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

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31,September 30, 2020

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: 000-55760


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.)

9130 WEST POST ROAD SUITE 200, LAS VEGAS, NV 89148
 (Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, including Area Code: (702) 534-5577

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X] No [   ]

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ]
Accelerated filer [   ]
Non-accelerated filer [X]
Smaller reporting company [X]
Emerging growth company [X]
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [   ] No [ X ]

As of May 13,November 16, 2020, the registrant had 7,327,6977,327,696 shares of common stock outstanding.

TABLE OF CONTENTS

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5
   
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28
30
   
4451
   
4451
   
 
   
44
51
   
45
51
   
46
52
   
47
52
   
47
52
   
47
52
   
48
53
   
 
49
54
   
 
EXHIBIT 31.1
 
   
 
EXHIBIT 31.2
 
   
 
EXHIBIT 32
 




PART I
ITEM 1. FINANCIAL STATEMENTS

THE PARKING REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 As of March 31,  As of December 31,  As of September 30,  As of December 31, 
 2020  2019  2020  2019 
 (unaudited)     (unaudited)    
ASSETSASSETS ASSETS 
Investments in real estate
            
Land and improvements 
$
136,607,000
  
$
136,607,000
  
$
128,284,000
  
$
136,607,000
 
Buildings and improvements 
170,319,000
  
170,276,000
  
163,668,000
  
170,276,000
 
Construction in progress 
1,284,000
  
714,000
  
1,151,000
  
714,000
 
Intangible assets  
2,107,000
   
2,288,000
   
2,107,000
   
2,288,000
 
 
310,317,000
  
309,885,000
  
295,210,000
  
309,885,000
 
Accumulated depreciation  
(13,181,000
)
  
(12,049,000
)
  
(15,789,000
)
  
(12,049,000
)
Total investments in real estate, net
 
297,136,000
  
297,836,000
  
279,421,000
  
297,836,000
 
            
Fixed Assets, net of accumulated depreciation of $51,000 and $42,000 as of March 31, 2020 and December 31, 2019, respectively
 
90,000
  
21,000
 
Fixed Assets, net of accumulated depreciation of $69,000 and $42,000 as of September 30, 2020 and December 31, 2019, respectively
 
72,000
  
21,000
 
Assets held for sale, net of accumulated depreciation of $212,000
 
3,288,000
  
3,288,000
  
--
  
3,288,000
 
Cash
 
5,445,000
  
7,707,000
  
3,466,000
  
7,707,000
 
Cash – restricted
 
2,945,000
  
3,937,000
  
3,428,000
  
3,937,000
 
Prepaid expenses
 
1,281,000
  
1,679,000
  
1,746,000
  
1,679,000
 
Accounts receivable
 
719,000
  
929,000
 
Accounts receivable, net
 
2,832,000
  
929,000
 
Investment in DST
 
2,838,000
  
2,836,000
  
2,931,000
  
2,836,000
 
Right of use leased asset
 
1,364,000
  
--
  
1,309,000
  
--
 
Due from related parties
 
1,000
  
--
 
Other assets
  
117,000
   
111,000
   
190,000
   
111,000
 
Total assets
 
$
315,223,000
  
$
318,344,000
  
$
295,396,000
  
$
318,344,000
 
LIABILITIES AND EQUITYLIABILITIES AND EQUITY LIABILITIES AND EQUITY 
Liabilities
            
Notes payable, net of unamortized loan issuance costs of approximately $1.6 million and $1.8 million as of March 31, 2020 and December 31, 2019, respectively
 
$
158,338,000
  
$
159,120,000
 
Notes payable, net of unamortized loan issuance costs of approximately $1.3 million and $1.8 million as of September 30, 2020 and December 31, 2019, respectively
 
$
158,191,000
  
$
159,120,000
 
Accounts payable and accrued liabilities
 
9,272,000
  
10,883,000
  
10,551,000
  
10,883,000
 
Right of use lease liability
 
1,364,000
  
--
  
1,309,000
  
--
 
Deferred management internalization
 
17,800,000
  
17,800,000
  
17,800,000
  
17,800,000
 
Security deposits
 
138,000
  
138,000
  
138,000
  
138,000
 
Due to related parties
 
--
  
54,000
  
--
  
54,000
 
Deferred revenue
  
49,000
   
104,000
   
122,000
   
104,000
 
Total liabilities
  
186,961,000
   
188,099,000
   
188,111,000
   
188,099,000
 
Commitments and contingencies
 
--
  
--
  
--
  
--
 
Equity
            
The Parking REIT, Inc. Stockholders’ Equity
            
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of March 31, 2020 and December 31, 2019) 
--
  
--
 
Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of March 31, 2020 and December 31, 2019) 
--
  
--
 
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of September 30, 2020 and December 31, 2019) 
--
  
--
 
Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of September 30, 2020 and December 31, 2019) 
--
  
--
 
Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, no shares issued and outstanding 
--
  
--
  
--
  
--
 
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,330,070 and 7,332,811 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively 
--
  
--
 
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,327,696 and 7,332,811 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 
--
  
--
 
Additional paid-in capital 
193,319,000
  
194,137,000
  
191,759,000
  
194,137,000
 
Accumulated deficit  
(67,661,000
)
  
(66,511,000
)
  
(86,520,000
)
  
(66,511,000
)
Total The Parking REIT, Inc. Shareholders’ Equity 
125,658,000
  
127,626,000
  
105,239,000
  
127,626,000
 
Non-controlling interest
  
2,604,000
   
2,619,000
   
2,046,000
   
2,619,000
 
Total equity
  
128,262,000
   
130,245,000
   
107,285,000
   
130,245,000
 
Total liabilities and equity
 
$
315,223,000
  
$
318,344,000
  
$
295,396,000
  
$
318,344,000
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-1-

Table Ofof Contents


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,
 
 2020  2019  2020  2019  2020  2019 
Revenues               
Base rent income
 
$
4,991,000
  
$
5,054,000
  
$
3,132,000
 
$
5,036,000
 
$
11,525,000
 
$
15,126,000
 
Management income
 
303,000
 
--
 
596,000
 
--
 
Percentage rent income
  
327,000
   
301,000
   
75,000
  
1,045,000
  
402,000
  
1,756,000
 
Total revenues
 
5,318,000
  
5,355,000
  
3,510,000
 
6,081,000
 
12,523,000
 
16,882,000
 
               
Operating expenses               
Property taxes
 
665,000
  
793,000
  
955,000
 
734,000
 
2,460,000
 
2,254,000
 
Property operating expense
 
386,000
  
379,000
  
263,000
 
421,000
 
1,374,000
 
1,157,000
 
Asset management expense – related party
 
--
  
854,000
  
--
 
--
 
--
 
854,000
 
General and administrative
 
1,653,000
  
850,000
  
1,452,000
 
1,625,000
 
4,681,000
 
3,737,000
 
Professional fees
 
316,000
  
666,000
 
Professional fees, net of reimbursement of insurance proceeds
 
384,000
 
3,869,000
 
592,000
 
5,598,000
 
Management Internalization
 
--
 
--
 
--
 
32,004,000
 
Acquisition expenses
 
3,000
  
4,000
  
--
 
1,000
 
3,000
 
251,000
 
Depreciation and amortization
  
1,322,000
   
1,308,000
  
1,305,000
 
1,285,000
 
3,948,000
 
3,876,000
 
Impairment
  
6,475,000
  
500,000
  
14,115,000
  
1,452,000
 
Total operating expenses
  
4,345,000
   
4,854,000
   
10,834,000
  
8,435,000
  
27,173,000
  
51,183,000
 
               
Income from operations  
973,000
   
501,000
 
Loss from operations  
(7,324,000
)
  
(2,354,000
)
  
(14,650,000
)
  
(34,301,000
)
               
Other income (expense)               
Interest expense
 
(2,329,000
)
 
(2,356,000
)
 
(2,326,000
)
 
(2,375,000
)
 
(6,910,000
)
 
(7,164,000
)
Gain from sale of investment in real estate
 
--
 
2,294,000
 
694,000
 
2,294,000
 
Other Income
 
151,000
  
31,000
  
--
 
50,000
 
151,000
 
81,000
 
Income from DST
  
50,000
   
70,000
   
44,000
  
52,000
  
143,000
  
170,000
 
Total other expense
  
(2,128,000
)
  
(2,255,000
)
Total other income (expense)
  
(2,282,000
)
  
21,000
  
(5,922,000
)
  
(4,619,000
)
               
Net loss
 
(1,155,000
)
 
(1,754,000
)
 
(9,606,000
)
 
(2,333,000
)
 
(20,572,000
)
 
(38,920,000
)
Less net loss attributable to non-controlling interest
  
(5,000
)
  
(1,000
)
Less net income (expense) attributable to non-controlling interest
  
(530,000
)
  
62,000
  
(563,000
)
  
62,000
 
Net loss attributable to The Parking REIT, Inc.’s stockholders
 
$
(1,150,000
)
 
$
(1,753,000
)
 
$
(9,076,000
)
 
$
(2,395,000
)
 
$
(20,009,000
)
 
$
(38,982,000
)
               
Preferred stock distributions declared - Series A
 
(54,000
)
 
(54,000
)
 
(54,000
)
 
(54,000
)
 
(162,000
)
 
(162,000
)
Preferred stock distributions declared - Series 1
  
(696,000
)
  
(696,000
)
  
(696,000
)
  
(696,000
)
  
(2,088,000
)
  
(2,088,000
)
Net loss attributable to The Parking REIT, Inc.’s common stockholders  
(1,900,000
)
  
(2,503,000
)
 
$
(9,826,000
)
 
$
(3,145,000
)
 
$
(22,259,000
)
 
$
(41,232,000
)
               
Basic and diluted loss per weighted average common share:
               
Net loss per share attributable to The Parking REIT, Inc.’s common stockholders - basic and diluted 
$
(0.26
)
 
$
(0.38
)
 
$
(1.34
)
 
$
(0.45
)
 
$
(3.04
)
 
$
(6.06
)
Distributions declared per common share 
$
--
  
$
--
  
$
--
 
$
--
 
$
--
 
$
--
 
Weighted average common shares outstanding, basic and diluted
  
7,332,480
   
6,542,057
   
7,327,697
  
6,933,520
  
7,329,499
  
6,804,228
 

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


-2-

Table Ofof Contents

THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREENINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)

  Preferred stock  Common stock             
  Number of Shares  Par Value  Number of Shares  Par Value  Additional Paid-in Capital  Accumulated Deficit  Non-controlling interest  Total 
Balance, December 31, 2019  
42,673
   
--
   
7,332,811
   
--
  
$
194,137,000
  
$
(66,511,000
)
 
$
2,619,000
  
$
130,245,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
(10,000
)
  
(10,000
)
Issuance of preferred Series 1
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Redeemed Shares
  
--
   
--
   
(2,741
)
  
--
   
(68,000
)
  
--
   
--
   
(68,000
)
Distributions - Common
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net income (loss)
  
--
   
--
   
--
   
--
   
--
   
(1,150,000
)
  
(5,000
)
  
(1,155,000
)
Balance, March 31, 2020  
42,673
  
$
--
   
7,330,070
  
$
--
  
$
193,319,000
  
$
(67,661,000
)
 
$
2,604,000
  
$
128,262,000
 


 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, 2018  
42,673
  
$
--
   
6,542,797
  
$
--
  
$
183,382,000
  
$
(23,953,000
)
 
$
2,691,000
  
$
162,120,000
 
Balance, December 31, 2019  
42,673
  
$
--
   
7,332,811
  
$
--
  
$
194,137,000
  
$
(66,511,000
)
 
$
2,619,000
  
$
130,245,000
 
Distributions to non-controlling interest
 
--
  
--
  
--
  
--
  
--
  
--
  
(11,000
)
 
(11,000
)
 
--
  
--
  
--
  
--
  
--
  
--
  
(10,000
)
 
(10,000
)
Redeemed Shares
 
--
  
--
  
(2,433
)
 
--
  
(60,000
)
 
--
  
--
  
(60,000
)
 
--
  
--
  
(2,741
)
 
--
  
(68,000
)
 
--
  
--
  
(68,000
)
Distributions – Series A
 
--
  
--
  
-
  
--
  
(54,000
)
 
--
  
--
  
(54,000
)
 
--
  
--
  
--
  
--
  
(54,000
)
 
--
  
--
  
(54,000
)
Distributions – Series 1
 
--
  
--
  
--
  
--
  
(696,000
)
 
--
  
--
  
(696,000
)
 
--
  
--
  
--
  
--
  
(696,000
)
 
--
  
--
  
(696,000
)
Net income (loss)
  
--
   
--
   
--
   
--
   
--
   
(1,753,000
)
  
(1,000
)
  
(1,754,000
)
Balance, March 31, 2019  
42,673
  
$
--
   
6,540,364
  
$
--
  
$
182,572,000
  
$
(25,706,000
)
 
$
2,679,000
  
$
159,545,000
 
Net loss
  
--
   
--
   
--
   
--
   
--
   
(1,150,000
)
  
(5,000
)
  
(1,155,000
)
Balance, March 31, 2020  
42,673
  
$
--
   
7,330,070
  
$
--
  
$
193,319,000
  
$
(67,661,000
)
 
$
2,604,000
  
$
128,262,000
 
Distributions to non-controlling interest
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
--
 
Issuance of common stock
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
--
 
Redeemed Shares
 
--
  
--
  
(2,374
)
 
--
  
(60,000
)
 
--
  
--
  
(60,000
)
Distributions – Series A
 
--
  
--
  
--
  
--
  
(54,000
)
 
--
  
--
  
(54,000
)
Distributions – Series 1
 
--
  
--
  
--
  
--
  
(696,000
)
 
--
  
--
  
(696,000
)
Net (loss)
  
--
   
--
   
--
   
--
   
--
   
(9,783,000
)
  
(28,000
)
  
(9,811,000
)
Balance, June 30, 2020  
42,673
  
$
--
   
7,327,696
  
$
--
  
$
192,509,000
  
$
(77,444,000
)
 
$
2,576,000
  
$
117,641,000
 
Distributions to non-controlling interest
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
--
 
Issuance of common stock
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
--
 
Redeemed Shares
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
--
 
Distributions – Series A
 
--
  
--
  
--
  
--
  
(54,000
)
 
--
  
--
  ��
(54,000
)
Distributions – Series 1
 
--
  
--
  
--
  
--
  
(696,000
)
 
--
  
--
  
(696,000
)
Net (loss)
  
--
   
--
   
--
   
--
   
--
   
(9,076,000
)
  
(530,000
)
  
(9,606,000
)
Balance, September 30, 2020  
42,673
  
$
--
   
7,327,696
  
$
--
  
$
191,759,000
  
$
(86,520,000
)
 
$
2,046,000
  
$
107,285,000
 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
-3-

Table Ofof Contents


THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(UNAUDITED)

  Preferred stock  Common stock             
  Number of Shares  Par Value  Number of Shares  Par Value  Additional Paid-in Capital  Accumulated Deficit  Non-controlling interest  Total 
Balance, December 31, 2018  
42,673
  
$
--
   
6,542,797
  
$
--
  
$
183,382,000
  
$
(23,953,000
)
 
$
2,691,000
  
$
162,120,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
(11,000
)
  
(11,000
)
Redeemed shares
  
--
   
--
   
(2,433
)
  
--
   
(60,000
)
  
--
   
--
   
(60,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net loss
  
--
   
--
   
--
   
--
   
--
   
(1,753,000
)
  
(1,000
)
  
(1,754,000
)
Balance, March 31, 2019  
42,673
  
$
--
   
6,540,364
  
$
--
  
$
182,572,000
  
$
(25,706,000
)
  
2,679,000
  
$
159,545,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
(15,000
)
  
(15,000
)
Issuance of common stock
  
--
   
--
   
400,000
   
--
   
7,000,000
   
--
   
--
   
7,000,000
 
Redeemed shares
  
--
   
--
   
(6,430
)
  
--
   
(157,000
)
  
--
   
--
   
(157,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net income (loss)
  
--
   
--
   
--
   
--
   
--
   
(34,834,000
)
  
1,000
   
(34,833,000
)
Balance, June 30, 2019  
42,673
  
$
--
   
6,933,934
  
$
--
  
$
188,665,000
  
$
(60,540,000
)
 
$
2,665,000
  
$
130,790,000
 
Distributions to non-controlling interest
  
--
   
--
   
--
   
--
   
--
   
--
   
(16,000
)
  
(16,000
)
Issuance of common stock
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Redeemed shares
  
--
   
--
   
(681
)
  
--
   
(17,000
)
  
--
   
--
   
(17,000
)
Distributions – Series A
  
--
   
--
   
--
   
--
   
(54,000
)
  
--
   
--
   
(54,000
)
Distributions – Series 1
  
--
   
--
   
--
   
--
   
(696,000
)
  
--
   
--
   
(696,000
)
Net income (loss)
  
--
   
--
   
--
   
--
   
--
   
(2,395,000
)
  
62,000
   
(2,333,000
)
Balance, September 30, 2019  
42,673
  
$
--
   
6,933,253
  
$
--
  
$
187,898,000
  
$
(62,935,000
)
 
$
2,711,000
  
$
127,674,000
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents

THE PARKING REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 For The Three Months Ended March 31,  For The Nine Months Ended September 30, 
 2020  2019  2020  2019 
Cash flows from operating activities:           
Net Loss 
$
(1,155,000
)
 
$
(1,754,000
)
 
$
(20,572,000
)
 
$
(38,920,000
)
Adjustments to reconcile net loss to net cash used in operating activities:           
Depreciation and amortization expense 
1,322,000
  
1,308,000
  
3,948,000
 
3,876,000
 
Amortization of loan costs 
209,000
  
222,000
  
614,000
 
688,000
 
Amortization of right of use lease assets 
84,000
 
--
 
Gain from sale of investment in real estate 
(694,000
)
 
(2,294,000
)
Deferred management internalization consideration 
--
 
31,800,000
 
Impairment 
14,115,000
 
1,452,000
 
Income from DST 
(50,000
)
 
(70,000
)
 
(143,000
)
 
(170,000
)
Changes in operating assets and liabilities           
Due to/from related parties 
(54,000
)
 
3,000
  
(55,000
)
 
3,000
 
Accounts payable 
(1,611,000
)
 
(881,000
)
 
(1,786,000
)
 
2,638,000
 
Right of use lease asset 
(1,364,000
)
 
--
 
Right of use lease liability 
1,364,000
  
--
 
Loan Fees 
(1,000
)
 
(253,000
)
Lease liability 
(84,000
)
 
--
 
Loan fees 
(44,000
)
 
(275,000
)
Assets held for sale 
--
 
(54,000
)
Security deposits 
--
 
--
 
Other assets 
(6,000
)
 
(15,000
)
 
(79,000
)
 
(33,000
)
Deferred revenue 
(55,000
)
 
(38,000
)
 
18,000
 
106,000
 
Accounts receivable 
210,000
  
439,000
  
(603,000
)
 
(305,000
)
Prepaid expenses  
398,000
   
(233,000
)
  
(67,000
)
  
(1,715,000
)
Net cash used in operating activities  
(793,000
)
  
