the taxable year ended December 31, 2017; however, ifprovisions of ASC 740, "Income Taxes," using the Company is unableasset and liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases (including for operating loss, capital loss, and tax credit carryforwards) and are calculated using the enacted tax rates and laws expected to satisfy the requirements for REIT qualification for the year ended December 31, 2017,be in effect when such amounts are realized or settled. In addition, the Company will continue to operateestablish valuation allowances for tax benefits when we believe it is more-likely-than-not (defined as a C corporation for U.S. federal income tax purposes. Aslikelihood of December 31, 2016, the Company ceased all selling efforts for the initial public offering (the "Common Stock Offering"more than 50%) of its common stock, $0.0001 par value per share, at $25.00 per share, pursuant to a registration statement on Form S-11 (No. 333-205893) filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering. As of March 31, 2018, the Company had raised approximately $61.3 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 $1.8 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.that such assets will not be realized.
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 were used for investment in Canadian properties. States. To a lesser extent, the Company may also invest in properties other than parking facilities.
The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the "Operating Partnership"). The Company intends to ownowns substantially all of its assets and conductconducts substantially all of its operations through the Operating Partnership. The Company'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 to be operated in a manner that enables the Company to (1) satisfy the requirements to 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 traded 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.
The Company utilizes an Umbrella Partnership Real Estate Investment Trust ("UPREIT") structure to enable the Company to acquire real property in exchange for limited partnership interests in the 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 the Company in exchange for shares of the Company's common stock or cash.
As part of the Company's initial capitalization, 8,000 shares of common stock were sold for $200,000 to MVP Capital Partners II, LLC (the "Sponsor"), the Company's sponsor. The Sponsor is owned 60% by Vestin Realty Mortgage II, Inc. ("VRM II"), and 40% by Vestin Realty Mortgage I, Inc. ("VRM I"). Both VRM II and VRM I are Maryland corporations whichthat trade on the OTC pink sheets and were managed by Vestin Mortgage, LLC, a Nevada limited liability company wholly owned by Michael Shustek ("Vestin Mortgage"), prior to being internalized in January 2018.
The Company's advisor is MVP Realty Advisors, LLC, dba The Parking REIT Advisors (the "Advisor"), a Nevada limited liability company, which is owned 60% by VRM II and 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 a second amended and restated advisory agreement between the Company and the Advisor (the "Amended and Restated Advisory Agreement"), which became effective upon consummation of the Merger (as such term is defined below). As of JulyNovember 139, 2018, the Company had no paid employees.
As previously disclosed, the Company's board of directors unanimously authorized a suspension of cash distributions and stock dividends to holders of common stock, effective as of March 22, 2018. The Company is focused on preserving capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants, including minimum liquidity covenants and to seek to enhance value for stockholders through potential future acquisitions. The Company expects that cash retained by the suspension of cash distributions will allow the Company to continue to pursue investment opportunities while also preparing for a possible liquidity event in the future. The Conpany's board will continue to evaluate the Company's performance and expects to assess the Company's distribution policy quarterly. There can be no assurance that the Company will resume payment of distributions to common stockholders at any time in the future, that any acquisitions will be completed on an attractive basis, or at all, or that any liquidity event will occur or when such event may occur.
From inception through March 31, 2018 , the Company has paid approximately $3.8 million in distributions, including issuing 83,437 shares of its common stock as DRIP shares, issuing 153,827 shares of its common stock as dividend in distributions to the Company's common stockholders, all of which have been paid from offering proceeds and constituted a return of capital. If the Company resumes the payment of distributions, 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.
On May 26, 2017, the Company, MVP REIT, Inc., a Maryland corporation ("MVP I"), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company ("Merger Sub"), and the Advisor entered into an agreement and plan of merger (the "Merger Agreement"), pursuant to which MVP I would merge with and into Merger Sub (the "Merger").
On December 15, 2017, the Merger was consummated. Following the Merger, the Company contributed 100% of its equity interests in Merger Sub to the Operating Partnership. The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership and is advised by the Advisor.
At the effective time of the Merger, each share of MVP I common stock, par value $0.001 per share, that was issued and outstanding immediately prior to the Merger (the "MVP I Common Stock"), was converted into the right to receive 0.365 shares of Company common stock. A total of approximately 3.9 million shares of Company common stock were issued to former MVP I stockholders, and former MVP I stockholders, immediately following the Merger, ownowned approximately 59.7% of the Company's common stock. The Company was subsequently renamed "The Parking REIT, Inc." as set forth in the articles of amendment in connection with the Merger.
The Company was subsequently renamed "The Parking REIT, Inc." as set forth in the articles of amendment in connection with the Merger.
Capitalization
As of March 31,September 30, 2018, the Company had 6,568,3786,547,977 shares of common stock issued and outstanding.As of On December 31, 2016, the Company ceased all selling efforts for the Common Stock Offering of its common stock. 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 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"). The Company commenced a 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. The Company raised approximately $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, 2018.
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"). On April 7, 2017, the Company commenced a private placement of shares of Series 1, together with warrants to acquire the Company's common stock to accredited investors. As of Marchinvestors, and closed the offering on January 31, 2018, the2018. The Company had raised approximately $36.0 million, net of offering costs, in the Series 1 private placements and had 39,811 Series 1 shares issued and outstanding. On January 31, 2018, the Company closed the Series 1 preferred offering.