(1,272,000
)
  
(5,348,000
)
  
(3,203,000
)
Cash flows from investing activities:           
Building improvements 
(613,000
)
 
(246,000
)
 
(921,000
)
 
(1,324,000
)
Fixed asset purchase 
(78,000
)
 
--
  
(78,000
)
 
--
 
Proceeds from Investments 
48,000
  
52,000
  
48,000
 
152,000
 
Proceeds from sale of investment in real estate 
1,436,000
 
3,674,000
 
Payment of deposit made for purchase of investment in real estate or debt 
--
  
(97,000
)
 
--
 
(97,000
)
Deposits applied to purchase of investment in real estate or debt  
--
   
97,000
   
--
  
97,000
 
Net cash used in investing activities  
(643,000
)
  
(194,000
)
Net cash provided by investing activities  
485,000
  
2,502,000
 
Cash flows from financing activities           
Proceeds from notes payable 
--
  
5,500,000
  
3,545,000
 
9,181,000
 
Payments on notes payable 
(990,000
)
 
(4,262,000
)
 
(2,544,000
)
 
(5,666,000
)
Distribution to non-controlling interest 
(10,000
)
 
(11,000
)
 
(10,000
)
 
(42,000
)
Redeemed shares 
(68,000
)
 
(60,000
)
 
(128,000
)
 
(234,000
)
Preferred dividends paid to stockholders  
(750,000
)
  
(750,000
)
  
(750,000
)
  
(2,250,000
)
Net cash provided by (used in) financing activities  
(1,818,000
)
  
417,000
 
Net cash provided by financing activities  
113,000
  
989,000
 
Net change in cash and cash equivalents and restricted cash  
(3,254,000
)
  
(1,049,000
)
  
(4,750,000
)
  
288,000
 
Cash and cash equivalents and restricted cash, beginning of period  
11,644,000
   
9,435,000
   
11,644,000
  
9,435,000
 
Cash and cash equivalents and restricted cash, end of period 
$
8,390,000
  
$
8,386,000
  
$
6,894,000
 
$
9,723,000
 
      
Reconciliation of Cash and Cash Equivalents and Restricted Cash:           
Cash and cash equivalents at beginning of period 
$
7,707,000
  
$
5,106,000
  
$
7,707,000
 
$
5,106,000
 
Restricted cash at beginning of period  
3,937,000
   
4,329,000
  
3,937,000
 
4,329,000
 
Cash and cash equivalents and restricted cash at beginning of period 
$
11,644,000
  
$
9,435,000
  
$
11,644,000
 
$
9,435,000
 
      
Cash and cash equivalents at end of period 
$
5,445,000
  
$
5,628,000
  
$
3,466,000
 
$
6,358,000
 
Restricted cash at end of period  
2,945,000
   
2,758,000
  
3,428,000
 
3,365,000
 
Cash and cash equivalents and restricted cash at end of period 
$
8,390,000
  
$
8,386,000
  
$
6,894,000
 
$
9,723,000
 
Supplemental disclosures of cash flow information:           
Interest Paid
 
$
2,120,000
  
$
2,134,000
  
$
6,297,000
 
$
6,477,000
 
Non-cash investing and financing activities:           
Dividends declared not yet paid 
$
250,000
  
$
250,000
  
$
1,751,000
 
$
250,000
 
Deposits applied to purchase of investment in real estate or financing 
$
--
 
$
(97,000
)
Deferred management internalization 
$
--
 
$
24,800,000
 
Issuance of common stock – internalization 
$
--
 
$
7,000,000
 
Payments on note payable through sale of investment in real estate 
$
(2,500,000
)
 
$
(2,000,000
)
Recognition of use lease asset / liability 
$
1,393,000
 
$
--
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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Table Ofof Contents


THE PARKING REIT, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,SEPTEMBER 30, 2020
(UNAUDITED)

Note A — Organization and Business Operations

The Parking REIT, Inc., formerly known as MVP REIT II, Inc. (the “Company,” “we,” “us” or “our”), is a Maryland corporation formed on May 4, 2015 and has elected to be taxed, and subject to the discussion below under the heading Income Taxes in Note B, has operated in a manner that will allowallowed the Company to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2017.2017 through December 31, 2019.  As a result of the COVID-19 pandemic, the Company has entered into temporary lease amendments with some of its tenants. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020.  These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters.  If implemented, these options and strategies, may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of these options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful  or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020.  If we fail to qualify as a REIT for our taxable year ended December 31, 2020, we would no longer be required to make distributions of our annual taxable income in order to maintain our REIT status and any distributions we make would not be deductible.  Moreover, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for the four taxable years following 2020.  We believe that we may not be entitled to this statutory relief, and there can be no assurances that we will be able to obtain such relief.

The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada. To a lesser extent, the Company may also invest in parking properties that contain other sources of rental income, potentially including office, retail, storage, residential, billboard or cell towers.

The Company is the sole general partner of MVP REIT II Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts 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 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.

The Company’s former advisor is MVP Realty Advisors, LLC, dba The Parking REIT Advisors (the “former Advisor”), a Nevada limited liability company, which is owned 60% by Vestin Realty Mortgage II, Inc. (“VRM II”) and 40% by Vestin Realty Mortgage I, Inc. (“VRM I”). Prior to the Internalization (as defined below), the former Advisor was 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 among the Company, the Operating Partnership and the former Advisor (the “Amended and Restated Advisory Agreement”), which became effective upon consummation of the Merger (as such term is defined below). VRM II and VRM I are Maryland corporations that trade on the OTC pink sheets and were managed by Vestin Mortgage, LLC, an affiliate of the former Advisor, prior to being internalized in January 2018.

As part of the Company’s initial capitalization, 8,000 shares of common stock were sold for $200,000 to an affiliate of the former Advisor (as defined below).

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Table of Contents

Merger of MVP REIT with Merger Sub, LLC

On May 26, 2017, the Company, MVP REIT, Inc., a Maryland corporation (“MVP I”), MVP Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the former Advisor entered into an agreement and plan of merger (the “Merger Agreement”), pursuant to which MVP I would merge with and into Merger Sub (the “Merger”). On December 15, 2017, the Merger was consummated. Following the Merger, the Company contributed 100% of its equity interests in Merger Sub to the Operating Partnership.

At the effective time of the Merger, each share of MVP I common stock, par value $0.001 per share, that was issued and outstanding immediately prior to the Merger (the “MVP I Common Stock”), was converted into the right to receive 0.365 shares of Company common stock. A total of approximately 3.9 million shares of Company common stock were issued to former MVP I stockholders, and former MVP I stockholders, immediately following the Merger, owned approximately 59.7% of the Company's common stock. The Company was subsequently renamed “The Parking REIT, Inc.”

Capitalization

As of March 31,September 30, 2020, the Company had 7,330,0707,327,696 shares of common stock issued and outstanding. On December 31, 2016, the Company ceased all selling efforts for the initial public offering of its common stock (the “Common Stock Offering”). The Company accepted additional subscriptions through March 31, 2017, the last day of the Common Stock Offering. In connection with its formation, the Company sold 8,000 shares of common stock to MVP Capital Partners II, LLC (the “Sponsor”) for $200,000.
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Table Of Contents


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 had 2,862 Series A shares issued and outstanding as of March 31,September 30, 2020.

On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland, Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock par value $0.0001 per share (the “Series 1”). 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 and closed the offering on January 31, 2018. The Company 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 as of March 31,September 30, 2020.

Note B — Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited condensed consolidated financial statements of the Company are prepared 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, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. 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, 2019.

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

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the threenine months ended March 31,September 30, 2020, the Company had a net loss of $1.2$20.6 million and had $8.4$6.9 million in cash, cash equivalents and restricted cash. In connection with preparing the condensed consolidated financial statements for the three and nine months ended March 31,September 30, 2020, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through May 13,November 16, 2021.
-7-
Table of Contents

Management has implemented the following plan to address the Company’s liquidity over the next twelve months plus a day from the filing of this Quarterly Report:

The Company has received unsolicited offers, from third parties, to purchase properties and executed a PSA forcompleted the sale of the San Jose, California garage on February 25,May 26, 2020 from a third-party buyer. The buyer’s earnest money depositat the contract price of $200,000 became nonrefundable on March 27, 2020. On May 5, 2020, the buyer provided an additional nonrefundable deposit of $250,000 to extend the closing date to May 25, 2020.$4.1 million. See Note I – Assets Held for SaleDisposition of Investment in Real Estate of this Quarterly Report for additional information.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A Preferred stock, however, such distributions will continue to accrue in accordance with the terms of the Series A.
On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1 Preferred Stock, however, such distributions will continue to accrue in accordance with the terms of the Series 1.
On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
The Company is in preliminarycontinuing to have discussions with its lenders including Bank of America, to obtain waivers from certain liquidity requirements and defer payments due under its loans in light of the current economic conditions. However, there can be no assuranceconditions and entered into one loan modification during the quarter ended June 30, 2020 and five loan modifications during the quarter ended September 30, 2020.
While the Company is currently unable to completely estimate the impact that the CompanyCOVID-19 pandemic and efforts to contain its spread will reach any such agreement with its lenders. See Note R – Subsequent Events for additional information.
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Table Of Contents


The Company expects to allowhave on the Company’s business and on its tenants, to defer their base rent payments due toas of September 30, 2020, the Company under its leaseshas entered into thirty-five lease amendments with its tenants,eight tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in orderrent for a period of four to assist tenants with the impactseven months, (ii) conversion of the current COVID-19 pandemic. See Note R – Subsequent Events for additional information.lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease.
The Company applied for the Paycheck Protection Program loan, guaranteed by the Small Business Administration (“SBA”), through Key Bank National Association, Inc., on April 3, 2020. This loan program is for companies with 500 or less employees, under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed by President Trump on March 27, 2020. On April 23, 2020 the Company received the funding for its CARES Act loan of approximately $348,000. Because these funds were used exclusively for employee payroll management expects this loan will not be required to be paid back under the terms of the CARES Act.
The Company is in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of this loan on terms the Company can satisfy; however, there can be no assurance this option will be exercised.  If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral. See Note R – Subsequent EventsCompany Indebtedness in Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
The Company has plans to dispose of an asset within the next twelve months. Management disposed of two assets in 2019 and one asset during the nine - months ended September 30, 2020.

If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. If the Company is unable to obtain additional financing, it may be required to significantly scale back its business and operations.  The Company’s ability to raise additional capital will also be impacted by the recent outbreak of COVID-19.

Based on the Company’sthis current business plan, the Company believes its existing cash, projectedanticipated cash collections and cash inflows will beis sufficient to meet its anticipated cash requirementsconduct planned operations for at least twelve months afterone year from the March 31,issuance of the September 30, 2020 financial statements are issued.statements.

-8-

Consolidation

The Company’s consolidated financial statements include its accounts, the accounts of the Company’s assets that were sold during 2020 and 2019 (as applicable), the accounts of its subsidiaries, Operating Partnership and all of the following subsidiaries. All intercompany profits and losses, balances and transactions are eliminated in consolidation. The following list includes the subsidiaries that are included in the Company’s consolidated financial statements, not the number of properties owned by the Company at March 31,September 30, 2020 and 2019.

MVP PF Memphis Poplar 2013, LLC
MVP Indianapolis Meridian Lot, LLC
White Front Garage Partners, LLC
MVP PF St. Louis 2013, LLC
MVP Milwaukee Clybourn, LLC
Cleveland Lincoln Garage, LLC
Mabley Place Garage, LLC
MVP Milwaukee Arena Lot, LLC
MVP Houston Preston, LLC
MVP Denver Sherman, LLC
MVP Clarksburg Lot, LLC
MVP Houston San Jacinto Lot, LLC
MVP Fort Worth Taylor, LLC
MVP Denver Sherman 1935, LLC
MVP Detroit Center Garage, LLC
MVP Milwaukee Old World, LLC
MVP Bridgeport Fairfield Garage, LLC
St. Louis Broadway, LLC
MVP Houston Saks Garage, LLC
West 9th Street Properties II, LLC
St. Louis Seventh & Cerre, LLC
MVP Milwaukee Wells, LLC
MVP San Jose 88 Garage, LLC
MVP Preferred Parking, LLC
MVP Wildwood NJ Lot, LLC
MCI 1372 Street, LLC
MVP Raider Park Garage, LLC
MVP Indianapolis City Park, LLC
MVP Cincinnati Race Street, LLC
MVP New Orleans Rampart, LLC
MVP Indianapolis WA Street Lot, LLC
MVP St. Louis Washington, LLC
MVP Hawaii Marks Garage, LLC
Minneapolis City Parking, LLC
MVP St. Paul Holiday Garage, LLC
 
MVP Minneapolis Venture, LLC
MVP Louisville Station Broadway, LLC
 

Under GAAP, the Company’s consolidated financial statements will also include the accounts of its consolidated subsidiaries and joint ventures in which the Company is the primary beneficiary, or in which the Company has a controlling interest. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, the Company’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 fourteen and fifteensixteen parking tenants as of March 31,tenants/operators during the nine months ended September 30, 2020 and 2019.2019, respectively. One tenant,tenant/operator, SP Plus Corporation (Nasdaq: SP) (“SP+”), represented 59.6%61.0% of the Company’s base parking rental revenue for the threenine months ended March 31,September 30, 2020.
-7-

SP+ is one of the largest providers of parking management in the United States. As of March 31,September 30, 2020, SP+ managed approximately 3,1003,200 locations in North America.

-9-

Below is a table that summarizes parking rent by tenant:tenant/operator as a percentage of the Company’s total base parking rental revenue for the periods presented:

 For The Three Months Ended March 31,  For The Nine Months Ended September 30, 
Parking Tenant 2020  2019  2020  2019 
SP +
 
59.6
%
 
57.7
%
 
61.0
%
 
58.1
%
Premier Parking
 
15.7
%
 
16.7
%
 
15.9
%
 
16.3
%
Denison
 
6.4
%
 
2.4
%
ISOM Management
 
5.1
%
 
4.1
%
Interstate Parking
 
2.8
%
 
2.9
%
342 N Rampart
 
2.0
%
 
3.1
%
TNSH, LLC
 
1.5
%
 
1.2
%
Best Park
 
1.4
%
 
0.3
%
St. Louis Parking
 
1.3
%
 
2.1
%
Lanier
 
1.0
%
 
2.6
%
ABM
 
4.2
%
 
4.5
%
 
0.7
%
 
4.3
%
ISOM Management
 
3.9
%
 
4.2
%
342 N Rampart
 
3.6
%
 
2.9
%
Interstate Parking
 
2.6
%
 
2.8
%
Denison
 
2.3
%
 
2.4
%
Lanier
 
2.2
%
 
2.6
%
St. Louis Parking
 
2.1
%
 
2.1
%
Best Park
 
1.3
%
 
1.0
%
TNSH, LLC
 
1.2
%
 
1.2
%
Riverside Parking
 
1.0
%
 
1.0
%
 
0.6
%
 
1.0
%
Denver School
 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
Secure
 
0.1
%
 
0.1
%
 
0.1
%
 
0.1
%
Premium Parking
 
--
  
0.6
%
 
--
  
1.3
%

In addition, the Company had concentrations in various cities based on parking rental revenue for the threenine months ended March 31,September 30, 2020 and 2019, as well as concentrations in various cities based on the real estate the Company owned as March 31,September 30, 2020 and December 31, 2019. The below tables summarize this information by city.

City Concentration for Parking Rental RevenueCity Concentration for Parking Rental Revenue City Concentration for Parking Rental Revenue 
 For the Three Months Ended March 31,  For the Nine Months Ended September 30, 
 2020  2019  2020 2019 
Detroit 
19.6
%
 
17.8
%
 
24.3
%
 
17.4
%
Houston 
12.2
%
 
13.1
%
 
12.2
%
 
12.8
%
Fort Worth 
9.3
%
 
8.0
%
 
10.1
%
 
7.8
%
Cincinnati 
8.6
%
 
9.1
%
 
8.2
%
 
8.9
%
Indianapolis 
6.0
%
 
6.3
%
 
6.4
%
 
6.2
%
St. Louis 
5.1
%
 
5.3
%
Lubbock 
5.1
%
 
4.1
%
Cleveland 
5.0
%
 
5.3
%
 
4.5
%
 
6.9
%
Honolulu 
4.6
%
 
4.9
%
 
4.4
%
 
4.8
%
Milwaukee 
3.7
%
 
3.2
%
Nashville 
3.7
%
 
3.5
%
St. Louis 
3.6
%
 
5.2
%
Minneapolis 
3.9
%
 
4.1
%
 
2.9
%
 
4.1
%
Lubbock 
3.9
%
 
4.2
%
Milwaukee 
3.8
%
 
3.4
%
St Paul 
2.8
%
 
2.9
%
New Orleans 
3.6
%
 
2.9
%
 
2.0
%
 
3.1
%
Nashville 
3.4
%
 
3.6
%
St Paul 
2.6
%
 
2.8
%
San Jose 
2.2
%
 
2.3
%
Bridgeport 
2.1
%
 
2.1
%
 
1.4
%
 
2.1
%
Memphis 
1.3
%
 
1.6
%
 
1.4
%
 
1.6
%
San Jose 
1.0
%
 
2.3
%
Denver 
0.7
%
 
0.8
%
Louisville 
1.0
%
 
1.0
%
 
0.6
%
 
1.0
%
Denver 
0.8
%
 
0.8
%
Clarksburg 
0.4
%
 
0.3
%
Wildwood 
0.4
%
 
0.4
%
 
0.3
%
 
0.4
%
Clarksburg 
0.4
%
 
0.3
%
Canton 
0.2
%
 
0.3
%
 
0.3
%
 
0.2
%
Ft. Lauderdale 
--
  
0.4
%
 
--
 
0.4
%

-8--10-


Real Estate Investment Concentration by CityReal Estate Investment Concentration by City Real Estate Investment Concentration by City 
      
 As of March 31, 2020  As of December 31, 2019  As of September 30, 2020 As of December 31, 2019 
Detroit 
17.9
%
 
17.8
%
 
18.9
%
 
17.6
%
Houston 
12.1
%
 
12.1
%
 
11.6
%
 
12.0
%
Fort Worth 
8.9
%
 
8.8
%
 
9.3
%
 
8.8
%
Cincinnati 
8.8
%
 
8.8
%
 
8.1
%
 
8.7
%
Honolulu 
6.8
%
 
6.8
%
 
6.7
%
 
6.7
%
Indianapolis 
5.9
%
 
5.8
%
 
6.1
%
 
5.8
%
Cleveland 
5.8
%
 
6.2
%
 
5.7
%
 
6.2
%
Lubbock 
4.5
%
 
3.7
%
St Louis 
4.4
%
 
4.4
%
 
4.2
%
 
4.4
%
Minneapolis 
4.3
%
 
4.3
%
 
3.9
%
 
4.4
%
Lubbock 
4.3
%
 
4.3
%
Nashville 
3.9
%
 
3.7
%
Milwaukee 
3.9
%
 
3.9
%
 
3.8
%
 
3.8
%
Nashville 
3.7
%
 
3.7
%
St Paul 
2.7
%
 
2.7
%
 
2.8
%
 
2.7
%
Bridgeport 
2.7
%
 
2.6
%
 
2.8
%
 
2.6
%
New Orleans 
2.6
%
 
2.6
%
 
2.6
%
 
2.6
%
Memphis 
1.3
%
 
1.3
%
 
1.2
%
 
1.3
%
San Jose 
1.1
%
 
1.1
%
 
1.2
%
 
1.1
%
Denver 
1.0
%
 
1.0
%
 
1.1
%
 
1.0
%
Louisville 
1.0
%
 
1.0
%
 
1.0
%
 
1.0
%
Wildwood 
0.4
%
 
0.4
%
Clarksburg 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
Canton 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
Wildwood 
0.2
%
 
0.4
%
Fort Lauderdale 
--
  
--
  
--
 
1.1
%

Acquisitions

The Company records the acquired tangible and intangible assets and assumed liabilities of acquisitions of all operating properties and those development and redevelopment opportunities that meet the accounting criteria to be accounted for as business combinations at fair value at the acquisition date. The Company assesses and considers fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that the Company deems appropriate. Estimates of future cash flows are based on several 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, the property is written down to fair value and an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.

The Company recorded impairment charges of approximately $6.5 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively.  The Company recorded impairment charges of approximately $14.1 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively.  These charges were recorded to write down the carrying value of these assets to their current appraised values net of estimated closing costs.  The appraisals were performed by independent third-party appraisers primarily using the income capitalization approach based on the contracted rent to be received from the operator or the sales comparison approach. The income capitalization approach reflects the property’s income-producing capabilities based on the assumption that value is created by the expectation of benefits to be derived in the future. The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate value.
-11-
The following is a summary of the impairments for the nine months ended September 30, 2020:

Property Impairment Valuation Method
Mabley Place Garage
 
$
3,000,000
 Income Capitalization
MVP Houston Saks
 
$
2,500,000
 Income Capitalization
MVP Milwaukee Wells
 
$
620,000
 Sales Comparison
MVP Wildwood NJ Lot
 
$
535,000
 Sales Comparison
MVP Indianapolis Meridian
 
$
50,000
 Income Capitalization
MVP Clarksburg Lot
 
$
90,000
 Income Capitalization
Minneapolis City Parking
 
$
320,000
 Sales Comparison
33740 Crown Colony
 
$
95,000
 Income Capitalization
MVP St Louis Washington
 
$
1,320,000
 Income Capitalization
MVP Cincinnati Race Street
 
$
500,000
 Income Capitalization
MVP Louisville Broadway
 
$
100,000
 Income Capitalization
Cleveland Lincoln Garage
 
$
2,725,000
 Income Capitalization
MVP Preferred Parking
 
$
740,000
 Sales Comparison
MVP New Orleans Rampart
 
$
270,000
 Income Capitalization
MVP Hawaii Marks Garage
 
$
1,250,000
 Income Capitalization
Total 
$
14,115,000
  

The following is a summary of the impairments for the nine months ended September 30, 2019:

Property 2019 Impairment Valuation Method
MVP Memphis Court
 
$
558,000
 Sales Comparison
Minneapolis City Parking
 
$
500,000
 Income Capitalization
MVP San Jose 88 Garage
 
$
344,000
 Income Capitalization
MVP St Louis Washington
 
$
50,000
 Income Capitalization
Total 
$
1,452,000
  

Cash

The Company maintains a significant portion of its cash deposits at 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, 2020, and December 31, 2019, the Company had approximately $0.9$0.7 million and $2.7 million, respectively, in excess of the federally insured limits. As of March 31, 2020,the date of this filing, the Company has not experienced any losses on cash deposits.

-9-

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. If 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 are expensed as incurred. During the three and nine months ended March 31,September 30, 2020 and 2019, the Company had no advertising costs.

-12-

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, considering 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.

-10-

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 several 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.

-13-

Organization, Offering and Related Costs

Certain organization and offering costs will be incurred by the former Advisor. Pursuant to the terms of the Amended and Restated Advisory Agreement, the Company will not reimburse the Advisor for these out of pocket costs and future organization and offering costs it may incur. Such costs shall include legal, accounting, printing and other offering expenses, including marketing, and direct expenses of the former Advisor’s employees and employees of the former 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

Commencing with its taxable year ended December 31, 2017 through December 31, 2019, and subject to the discussion below relating to the Company’s REIT status from and after January 1, 2020, the Company has operated in a manner to qualify as a REIT under Sections 856 to 860 of the Code. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met. The Company’s REIT taxable income may substantially exceed or be less than the income calculated according to GAAP. In addition, the Company will be subjected to corporate income tax to the extent that less than 100% of the net taxable income is distributed, including any net capital gain.

The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of March 31,September 30, 2020.

-11-

A full valuation allowance for deferred tax assets was provided since the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur. As long as the Company continues to qualify as a REIT, it will generally not be subject to corporate level federal income taxes on earnings distributed to its stockholders and therefore may not realize any benefit from deferred tax assets arising during 2019 or any prior period in which the Company maintained its status as a REIT. The Company intends to distribute at least 100% of its taxable income annually for every year in which the Company is a REIT. The Company has placed a full valuation allowance on all

As of its deferred tax assets, and thus no asset is recorded on the Company’s balance sheet. As discussed in Note R – Subsequent Events, subsequent to March 31,September 30, 2020, as a result of the COVID-19 pandemic, the Company has entered into temporary lease amendments with some of its tenants. The Company was compelled to make certain of these amendments in response to challenging market conditions faced by its lessees and operating partners due to the significant negative impact of COVID-19 on demand for parking in many of the markets in which the Company owns properties, particularly in major population centers.  At the time the leases were amended, the Company intended for the amendments to be temporary and did not believe that the amendments would cause the Company to fail its REIT income tests for the 2020 year.  Because the COVID-19 pandemic has continued to negatively impact the Company and its operating partners and lessees longer than anticipated, the Company has not yet been able to amend all of its agreements back to their original form. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests.  As a result, the Company was not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020.   These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters.  If implemented, these options and strategies may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of these amendments,options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful  or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are able, to successfully implement an alternative operating strategy, it is possiblehighly likely that the Company will no longer qualify as a REIT infor the year ending December 31, 2020.  If we fail to qualify as a REIT for our taxable year ended December 31, 2020, andwe would no longer be required to make distributions of itsour annual taxable income in order to maintain our REIT status.  If the Company fails to qualify as a REIT instatus and any taxable year, the Company will be subject to federal income tax on the taxable income at regular corporate rates and willdistributions we make would not be permitteddeductible by us.  Moreover, unless entitled to qualify for treatmentrelief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for federal income tax purposes forthe four taxable years following the year in which qualification is denied. Failing2020.  We believe that we may not be entitled to qualify as a REIT could materiallythis statutory relief, and adversely affect the Company’s net income.   there can be no assurances that we will be able to obtain such relief.
-14-

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

Per Share Data

The Company calculates basic income (loss) per share by dividing net income (loss) for the period by weighted-average shares of its common stock outstanding for the respective period. Diluted income per share considers 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, 2020 and 2019.

There is a potential for dilution from the Company’s Series A Convertible Redeemable Preferred Stock which may be converted into the Company’s common stock at any time. As of March 31,September 30, 2020, there were 2,862 shares of the Series A Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.

There is a potential for dilution from the Company’s Series 1 Convertible Redeemable Preferred Stock which may be converted upon a holder’s election into the Company’s common stock at any time. As of March 31,September 30, 2020, there were 39,811 shares of the Series 1 Convertible Redeemable Preferred Stock issued and outstanding. As of filing date, the Company has not received any requests to convert.

Each share of Series A preferred stock and Series 1 preferred stock will convert into the number of shares of the Company’s common stock determined by dividing (i) the stated value per Series A share or Series 1 share of $1,000 (as may be adjusted pursuant to the applicable articles supplementary) plus any accrued but unpaid dividends to, but not including, the conversion date by (ii) the conversion price. The conversion price is equal to the net asset value per share of the Company’s common stock; provided that if a “Listing Event” (as defined in the applicable articles supplementary) occurs, the conversion price will be 100% of the volume weighted average price per share of the Company’s common stock for the 20 trading days prior to the delivery date of the conversion notice. The Company will have the right (but not the obligation) to redeem any Series A or Series 1 shares that are subject to a conversion notice on the terms set forth in the applicable articles supplementary.

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 mayis expected to be up to five fiscal years,through December 31, 2020, the Company is not required to (1) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (2) provide an auditor’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.
-12-

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.

-15-

Note C — Commitments and Contingencies

Environmental Matters

Investments in real property create the potential for environmental liability on the part of the owner or operator of such real property. If hazardous substances are discovered on or emanating from a property, the owner or operator of the property may be held strictly liable for all costs and liabilities relating to such hazardous substances. The Company has obtained a Phase I environmental study (which involves inspection without soil sampling or ground water analysis) conducted by independent environmental consultants on each of the properties and, in certain instances, has conducted additional investigation, including a Phase II environmental assessment. Furthermore, the Company has adopted a policy of conducting a Phase I environmental study on each property acquired and any additional investigation as warranted.

During the Company’s predecessor’s due diligence of a property purchased on December 15, 2017 (originally purchased by predecessor on March 31, 2015) and located in Milwaukee, it was discovered that the soil and ground water at the subject property had been impacted by the site’s historical use as a printing press as well as neighboring property uses. As 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, 2020, management has not received the closure letter, however the Company does not anticipate a material adverse effect related to this environmental matter.

The Company believes that it complies, in all material respects, with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Furthermore, as of March 31,September 30, 2020, 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.

-13-

Note D – Investments in Real Estate

As of March 31,September 30, 2020, the Company had the following Investments in Real Estate that were consolidated on the Company’s balance sheet:

Property NameLocationDate AcquiredProperty Type # Spaces  Property Size (Acres)  Retail Sq. Ft  Investment Amount  Parking Tenant 
MVP Cleveland West 9th (1)Cleveland, OH5/11/2016Lot  260   2   N/A  $5,845,000  SP + 
33740 Crown Colony (1)Cleveland, OH5/17/2016Lot  82   0.54   N/A  $3,050,000  SP + 
MCI 1372 StreetCanton, OH7/8/2016Lot  66   0.44   N/A  $700,000  ABM 
MVP Cincinnati Race Street GarageCincinnati, OH7/8/2016Garage  350   0.63   N/A  $6,347,000  SP + 
MVP St. Louis WashingtonSt Louis, MO7/18/2016Lot  63   0.39   N/A  $2,957,000  SP + 
MVP St. Paul Holiday GarageSt Paul, MN8/12/2016Garage  285   0.85   N/A  $8,396,000  Interstate Parking 
MVP Louisville Station BroadwayLouisville, KY8/23/2016Lot  165   1.25   N/A  $3,107,000  Riverside Parking 
White Front Garage PartnersNashville, TN9/30/2016Garage  155   0.26   N/A  $11,673,000  Premier Parking 
Cleveland Lincoln GarageCleveland, OH10/19/2016Garage  536   1.14   45,272  $10,649,000  SP + 
MVP Houston Preston LotHouston, TX11/22/2016Lot  46   0.23   N/A  $2,820,000  Premier Parking 
MVP Houston San Jacinto LotHouston, TX11/22/2016Lot  85   0.65   240  $3,250,000  Premier Parking 
MVP Detroit Center GarageDetroit, MI2/1/2017Garage  1,275   1.28   N/A  $55,476,000  SP + 
St. Louis BroadwaySt Louis, MO5/6/2017Lot  161   0.96   N/A  $2,400,000  St. Louis Parking 
St. Louis Seventh & CerreSt Louis, MO5/6/2017Lot  174   1.06   N/A  $3,300,000  St. Louis Parking 
MVP Preferred Parking (4)Houston, TX8/1/2017Garage/Lot  528   0.98   784  $21,210,000  Premier Parking 
MVP Raider Park GarageLubbock, TX11/21/2017Garage  1,495   2.15   20,536  $13,517,000  ISOM Management 
MVP PF Memphis PoplarMemphis, TN12/15/2017Lot  127   0.87   N/A  $3,669,000  Best Park 
MVP PF St. LouisSt Louis, MO12/15/2017Lot  183   1.22   N/A  $5,041,000  SP + 
Mabley Place Garage (2)Cincinnati, OH12/15/2017Garage  775   0.9   8,400  $21,185,000  SP + 
MVP Denver ShermanDenver, CO12/15/2017Lot  28   0.14   N/A  $705,000  Denver School 
MVP Fort Worth TaylorFort Worth, TX12/15/2017Garage  1,013   1.18   11,828  $27,663,000  SP + 
MVP Milwaukee Old WorldMilwaukee, WI12/15/2017Lot  54   0.26   N/A  $2,044,000  SP + 
MVP Houston Saks GarageHouston, TX12/15/2017Garage  265   0.36   5,000  $10,423,000  Premier Parking 
MVP Milwaukee WellsMilwaukee, WI12/15/2017Lot  148   1.07   N/A  $5,083,000  Symphony 
MVP Wildwood NJ Lot 1 (3)Wildwood, NJ12/15/2017Lot  29   0.26   N/A  $545,000  SP + 
MVP Wildwood NJ Lot 2 (3)Wildwood, NJ12/15/2017Lot  45   0.31   N/A  $686,000  SP+ 
MVP Indianapolis City ParkIndianapolis, IN12/15/2017Garage  370   0.47   N/A  $10,934,000  ABM 
MVP Indianapolis WA StreetIndianapolis, IN12/15/2017Lot  141   1.07   N/A  $5,749,000  Denison 
MVP Minneapolis VentureMinneapolis, MN12/15/2017Lot  195   1.65   N/A  $4,013,000   N/A 
Minneapolis City ParkingMinneapolis, MN12/15/2017Lot  268   1.98   N/A  $9,338,000  SP + 
MVP Indianapolis MeridianIndianapolis, IN12/15/2017Lot  36   0.24   N/A  $1,601,000  Denison 
MVP Milwaukee ClybournMilwaukee, WI12/15/2017Lot  15   0.06   N/A  $262,000  Secure 
MVP Milwaukee Arena LotMilwaukee, WI12/15/2017Lot  75   1.11   N/A  $4,631,000  SP + 
MVP Clarksburg LotClarksburg, WV12/15/2017Lot  94   0.81   N/A  $715,000  ABM 
MVP Denver Sherman 1935Denver, CO12/15/2017Lot  72   0.43   N/A  $2,533,000  SP + 
MVP Bridgeport FairfieldBridgeport, CT12/15/2017Garage  878   1.01   4,349  $8,256,000  SP + 
MVP New Orleans RampartNew Orleans, LA2/1/2018Lot  78   0.44   N/A  $8,105,000  342 N. Rampart 
MVP Hawaii Marks GarageHonolulu, HI6/21/2018Garage  311   0.77   16,205   21,155,000  SP + 
Construction in progress               $1,284,000     
Total Investment in real estate and fixed assets              $310,317,000     
Property NameLocationDate AcquiredProperty Type # Spaces  Property Size (Acres)  Retail Sq. Ft  Investment Amount Parking Tenant / Operator
MVP Cleveland West 9th (1)Cleveland, OH5/11/2016Lot  260   2   N/A  $5,845,000 SP +
33740 Crown Colony (1)Cleveland, OH5/17/2016Lot  82   0.54   N/A  $2,954,000 SP +
MCI 1372 StreetCanton, OH7/8/2016Lot  66   0.44   N/A  $700,000 ABM
MVP Cincinnati Race Street GarageCincinnati, OH7/8/2016Garage  350   0.63   N/A  $5,848,000 SP +
MVP St. Louis WashingtonSt Louis, MO7/18/2016Lot  63   0.39   N/A  $1,637,000 SP +
MVP St. Paul Holiday GarageSt Paul, MN8/12/2016Garage  285   0.85   N/A  $8,396,000 Interstate Parking
MVP Louisville Station BroadwayLouisville, KY8/23/2016Lot  165   1.25   N/A  $3,007,000 Riverside Parking
White Front Garage PartnersNashville, TN9/30/2016Garage  155   0.26   N/A  $11,672,000 Premier Parking
Cleveland Lincoln GarageCleveland, OH10/19/2016Garage  536   1.14   45,272  $8,272,000 SP +
MVP Houston Preston LotHouston, TX11/22/2016Lot  46   0.23   N/A  $2,820,000 Premier Parking
MVP Houston San Jacinto LotHouston, TX11/22/2016Lot  85   0.65   240  $3,250,000 Premier Parking
MVP Detroit Center GarageDetroit, MI2/1/2017Garage  1,275   1.28   N/A  $55,477,000 SP +
St. Louis BroadwaySt Louis, MO5/6/2017Lot  161   0.96   N/A  $2,400,000 St. Louis Parking
St. Louis Seventh & CerreSt Louis, MO5/6/2017Lot  174   1.06   N/A  $3,300,000 St. Louis Parking
MVP Preferred Parking (4)Houston, TX8/1/2017Garage/Lot  528   0.98   784  $20,479,000 Premier Parking
MVP Raider Park GarageLubbock, TX11/21/2017Garage  1,495   2.15   20,536  $13,517,000 ISOM Management
MVP PF Memphis PoplarMemphis, TN12/15/2017Lot  127   0.87   N/A  $3,669,000 Best Park
MVP PF St. LouisSt Louis, MO12/15/2017Lot  183   1.22   N/A  $5,041,000 SP +
Mabley Place Garage (2)Cincinnati, OH12/15/2017Garage  775   0.9   8,400  $18,210,000 SP +
-14--16-

                   
MVP Denver ShermanDenver, CO12/15/2017Lot  28   0.14   N/A  $705,000  Denver School 
MVP Fort Worth TaylorFort Worth, TX12/15/2017Garage  1,013   1.18   11,828  $27,663,000  SP + 
MVP Milwaukee Old WorldMilwaukee, WI12/15/2017Lot  54   0.26   N/A  $2,044,000  SP + 
MVP Houston Saks GarageHouston, TX12/15/2017Garage  265   0.36   5,000  $7,923,000  Premier Parking 
MVP Milwaukee WellsMilwaukee, WI12/15/2017Lot  148   1.07   N/A  $4,463,000  Symphony 
MVP Wildwood NJ Lot 1 (3)Wildwood, NJ12/15/2017Lot  29   0.26   N/A  $278,000  SP + 
MVP Wildwood NJ Lot 2 (3)Wildwood, NJ12/15/2017Lot  45   0.31   N/A  $419,000  SP+ 
MVP Indianapolis City ParkIndianapolis, IN12/15/2017Garage  370   0.47   N/A  $10,934,000  Denison 
MVP Indianapolis WA StreetIndianapolis, IN12/15/2017Lot  141   1.07   N/A  $5,749,000  Denison 
MVP Minneapolis VentureMinneapolis, MN12/15/2017Lot  195   1.65   N/A  $4,013,000   N/A 
Minneapolis City ParkingMinneapolis, MN12/15/2017Lot  268   1.98   N/A  $7,718,000  SP + 
MVP Indianapolis MeridianIndianapolis, IN12/15/2017Lot  36   0.24   N/A  $1,551,000  Denison 
MVP Milwaukee ClybournMilwaukee, WI12/15/2017Lot  15   0.06   N/A  $262,000  Secure 
MVP Milwaukee Arena LotMilwaukee, WI12/15/2017Lot  75   1.11   N/A  $4,631,000  SP + 
MVP Clarksburg LotClarksburg, WV12/15/2017Lot  94   0.81   N/A  $625,000  ABM 
MVP Denver Sherman 1935Denver, CO12/15/2017Lot  72   0.43   N/A  $2,533,000  SP + 
MVP Bridgeport FairfieldBridgeport, CT12/15/2017Garage  878   1.01   4,349  $8,268,000  SP + 
MVP New Orleans RampartNew Orleans, LA2/1/2018Lot  78   0.44   N/A  $7,835,000  342 N. Rampart 
MVP Hawaii Marks GarageHonolulu, HI6/21/2018Garage  311   0.77   16,205  $19,951,000  SP + 
Construction in progress               $1,151,000     
Total Investment in real estate and fixed assets              $295,210,000     

(1)
These properties are held by West 9th St. Properties II, LLC.
(2)
The Company holds an 83.3% undivided interest in the Mabley Place Garage pursuant to a tenancy-in-common agreement and is the Managing Co-Owner of the property.
(3)
These properties are held by MVP Wildwood NJ Lot, LLC.
(4)
MVP Preferred Parking, LLC holds a Garage and a Parking Lot.