As previously disclosed in its annual report, to comply with the Company's amended credit agreement, the Company will redeem alloutstanding as of the outstanding shares of the Series A preferred stock and Series 1 preferred stock and pay the entire redemption price in the form of shares of the Company common stock, within 30 days after the completion of the listing of the Company's common stock on a national securities exchange. As further described in the section entitled "Management's Discussion And Analysis Of Financial Condition And Results Of Operations – Liquidity and Capital Resources," the Company intends to file a listing application by July 31, 2018 and complete the listing by September 30, 2018, although no assurances can be given that a listing will be completed within such timeframe or at all.
If the Company resumes the payment of distributions, stockholders may elect to reinvest distributions received from the Company in common shares by participating in the Company's DRIP. Stockholders may enroll in the DRIP by completing the distribution change form. Stockholders may also withdraw at any time, without penalty, by delivering written notice to the Company. Initially 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 on May 29, 2018 (the "Valuation Date"), which was 150 days following the second anniversary of the date on which the minimum offering requirement in the Common Stock Offering was satisfied, the purchase price for the DRIP shares will be equal to the Company's net asset value ("NAV") per common share if the DRIP is ongoing. The Company announced an NAV of $24.61 per common share effective as of May 29, 2018.The Company will update the NAV per share at least annually following the Valuation Date, provided the Company is not listed, 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.
On February 7, 2018, the Company filed a Current Report on Form 8-K stating that the board of directors has determined that the Merger and the issuance of the Company's common stock as consideration for the Merger qualifies as an involuntary exigent circumstance under the SRP. As a result, shares of common stock that, when combined with the holding period of the related MVP I Common Stock, have been held for the Two-Year Holding Period (as such term is defined in the SRP), are eligible to participate in the SRP subject to the other requirements and limitations of the SRP. In addition, the issuance date for any shares of MVP I Common Stock issued pursuant to the MVP REIT, Inc. Distribution Reinvestment Plan shall be deemed to be the same date as the issuance of the shares of MVP I Common Stock to which such shares relate.
On May 29, 2018 the Company's Board of Directors suspended its SRP, other than for repurchases in connection with a shareholder's death. In accordance with the SRP, the suspension of the SRP became effective on June 28, 2018, which is 30 days after the filing date of the Form 8-K providing notice of the suspension. The Company plans to utilize the cash savings to further its business operations.
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. Redemption requests other than those made in connection with the death or disability (as defined in 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. The SRP will terminate if the shares of common stock are listed on a national securities exchange.
For the three months ended March 31, 2018, 7,636 shares had been redeemed.
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") for interim financial information as contained in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), and in conjunction with rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. 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's financial position, results of operations and cash flows for the interim period. Operating results for the three and nine months ended March 31,September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
The condensed consolidated balance sheet as of December 31, 2017 contained herein has been derived from the audited financial statements as of December 31, 2017, but does not include all disclosures required by GAAP.
Consolidation
The Company's condensed consolidated financial statements include its accounts, the accounts of the Company's assets that were sold during 2017 (as applicable), the accounts of its subsidiaries, Operating Partnership and all of the following subsidiaries. All intercompany profits and losses, balances and transactions are eliminated in consolidation.
MVP PF Ft. Lauderdale 2013, LLC | MVP Milwaukee ArenaClarksburg Lot, LLC |
MVP PF Kansas City 2013, LLC | MVP Clarksburg Lot, LLC |
MVP PF Memphis Poplar 2013, LLC | MVP Denver Sherman 1935, LLC |
MVP PF Memphis CourtPoplar 2013, LLC | MVP Bridgeport Fairfield Garage, LLC |
MVP PF St. LouisMemphis Court 2013, LLC | West 9th Street Properties II, LLC |
Mabley Place Garage,MVP PF St. Louis 2013, LLC | MVP San Jose 88 Garage, LLC |
Mabley Place Garage, LLC | MCI 1372 Street, LLC |
MVP Denver Sherman, LLC | MCI 1372MVP Cincinnati Race Street, LLC |
MVP Fort Worth Taylor, LLC | MVP Cincinnati Race Street,St. Louis Washington, LLC |
MVP Milwaukee Old World, LLC | MVP St. Louis Washington,Paul Holiday Garage, LLC |
MVP St. Louis Convention Plaza, LLC | MVP St. Paul Holiday Garage,Louisville Station Broadway, LLC |
MVP Houston Saks Garage, LLC | MVP Louisville Station Broadway, LLC |
MVP St. Louis Lucas, LLC | White Front Garage Partners, LLC |
MVP Milwaukee Wells,St. Louis Lucas, LLC | Cleveland Lincoln Garage, LLC |
MVP Milwaukee Wells, LLC | MVP Houston Preston, LLC |
MVP Wildwood NJ Lot, LLC | MVP Houston Preston,San Jacinto Lot, LLC |
MVP Indianapolis City Park, LLC | MVP Houston San Jacinto Lot,Detroit Center Garage, LLC |
MVP KC Cherry Lot, LLC | MVP Detroit Center Garage,St Louis Broadway, LLC |
MVP Indianapolis WA Street Lot, LLC | St Louis Broadway,Seventh & Cerre, LLC |
Minneapolis City Parking, LLC | St Louis Seventh & Cerre,MVP Preferred Parking, LLC |
MVP Minneapolis Venture, LLC | MVP Preferred Parking,Raider Park Garage, LLC |
MVP Indianapolis Meridian Lot, LLC | MVP Raider Park Garage,New Orleans Rampart, LLC |
MVP Milwaukee Clybourn, LLC | MVP New Orleans Rampart,Hawaii Marks Garage, LLC |
MVP Milwaukee Arena Lot, LLC | |
Under GAAP, the Company's condensed 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's management considers factors such as an entity's purpose and design and the Company's ability to direct the activities of the entity that most significantly impacts the entity'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'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 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
The Company had fifteen parking tenants as of March 31,September 30, 2018 and nine parking tenants as of March 31,September 30, 2017. One tenant, SP Plus Corporation (Nasdaq: SP) ("SP+"), represented 55.8%57.4% and 47.4%54.9% of the Company's base parking rental revenue for the threenine months ended March 31,September 30, 2018 and 2017, respectively.
SP+ is one of the largest providers of parking management in the United States. As of March 31,September 30, 2018, SP+ managed approximately 3,6002,800 locations in North America.
Below is a table that summarizes parking rent by tenant:
| | For The Three Months Ended March 31, | | For the Nine Months Ended September 30, |
Parking Tenant | | 2018 | | 2017 | | 2018 | | 2017 |
SP + | | 55.8% | | 47.4% | | 57.4% | | 54.9% |
iPark Services | | 13.6% | | 4.3% | | 13.4% | | 10.6% |
ABM** | | 6.1% | | 6.0% | |
ISOM Mgmt | | 4.3% | | -- | |
ABM | | | 4.6% | | 2.3% |
ISOM Mgmt. | | | 4.2% | | -- |
Premier Parking | | 3.8% | | 8.5% | | 3.7% | | 8.4% |
Interstate Parking | | 2.9% | | 6.5% | | 2.8% | | 6.4% |
342 N. Rampart | | | 2.6% | | -- |
Denison | | 2.5% | | -- | | 2.5% | | -- |
Lanier** | | 2.4% | | 1.8% | |
Lanier | | | 2.4% | | 4.2% |
St. Louis Parking | | 2.2% | | 3.3% | | 2.2% | | 4.3% |
342 N. Rampart | | 2.0% | | -- | |
PCAM, LLC | | 1.5% | | -- | |
BEST PARK | | 1.5% | | -- | | 1.5% | | -- |
Riverside Parking | | 1.1% | | 2.4% | | 1.0% | | 2.4% |
PCAM, LLC | | | 0.8% | | -- |
TNSH, LLC | | | 0.6% | | -- |
Denver School | | 0.2% | | -- | | 0.2% | | -- |
Secure | | 0.1% | | -- | | 0.1% | | -- |
Miller Parking* | | -- | | 19.8% | |
Miller Parking | | | -- | | 6.5% |
* Revenue for Miller parkingParking represents a settlement received by MVP Detroit Center Garage, LLC of approximately $408,000 for the operations of the garage through January 2017, at which time SP+ assumed operations under a longer-term lease agreement.
** Through February 28, 2017, MVP San Jose 88 Garage, LLC was subject to a parking management agreement with ABM and received revenue of $110,000. Starting on March 1, 2017, this property was leased to Lanier Parking Solutions.
In addition, the Company had concentrations in various cities based on parking rental revenue for the threenine months ended March 31,September 30, 2018 and 2017, as well as concentrations in various cities based on the real estate the Company owned as of March 31,September 30, 2018 and December 31, 2017. The below tables summarize this information by city.
City Concentration for Parking Rental Revenue | | | For The Three Months Ended March 31, | | For the Nine Months Ended September 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
Detroit | | 18.5% | | 48.9% | | 18.2% | | 43.4% |
Houston | | 13.6% | | 4.3% | | 13.4% | | 10.6% |
Cincinnati | | | 9.1% | | 3.9% |
Fort Worth | | 8.3% | | -- | | 8.2% | | -- |
Cincinnati | | 7.8% | | 4.0% | |
Indianapolis | | 6.6% | | -- | | 6.5% | | -- |
St. Louis | | 6.6% | | 5.3% | | 5.7% | | 6.3% |
Cleveland | | 5.5% | | 12.3% | | 5.4% | | 12.1% |
Lubbock | | 4.3% | | -- | | 4.3% | | -- |
Minneapolis | | 4.3% | | -- | | 4.2% | | -- |
Nashville | | 3.8% | | 8.5% | | 3.7% | | 8.4% |
Milwaukee | | 3.6% | | -- | | 3.5% | | -- |
St Paul | | 2.9% | | 6.5% | | 2.8% | | 6.4% |
New Orleans | | | 2.6% | | -- |
San Jose | | 2.4% | | 7.2% | | 2.4% | | 5.9% |
Bridgeport | | 2.1% | | -- | | 2.1% | | -- |
New Orleans | | 2.0% | | -- | |
Canton | | 1.8% | | 0.6% | |
Honolulu | | | 1.8% | | -- |
Memphis | | 1.6% | | -- | | 1.6% | | -- |
Louisville | | 1.1% | | 2.4% | | 1.0% | | 2.4% |
Ft. Lauderdale | | | 0.9% | | -- |
Denver | | | 0.8% | | -- |
Kansas City | | 0.9% | | -- | | 0.8% | | -- |
Denver | | 0.8% | | -- | |
Ft. Lauderdale | | 0.8% | | -- | |
Wildwood | | 0.4% | | -- | | 0.4% | | -- |
Canton | | | 0.3% | | 0.6% |
Clarksburg | | 0.3% | | -- | | 0.3% | | -- |
Real Estate Investment Concentration by City |
| | As of March 31, |
| | 2018 | | 2017 |
Detroit | | 18.2% | | 21.2% |
Houston | | 12.4% | | 6.3% |
Fort Worth | | 9.1% | | 10.6% |
Cincinnati | | 8.9% | | 9.9% |
St Louis | | 6.8% | | 7.9% |
Indianapolis | | 6.0% | | 7.0% |
Cleveland | | 5.7% | | 6.2% |
Minneapolis | | 5.4% | | 6.3% |
Milwaukee | | 3.9% | | 4.6% |
Nashville | | 3.8% | | 4.4% |
Lubbock | | 3.6% | | 0.0% |
St Paul | | 2.8% | | 3.1% |
Bridgeport | | 2.7% | | 3.2% |
New Orleans | | 2.7% | | 0.0% |
Memphis | | 1.6% | | 1.9% |
San Jose | | 1.3% | | 1.4% |
Fort Lauderdale | | 1.1% | | 1.3% |
Denver | | 1.1% | | 1.2% |
Louisville | | 1.0% | | 1.2% |
Kansas City | | 0.9% | | 1.1% |
Wildwood | | 0.6% | | 0.6% |
Clarksburg | | 0.2% | | 0.3% |
Canton | | 0.2% | | 0.3% |
Real Estate Investment Concentration by City |
| | As of September 30, 2018 | | As of December 31, 2017 |
Detroit | | 17.8% | | 18.9% |
Houston | | 12.1% | | 12.7% |
Fort Worth | | 8.9% | | 9.5% |
Cincinnati | | 8.6% | | 8.8% |
Honolulu | | 6.7% | | -- |
Indianapolis | | 5.9% | | 6.2% |
Cleveland | | 5.2% | | 5.5% |
Minneapolis | | 4.4% | | 5.6% |
St Louis | | 4.4% | | 7.1% |
Milwaukee | | 3.9% | | 4.1% |
Nashville | | 3.8% | | 3.9% |
Lubbock | | 3.5% | | 3.8% |
St Paul | | 2.7% | | 2.8% |
Bridgeport | | 2.7% | | 2.8% |
New Orleans | | 2.6% | | -- |
Memphis | | 1.6% | | 1.7% |
San Jose | | 1.2% | | 1.2% |
Fort Lauderdale | | 1.1% | | 1.2% |
Denver | | 1.0% | | 1.1% |
Louisville | | 1.0% | | 1.1% |
Kansas City | | -- | | 1.0% |
Wildwood | | 0.5% | | 0.6% |