Note E — Related Party Transactions and Arrangements

The transactions described in this Note were approved by a majority of the Company’s board of directors (including a majority of the independent directors) not otherwise interested in such transactions as fair and reasonable to the Company and on terms and conditions no less favorable to the Company than those available from unaffiliated third parties.

Ownership of Company Stock

As of March 31,September 30, 2020, the Sponsor owned 9,108 shares, VRM II owned 844,960 shares and VRM I owned 456,834 shares of the Company’s outstanding common stock.

Ownership of the Former Advisor

VRM I and VRM II own 40% and 60%, respectively, of the former Advisor. Neither VRM I nor VRM II paid any up-front consideration for these ownership interests, but each agreed to be responsible for its proportionate share of future expenses of the former Advisor.

Note F — Economic Dependency

Under various agreements, the Company has engaged or will engage the former Advisor and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition services, the sale of shares of the Company’s securities available for issuance, as well as other administrative responsibilities for the Company, including accounting services and investor relations. In addition, the Sponsor paid selling commissions in connection with the sale of the Company’s shares in the Common Stock Offering and the former Advisor paid the Company’s organization and offering expenses.

As a result of these relationships, the Company is dependent upon the former Advisor and its affiliates. If these companies are unable to provide the Company with the respective services, including loan guaranties, the Company may be required to find alternative providers of these services.

-17-

Note G — Stock-Based Compensation

Long-Term Incentive Plan

The Company’s board of directors has adopted a long-term incentive plan which the Company may use to attract and retain qualified directors, officers, employees and consultants. The Company’s long-term incentive plan will offer these individuals an opportunity to participate in the Company’s growth through awards in the form of, or based on, the Company’s common stock. The Company currently anticipates that it will not issue awards under the Company’s long-term incentive plan, although it may do so in the future, including possible equity grants to the Company’s independent directors as a form of compensation.

The long-term incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company’s affiliates selected by the board of directors for participation in the Company’s long-term incentive plan. Stock options granted under the long-term incentive plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock on the date of grant of any such stock options. Stock options may not have an exercise price that is less than the fair market value of a share of the Company’s common stock on the date of grant.

The Company’s board of directors or a committee appointed by its board of directors will administer the long-term incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the long-term incentive plan if the grant or vesting of the awards would jeopardize the Company’s status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under its charter. Unless otherwise determined by the Company’s board of directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.

-15-

The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between the Company and its stockholders that causes the per-share value of the Company’s common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the long-term incentive plan will be adjusted proportionately and the board of directors will make such adjustments to the long-term incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the long-term incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.

The Company’s board of directors may in its sole discretion at any time determine that all or a portion of a participant’s awards will become fully vested. The board may discriminate among participants or among awards in exercising such discretion. The long-term incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by the board of directors and stockholders, unless extended or earlier terminated by the board of directors. The Company’s board of directors may terminate the long-term incentive plan at any time. The expiration or other termination of the long-term incentive plan will not, without the participant’s consent, have an adverse impact on any award that is outstanding at the time the long-term incentive plan expires or is terminated. The board of directors may amend the long-term incentive plan at any time, but no amendment will adversely affect any award without the participant’s consent and no amendment to the long-term incentive plan will be effective without the approval of the Company’s stockholders if such approval is required by any law, regulation or rule applicable to the long-term incentive plan. During the three and nine months ended March 31,September 30, 2020 and 2019, no grants were made under the long-term incentive plan.

Note H – Recent Accounting Pronouncements

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

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. During the first quarter 2020, the Company adopted ASU 2016-13 and such adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The objective of ASU 2017-12 is to expand hedge accounting for both financial (interest rate) and commodity risks and create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. ASU 2017-12 will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods in the year of adoption. Early adoption is permitted for any interim or annual period. During the first quarter 2019, the Company adopted ASU 2017-12 and such adoption did not have a material impact on the Company's unaudited condensed consolidated financial statements.

Note I — Assets held for saleDisposition of Investment in Real Estate

Effective April 17, 2019,On May 26, 2020, the Company, entered intothrough an entity wholly owned by the Company, sold a purchase sales agreement (“PSA”) with an unrelated third partyparking garage in San Jose, California for cash consideration of $4.1 million to sellUC 88 Garage Owner LLC, a third-party buyer.  The Company used $2.5 million of the proceeds to pay off the existing promissory note secured by the MVP San Jose 88 Garage, LLC, which is wholly owned by the Company and is listed as held for sale. This multi-level parking garage located in San Jose, CaliforniaLLC. The property was originally acquired by the Companypurchased in June 2016 for approximately $3.6 million. The gain on June 15, 2016. On May 14, 2019 the unrelated third party cancelled the PSA. The Company executed a new PSA for this property with another unrelated third party on February 25, 2020.  Such third party has made a deposit of $200,000 that became nonrefundable on March 27, 2020. On May 5, 2020, the buyer provided an additional nonrefundable deposit of $250,000 to extend the closing date to May 25, 2020.
-16-
sale is approximately $0.7 million.

The following is summary of San Jose 88 Garage, LLC net assets held for sale as of March 31, 2020:
  March 31, 2020  December 31, 2019 
Assets:
      
Prepaid expenses
 
$
100,000
  
$
42,000
 
Property and equipment, net of accumulated depreciation
  
3,288,000
   
3,288,000
 
       Total assets
 
$
3,388,000
  
$
3,330,000
 
Liabilities:
        
Notes payable
 
$
2,500,000
  
$
2,500,000
 
Accounts payable and accrued liabilities
  
53,000
   
47,000
 
     Total liabilities
  
2,553,000
   
2,547,000
 
Net assets held for sale
 
$
835,000
  
$
783,000
 

The PSA with the buyer is an asset purchase agreement for purchase of the property and equipment. The following is a summary of the results of operations related to MVPthe parking garage in San Jose 88 Garage for the three and nine months ended March 31, 2020 and 2019:
September 30, 2020:

    
  2020  2019 
Revenue
 
$
113,000
  
$
113,000
 
Expense
  
(114,000
)
  
(134,000
)
Income/(loss) from assets held for sale, net of income taxes
 
$
(1,000
)
 
$
(21,000
)
  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
  2020  2019  2020  2019 
Revenue
 
$
--
  
$
113,000
  
$
113,000
  
$
338,000
 
Expenses *
  
--
   
102,000
   
191,000
   
705,000
 
Income/(Loss) from assets held for sale, net of income taxes
 
$
--
  
$
11,000
  
$
(78,000
)
 
$
(367,000
)

-17-
*Includes $343,000 impairment in 2019

Note J — Notes Payable

As of March 31,September 30, 2020, the principal balances on notes payable are as follows:

Property Original Debt Amount  Monthly Payment  Balance as of 03/31/20 LenderTerm Interest Rate Loan Maturity
MVP San Jose 88 Garage, LLC (5) $1,645,000  Interest Only  $2,500,000 Multiple1 Year  7.50%6/30/2020
MVP Cincinnati Race Street, LLC $2,550,000  Interest Only  $2,550,000 Multiple1 Year  7.50%10/30/2020
MVP Wildwood NJ Lot, LLC $1,000,000  Interest Only  $1,000,000 Tigges Construction Co.1 Year  7.50%10/30/2020
The Parking REIT D&O Insurance $1,681,000  $171,000  $171,000 MetaBank1 Year  3.60%4/30/2020
Minneapolis Venture $2,000,000  Interest Only  $2,000,000 Multiple1 Year  8.00%10/22/2020
MVP Raider Park Garage, LLC (4) $7,400,000  Interest Only  $7,400,000 LoanCore2 Year Variable 12/9/2020
MVP New Orleans Rampart, LLC (4) $5,300,000  Interest Only  $5,300,000 LoanCore2 Year Variable 12/9/2020
MVP Hawaii Marks Garage, LLC (4) $13,500,000  Interest Only  $13,500,000 LoanCore2 Year Variable 12/9/2020
MVP Milwaukee Wells, LLC (4) $2,700,000  Interest Only  $2,700,000 LoanCore2 Year Variable 12/9/2020
MVP Indianapolis City Park, LLC (4) $7,200,000  Interest Only  $7,200,000 LoanCore2 Year Variable 12/9/2020
MVP Indianapolis WA Street, LLC (4) $3,400,000  Interest Only  $3,400,000 LoanCore2 Year Variable 12/9/2020
MVP Memphis Poplar (3) $1,800,000  Interest Only  $1,800,000 LoanCore5 Year  5.38%3/6/2024
MVP St. Louis (3) $3,700,000  Interest Only  $3,700,000 LoanCore5 Year  5.38%3/6/2024
Mabley Place Garage, LLC $9,000,000  $44,000  $8,143,000 Barclays10 year  4.25%12/6/2024
MVP Houston Saks Garage, LLC $3,650,000  $20,000  $3,238,000 Barclays Bank PLC10 year  4.25%8/6/2025
Minneapolis City Parking, LLC $5,250,000  $29,000  $4,763,000 American National Insurance, of NY10 year  4.50%5/1/2026
MVP Bridgeport Fairfield Garage, LLC $4,400,000  $23,000  $3,995,000 FBL Financial Group, Inc.10 year  4.00%8/1/2026
West 9th Properties II, LLC
 $5,300,000  $30,000  $4,876,000 American National Insurance Co.10 year  4.50%11/1/2026
MVP Fort Worth Taylor, LLC $13,150,000  $73,000  $12,126,000 American National Insurance, of NY10 year  4.50%12/1/2026
MVP Detroit Center Garage, LLC $31,500,000  $194,000  $29,550,000 Bank of America10 year  5.52%2/1/2027
MVP St. Louis Washington, LLC (1) $1,380,000  $8,000  $1,355,000 KeyBank10 year *  4.90%5/1/2027
St. Paul Holiday Garage, LLC (1) $4,132,000  $24,000  $4,056,000 KeyBank10 year *  4.90%5/1/2027
Cleveland Lincoln Garage, LLC (1) $3,999,000  $23,000  $3,926,000 KeyBank10 year *  4.90%5/1/2027
MVP Denver Sherman, LLC (1) $286,000  $2,000  $280,000 KeyBank10 year *  4.90%5/1/2027
MVP Milwaukee Arena Lot, LLC (1) $2,142,000  $12,000  $2,103,000 KeyBank10 year *  4.90%5/1/2027
MVP Denver Sherman 1935, LLC (1) $762,000  $4,000  $748,000 KeyBank10 year *  4.90%5/1/2027
MVP Louisville Broadway Station, LLC (2) $1,682,000  Interest Only  $1,682,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Whitefront Garage, LLC (2) $6,454,000  Interest Only  $6,454,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Houston Preston Lot, LLC (2) $1,627,000  Interest Only  $1,627,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Houston San Jacinto Lot, LLC (2) $1,820,000  Interest Only  $1,820,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
St. Louis Broadway, LLC (2) $1,671,000  Interest Only  $1,671,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
St. Louis Seventh & Cerre, LLC (2) $2,057,000  Interest Only  $2,057,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Indianapolis Meridian Lot, LLC (2) $938,000  Interest Only  $938,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Preferred Parking, LLC $11,330,000  Interest Only  $11,330,000 Key Bank10 year **  5.02%8/1/2027
Less unamortized loan issuance costs         $ (1,621,000)          
          $158,338,000           

Property Original Debt Amount  Monthly Payment  Balance as of 09/30/20 LenderTerm Interest Rate Loan Maturity
MVP Cincinnati Race Street, LLC (6) $2,550,000  Interest Only  $2,550,000 Multiple1 Year  7.50%4/30/2021
MVP Wildwood NJ Lot, LLC (6) $1,000,000  Interest Only  $1,000,000 Tigges Construction Co.1 Year  7.50%4/30/2021
The Parking REIT D&O Insurance $1,185,000  $150,000  $744,000 MetaBank1 Year  3.60%2/28/2021
Minneapolis Venture (6) $2,000,000  Interest Only  $2,000,000 Multiple1 Year  8.00%04/30/2021
MVP Raider Park Garage, LLC (4) $7,400,000  Interest Only  $7,400,000 LoanCore2 Year Variable 12/9/2020
MVP New Orleans Rampart, LLC (4) $5,300,000  Interest Only  $5,300,000 LoanCore2 Year Variable 12/9/2020
MVP Hawaii Marks Garage, LLC (4) $13,500,000  Interest Only  $13,500,000 LoanCore2 Year Variable 12/9/2020
MVP Milwaukee Wells, LLC (4) $2,700,000  Interest Only  $2,700,000 LoanCore2 Year Variable 12/9/2020
MVP Indianapolis City Park, LLC (4) $7,200,000  Interest Only  $7,200,000 LoanCore2 Year Variable 12/9/2020
MVP Indianapolis WA Street, LLC (4) $3,400,000  Interest Only  $3,400,000 LoanCore2 Year Variable 12/9/2020
MVP Clarksburg Lot (6) $476,000  Interest Only  $476,000 Multiple1 Year  7.50%5/21/2021
MCI 1372 Street (6) $574,000  Interest Only  $574,000 Multiple1 Year  7.50%5/27/2021
MVP Milwaukee Old World (6) $771,000  Interest Only  $771,000 Multiple1 Year  7.50%5/27/2021
-18--19-


MVP Milwaukee Clybourn (6) $191,000  Interest Only  $191,000 Multiple1 Year  7.50%5/27/2021
SBA PPP Loan $348,000  $14,700  $348,000 Small Business Administration2 Year  1.00%10/22/2022
MVP Memphis Poplar (3) $1,800,000  Interest Only  $1,800,000 LoanCore5 Year  5.38%3/6/2024
MVP St. Louis (3) $3,700,000  Interest Only  $3,700,000 LoanCore5 Year  5.38%3/6/2024
Mabley Place Garage, LLC (8) $9,000,000  $44,000  $8,052,000 Barclays10 year  4.25%12/6/2024
MVP Houston Saks Garage, LLC $3,650,000  $20,000  $3,189,000 Barclays Bank PLC10 year  4.25%8/6/2025
Minneapolis City Parking, LLC (7) $5,250,000  $29,000  $4,694,000 American National Insurance, of NY10 year  4.50%5/1/2026
MVP Bridgeport Fairfield Garage, LLC (5) $4,400,000  $23,000  $3,965,000 FBL Financial Group, Inc.10 year  4.00%8/1/2026
West 9th Properties II, LLC (7)
 $5,300,000  $30,000  $4,808,000 American National Insurance Co.10 year  4.50%11/1/2026
MVP Fort Worth Taylor, LLC (7) $13,150,000  $73,000  $11,959,000 American National Insurance, of NY10 year  4.50%12/1/2026
MVP Detroit Center Garage, LLC $31,500,000  $194,000  $29,212,000 Bank of America10 year  5.52%2/1/2027
MVP St. Louis Washington, LLC (1) $1,380,000  $8,000  $1,341,000 KeyBank10 year *  4.90%5/1/2027
St. Paul Holiday Garage, LLC (1) $4,132,000  $24,000  $4,013,000 KeyBank10 year *  4.90%5/1/2027
Cleveland Lincoln Garage, LLC (1) $3,999,000  $23,000  $3,884,000 KeyBank10 year *  4.90%5/1/2027
MVP Denver Sherman, LLC (1) $286,000  $2,000  $277,000 KeyBank10 year *  4.90%5/1/2027
MVP Milwaukee Arena Lot, LLC (1) $2,142,000  $12,000  $2,081,000 KeyBank10 year *  4.90%5/1/2027
MVP Denver Sherman 1935, LLC (1) $762,000  $4,000  $740,000 KeyBank10 year *  4.90%5/1/2027
MVP Louisville Broadway Station, LLC (2) $1,682,000  Interest Only  $1,682,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Whitefront Garage, LLC (2) $6,454,000  Interest Only  $6,454,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Houston Preston Lot, LLC (2) $1,627,000  Interest Only  $1,627,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Houston San Jacinto Lot, LLC (2) $1,820,000  Interest Only  $1,820,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
St. Louis Broadway, LLC (2) $1,671,000  Interest Only  $1,671,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
St. Louis Seventh & Cerre, LLC (2) $2,057,000  Interest Only  $2,057,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Indianapolis Meridian Lot, LLC (2) $938,000  Interest Only  $938,000 Cantor Commercial Real Estate10 year **  5.03%5/6/2027
MVP Preferred Parking, LLC $11,330,000  Interest Only  $11,330,000 Key Bank10 year **  5.02%8/1/2027
Less unamortized loan issuance costs         $ (1,257,000)          
          $158,191,000           
(1)The Company issued a promissory note to KeyBank for $12.7 million secured by a pool of properties, including (i) MVP Denver Sherman, LLC, (ii) MVP Denver Sherman 1935, LLC, (iii) MVP Milwaukee Arena, LLC, (iv) MVP St. Louis Washington, LLC, (v) St. Paul Holiday Garage, LLC and (vi) Cleveland Lincoln Garage, LLC.
(2)The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by a pool of properties, including (i) MVP Indianapolis Meridian Lot, LLC, (ii) MVP Louisville Station Broadway, LLC, (iii) MVP White Front Garage Partners, LLC, (iv) MVP Houston Preston Lot, LLC, (v) MVP Houston San Jacinto Lot, LLC, (vi) St. Louis Broadway Group, LLC, and (vii) St. Louis Seventh & Cerre, LLC.
(3)On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”), and MVP PF Memphis Poplar 2013 (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis and MVP Memphis Poplar $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis and MVP Memphis Poplar.
-20-