Clarksburg | | 0.2% | | 0.2% |
Canton | | 0.2% | | 0.2% |
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 of 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.
Impairment of Long 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'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, 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.
Cash
The Company maintains the majoritya significant portion of its cash deposits at KeyBank.KeyBank, which are held by the Company's subsidiaries allowing the Company to maximize FDIC insurance coverage. The balances are insured by the Federal Deposit Insurance Corporation ("FDIC") under the same ownership category of $250,000. As of March 31,September 30, 2018 and as of December 31, 2017, the Company had $0.8approximately $0.6 million and $5.6 million, respectively, in excess of the federally-insured limits. As of March 31,September 30, 2018, 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'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 that 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 March 31,September 30, 2018 and 2017, 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 account 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'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'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'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'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 of 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 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's employees and employees of the Advisor's affiliates and others.
All direct offering costs incurred and or paid by the 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 Note G — Stock-Based Compensation).
Income Taxes
The Company has been organized and conducts its operations to continue to qualify as a REIT under Sections 856 to 860 of the Code. The Company expects to qualify as a REIT commencing with the taxable year ending December 31, 2017. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met. The Company's REIT taxable income may substantially exceed or be less than the Company's net 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,costs, capital gains and losses and deferred income.
A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained on audit, including resolutions of any related appeals or litigation process, based on the technical merits. Based on the Company's evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition on the financial statements. The net income tax provision for the year ended December 31, 2017 was approximately zero.
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 account 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 March 31,September 30, 2018 and 2017.
There is a potential for dilution from the Company's Series A Convertible Redeemable Preferred Stock which may be converted upon a holder's election into the Company'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). As of March 31,September 30, 2018, there were 2,862 shares of the Series A Convertible Redeemable Preferred Stock issued and outstanding.
There is a potential for dilution from the Company's Series 1 Convertible Redeemable Preferred Stock which may be converted upon a holder's election into the Company's common stock at any time 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). As of March 31,September 30, 2018, there were 39,811 shares of the Series 1 Convertible Redeemable Preferred Stock issued and outstanding.
Each share of Series A preferred stock and Series 1 preferred stock will convert into the number of shares of the Company's common stock determined by dividing (i) the stated value per Series A share or Series 1 share of $1,000 (as may be adjusted pursuant to the applicable articles supplementary) plus any accrued but unpaid dividends to, but not including, the conversion date by (ii) the conversion price. The conversion price is equal to 100% or, if the conversion notice is received beforeon or prior to December 1, 2017 (for Series 1 shares) or on or prior to the day immediately preceding the first anniversary of the issuance of such share (for Series A shares), 110% of the volume weighted average price per share of the Company'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. 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.
There is also potential for dilution fromin the Company'sevent that the Company completes the contemplated redemption of all of the outstanding shares of the Series A preferred stock and Series 1 preferred stock and payment of thepays entire redemption price in the form of shares of the Company's common stock, within 30 days after the completion of the listing of the Company's common stock on a national securities exchange,in order to comply with the terms of its amended credit agreement, as further described in "Management's Discussion And Analysis Of Financial Condition And Results Of Operations – Liquidity and Capital Resources."
Reportable Segments
The Company currently operates one reportable segment.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Accounting and Auditing Standards Applicable to "Emerging Growth Companies"
The Company is an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). For as long as the Company remains an "emerging growth company," which may be up to five fiscal years, 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's attestation report on management'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 (the "PCAOB"), requiring mandatory audit firm rotation or a supplement to the auditor'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'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 (the "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.
On May 29, 2018, the Company announced that the Company's Board of Directors suspended the SRP, other than for repurchases in connection with a shareholder's death, as further described below.
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 the Company has 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 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. On May 29, 2018, the Company established a NAV equal to $24.61 per common share.
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, the Company 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. As further described in the section entitled "Management's Discussion And Analysis Of Financial Condition And Results Of Operations – Liquidity and Capital Resources," the Company intendsfiled an application to file a listing application bylist its shares on The NASDAQ Global Market under the symbol "PARK" on July 31, 2018 and complete the listing by September 30, 2018, although no assurances can be given that a listing will be completed within such timeframe or at all.13, 2018.
On May 29, 2018, the Company established a NAV equal to $24.61 per common share.
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.
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 Current Report on 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 stockholder 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, the Company 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. . For the three months ended March 31, 2018, 7,636 shares had been redeemed. Subsequent to March 31, 2018,
18,179-14- shares were redeemed. Notwithstanding the foregoing, the share repurchase program will terminate if the shares
On February 7, 2018, the Company filed a Current Report on Form 8-K stating that the board of directors has determined that the Merger and the issuance of the Company's common stock as consideration for the Merger qualifies as an involuntary exigent circumstance under the SRP. As a result, shares of common stock that, when combined with the holding period of the related MVP I Common Stock, have been held for the Two-Year Holding Period, are eligible to participate in the SRP subject to the other requirements and limitations of the SRP. In addition, the issuance date for any shares of MVP I Common Stock issued pursuant to the MVP REIT, Inc. Distribution Reinvestment Plan shall be deemed to be the same date as the issuance of the shares of MVP I Common Stock to which such shares relate.
On May 29, 2018, the Company filed a Current Report on Form 8-K stating that the Company's board of directors suspended its SRP, other than for repurchases in connection with a shareholder's death. In accordance with the SRP, the suspension of the SRP took effect on June 28, 2018, which is 30 days after the date of the Form 8-K providing notice of the suspension. The Company plans to utilize the cash savings to further its business operations. TheIf a listing of the Company's common stock does not occur, the Company's Board of Directors may in the future reinstate the SRP, although there is no assurance as to if or when this will happen.
For the three and nine months ended September 30, 2018, 2,222 and 28,037 shares, respectively, had been redeemed. There have been 2,612 shares redeemed subsequent to September 30, 2018.
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 Common Stock 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. The Company has issued a total of 83,437 shares of common stock under the DRIP as of March 31,September 30, 2018. The Company suspended payment of distributions on March 22, 2018 and as such there are currently no distributions to invest in the DRIP.
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distributions, stockholders may elect to reinvest distributions received from the Company in common shares by participating in the Company's DRIP. Stockholders may enroll in the DRIP by completing the distribution change form. Stockholders may also withdraw at any time, without penalty, by delivering written notice to the Company. Initially 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 on May 29, 2018 (the "Valuation Date"), which was 150 days following the second anniversary of the date on which the minimum offering requirement in the Common Stock Offering was satisfied, the purchase price for the DRIP shares will be equal to the Company's net asset value ("NAV") per common share if the DRIP is ongoing. The Company announced an NAV of $24.61 per common share effective as of May 29, 2018. The Company will update the NAV per share at least annually following the Valuation Date, provided the Company is not listed, 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.
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.
Note C — Commitments and Contingencies
Litigation
The nature of the Company's business exposes its properties, the Company and its 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, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company.
Environmental Matters
In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. During the Company's due diligence of a property purchased on December 15, 2017 and located in Milwaukee, it was discovered that the soil and ground water at the subject property had been impacted by the site's historical use as a printing press as well as neighboring property uses. As a result, the Company retained a local environmental engineer to seek a closure letter or similar certificate of no further action from the State of Wisconsin due to the Company's use of the property as a parking lot. As of March 31,September 30, 2018, management does not anticipate a material adverse effect related to this environmental matter. As of March 31,September 30, 2018, the Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations. The Company, however, cannot predict the impact of any unforeseen environmental contingencies or new or changed laws or regulations on properties in which the Company holds an interest, or on properties that may be acquired directly or indirectly in the future.