(4)On November 30, 2018, subsidiaries of the Company, consisting of MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Park Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, and MVP Milwaukee Wells LLC (the “Borrowers”) entered into a loan agreement, dated as of November 30, 2018 (the “Loan Agreement”), with LoanCore Capital Credit REIT LLC (the “LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan the Borrowers $39.5 million to repay and discharge the outstanding KeyBank Revolving Credit Facility. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by the Borrowers (the “Properties”). The loan bears interest at a floating rate equal to the sum of one-month LIBOR plus 3.65%, subject to a LIBOR minimum of 1.95%. Additionally, the Borrowers were required to purchase an Interest Rate Protection Agreement which caps its maximum LIBOR at 3.50% for the duration of the loan. Payments are interest-only for the duration of the loan, with the $39.5 million principal repayment due in a balloon payment due on December 9, 2020, with an option to extend the term until December 9, 2021 subject to certain conditions and payment obligations. The Borrowers have the right to prepay all or any part of the loan, subject to payment of any applicable Spread Maintenance Premium and Exit Fee (as defined in the Loan Agreement). The loan is also subject to mandatory prepayment upon certain events of Insured Casualty or Condemnation (as defined in the Loan Agreement). The Borrowers made customary representations and warranties to LoanCore and agreed to maintain certain covenants under the Loan Agreement, including but not limited to, covenants involving their existence; property taxes and other charges; access to properties, repairs, maintenance and alterations; performance of other agreements; environmental matters; title to properties; leases; estoppel statements; management of the Properties; special purpose bankruptcy remote entity status; change in business or operation of the Properties; debt cancellation; affiliate transactions; indebtedness of the Borrowers limited to Permitted Indebtedness (as defined in the Loan Agreement); ground lease reserve relating to MVP New Orleans’ Property; property cash flow allocation; liens on the Properties; ERISA matters; approval of major contracts; payments upon a sale of a Property; and insurance, notice and reporting obligations as set forth in the loan agreement. The Loan Agreement contains customary events of default and indemnification obligations. The loan proceeds were used to repay and discharge the KeyBank Credit Agreement, dated as of December 29, 2017, as amended, per the terms outlined in the third amendment to the Credit Agreement dated September 28, 2018, as previously filed on Form 8-K on October 2, 2018 and incorporated herein by reference. The Company is in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of this loan; however, there can be no assurance this option will be exercised.  If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral. On July 9, 2020, the Company entered into a loan modification agreement with LoanCore Capital Credit REIT, LLC for the following notes payable: (i) MVP Raider Park Garage, LLC, (ii) MVP New Orleans Rampart, LLC, (iii) MVP Hawaii Marks Garage, LLC, (iv) MVP Milwaukee Wells, LLC, (v) MVP Indianapolis City Park, LLC, (vi) MVP Indianapolis WA Street, LLC. The Agreement defers a portion of the required monthly interest payments from June 2020 through November 2020 and reduces the LIBOR Floor from 1.95% to 0.50%, the Modified LIBOR Floor.
(5)Due to the impact of COVID-19, on May 12, 2020, the Company entered into a Loan Modification Agreement with Farm Bureau Life Insurance Company providing for a ninety-day interest-only period commencing with the payment due June 1, 2020 and continuing through the payment due August 1, 2020. During the interest only period, the monthly installments due under the Note are modified to provide for payment of accrued interest only in the amount of $2,500,000 was originated on June 5, 2018 of which $1,645,000 was funded.  Remaining balance available of $855,000 was funded on December 11, 2018.$13,384.

(6)Loan agreement provides automatic six-month extensions.
(7)
On July 31, 2020, the Company entered into three loan modification agreements with American National Insurance Company (“ANICO”) for the following three loans: (i) Minneapolis City Parking, LLC, (ii) West 9th Properties II, LLC and (iii) MVP Fort Worth Taylor, LLC. The Company has entered into an Escrow Agreement with ANICO in which $950,000 in condemnation proceeds from the City of Minneapolis shall be used to pay the monthly principal and interest due each note, beginning with the payment due May 1, 2020, until the termination date.
(8)On August 4, 2020, the Company’s wholly owned subsidiary (Mabley Place Garage, LLC) entered into a loan modification agreement with Wells Fargo Bank, National Association, as Trustee for the Benefit of the Registered Holders of JPMBB Commercial Mortgage Securities Trust 2015-C27 (the “Lender”). Under the terms of the agreement, the Lender will permit the Company to apply funds in an amount up to $43,000 per month from a replacement reserve account, to the extent there are sufficient funds available, to pay all or any portion of the monthly debt service payment amount then due for the May, June, July and August 2020 payment dates.
 * 2 Year Interest Only
** 10 Year Interest Only

Total interest expense incurred for each of the three months ended March 31,September 30, 2020 and 2019 was approximately $2.1 million. Total loan amortization cost for each of the three months ended March 31,September 30, 2020 and 2019, was approximately $0.2 million. Total interest expense incurred for the nine months ended September 30, 2020 and 2019, was approximately $6.3 million and $6.5 million, respectively. Total loan amortization cost for the nine months ended September 30, 2020 and 2019, was approximately $0.6 million and $0.7 million, respectively.

-21-

As of March 31,September 30, 2020, future principal payments on notes payable are as follows:

2020
 
$
49,193,000
  
$
48,654,000
 
2021
 
2,058,000
   
2,087,000
 
2022
 
2,252,000
   
2,252,000
 
2023
 
2,498,000
   
2,498,000
 
2024
 
15,283,000
   
15,283,000
 
Thereafter
 
88,675,000
   
88,674,000
 
Less unamortized loan issuance costs
  
(1,621,000
)
  
(1,257,000
)
Total 
$
158,338,000
  
$
158,191,000
 

-19-
The following table shows notes payable paid in full during the nine months ended September 30, 2020:

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

Note K — Fair Value

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

1.Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
2.Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable.
3.Level 3 – Model-derived valuations with unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

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

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

Note L – Investment In DST

On May 31, 2017, the Company, through a wholly owned subsidiary of its Operating Partnership, purchased a 51.0% beneficial interest in MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”), for approximately $2.8 million. MVP St. Louis is the owner of a 2.56-acre, 376-vehicle commercial parking lot located at 500 South Broadway, St. Louis, Missouri 63103, known as the Cardinal Lot (the “Property”), which is adjacent to Busch Stadium, the home of the St. Louis Cardinals major league baseball team. The Property was purchased by MVP St. Louis from an unaffiliated seller for a purchase price of $11,350,000, plus payment of closing costs, financing costs, and related transactional costs.

Concurrently with the acquisition of the Property, MVP St. Louis obtained a first mortgage loan from Cantor Commercial Real Estate Lending, L.P (“St. Louis Lender”), in the principal amount of $6,000,000, with a 10-year, interest-only term at a fixed interest rate of 5.25%, resulting in an annual debt service payment of $315,000 (the “St. Louis Loan”). MVP St. Louis used the Company’s investment to fund a portion of the purchase price for the Property. The remaining equity portion was funded through short-term investments by VRM II, an affiliate of the former Advisor, pending the private placements of additional beneficial interest in MVP St. Louis exempt from registration under the Securities Act. VRM II and Michael V. Shustek, the Company’s Chairman and Chief Executive Officer, provided non-recourse carveout guaranties of the loan and environmental indemnities of St. Louis Lender.

-22-

Also, concurrently with the acquisition of the Property, MVP St. Louis, as landlord, entered into a 10-year master lease (the “St. Louis Master Lease”), with MVP St. Louis Cardinal Lot Master Tenant, LLC, an affiliate of the former Advisor, as tenant, (the “St. Louis Master Tenant”). St. Louis Master Tenant, in turn, concurrently entered into a 10-year sublease with Premier Parking of Missouri, LLC. The St. Louis Master Lease provides for annual rent payable monthly to MVP St. Louis, consisting of base rent in an amount to pay debt service on the St. Louis Loan, stated rent of $414,000 and potential bonus rent equal to a share of the revenues payable under the sublease in excess of a threshold. The Company will be entitled to its proportionate share of the rent payments based on its ownership interest. Under the St. Louis Master Lease, MVP St. Louis is responsible for capital expenditures and the St. Louis Master Tenant is responsible for taxes, insurance and operating expenses.  For the three months ended March 31, 2020 and 2019, income earned was $182,000. For the three months ended March 31,September 30, 2020 and 2019, distributions received were $50,000none and $70,000,$52,000 respectively.  For the nine months ended September 30, 2020 and 2019, distributions received were $34,000 and $170,000, respectively.

The Company conducted an analysis and concluded that the 51% investment in the DST should not be consolidated. As a DST, the entity is subject to the Variable Interest Entity (“VIE”) Model under ASC 810-10.

As stated in ASC 810: “A controlling financial interest in the VIE model requires both of the following:

a. The power to direct the activities that most significantly impact the VIE’s economic performance
b. The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.”

As a VIE, the DST is governed in a manner similar to a limited partnership (i.e., there are trustees and there is no board) and the Company, as a beneficial owner, lacks the power thoughthrough voting rights or otherwise to direct the activities of the DST that most significantly impact the entity’s economic performance. Specifically, the beneficial interest owners do not have the rights set forth in ASC 810-10-15-14(b)(1)(ii) – the beneficial owners can only remove the trustees if the trustees have engaged in fraud or gross negligence with respect to the trust and the beneficial owners have no substantive participating rights over the trustees.

-20-

The former Advisor was the advisor to the Company. The Company is controlled by its independent board of directors and its shareholders. In addition, the former Advisor is the 100% direct/indirect owner of the MVP Parking DST, LLC (“DST Sponsor”), the MVP St. Louis Cardinal Lot Signature Trustee, LLC (“Signature Trustee”) and MVP St. Louis Cardinal Lot Master Tenant, LLC (the “Master Tenant”), who have no direct or indirect ownership in the Company. The Signature Trustee and the Master Tenant can direct the most significant activities of the DST.

The former Advisor controls and consolidates the Signature Trustee, the Master Tenant, and the DST Sponsor. The Company concluded the Master Tenant/property management agreement exposes the Master Tenant to funding operating losses of the Property. As such, that agreement should be considered a variable interest in DST (ASC 810-10-55-37 and 810-10-55-37C). Accordingly, the former Advisor has a variable interest in the DST (through the master tenant/property manager) and has power over the significant activities of the DST (through the Signature Trustee and the master tenant/property manager). Accordingly, the Company believes that the Master Tenant is the primary beneficiary of the DST, which is ultimately owned and controlled by the former Advisor. In addition, the Company does not have the power to direct or change the activities of the Trust and shares income and losses pari passu with the other owners. As such, the Company accounts for its investment under the equity method and does not consolidate its investment in the DST.

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

  March 31, 2020  December 31, 2019 
  (Unaudited)  (Unaudited) 
ASSETS 
Investments in real estate and fixed assets
 
$
11,512,000
  
$
11,512,000
 
Cash
  
26,000
   
28,000
 
Cash – restricted
  
27,000
   
24,000
 
Accounts receivable
  
2,000
   
--
 
Prepaid expenses
  
16,000
   
10,000
 
Total assets 
$
11,583,000
  
$
11,574,000
 
LIABILITIES AND EQUITY 
Liabilities        
Notes payable, net of unamortized loan issuance costs of approximately $44,000 and $46,000 as of March 31, 2020 and December 31, 2019, respectively
 
$
5,956,000
  
$
5,954,000
 
Accounts payable and accrued liabilities  
107,000
   
93,000
 
Due to related party  
60,000
   
57,000
 
Total liabilities  
6,123,000
   
6,104,000
 
Equity        
Member’s equity  
6,129,000
   
6,129,000
 
  Offering costs
  
(574,000
)
  
(574,000
)
  Accumulated earnings
  
1,040,000
   
952,000
 
  Distributions to members
  
(1,135,000
)
  
(1,037,000
)
Total equity  
5,460,000
   
5,470,000
 
Total liabilities and equity 
$
11,583,000
  
$
11,574,000
 
  September 30, 2020  December 31, 2019 
  (Unaudited)  (Unaudited) 
ASSETS 
Investments in real estate and fixed assets
 
$
11,512,000
  
$
11,512,000
 
Cash
  
1,000
   
28,000
 
Cash – restricted
  
31,000
   
24,000
 
Due from related parties
  
158,000
   
--
 
Prepaid expenses
  
12,000
   
10,000
 
Total assets 
$
11,714,000
  
$
11,574,000
 

-23-

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

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

 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 For the Three Months Ended March 31, 2020  For the Three Months Ended March 31, 2019  2020  2019  2020  2019 
Revenue
 
$
182,000
  
$
182,000
  
$
182,000
 
$
183,000
 
$
547,000
 
$
556,000
 
Expenses
  
(94,000
)
  
(84,000
)
  
(99,000
)
  
(91,000
)
  
(279,000
)
  
(269,000
)
Net income
 
$
88,000
  
$
98,000
  
$
83,000
 
$
92,000
 
$
268,000
 
$
287,000
 

Note M – Right of Use Leased Asset and Lease Liability

The Company executed a lease agreement for its office space at 9130 W. Post Rd., Suite 200, Las Vegas, NV 8913589148 with a commencement date of January 10, 2020. The lease has a ten-year term with an annual payment of $180,480 per annum during the lease term. The lease is accounted for as an operating lease under ASU 2016-02, Leases – (Topic 842). The Company recognized a Right of Use (“ROU”) Leased Asset and a Right of Use (“ROU”) Lease Liability on the lease commencement date. The value of both the ROU asset and ROU liability, at March 31,September 30, 2020, was approximately $1,364,000.$1,309,000. The Company recognized approximately $42,000$45,000 and $135,000 of operating lease expense during the three and nine months ended March 31, 2020.September 30, 2020, respectively. This expense is included in general and administrative expense.

-21-

As of March 31,September 30, 2020, future lease liability is as follows:

2020
 
$
82,000
  
$
37,000
 
2021
 
114,000
  
114,000
 
2022
 
121,000
  
121,000
 
2023
 
127,000
  
127,000
 
2024
 
134,000
  
134,000
 
Thereafter
  
786,000
   
776,000
 
Total 
$
1,364,000
  
$
1,309,000
 

Note N — Legal

Federal Action

On March 12, 2019, stockholder SIPDA Revocable Trust (“SIPDA”) filed a purported class action complaint in the United States District Court for the District of Nevada, against the Company and certain of its current and former officers and directors. SIPDA filed an Amended Complaint on October 11, 2019. The Amended Complaint purports to assert class action claims on behalf of all public shareholders of the Company and MVP I between August 11, 2017 and April 1, 2019 in connection with the (i) August 2017 proxy statements filed with the SEC to obtain shareholder approval for the merger of the Company and MVP I (the “proxy statements”), and (ii) August 2018 proxy statement filed with the SEC to solicit proxies for the election of certain directors (the “2018 proxy statement”). The Amended Complaint alleges, among other things, that the 2017 proxy statements failed to disclose that two major reasons for the merger and certain charter amendments implemented in connection therewith were (i) to facilitate the execution of an amended advisory agreement that allegedly was designed to benefit Mr. Shustek financially in the event of an internalization and (ii) to give Mr. Shustek the ability to cause the Company to internalize based on terms set forth in the amended advisory agreement. The Amended Complaint further alleges, among other things, that the 2018 proxy statement failed to disclose the Company’s purported plan to internalize its management function.
-24-

The Amended Complaint alleges, among other things, (i) that all defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, by disseminating proxy statements that allegedly contain false and misleading statements or omit to state material facts; (ii) that the director defendants violated Section 20(a) of the Exchange Act; and (iii) that the director defendants breached their fiduciary duties to the members of the class and to the Company.

The Amended Complaint seeks, among other things, unspecified damages; declaratory relief; and the payment of reasonable attorneys' fees, accountants' and experts' fees, costs and expenses.

On June 13, 2019, the court granted SIPDA’s motion for Appointment as Lead Plaintiff. The litigation is still at a preliminary stage.   On January 9, 2020, the Company and the Board of Directors moved to dismiss the Amended Complaint.  The Company and the Board of Directors have reviewed the allegations in the Amended Complaint and believe the claims asserted against them in the Amended Complaint are without merit and intend to vigorously defend this action.

Maryland Actions

On May 31, 2019, and June 27, 2019, alleged stockholders filed class action lawsuits alleging direct and derivative claims against the Company, certain of our officers and directors, MVP Realty Advisors, Vestin Realty Mortgage I, and Vestin Realty Mortgage II in the Circuit Court for Baltimore City, captioned Arthur Magowski v. The Parking REIT, Inc., et. al, No. 24-C-19003125 (filed on May 31, 2019) (the “Magowski Complaint”) and Michelle Barene v. The Parking REIT, Inc., et. al, No. 24-C-19003527 (filed on June 27, 2019) (the “Barene Complaint”).

The Magowski Complaint asserts purportedly direct claims on behalf of all stockholders (other than the defendants and persons or entities related to or affiliated with any defendant) for breach of fiduciary duty and unjust enrichment arising from the Company’s decision to internalize its advisory function. In this Complaint, Plaintiff Magowski asserts that the stockholders have allegedly been directly injured by the internalization and related transactions. The Barene Complaint asserts both direct and derivative claims for breach of fiduciary duty arising from substantially similar allegations as those contained in the Magowski Complaint. The purportedly direct claims are asserted on behalf of the same class of stockholder as the purportedly direct claims in the Magowski Complaint, and the derivative claims in the Barene Complaint are asserted on behalf of the Company.

On September 12 and 16, 2019, the defendants filed motions to dismiss the Magowski and Barene complaints, respectively. The Magowski and Barene Complaints seek, among other things, damages; declaratory relief; equitable relief to reverse and enjoin the internalization transaction; and the payment of reasonable attorneys' fees, accountants' and experts' fees, costs and expenses. The actions are at a preliminary stage. The Company and the board of directors intend to vigorously defend against these lawsuits.

-22-

The Magowski Complaint also previewed that a stockholder demand would be made on the Board to take action with respect to claims belonging to the Company for the alleged injury to the Company. On June 19, 2019, Magowski submitted a formal demand letter to the Board asserting the same alleged wrongdoing as alleged in the Magowski Complaint and demanding that the Board investigate the alleged wrongdoing and take action to remedy the alleged injury to the Company. The demand includes that claims be initiated against the same defendants as are named in the Magowski Complaint. In response to this stockholder demand letter, on July 16, 2019, the Board established a demand review committee of one independent director to investigate the allegations of wrongdoing made in the letter and to make a recommendation to the Board for a response to the letter.  On September 27, 2019, the Board replaced the demand review committee with a special litigation committee. The special litigation committee is responsible for investigating the allegations of wrongdoing made in the letter and making a final determination regarding the response for the Company to the demand. The work of the special litigation committee is on-going.

SEC Investigation

The Securities and Exchange Commission (“SEC”) is conducting an investigation relating to the Parking REIT. In June 2019, the SEC issued subpoenas to the Company and its chairman and chief executive officer Michael V. Shustek, and since then has requested more information. The Company cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies, if any, that may be imposed on Mr. Shustek, the Company or any other entity arising out of the SEC investigation.

Nasdaq Notification Regarding Company’s Common Stock

Further, Nasdaq has informed the Company that (i) the Company’s common stock will not be approved for listing currently on the Nasdaq Global Market, and (ii) it is highly unlikely that the Company’s common stock would be approved for listing while the SEC investigation is ongoing. There can be no assurance that the Company’s common stock will ever be approved for listing on the Nasdaq Global Market or any other stock exchange, even if the SEC investigation referred to above is completed and no wrongdoing is found and no action is taken in connection therewith against the Company, Mr. Shustek or any other person.