Note D – Investments in Real Estate and Fixed Assets
As of March 31,September 30, 2018, the Company had the following Investments in Real Estate that were consolidated on the Company's balance sheet:
Property Name | Location | Date Acquired | Property Type | # Spaces | Property Size (Acres) | Retail Sq. Ft | Investment Amount | Parking Tenant |
|
MVP Cleveland West 9th (1) | Cleveland, OH | 5/11/2016 | Lot | 260 | 2 | N/A | $5,840,000 | SP + |
33740 Crown Colony (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $3,050,000 | SP + |
MVP San Jose 88 Garage | San Jose, CA | 6/15/2016 | Garage | 328 | 1.33 | N/A | $3,844,000 | Lanier |
MCI 1372 Street | Canton, OH | 7/8/2016 | Lot | 66 | 0.44 | N/A | $700,000 | ABM |
MVP Cincinnati Race Street Garage | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $5,558,000 | SP + |
MVP St. Louis Washington | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $3,007,000 | SP + |
MVP St. Paul Holiday Garage | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,396,000 | Interstate Parking |
MVP Louisville Station Broadway | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,107,000 | Riverside Parking |
White Front Garage Partners | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $11,672,000 | Premier Parking |
Cleveland Lincoln Garage Owners | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.14 | 45,272 | $7,406,000 | SP + |
MVP Houston Preston Lot | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $2,820,000 | iPark Services |
MVP Houston San Jacinto Lot | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,250,000 | iPark Services |
MVP Detroit Center Garage | Detroit, MI | 2/1/2017 | Garage | 1,275 | 1.28 | N/A | $55,476,000 | SP + |
St. Louis Broadway | St Louis, MO | 5/6/2017 | Lot | 161 | 0.96 | N/A | $2,400,000 | St. Louis Parking |
St. Louis Seventh & Cerre | St Louis, MO | 5/6/2017 | Lot | 174 | 1.06 | N/A | $3,300,000 | St. Louis Parking |
MVP Preferred Parking (4) | Houston, TX | 8/1/2017 | Garage/Lot | 530 | 0.75 | 784 | $21,109,000 | iPark Services |
MVP Raider Park Garage | Lubbock, TX | 11/21/2017 | Garage | 1,495 | 2.15 | 20,536 | $11,030,000 | ISOM Management |
MVP PF Ft. Lauderdale | Ft. Lauderdale, FL | 12/15/2017 | Lot | 66 | 0.75 | 4,017 | $3,423,000 | SP + |
MVP PF Memphis Court | Memphis, TN | 12/15/2017 | Lot | 37 | 0.41 | N/A | $1,208,000 | SP + |
MVP PF Memphis Poplar | Memphis, TN | 12/15/2017 | Lot | 125 | 0.86 | N/A | $3,735,000 | Best Park |
MVP PF St. Louis | St Louis, MO | 12/15/2017 | Lot | 179 | 1.22 | N/A | $5,145,000 | SP + |
Mabley Place Garage (2) | Cincinnati, OH | 12/15/2017 | Garage | 775 | 0.9 | 8,400 | $21,185,000 | SP + |
MVP Denver Sherman | Denver, CO | 12/15/2017 | Lot | 28 | 0.14 | N/A | $705,000 | Denver School |
MVP Fort Worth Taylor | Fort Worth, TX | 12/15/2017 | Garage | 1,013 | 1.18 | 11,828 | $27,663,000 | SP + |
Property Name | Location | Date Acquired | Property Type | # Spaces | Property Size (Acres) | Retail Sq. Ft | Investment Amount | Parking Tenant |
|
MVP Cleveland West 9th (1) | Cleveland, OH | 5/11/2016 | Lot | 260 | 2.0 | N/A | $5,823,000 | SP + |
33740 Crown Colony (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $3,049,000 | SP + |
MVP San Jose 88 Garage | San Jose, CA | 6/15/2016 | Garage | 328 | 1.33 | N/A | $3,825,000 | Lanier |
MCI 1372 Street | Canton, OH | 7/8/2016 | Lot | 66 | 0.44 | N/A | $700,000 | ABM |
MVP Cincinnati Race Street Garage | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $5,558,000 | SP + |
MVP St. Louis Washington | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $3,000,000 | SP + |
MVP St. Paul Holiday Garage | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $8,396,000 | Interstate Parking |
MVP Louisville Station Broadway | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $3,107,000 | Riverside Parking |
White Front Garage Partners | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $11,673,000 | Premier Parking |
Cleveland Lincoln Garage Owners | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.14 | 45,272 | $7,406,000 | SP + |
MVP Houston Preston Lot | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $2,820,000 | iPark Services |
MVP Houston San Jacinto Lot | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $3,250,000 | iPark Services |
(Tabletable continued)
MVP Detroit Center Garage | Detroit, MI | 2/1/2017 | Garage | 1,275 | 1.28 | N/A | $55,307,000 | SP + | |
St. Louis Broadway | St Louis, MO | 5/6/2017 | Lot | 161 | 0.96 | N/A | $2,400,000 | St. Louis Parking | |
St. Louis Seventh & Cerre | St Louis, MO | 5/6/2017 | Lot | 174 | 1.06 | N/A | $3,300,000 | St. Louis Parking | |
MVP Preferred Parking | Houston, TX | 8/1/2017 | Garage | 500 | 0.75 | 784 | $20,500,000 | iPark Services | |
MVP Raider Park Garage | Lubbock, TX | 11/21/2017 | Garage | 1,495 | 2.15 | 20,536 | $11,030,000 | ISOM Management | |
MVP PF Ft. Lauderdale | Ft. Lauderdale, FL | 12/15/2017 | Lot | 66 | 0.75 | 4,017 | $3,423,000 | SP + | |
MVP PF Kansas City | Kansas City, MO | 12/15/2017 | Lot | 164 | 1.18 | N/A | $1,812,000 | SP + | |
MVP PF Memphis Poplar | Memphis, TN | 12/15/2017 | Lot | 125 | 0.86 | N/A | $3,735,000 | Best Park | |
MVP PF Memphis Court | Memphis, TN | 12/15/2017 | Lot | 37 | 0.41 | N/A | $1,208,000 | SP + | |
MVP PF St. Louis | St Louis, MO | 12/15/2017 | Lot | 179 | 1.22 | N/A | $5,145,000 | SP + | |
Mabley Place Garage (2) | Cincinnati, OH | 12/15/2017 | Garage | 775 | 0.9 | 8,400 | $21,182,000 | SP + | |
MVP Denver Sherman | Denver, CO | 12/15/2017 | Lot | 28 | 0.14 | N/A | $705,000 | Denver School | |
MVP Fort Worth Taylor | Fort Worth, TX | 12/15/2017 | Garage | 1,013 | 1.18 | 11,828 | $27,662,000 | SP + | |
MVP Milwaukee Old World | Milwaukee, WI | 12/15/2017 | Lot | 54 | 0.26 | N/A | $2,043,000 | SP + | Milwaukee, WI | 12/15/2017 | Lot | 54 | 0.26 | N/A | $2,044,000 | SP + |
MVP St. Louis Convention Plaza | St. Louis, MO | 12/15/2017 | Lot | 221 | 1.26 | N/A | $3,091,000 | SP + | |
MVP Houston Saks Garage | Houston, TX | 12/15/2017 | Garage | 265 | 0.36 | 5,000 | $10,391,000 | iPark Services | Houston, TX | 12/15/2017 | Garage | 265 | 0.36 | 5,000 | $10,391,000 | iPark Services |
MVP St. Louis Lucas | St. Louis, MO | 12/15/2017 | Lot | 202 | 1.07 | N/A | $3,695,000 | SP + | |
MVP Milwaukee Wells | Milwaukee, WI | 12/15/2017 | Lot | 100 | 0.95 | N/A | $4,873,000 | PCAM, LLC | Milwaukee, WI | 12/15/2017 | Lot | 100 | 0.95 | N/A | $5,083,000 | Symphony |
MVP Wildwood NJ Lot 1 (3) | Wildwood, NJ | 12/15/2017 | Lot | 29 | 0.26 | N/A | $745,000 | SP + | Wildwood, NJ | 12/15/2017 | Lot | 29 | 0.26 | N/A | $745,000 | SP + |
MVP Wildwood NJ Lot 2 (3) | Wildwood, NJ | 12/15/2017 | Lot | 45 | 0.31 | N/A | $886,000 | SP+ | Wildwood, NJ | 12/15/2017 | Lot | 45 | 0.31 | N/A | $886,000 | SP+ |
MVP Indianapolis City Park | Indianapolis, IN | 12/15/2017 | Garage | 370 | 0.47 | N/A | $10,813,000 | ABM | Indianapolis, IN | 12/15/2017 | Garage | 370 | 0.47 | N/A | $10,934,000 | ABM |
MVP KC Cherry Lot | Kansas City, MO | 12/15/2017 | Lot | 84 | 0.6 | N/A | $987,000 | SP + | |
MVP Indianapolis WA Street | Indianapolis, IN | 12/15/2017 | Lot | 141 | 1.07 | N/A | $5,749,000 | Denison | Indianapolis, IN | 12/15/2017 | Lot | 141 | 1.07 | N/A | $5,749,000 | Denison |
MVP Minneapolis Venture | | Minneapolis, MN | 12/15/2017 | Lot | 201 | 2.48 | N/A | $4,012,000 | |
Minneapolis City Parking | Minneapolis, MN | 12/15/2017 | Lot | 270 | 1.98 | N/A | $9,838,000 | SP + | Minneapolis, MN | 12/15/2017 | Lot | 268 | 1.98 | N/A | $9,838,000 | SP + |
MVP Indianapolis Meridian | Indianapolis, IN | 12/15/2017 | Lot | 36 | 0.24 | N/A | $1,601,000 | Denison | Indianapolis, IN | 12/15/2017 | Lot | 36 | 0.24 | N/A | $1,601,000 | Denison |
MVP Milwaukee Clybourn | Milwaukee, WI | 12/15/2017 | Lot | 15 | 0.06 | N/A | $262,000 | Secure | Milwaukee, WI | 12/15/2017 | Lot | 15 | 0.06 | N/A | $262,000 | Secure |
MVP Milwaukee Arena Lot | Milwaukee, WI | 12/15/2017 | Lot | 75 | 1.11 | N/A | $4,632,000 | SP + | Milwaukee, WI | 12/15/2017 | Lot | 75 | 1.11 | N/A | $4,631,000 | SP + |
MVP Clarksburg Lot | Clarksburg, WV | 12/15/2017 | Lot | 94 | 0.81 | N/A | $715,000 | ABM | Clarksburg, WV | 12/15/2017 | Lot | 94 | 0.81 | N/A | $715,000 | ABM |
MVP Denver Sherman 1935 | Denver, CO | 12/15/2017 | Lot | 72 | 0.43 | N/A | $2,534,000 | SP + | Denver, CO | 12/15/2017 | Lot | 72 | 0.43 | N/A | $2,533,000 | SP + |
MVP Bridgeport Fairfield | Bridgeport, CT | 12/15/2017 | Garage | 878 | 1.01 | 4,349 | $8,256,000 | SP + | Bridgeport, CT | 12/15/2017 | Garage | 878 | 1.01 | 4,349 | $8,256,000 | SP + |
MVP New Orleans Rampart | New Orleans, LA | 2/1/2018 | Lot | 78 | 0.44 | N/A | $8,105,000 | 342 N. Rampart | New Orleans, LA | 2/1/2018 | Lot | 78 | 0.44 | N/A | $8,105,000 | 342 N. Rampart |
MVP Hawaii Marks Garage | | Honolulu, HI | 6/21/2018 | Garage | 311 | 0.77 | 16,205 | 20,834,000 | SP + |
Construction in progress | Construction in progress | | | | | | $2,004,000 | | Construction in progress | | | | | | $4,121,000 | |
Software | | | | | | | $63,000 | | | | | | | | $63,000 | |
Total Investment in real estate and fixed assets | Total Investment in real estate and fixed assets | | | | | $297,299,000 | | Total Investment in real estate and fixed assets | | | | | $315,832,000 | |
(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. |
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(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's board of directors (including a majority of the independent directors) not otherwise interested in such transaction 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 the Company's common stock from third party investors in exchange for various trust deed investments. During the threenine months ending March 31,September 30, 2018 and 2017, VRM II received approximately $33,000 and $8,000,$11,900, respectively, in distributions in accordance with the Company's DRIP program.