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Note O — Preferred Stock and Warrants

The Company reviewed the relevant ASC’s, specifically ASC 480 – Distinguishing Liabilities from Equity and ASC 815 – Derivatives and Hedging, in connection with the presentation of the Series A and Series 1 preferred stock. Below is a summary of the Company’s preferred stock offerings.

Series A Preferred Stock

On November 1, 2016, the Company commenced an offering of up to $50 million in shares of the Company’s Series A Convertible Redeemable Preferred Stock (“Series A”), par value $0.0001 per share, together with warrants to acquire the Company’s common stock, in a Regulation D 506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company closed the offering on March 24, 2017 and raised approximately $2.5 million, net of offering costs, in the Series A private placements.

The holders of the Series A Preferred Stock are entitled to receive, when and as authorized by the board of directors and declared by the Company out of funds legally available for the payment of dividends, cash dividends at the rate of 5.75% per annum of the initial stated value of $1,000 per share. Since a Listing Event, as defined in the charter, did not occur by March 31, 2018, the cash dividend rate has been increased to 7.50%, until a Listing Event at which time, the annual dividend rate will be reduced to 5.75% of the Stated Value. Based on the number of Series A shares outstanding at March 31,September 30, 2020, the increased dividend rate costs the Company approximately $13,000 more per quarter in Series A dividends.

Subject to the Company’s redemption rights as described below, each Series A share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series A Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 90 days after the occurrence of a Listing Event or (ii) the second anniversary of the final closing of the Series A offering (whether or not a Listing Event has occurred). Each Series A share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series A Conversion Price”) determined as follows:

Provided there has been a Listing Event, if a Series A Conversion Notice with respect to any Series A share is received on or prior to the day immediately preceding the first anniversary of the issuance of such share, the Series A Conversion Price will be equal to 110% of the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the delivery date of the Series A Conversion Notice.
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Provided there has been a Listing Event, if a Series A Conversion Notice with respect to any Series A share is received after the first anniversary of the issuance of such share, the Series A Conversion Price will be equal to the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the delivery date of the Series A Conversion Notice.
If a Series A Conversion Notice with respect to any Series A share is received on or after the second anniversary of the final closing of the Series A offering, and at the time of receipt of such Series A Conversion Notice, a Listing Event has not occurred, the Series A Conversion Price will be equal to 100% of the Company’s net asset value per share.

If the Amended Charter becomes effective, the date by which holders of Series A must provide notice of conversion will be changed from the day immediately preceding the first anniversary of the issuance of such share to December 31, 2017. This change will conform the terms of the Series A with the terms of the Series 1 with respect to conversions.

At any time, from time to time, after the 20th trading day after the date of a Listing Event, the Company (or its successor) will have the right (but not the obligation) to redeem, in whole or in part, the Series A at the redemption price equal to 100% of the Stated Value, initially $1,000 per share, plus any accrued but unpaid dividends if any, to and including the date fixed for redemption. If the Company (or its successor) chooses to redeem any Shares, the Company (or its successor) has the right, in its sole discretion, to pay the redemption price in cash or in equal value of common stock of the Company (or its successor), based on the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the redemption, in exchange for the Series A. The Company (or its successor) also will have the right (but not the obligation) to redeem all or any portion of the Series A subject to a Series A Conversion Notice for a cash payment to the holder thereof equal to the applicable redemption price, by delivering a redemption notice to the holder of such Shares on or prior to the 10th trading day prior to the close of trading on the applicable Conversion Date.

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Each investor in the Series A received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of March 31,September 30, 2020, there were detachable warrants that may be exercised for 84,510 shares of the Company’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at March 31,September 30, 2020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to the Company would be approximately $2.1 million and the Company would as a result issue an additional 84,510 shares of common stock. As of the date of this filing the Company had an estimated fair market value of potential warrants that was immaterial.

On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A, however, such distributions will continue to accrue in accordance with the terms of the Series A.

Series 1 Preferred Stock

On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock (“Series 1”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1, together with warrants to acquire the Company’s common stock, to accredited investors. On January 31, 2018 the Company closed this offering.

The holders of the Series 1 Preferred Stock are entitled to receive, when and as authorized by the Company’s board of directors and declared by us out of legally available funds, cumulative, cash dividends on each Share at an annual rate of 5.50% of the Stated Value pari passu with the dividend preference of the Series A Preferred Stock and in preference to any payment of any dividend on the Company’s common stock; provided, however, that Qualified Purchasers (who purchased $1.0 million or more in a single closing) are entitled to receive, when and as authorized by the Company’s board of directors and declared by us out of legally available funds, cumulative, cash dividends on each Series 1 share held by such Qualified Purchaser at an annual rate of 5.75% of the Stated Value (instead of the annual rate of 5.50% for all other holders of the Series 1 shares) until April 7, 2018, at which time, the annual dividend rate will be reduced to 5.50% of Stated Value; provided further, however, that since a Listing Event has not occurred by April 7, 2018, the annual dividend rate on all Series 1 shares (without regard to Qualified Purchaser status) has been increased to 7.00% of the Stated Value until the occurrence of a Listing Event, at which time, the annual dividend rate will be reduced to 5.50% of the Stated Value. Based on the number of Series 1 shares outstanding at March 31,September 30, 2020, the increased dividend rate costs the Company approximately $150,000 more per quarter in Series 1 dividends.

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Subject to the Company’s redemption rights as described below, each Series 1 share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series 1 Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 45 days after the occurrence of a Listing Event or (ii) April 7, 2019 (whether or not a Listing Event has occurred). Each Series 1 share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series 1 Conversion Price”) determined as follows:

Provided there has been a Listing Event, if a Series 1 Conversion Notice is received prior to December 1, 2017, the Series 1 Conversion Price will be equal to 110% of the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the delivery date of the Series 1 Conversion Notice.
Provided there has been a Listing Event, if a Series 1 Conversion Notice is received on or after December 1, 2017, the Series 1 Conversion Price will be equal to the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the delivery date of the Series 1 Conversion Notice.
If a Series 1 Conversion Notice is received on or after April 7, 2019, and at the time of receipt of such Series 1 Conversion Notice, a Listing Event has not occurred, the Series 1 Conversion Price for such Share will be equal to 100% of the Company’s net asset value per share, or NAV per share.

At any time, from time to time, on and after the later of (i) the 20th trading day after the date of a Listing Event, if any, or (ii) April 7, 2018, the Company (or its successor) will have the right (but not the obligation) to redeem, in whole or in part, the Series 1 Preferred Stock at the redemption price equal to 100% of the Stated Value, initially $1,000 per share, plus any accrued but unpaid dividends if any, to and including the date fixed for redemption. In case of any redemption of less than all of the shares by the Company, the shares to be redeemed will be selected either pro rata or in such other manner as the board of directors may determine. If the Company (or its successor) chooses to redeem any shares, the Company (or its successor) has the right, in its sole discretion, to pay the redemption price in cash or in equal value of common stock of the Company (or its successor), based on the volume weighted average price per share of the common stock of the Company (or its successor) for the 20 trading days prior to the redemption, in exchange for the shares. The Company (or its successor) also will have the right (but not the obligation) to redeem all or any portion of the Series 1 Preferred Stock subject to a Series 1 Conversion Notice for a cash payment to the holder thereof equal to the applicable redemption price, by delivering a Redemption Notice to the holder of such Shares on or prior to the 10th trading day prior to the close of trading on the Conversion Date for such Shares.
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Each investor in the Series 1 received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of March 31,September 30, 2020, there were detachable warrants that may be exercised for 1,382,675 shares of the Company’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at March 31,September 30, 2020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, gross proceeds to the Company would be approximately $34.6 million and as a result the Company would issue an additional 1,382,675 shares of common stock. As of the date of this filing the Company had an estimated fair market value of potential warrants that was immaterial.

On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in accordance with the terms of the Series 1.

Note P — Deferred Management Internalization

Management Internalization

On March 29, 2019, the Company and the former Advisor entered into definitive agreements to internalize the Company’s management function effective April 1, 2019 (the “Internalization”). Since their formation, under the supervision of the board of directors (the “Board of Directors”), the former Advisor has been responsible for managing the operations of the Company and MVP I, which merged with a wholly owned indirect subsidiary of the Company in December 2017. As part of the Internalization, among other things, the Company agreed with the former Advisor to (i) terminate the Second Amended and Restated Advisory Agreement, dated as of May 26, 2017 and, for the avoidance of doubt, the Third Amended and Restated Advisory Agreement, dated as of September 21, 2018, which by its terms would have become effective only upon a listing of the Company’s common stock on a national securities exchange (collectively, the “Management Agreements”), each entered into among the Company, the former Advisor and MVP REIT II Operating Partnership, LP (the “Operating Partnership”); (ii) extend employment to the executives and other employees of the former Advisor; (iii) arrange for the former Advisor to continue to provide certain services with respect to outstanding indebtedness of the Company and its subsidiaries; and (iv) lease the employees of the former Advisor for a limited period of time prior to the time that such employees become employed by the Company.
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Contribution Agreement

On March 29, 2019, the Company entered into a Contribution Agreement (the “Contribution Agreement”) with the former Advisor, Vestin Realty Mortgage I, Inc. (“VRTA”) (solely for purposes of Section 1.01(c) thereof), Vestin Realty Mortgage II, Inc. (“VRTB”) (solely for purposes of Section 1.01(c) thereof) and Shustek (solely for purposes of Section 4.03 thereof). In exchange for the Contribution, the Company agreed to issue to the former Advisor 1,600,000 shares of Common Stock as consideration (the “Internalization Consideration”), issuable in four equal installments. The first and second installments of 400,000 shares of Common Stock per installment were issued on April 1, 2019 and December 31, 2019, respectively. The remaining installments will be issued on December 31, 2020 and December 31, 2021 (or if December 31st is not a business day, the day that is the last business day of such year). If requested by the Company in connection with any contemplated capital raise by the Company, the former Advisor has agreed not to sell, pledge or otherwise transfer or dispose of any of the Internalization Consideration for a period not to exceed the lock-up period that otherwise would apply to other stockholders of the Company in connection with such capital raise. See the Current Report on Form 8-K filed with the SEC on April 3, 2019 and Contribution Agreement in Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the Management Internalization.

The Internalization transaction closed on April 1, 2019, and the following table shows the Internalization Consideration to be paid in aggregate to the former Advisor. The first and second installment of 400,000 shares of Common Stock per installment were issued to the former Advisor on April 1, 2019 and December 31, 2019, respectively.

 Number of shares     Internalization Contribution  Number of shares   Internalization Contribution 
Internalization consideration in common stock at $17.50
  
1,100,000
   
(1
)
 
$
19,250,000
  
1,100,000
 
(1
)
 
$
19,250,000
 
Internalization consideration in common stock at $25.10
  
500,000
   
(2
)
  
12,550,000
   
500,000
 
(2
)
  
12,550,000
 
Total internalization consideration
  
1,600,000
      
$
31,800,000
   
1,600,000
   
$
31,800,000
 
                   
Internalization consideration issued April 1, 2019 at $17.50
  
(400,000
)
      
(7,000,000
)
 
(400,000
)
   
(7,000,000
)
Shares issued December 31, 2019 at $17.50
  
(400,000
)
      
(7,000,000
)
  
(400,000
)
    
(7,000,000
)
Deferred management internalization at March 31, 2020
  
800,000
      
$
17,800,000
 
Deferred management internalization at September 30, 2020
  
800,000
   
$
17,800,000
 
1) The Company has the right to purchase 1,100,000 of these shares at $17.50 per share which potentially limits the cost to the Company.
2) $25.10 is the Company's stated NAV as of May 28, 2019.
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Note Q— Employee Benefit Plan

Effective July 1, 2019, the Company began participating in a multi-employer 401(k) Safe Harbor Plan (the “Plan”), which is a defined contribution plan covering all eligible employees. Under the provisions of the Plan, participants may direct the Company to defer a portion of their compensation to the Plan, subject to Internal Revenue Code limitations. The Company provides for an employer matching contribution equal to 100% of the first 3% of eligible compensation and 50% of the next 2% of eligible compensation contributed by each employee, which is funded in cash. All contributions vest immediately.

Total expense recorded for the matching 401(k) contribution in the three and nine months ended March 31,September 30, 2020 was approximately $3,000. There was no similar$10,000 and $25,000, respectively. Total expense for the matching 401 (k) contribution in the three and nine months ended March 31, 2019.September 30, 2019 was $5,000.

Note R — Subsequent Events

Subsequent to March 31, 2020, the global economy has continued to be severely impacted by the COVID-19 pandemic and the Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it will impact the Company’s tenants in the near and long term. In particular, many of the Company’s properties are located near government buildings and sports centers, which depend in large part on customer traffic, and conditions that lead to a decline in customer traffic will have a material and adverse impact on those businesses. Many state and local governments are currently restricting public gatherings or requiring people to shelter in place, which has in some cases eliminated or severely reduced the demand for parking.  Such events are adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or cause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, may impact or eliminate the rental revenue the Company generates from its leases with them. While we did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, we expect this situation will have an impact on our business and results of operations in the second quarter and in later periods of 2020 that may be material, but cannot be reasonably estimated at this time due to numerous uncertainties.

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The Company’s rental revenue and the return on its investments may be materially adversely affected by restrictions requiring people to shelter in place in reaction to the COVID-19 outbreak and may continue to be materially adversely affected to the extent that economic conditions result in the elimination of jobs or the migration of jobs from the urban centers where the Company’s parking facilities are situated to other locations. In particular, a majority of the Company’s property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking. Subsequent to March 31, 2020, as a result of the COVID-19 pandemic, the Company has entered into lease amendments with eight tenants. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease. While the Company continues to review and negotiate rent relief requests with tenants and plans to continue to execute lease amendments based on its evaluation of each tenant’s circumstances, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. The extent of the impact of COVID-19 on the Company’s financial and operational performance will depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted. The extent to which COVID-19 may impact the Company’s financial condition or results of operations cannot be determined at this time. For further information regarding the impact of COVID-19 on the Company, see Part II, Item 1A titled “Risk Factors.”

The Company applied for the Paycheck Protection Program loan, guaranteed by the SBA, through Key Bank National Association, Inc., on April 3, 2020. This loan program is for companies with 500 or less employees, under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed by President Trump on March 27, 2020. On AprilOctober 23, 2020, the Company received funding for its CARES Act loanthe remaining condemnation proceeds of approximately $348,000. The loan carries an interest rate of 1.00% and a term of two years with principal and interest payments of approximately $15,000 per month beginning the seventh month$596,000 from the datecity of Minneapolis and funded the loan.remaining $246,000 due to the ANICO escrow account on October 26, 2020.

AsOn November 13, 2020, the Company entered into a result of current economic conditions, the Company’s cash flow from operations might be impacted.settlement agreement with ABM Industry Groups, LLC.  The Companysettlement is in preliminary discussions with its lenders, including Bankconsideration for the release of America,ABM for any and all issues arising out of disputes related to obtain waivers from certain liquidity requirements and defer payments due under its loans in light of the current economic conditions and the fact that the Company is in preliminary discussions with tenants and has granted relief to some of its tenants to defer rent payments as a result of their estimated lost revenues from the current COVID-19 pandemic; however, there can be no assurance that the Company will reach any such agreement with its lenders. In particular, some of the Company’s loan agreements require that the Company maintain certain liquidity and net worth levels. For example, the loan with Bank of Americaleases for MVP Detroit garage requires the Company to maintain $2.3 million of unencumbered cashIndianapolis City Park Garage, LLC, MCI 1372 Street, LLC and cash equivalents at all times. As of the time of this filing, the Company was in compliance with this lender requirement; however, unless the Company sells some of its existing assets, it does not expect that it will be able to maintain such required minimum balances beyond the third quarter of 2020, if the Company does not receive a waiver for this requirement.  The Company may be unable to sell assets and may be unable to negotiate a waiver or amendment of the liquidity and net worth requirements, in which case, the Company could experience an event of technical default under its loan agreements, which, if uncured, could result in an acceleration of such indebtedness.

MVP Clarksburg Lot, LLC.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a financial review and analysis of the Company’s financial condition and results of operations for the three and nine months ended March 31,September 30, 2020 and 2019. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Conditions and Results of Operations in the Company’s annual report on Form 10-K for the year ended December 31, 2019. As used herein, the terms "we," "our" and "us" refer to The Parking REIT, Inc., and, as required by context, MVP REIT II Operating Partnership, LP, which the Company refers to as the "operating limited partnership," and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this quarterly report on Form 10-Q (this "Quarterly Report") that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential" or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon the Company’s current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on operations and future prospects include, but are not limited to:

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

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon any forward-looking statements included herein. All forward-looking statements are made as of the date of this Quarterly Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward – looking statements made after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward – looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.
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This report may include market data and forecasts with respect to the REIT industry. Although the Company is responsible for all of the disclosure contained in this report, in some cases the Company relies on and refers to market data and certain industry forecasts that were obtained from third party surveys, market research, consultant surveys, publicly available information and industry publications and surveys that are believed to be reliable.

Overview

Commencing with its taxable year ended December 31, 2017 through December 31, 2019, the Company has operated in a manner to qualify as a REIT. The Company was formed to focus primarily on investments in parking facilities, including parking lots, parking garagesHowever, for the quarters ended June 30, 2020 and other parking structures throughout the United States and Canada. To a lesser extent, the Company may also invest in parking properties that contain other sources of rental income, potentially including office, retail, storage, residential, billboard or cell towers. As of March 31,September 30, 2020, the Company held 40 propertiesdoes not appear to be in various cities, allcompliance with the REIT income tests. These REIT income tests are measured on an annual basis, and we are evaluating options and strategies that may enable us to maintain our REIT status for our taxable year ending December 31, 2020 notwithstanding our inability to comply with these income tests in the past two quarters.  If implemented, these options and strategies, may have negative ancillary impacts on our business and operations, including potentially increasing our overall tax liability.  If we determine that the potential negative impacts of whichthese options outweigh the benefits of potentially maintaining our REIT status, we may choose not to implement any of these options.  Moreover, even if we choose to implement any of these options, no assurances can be given that our implementation will be successful  or that these options will in fact enable us to maintain our status as a REIT for our taxable year ending December 31, 2020.  Accordingly, unless we choose, and are parking facilities. See note C – Commitmentsable, to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020. If we fail to qualify as a REIT for our taxable year ended December 31, 2020, we would no longer be required to make distributions of our annual taxable income in order to maintain our REIT status.  Moreover, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be treated as a REIT for the four taxable years following 2020.  We believe that we may not be entitled to this statutory relief, and Contingencies in Part I, Item 1 Notesthere can be no assurances that we will be able to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.obtain such relief.

The Company was incorporated in Maryland on May 4, 2015 and is the sole member of the Operating Partnership. The Company owns substantially all of its assets and conduct its operations through the Operating Partnership.