During November 2017, Corporate Center Sunset Holdings, an entity owned by VRM I and VRM II, acquired 1,039,620 shares pursuant to a membership purchase agreement unrelated to the Company. As of March 31,September 30, 2018 Corporate Center Sunset Holdings had distributed all acquired shares to VRM I and VRM II.
As of March 31,September 30, 2018, the Sponsor owned 9,108 shares, VRM I owned 136,834 shares and VRM II owned 364,960 shares of the Company's outstanding common stock.
Ownership of MVP IREIT
Prior to the Merger, the Company held 476,784 shares of MVP IREIT common stock. Upon completion of the Merger, these shares were retired. During the the three and nine months ended March 31,September 30, 2017, MVP IREIT paid the Company approximately $52,000$23,000 and $122,000, respectively, in stock distributions. In addition, the Company received 5,6742,544 shares of MVP I Common Stock in accordance with its DRIP program. During the three and nine months ended September 30, 2018, there were no distributions due to the completion of the Merger.
Ownership of the Advisor
VRM I and VRM II own 40% and 60%, respectively, of the 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 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. Michael Shustek has waived his rights to receive the 40% net profits of the Advisor
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 paypaid 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 months ended March 31,September 30, 2018, no fees were incurred. During the nine months ended September 30, 2018, the Company paid approximately $0.8 million in selling commissions, of which $0.2 million 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 its affiliate, MVP American Securities, LLC ("AMS"), 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 months ended March 31,September 30, 2018, no fees were incurred. During the nine months ended September 30, 2018, the Company paid approximately $0.2 million to AMS as compensation.
Fees Paid in Connection with the Operations of the Company
Starting on December 15, 2017, in connection with the Merger, all of the following fees were terminated except for a 1.1% asset management fee.
Prior to the Merger, the Advisor or its affiliates received an acquisition fee of 2.25% of the purchase price of any real estate provided, however, the Company did not pay any fees when acquiring loans from affiliates. In accordance with the amended and restated advisory agreement there were zero acquisition fees for the three months ended March 31, 2018. During the three months ended March 31, 2017, approximately $1.1 million in acquisition fees had been earned by the Advisor.
The Advisor or its affiliates were entitled to be reimbursed for actual expenses paid or incurred in the investment. During the three months ended March 31, 2018, approximately $0.9 million in reimbursable expenses were incurred by the advisor. During the three months ended March 31, 2017, no such expenses were incurred.
Prior to the merger, the Advisor or its affiliates received a monthlyreceives an asset management fee at an annual rate equal to 1.0% of the cost of all the assets then held by the Company. Currently, the Advisor or its affiliates receives a rate equal to 1.1% of the cost of all assets 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. PriorPursuant to the Merger, the Company was to determine the Company's NAV on a date not later than the Valuation Date. Following the Valuation Date,Amended and Restated Advisory Agreement, the asset management fee wasmay not exceed $2 million per annum until the earlier of such time, if ever, 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 equal to or greater than $0.3125 per share of common stock (an amount intended to reflect a 5% or greater annualized return on $25.00 per share of common stock) for two consecutive quarters, on a fully diluted basis. All amounts of the asset management fee in excess of $2 million per annum, 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 condition for payment is satisfied. From and after May 29, 2018 (or the Valuation Date), the asset management fee shall be calculated based on the lower of the value of the Company's assets rather thanand their historical cost. Asset management fees for the three and nine months ended March 31,September 30, 2018 were approximately $0.3 million and $2.0 million, respectively. Asset management fees for the three and nine months ended September 30, 2017 were approximately $0.3 million and $0.8 million, respectively. As of September 30, 2018, the Company has subordinated approximately $0.6 million in asset management fees which will be accrued and $0.2 million, respectively.paid once the above criteria are met.
The Company was to reimburse the Advisor or its affiliates for costs of providing administrative services, subject to the limitation that it 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 the Company made its 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. The Company was not to reimburse the Advisor for personnel costs in connection with services for which the Advisor received 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, the Company was not to 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 March 31,September 30, 2018, approximately $0.8$0.5 and $2.0 million, respectively, in operating expenses were incurred by the Company reimbursable to the Advisor. During the three and nine months ended March 31,September 30, 2017 no operating expenses had been reimbursed to the Advisor.
In connection with the Merger, the previousOn September 21, 2018, we entered into a Third Amended and Restated Advisory Agreement with the Advisor was amendedAdvisor. The Third Amended Advisory Agreement will become effective and replace the existing advisory agreement upon the consummationlisting of the Mergershares of our common stock on The Nasdaq Global Market. For more information, please see "Management's Discussion And Analysis Of Financial Condition And Results Of Operations – Overview" below. The Third Amended and Restated Advisory Agreement is filed as an exhibit to eliminate all fees except a 1.1% asset management fee, which will be limited to $2.0 million per year until the combined company:
· | holds assets with an Appraised Value equal to or in excess of $500,000,000 or, |
· | the Company reports AFFO per share of 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 connectionCompany's Current Report on Form 8-K filed with the Merger and pursuant to the Termination Agreement, at the effective timeSEC on September 26, 2018.