Prior to the management Internalization effective on April 1, 2019, the Company was externally managed by MVP Realty Advisors, LLC, dba The Parking REIT Advisors (the “former Advisor”), a Nevada limited liability company. As a result of the management Internalization, the Company will no longer incur an asset management fee equal to 1.1% of the cost of all assets held by the Company, effective April 1, 2019.

The Company has elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with our taxable year ended December 31, 2017.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.  The ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, has contributed to significant volatility and negative pressure in financial markets and resulted in unprecedented job losses causing many to fear an imminent global recession. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified, many countries, including the United States, have reacted by instituting quarantines, density limitations and social distancing measures, mandating business and school closures and restricting travel.

As a result of these measures, the COVID-19 pandemic iscontinues to negatively impactingimpact almost every industry directly or indirectly, including ours and the industries in which our tenants operate, with much of the impact still unknown. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. In particular, many of the Company’s properties are located in urban centers, near government buildings and sports centers, which dependcenters. Demand for parking in these locations depends in large part on customer traffic, and conditions that lead to a decline in customer traffic willhave had and may continue to have a material and adverse impact on those businesses. Many state and local governments are currently restricting public gatherings, or requiring people to shelter in place and implementing social distancing measures, which has in some cases eliminated or severely reduced the demand for parking. Such events are adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or cause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, may impact or eliminate the rental revenue the Company generates from its leases with them. In addition, some state governments and other authorities were in varying stages of lifting or modifying some of these measures and some have already been forced to, and others may in the future, reinstitute these measures or impose new, more restrictive measures, if the risks, or the perception of the risks, related to the COVID-19 pandemic worsen at any time. The Company’s rental revenue and the return on its investments has been and may continue to be materially adversely affected by restrictions requiring people to shelter in place in reaction to the COVID-19 outbreak and may continue to be further materially adversely affected to the extent that economic conditions result in the elimination of jobs or the migration of jobs from the urban centers where the Company’s parking facilities are situated to other locations. In particular, a majority of the Company’s property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking.

-31-

The Company did not experience significantexperienced certain disruptions from the COVID-19 pandemicin base rent revenue and percentage rent revenue during the first quarter ended September 30, 2020. For further information regarding the impact of 2020. COVID-19 on the Company’s see Results of operations for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. While the Company is currently unable to completely estimate the future impact that the COVID-19 pandemic and efforts to contain its spread will have on the Company’s business and on its tenants, as of May 13,November 16, 2020, the Company hashad entered into thirty five lease amendments with eight tenants.tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease. While the Company continues to review and negotiate rent relief requests with tenants and plans to continue to execute lease amendments based on its evaluation of each tenant’s circumstances, there can be no assurance the Company will reach an agreement with any tenant or if an agreement is reached, that any such tenant will be able to repay any such deferred rent in the future. The extent of the impact of COVID-19 on the Company’s financial and operational performance will depend on certain developments, including the duration and spread of the outbreak and its impact on the Company’s tenants, all of which are uncertain and cannot be predicted. The extent to which COVID-19 may impact the Company’s financial condition or results of operations cannot be determined at this time. For further information regarding the impact of COVID-19 on the Company, see Note R — Subsequent Events in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report and Part II, Item 1A titled “Risk Factors.”
-29-

In January of 2019, we were notified by the City of Minneapolis that a portion of our property, Minneapolis City Parking, located at 1022 Hennepin Ave would be utilized for an expansion of the street and for a new transienttransit center.  After negotiating with the City for over a year, we were able to settle on the City taking approximately 6,000 sq. ft. of frontage on Hennepin Avenue, where we would still be left with one entrance on Hennepin Avenue and multiple entrances and exits on 10th and 11th streets.  The City agreed to compensate The Parking REIT in the amount of $1.3 million, with a portion to be used to reconfigure the parking lot, to enable it to fit 266 parking spaces compared to 268 prior to the taking, and will be required to landscape the front portion of the lot once the improvements are complete.  After all attorney fees and improvement costs, we expect to collect approximately $1.0Proceeds totaling $1.3 million withinhave been received in full as of the second or third quartertime of this year.filing.

On July 31, 2020, the Company entered into three loan modification agreements and an escrow agreement with American National Insurance Company (“ANICO”) for the following three loans: (i) Minneapolis City Parking, LLC, (ii) West 9th Properties II, LLC and (iii) MVP Fort Worth Taylor, LLC in which $950,000 in condemnation proceeds from the City of Minneapolis shall be used to pay the monthly principal and interest due under each note, beginning with the payment due June 1, 2020, until the termination date defined as the earlier of (i) payment in full of the Minneapolis City loan or (ii) the date that the debt service coverage of the real property securing each loan is at least 1.10 to 1.0 calculated on a trailing three-month basis. On August 6, 2020, $704,000 was wired to the ANICO escrow account. On October 23, 2020, the Company received the remaining condemnation proceeds of $596,000 from the city of Minneapolis and funded the remaining $246,000 due to the ANICO escrow account on October 26, 2020.
On September 25, 2020, the Company entered into Parking Management Agreements with Interstate Parking Company for the following three properties: MVP St. Paul Holiday Garage, LLC effective October 1, 2020 through September 30, 2025; MVP Milwaukee Old World, LLC effective November 1, 2020 through October 31, 2025 and MVP Milwaukee Arena Lot, LLC effective December 1, 2020 through November 30, 2025. These Parking Management Agreements provide for Interstate Parking Company to receive a monthly base management fee and monthly incentive fee which consists of a certain percent of net operating income over a defined threshold. All other net operating income is remitted to the Company.
Objectives

The Company’s primary objectives are to:

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

In mid-2019, the Company engaged financial and legal advisors and began to explore a broad range of potential strategic alternatives to provide liquidity to stockholders. The Company is currently exploring certain strategic alternatives, including potential sales of assets, a potential sale of the Company or a portion thereof, a potential strategic business combination or a potential liquidation. However, there can be no assurance that the Board’s exploration of potential strategic alternatives will result in any change of strategy or transaction being entered into or consummated or, if a transaction is undertaken, as to its terms, structure or timing. In addition, the value received in any potential strategic alternative would likely be less than the NAV most recently estimated by the Company’s board of directors. Our assets have been valued based upon appraisal standards and the values of our assets using these methods are not required to reflect market value under those standards and will not necessarily result in a reflection of fair value under generally accepted accounting principles. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated NAV per share, which could be significantly different from the estimated NAV per share determined by our board of directors. The estimated NAV per share is not a representation or indication that, among other things a stockholder would ultimately realize distributions per share equal to the estimated NAV per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company or a third party would offer the estimated NAV per share in an arms-length transaction to purchase all or substantially all of our shares of common stock.
-32-

For example, we expect to incur additional costs in connection with ongoing litigation, the SEC investigation discussed in Note N - Legal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q and legal and consulting fees associated with pursuing any potential strategic alternatives, which in the aggregate may be material, none of which was taken in consideration when the board of directors determined the prior estimated NAV per share. Please see our Current Reports on Form 8-K filed with the SEC on May 28, 2019 for additional information regarding the NAV calculation, as well as “Item 1A. Risk Factors—Risks Related to an Investment in the Company–Stockholders should not rely on the estimated NAV per share as being an accurate measure of the current value of our shares of common stock” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Prior Investment Strategy

The Company’s investment strategy has historically focused primarily on acquiring, owning and managing parking facilities, including parking lots, parking garages and other parking structures throughout the United States and Canada.  The Company historically focused primarily on investing in income-producing parking lots and garages with air rights in central business districts. In building its current portfolio, the Company sought geographically targeted investments that present key demand drivers, that were expected to generate cash flows and provide greater predictability during periods of economic uncertainty. Such targeted investments include, but are not limited to, parking facilities near one or more of the following demand drivers:

Downtown core
Government buildings and courthouses
Sporting venues
Hospitals
Hotels

However, as a result of the current COVID-19 pandemic, among other factors, such demand drivers have been and are expected to be significantly diminished for an indeterminate period of time. Many state and local governments are currently restricting public gatherings or requiring people to shelter in place, which has in some cases eliminated or severely reduced the demand for parking. For further information regarding the impact of COVID-19 on the Company, see Part II, Item 1A titled “Risk Factors.”
-30-

Prior Investment Criteria

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

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

As noted above, the Company does not currently expect to make any additional acquisitions unless and until it is able to sell some of its existing assets, and then only after ensuring that it has sufficient liquidity resources.  In the event of a future acquisition, the Company would expect the foregoing criteria to serve as guidelines, however, Management and the Company’s board of directors may vary from these guidelines to acquire properties which they believe represent value opportunities.

Management Internalization

On March 29, 2019, the Company and the former Advisor entered into definitive agreements to internalize the Company’s management function effective April 1, 2019 (the “Internalization”). Under the supervision of the board of directors (the “Board of Directors”), the former Advisor had been responsible for managing the operations of the Company and MVP I, which merged with a wholly owned indirect subsidiary of the Company in December 2017, since their respective formations. As part of the Internalization, among other things, the Company agreed with the former Advisor to (i) terminate the Second Amended and Restated Advisory Agreement, dated as of May 26, 2017 and, for the avoidance of doubt, the Third Amended and Restated Advisory Agreement, dated as of September 21, 2018, which by its terms would have become effective only upon a listing of the Company’s common stock on a national securities exchange (collectively, the “Management Agreements”), each entered into among the Company, the former Advisor and MVP REIT II Operating Partnership, LP (the “Operating Partnership”); (ii) extend employment to the executives and other employees of the former Advisor; (iii) arrange for the former Advisor to continue to provide certain services with respect to outstanding indebtedness of the Company and its subsidiaries; and (iv) lease the employees of the former Advisor for a limited period of time prior to the time that such employees become employed by the Company.

-33-

Contribution Agreement

On March 29, 2019, the Company entered into a Contribution Agreement (the “Contribution Agreement”) with the former Advisor, Vestin Realty Mortgage I, Inc. (“VRTA”) (solely for purposes of Section 1.01(c) thereof), Vestin Realty Mortgage II, Inc. (“VRTB”) (solely for purposes of Section 1.01(c) thereof) and Shustek (solely for purposes of Section 4.03 thereof). In exchange for the Contribution, the Company agreed to issue to the former Advisor 1,600,000 shares of Common Stock as consideration (the “Consideration”), issuable in four equal installments. The first and second installments of 400,000 shares of Common Stock per installment were issued on the April 1, 2019 and December 31, 2019, respectively. See Note P — Deferred Management Internalization in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information. The remaining installments will be issued on December 31, 2020 and December 31, 2021 (or if December 31st is not a business day, the day that is the last business day of such year). If requested by the Company in connection with any contemplated capital raise by the Company, the former Advisor has agreed not to sell, pledge or otherwise transfer or dispose of any of the Internalization Consideration for a period not to exceed the lock-up period that otherwise would apply to other stockholders of the Company in connection with such capital raise. See the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2019 for more information regarding the Management Internalization.

Results of Operations for the three months ended March 31,September 30, 2020 compared to the three months ended March 31,September 30, 2019.

 For the Three Months Ended March 31,  For the Three Months Ended September 30, 
 2020  2019  $ Change  % Change  2020  2019 $ Change % Change 
Revenues                     
Base rent income
 
$
4,991,000
  
$
5,054,000
  
$
(63,000
)
 
-1
%
 
$
3,132,000
 
$
5,036,000
 
$
(1,904,000
)
 
(38
%)
Management income
 
303,000
 
--
 
303,000
 
100
%
Percentage rent income
  
327,000
   
301,000
   
26,000
   
9
%
  
75,000
  
1,045,000
  
(970,000
)
  
(93
%)
Total revenues
 
$
5,318,000
  
$
5,355,000
  
$
(37,000
)
 
-1
%
 
$
3,510,000
 
$
6,081,000
 
$
(2,571,000
)
 
(42
%)

Rental revenue

On January 1, 2020 the operating lease of MVP PF Memphis Poplar 2013, LLC (“MVP Memphis Poplar”) by Premium Parking was terminated.  According to the terms of the termination agreement a termination fee of $144,000 is due from Premium Parking to MVP Memphis Poplar. This fee will be paid monthly in the amount of $3,000 commencing March 1, 2020 and continuing through February 1, 2024.
-31-

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

Due to the COVID-19 pandemic the Company transitioned eleven leases to management agreements due to the fact that many state and local governments are currently restricting public gatherings, requiring people to shelter in place and implementing social distancing measures, which has in some cases eliminated or severely reduced the demand for parking. This reduced demand for parking is adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or cause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, may impact or eliminate the rental revenue the Company generates from its leases with them. Per these management agreements, the tenant now operates the property on behalf of the Company and pays their operating expenses from gross parking revenue and is required to remit an agreed upon percentage of the remainder to the Company instead of base rent payments. Revenues from these properties are recorded as management income.

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

-34-

During the three months ended March 31,September 30, 2020 and 2019 the Company received percentage rent on the following properties:

  For the Three Months Ended March 31 
  2020  2019  $ Change  % Change 
Percentage rent income            
MVP Ft Worth Taylor (a)
 $
94,000
  $
8,000
  $
86,000
   
1075
%
MVP Milwaukee Arena
  
31,000
   
30,000
   
1,000
   
3
%
MVP Denver 1935 Sherman
  
--
   
9,000
   
(9,000
)
  
(100
%)
MVP Detroit Center Garage (b)
  
153,000
   
216,000
   
(63,000
)
  
(29
%)
MVP St. Louis Broadway
  
5,000
   
--
   
5,000
   
100
%
MVP New Orleans Rampart
  
44,000
   
38,000
   
6,000
   
16
%
 Total revenues
 
$
327,000
  
$
301,000
  
$
26,000
   
9
%
  For the Three Months Ended September 30 
  2020  2019  $ Change  % Change 
Percentage rent income            
MVP PF Ft. Lauderdale(a)
 
$
--
  
$
33,000
  
$
(33,000
)
  
(100
%)
Mabley Place Garage
  
--
   
316,000
   
(316,000
)
  
(100
%)
MVP Indianapolis Washington
  
--
   
36,000
   
(36,000
)
  
(100
%)
MVP Milwaukee Arena
  
--
   
16,000
   
(16,000
)
  
(100
%)
MVP St Paul Holiday
  
--
   
57,000
   
(57,000
)
  
(100
%)
MVP Detroit Center Garage (d)
  
--
   
566,000
   
(566,000
)
  
(100
%)
St. Louis Broadway
  
--
   
4,000
   
(4,000
)
  
(100
%)
MVP Raider Park Garage
  
75,000
   
17,000
   
58,000
   
341
%
    Total revenues
 
$
75,000
  
$
1,045,000
  
$
(970,000
)
  
(92.8
%)
a)Increased activity due to Frost Tower and additional monthlies added, caused the increase for the last quarter

b)Lost transient business in March of 2020 as a result of restrictions intended to slow the spread of COVID-19.
Decrease in percentage rent is due to lease amendments entered into due to COVID-19. The Company does not expect to receive any additional percentage rent for the remainder of 2020.

 For the Three Months Ended March 31,  For the Three Months Ended September 30, 
 2020  2019  $ Change  % Change  2020  2019 $ Change % Change 
Operating expenses                     
Property taxes
 
$
665,000
  
$
793,000
  
$
(128,000
)
  
(16
%)
 
$
955,000
 
$
734,000
 
$
221,000
 
30
%
Property operating expense
  
386,000
   
379,000
   
7,000
   
2
%
 
263,000
 
421,000
 
(158,000
)
 
(38
%)
Asset management expense – related party
  
--
   
854,000
   
(854,000
)
  
(100
%)
General and administrative
  
1,653,000
   
850,000
   
803,000
   
94
%
 
1,452,000
 
1,625,000
 
(173,000
)
 
(11
%)
Professional fees
  
316,000
   
666,000
   
(350,000
)
  
(53
%)
 
384,000
 
3,869,000
 
(3,485,000
)
 
(90
%)
Acquisition expenses
  
3,000
   
4,000
   
(1,000
)
  
(25
%)
 
--
 
1,000
 
(1,000
)
 
(100
%)
Depreciation and amortization expenses
  
1,322,000
   
1,308,000
   
14,000
   
1
%
 
1,305,000
 
1,285,000
 
20,000
 
2
%
Impairment
  
6,475,000
  
500,000
  
5,975,000
  
1195
%
Total operating expenses
  
4,345,000
   
4,854,000
   
509,000
   
10
%
  
10,834,000
  
8,435,000
  
2,770,000
 
33
%
Income from operations 
$
973,000
  
$
501,000
  
$
472,000
   
94
%
Loss from operations
 
$
(7,324,000
)
 
$
(2,354,000
)
 
$
(4,970,000
)
  
211
%

The Company is continuing to monitor the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on rental rates and rent collections. As of May 13,September 30, 2020,, the Company has entered into thirty-five lease amendments with eight tenants.tenants/operators that became effective during the second quarter. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease.lease.  Although the Company is and will continue to be actively engaged in rent collection efforts related to uncollected rent, for such period, as well as working with certain tenants who have requested rent relief, the Company can provide no assurance that such efforts or its efforts in future periods will be successful, particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period. For further information regardingThe decrease in base rent income and percentage rent income during the quarter ended September 30, 2020 is primarily due to these lease amendments and the impact of the COVID-19 pandemic during the third quarter of 2020. In particular, many of the Company’s properties are located in urban centers, near government buildings and sporting venues, which depend in large part on customer traffic, and conditions that lead to a decline in customer traffic have had and may continue to have a material and adverse impact on those businesses. Many state and local governments are currently restricting public gatherings, requiring people to shelter in place and implementing social distancing measures, which has in some cases eliminated or severely reduced the Company, see Note R — Subsequent Events in Part I, Item 1 Financial Statements anddemand for parking. See Part II, Item 1A titled “Risk Factors.”Factors” for more information on the effect of COVID-19 on our business.

Property taxes

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

General and administrative

The decrease in general and administrative expenses from 2019 to 2020 of $173,000 was primarily attributable to (i) a decrease in director and officer insurance expense of approximately $151,000, (ii) a decrease in payroll expense of approximately $92,000 and (iii) a decrease in investor services expense of approximately $31,000. The decrease in the director and officer insurance expense is due to the fact that the premium paid for the six-year tail policy, purchased on June 30, 2019, was fully expensed during the twelve months ended June 30, 2020. These decreases were partially offset by increases in taxes & licenses expense of approximately $77,000 and office rent expense of approximately $25,000.

Professional fees

The decrease in professional fees was primarily due to lower legal fees incurred during the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019 and $0.8 million of insurance proceeds received, during the quarter ended September 30, 2020 for claims made against the director and officer insurance policy. These reimbursements were related to legal expenses incurred relating to lawsuits filed in 2019 and the SEC investigation, which was initiated in June of 2019.

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

Management internalization

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

Acquisition expenses

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

Depreciation and amortization expenses

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

Impairment

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

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

Interest expense

The decrease in interest expense for the period ended September 30, 2020, as compared to the same period in 2019, is primarily attributable to principal amortization of existing debt, a slight reduction of interest rates on the variable rate loan and the net paydown of certain private loans.

In the past, to maximize the use of cash, the Company sought opportunities to utilize debt financing in acquisitions, including the use of long-term debt. The interest expense will vary based on the amount of the Company’s borrowings and current interest rates at the time of financing. Historically, the Company’s intent was to secure appropriate leverage with the lowest interest rate available. The terms of any loans, in the future, will vary depending on the quality of the applicable property, the credit worthiness of the tenant and the amount of income the property is able to generate through parking leases. There is no assurance, however, that the Company will be acquiring additional properties in the future or will be able to secure additional financing on favorable terms or at all.

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

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

Gain on sale of investment in real estate

During September 2019, the Company sold the surface parking lot and office building in Fort Lauderdale for $6.1 million, which resulted in a gain from sale of investments of approximately $2.3 million.

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

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

Rental revenue

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

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

Due to the COVID-19 pandemic the Company temporarily transitioned fourteen leases to management agreements due to the fact that many state and local governments are currently restricting public gatherings, requiring people to shelter in place and implementing social distancing measures, which has in some cases eliminated or severely reduced the demand for parking. This reduced demand for parking is adversely impacting and may continue to adversely impact the Company’s tenants’ sales and/or cause the temporary closure of the Company’s tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, may impact or eliminate the rental revenue the Company generates from its leases with them. Per these management agreements, the tenant now operates the property on behalf of the Company and pays their operating expenses from gross parking revenue and is required to remit an agreed upon percentage of the remainder to the Company instead of base rent payments. Revenues from these properties are recorded as management income.

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

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


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

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

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

The Company is continuing to monitor the potential impact of the COVID-19 pandemic and restrictions intended to prevent its spread on rental rates and rent collections. As of September 30, 2020, the Company has entered into thirty-five lease amendments with eight tenants/operators that became effective during the second quarter. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease.  Although the Company is and will continue to be actively engaged in rent collection efforts related to uncollected rent, as well as working with certain tenants who have requested rent relief, the Company can provide no assurance that such efforts or its efforts in future periods will be successful, particularly in the event that the COVID-19 pandemic and restrictions intended to prevent its spread continue for a prolonged period. The decrease in base rent income and percentage rent income during the nine months ended September 30, 2020 is primarily due to these lease amendments and the impact of the COVID-19 pandemic during the second quarter of 2020. In particular, many of the Company’s properties are located in urban centers, near government buildings and sports centers, which depend in large part on customer traffic, and conditions that lead to a decline in customer traffic have had and may continue to have a material and adverse impact on those businesses. Many state and local governments are currently restricting public gatherings, requiring people to shelter in place and implementing social distancing measures, which has in some cases eliminated or severely reduced the demand for parking. See Item 1A titled “Risk Factors” in Part II of this report. For more information on the effect of COVID-19 on our business, see Part II, Item 1A titled “Risk Factors.” and Note R — Subsequent Events in Part I, Item 1 Financial Statements.

Property taxes

The decreaseincrease in property taxes in 2020 compared to 2019 is attributable primarily to the decrease inlease amendments which have decreased the number of properties remaining inproperty tax burden on the portfolio.Company’s tenants for 2020.


Asset management expense – related party

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

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

General and administrative

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

Professional fees

The decrease in professional fees was primarily due to $1.5$4.1 million of insurance proceeds received for claims made against the D&Odirector and officer insurance policy.  These reimbursements were related to legal expenses incurred relating to lawsuits filed in 2019 and the SEC investigation, which was initiated in June of 2019.


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

Management internalization

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

Acquisition expenses

Acquisition expenses related to purchased properties are capitalized with the investment in real estate. Acquisition expenses incurred during the threenine months ended March 31,September 30, 2020 and 2019 relate solely to dead deals.

Depreciation and amortization expenses

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

Impairment

During the nine months ended September 30, 2020 and 2019, the Company recorded approximately $14.1 million and $1.5 million of asset impairment charges, respectively. These charges were recorded to write down the carrying value of these assets to their current appraised values net of estimated closing costs. See Note B — Summary of Significant Accounting Policies in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
  For the Three Months Ended March 31 
  2020  2019  $ Change  % Change 
Other income (expense)            
Interest expense
 
$
(2,329,000
)
 
$
(2,356,000
)
 
$
27,000
   
1
%
Other income
  
151,000
   
31,000
   
120,000
   
387
%
Income from DST
  
50,000
   
70,000
   
(20,000
)
  
(29
%)
Total other expense
 
$
(2,128,000
)
 
$
(2,255,000
)
 
$
127,000
   
6
%

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

Interest expense

The increasedecrease in interest expense for the periodnine months ended March 31,September 30, 2020, as compared to the same period in 2019, is primarily attributable to lower interest rates for the Company’s increased usevariable rate loans and principal amortization of existing debt on properties throughout the year.partially offset by net increase in long term debt.

ToIn the past, to maximize the use of cash, the Company will continue to look forsought opportunities to utilize debt financing in future acquisitions, including the use of long-term debt. The interest expense will vary based on the amount of the Company’s borrowings and current interest rates at the time of financing. The Company will seekHistorically, the Company’s intent was to secure appropriate leverage with the lowest interest rate available. The terms of any loans, in the loansfuture, will vary depending on the quality of the applicable property, the credit worthiness of the tenant and the amount of income the property is able to generate through parking leases. There is no assurance, however, that the Company will be acquiring additional properties in the future or will be able to secure additional financing on favorable terms or at all.

Interest expense recorded for the threenine months ended March 31,September 30, 2020 and 2019 includes amortization of loan issuance costs. Total amortization of loan issuance cost for the threenine months ended March 31,September 30, 2020 and 2019 was approximately $0.2$0.6 million and $0.2$0.7 million, respectively.

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


Gain from sale of investment in real estate

On May 26, 2020 the Company sold a parking garage in San Jose, CA for cash consideration of $4.1 million to UC 88 Garage Owner LLC, a third-party buyer.  The Company used $2.5 million of the proceeds to pay off the existing promissory note secured by the MVP San Jose 88 Garage, LLC. The property was originally purchased in June 2016 for approximately $3.6 million. The gain on sale is approximately $0.7 million.

During September 2019, the Company sold the surface parking lot and office building in Fort Lauderdale for $6.1 million, which resulted in a gain from sale of investments of approximately $2.3 million.

Other income

During January 2020, the Company earned $144,000 from Premium Parking for the early termination of the parking lease at MVP Memphis Poplar.

During February 2020, the Company received approximately $6,000 for the energy efficiency fee at Detroit Center Garage.  Upon the completion of the lighting project at this property last year, the tenant agreed that if the energy costs did not meet or surpass $46,000 for the year, then the tenant would pay the Company 80% of the difference.

Rental Income and Property Gross Revenues

Since a majority of the Company’s property leases call for additional percentage rent, the Company monitors the gross revenue generated by each property on a monthly basis. The higher the property’s gross revenue the higher the Company’s potential percentage rent. The graph below shows the comparison of the Company’s quarterly rental income to the gross revenue generated by the properties.  As noted above under “Overview—Impact of COVID-19,” as a result of current economic conditions related to the COVID-19 pandemic and restrictions intended to prevent its spread, percentage rent earned in the current period was significantly reduced compared to prior periods, and the Company expects that the amount of percentage rent to be earned in the current and future periods will be significantly reduced.reduced if restrictions intended to prevent the spread of COVID-19 continue.


Non-GAAP Financial Measures

Funds from Operations and Modified Funds from Operations

The Company believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient. Additionally, publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, the Company believes that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases.


In order to provide a more complete understanding of the operating performance of a REIT, NAREIT promulgated a measure known as FFO. FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, adding back asset impairment write-downs, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures. Because FFO calculations exclude such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, the Company believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of the Company’s performance relative to the Company’s competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than the Company does, making comparisons less meaningful.

The Investment Program Association (“IPA”) issued Practice Guideline 2010-01 (the “IPA MFFO Guideline”) on November 2, 2010, which extended financial measures to include modified funds from operations (“MFFO”). In computing MFFO, FFO is adjusted for certain non-operating cash items such as acquisition fees and expenses and certain non-cash items such as straight-line rent, amortization of in-place lease valuations, amortization of discounts and premiums on debt investments, nonrecurring impairments of real estate-related investments, mark-to-market adjustments included in net income (loss), and nonrecurring gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Management is responsible for managing interest rate, hedge and foreign exchange risk. To achieve the Company’s objectives, the Company may borrow at fixed rates or variable rates. In order to mitigate the Company’s interest rate risk on certain financial instruments, if any, the Company may enter into interest rate cap agreements and in order to mitigate the Company’s risk to foreign currency exposure, if any, the Company may enter into foreign currency hedges. The Company views fair value adjustments of derivatives, impairment charges and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Additionally, the Company believes it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations, assessments regarding general market conditions, and the specific performance of properties owned, which can change over time.

No less frequently than annually, the Company evaluates events and changes in circumstances that could indicate that the carrying amounts of real estate and related intangible assets may not be recoverable. When indicators of potential impairment are present, the Company assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) expected from the use of the assets and the eventual disposition. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of MFFO as described above, investors are cautioned that because impairments are based on estimated future undiscounted cash flows and the relatively limited term of the Company’s operations, it could be difficult to recover any impairment charges through operational net revenues or cash flows prior to any liquidity event. The Company adopted the IPA MFFO Guideline as management believes that MFFO is a helpful indicator of the Company’s on-going portfolio performance. More specifically, MFFO isolates the financial results of the REIT’s operations. MFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings in accordance with GAAP. Further, since the measure is based on historical financial information, MFFO for the period presented may not be indicative of future results or the Company’s future ability to pay the Company’s dividends. By providing FFO and MFFO, the Company presents information that assists investors in aligning their analysis with management’s analysis of long-term operating activities. MFFO also allows for a comparison of the performance of the Company’s portfolio with other REITs that are not currently engaging in acquisitions, as well as a comparison of the Company’s performance with that of other non-traded REITs, as MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and the Company believes it is often used by analysts and investors for comparison purposes. As explained below, management’s evaluation of the Company’s operating performance excludes items considered in the calculation of MFFO based on the following economic considerations:

Straight-line rent. Most of the Company’s leases provide for periodic minimum rent payment increases throughout the term of the lease. In accordance with GAAP, these periodic minimum rent payment increases during the term of a lease are recorded to rental revenue on a straight-line basis in order to reconcile the difference between accrual and cash basis accounting. As straight-line rent is a GAAP non-cash adjustment and is included in historical earnings, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company’s portfolio.
Amortization of in-place lease valuation. As this item is a cash flow adjustment made to net income in calculating the cash flows provided by (used in) operating activities, it is added back to FFO to arrive at MFFO as a means of determining operating results of the Company’s portfolio.


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

For all of these reasons, the Company believes the non-GAAP measures of FFO and MFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of the Company’s real estate portfolio. However, a material limitation associated with FFO and MFFO is that they are not indicative of the Company’s cash available to fund distributions since other uses of cash, such as capital expenditures at the Company’s properties and principal payments of debt, are not deducted when calculating FFO and MFFO. Additionally, MFFO has limitations as a performance measure in an offering such as the Company’s where the price of a share of common stock is a stated value. The use of MFFO as a measure of long-term operating performance on value is also limited if the Company does not continue to operate under the Company’s current business plan as noted above. MFFO is useful in assisting management and investors in assessing the Company’s ongoing ability to generate cash flow from operations and continue as a going concern in future operating periods, and, after the sale of the Company’s common stock and acquisition stages are complete and NAV is disclosed. However, MFFO is not a useful measure in evaluating NAV because impairments are considered in determining NAV but not in determining MFFO. Therefore, FFO and MFFO should not be viewed as a more prominent measure of performance than income (loss) from operations, net income (loss) or cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

None of the SEC, NAREIT or any other organization has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate MFFO and its use as a non-GAAP performance measure. In the future, the SEC or NAREIT may decide to standardize the allowable exclusions across the REIT industry, and the Company may have to adjust the calculation and characterization of this non-GAAP measure.

The Company’s calculation of FFO and MFFO attributable to common shareholders is presented in the following table for the three and nine months ended March 31,September 30, 2020 and 2019:

 For the Three Months Ended March 31,  For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 2020  2019  2020  2019 2020  2019 
Net loss attributable to The Parking REIT, Inc. common shareholders
 
$
(1,900,000
)
 
$
(2,503,000
)
 
$
(9,826,000
)
 
$
(3,145,000
)
 
$
(22,259,000
)
 
$
(41,232,000
)
Add (Subtract):
                 
Depreciation and Amortization of real estate assets
  
1,322,000
   
1,308,000
 
Gain on Sale of real estate
 
--
  
(2,294,000
)
 
(694,000
)
 
(2,294,000
)
Impairment of real estate
 
6,475,000
  
500,000
 
14,115,000
  
1,452,000
 
Depreciation and amortization expenses of real estate assets
  
1,305,000
   
1,285,000
  
3,948,000
   
3,876,000
 
FFO 
$
(578,000
)
 
$
(1,195,000
)
 
$
(2,046,000
)
 
$
(3,654,000
)
 
$
(4,890,000
)
 
$
(38,198,000
)
Add:      
Add (subtract):           
Acquisition fees and expenses
 
3,000
  
4,000
  
--
  
1,000
 
3,000
  
251,000
 
Subtract:      
(Increase) in Deferred Rental Assets
  
(6,000
)
  
(14,000
)
Change in Deferred Rental Assets
  
(56,000
)
  
(10,000
)
  
(80,000
)
  
(32,000
)
MFFO attributable to The Parking REIT, Inc. shareholders 
$
(581,000
)
 
$
(1,205,000
)
 
$
(2,102,000
)
 
$
(3,663,000
)
 
$
(4,967,000
)
 
$
(37,979,000
)
Distributions paid to Common Shareholders 
$
--
  
$
-
  
$
--
  
$
--
 
$
--
  
$
--
 


Liquidity and Capital Resources

The Company commenced operations on December 30, 2015.

The Company’s principal demand for funds historically was for the acquisition of real estate assets, the payment of operating expenses, capital expenditures, principal and interest on the Company’s outstanding indebtedness and the payment of distributions to the Company’s stockholders. The cash required for acquisitions and investments in real estate has, to date, been funded primarily from the sale of shares of the Company’s common stock and preferred stock, including those shares offered for sale through the Company’s distribution reinvestment plan, dispositions of properties in the Company’s portfolio and through third party financing and the assumption of debt on acquired properties.

On December 31, 2016, the Company ceased all selling efforts for its initial public offering of shares of its common stock at $25.00 per share, pursuant to a registration statement on Form S-11 (No. 333-205893). The Company accepted additional subscriptions through March 31, 2017, the last day of the initial public offering, and raised approximately $61.3 million in the initial public offering before payment of deferred offering costs of approximately $1.1 million, contribution from an affiliate of the former Advisor of approximately $1.1 million and cash distributions of approximately $1.8 million.

The Company raised approximately $2.5 million, net of offering costs, in funds from the private placements of Series A Convertible Redeemable Preferred Stock and approximately $36.0 million, net of offering costs, in funds from the private placements of Series 1 Convertible Redeemable Preferred Stock.

As disclosed in Note N - Legal in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report, Nasdaq has informed the Company that (i) the Company’s common stock will not be approved for listing currently on the Nasdaq Global Market, and (ii) it is highly unlikely that the Company’s common stock would be approved for listing while the SEC investigation is ongoing. There can be no assurance that the Company’s common stock will ever be approved for listing on the Nasdaq Global Market or any other stock exchange, even if the SEC investigation referred to above is completed and no wrongdoing is found and no action is taken in connection therewith against the Company, Mr. Shustek or any other person. As a result of this Nasdaq decision, the Company has determined not to proceed with the registration and sale of the Company’s common stock as contemplated by the Registration Statement (File No. 333-205893) on Form S-11 filed with the U.S. Securities and Exchange Commission on October 5, 2018 and such Registration Statement was withdrawn on August 29, 2019.

As of March 31,September 30, 2020, the Company’s debt consisted of approximately $118.8$120.0 million in fixed rate debt and $39.5 million in variable rate debt, net of loan issuance costs and the Company’s cash and cash equivalents and restricted cash were approximately $8.4$6.9 million ($2.93.4 million of which was restricted cash). The Company’s unrestricted cash balance was approximately $3.1 million as of the date of filing.

The Company currently has little cash available for acquisitions and no ability to raise new debt or equity financing, and, accordingly, the Company’s only source of near-term liquidity is from operating activities or the sale of assets. In order to enhance liquidity, the Company’s board of directors is exploring certain strategic alternatives, including sales of assets, a sale of the Company or a portion thereof or a strategic business combination. For additional information see Note B - Liquidity Matters in Part I, Item 1 Notes to the Consolidated Financial Statements of this Quarterly Report.

Sources and Uses of Cash

The following table summarizes our cash flows for the threenine months ended March 31,September 30, 2020 and 2019:

  For the three months Ended March 31, 
  2020  2019 
Net cash used in operating activities
 
$
(793,000
)
 
$
(1,272,000
)
Net cash used in investing activities
  
(643,000
)
  
(194,000
)
Net cash provided by (used in) financing activities
  
(1,818,000
)
  
417,000
 
  For the nine months Ended September 30, 
  2020  2019 
Net cash used in operating activities
 
$
(5,348,000
)
 
$
(3,203,000
)
Net cash provided by investing activities
  
485,000
   
2,502,000
 
Net cash provided by financing activities
  
113,000
   
989,000
 

Comparison of the threenine months ended March 31,September 30, 2020 to the threenine months ended March 31,September 30, 2019:

The Company’s cash and cash equivalents and restricted cash were approximately $8.4$6.9 million as of March 31,September 30, 2020, which was a decrease of approximately $3.3$2.8 million from the balance at December 31,September 30, 2019.


Cash flows from operating activities

Net cash used in operating activities for the threenine months ended March 31,September 30, 2020 was approximately $0.8$5.3 million, compared to approximately $1.3$3.2 million for the same period in 2019. The decrease in cash used was primarily due to cash used to pay down accounts payable.

Cash flows from investing activities

Net cash used in investing activities for the three months ended March 31, 2020 was approximately $0.6 million, compared to approximately $0.2 million of net cash used, to acquire investments, for the same period in 2019. The increase in cash used was primarily due to an increase in accounts receivable and an increase in net loss adjusted for impairment recorded during the nine months ended September 30, 2020 compared to net loss adjusted for impairment and internalization expense during the nine months ended September 30, 2019. These increases were partially offset by a decrease in gain on sale of investment and other assets and prepaids.

Cash flows from investing activities

Net cash provided by investing activities for the nine months ended September 30, 2020 was approximately $0.5 million, compared to approximately $2.5 million for the same period in 2019. The decrease in cash provided by investing activities was due primarily to fixed assets placedlower proceeds from the sale of investments in service of approximately $0.6 million.  These assets were a result of the completion of ongoing construction projects.real estate.

Cash flows from financing activities

Net cash used inprovided by financing activities for the threenine months ended March 31,September 30, 2020 was approximately $1.8$0.1 million compared to approximately $0.5$1.0 million provided by financing activities during the same period in 2019. The decrease in cash provided by financing activities was primarily due to the fact that there were noless proceeds from notes payable acquired during the period and payments on notes payable of approximately $1.0$3.0 million.

Company Indebtedness

On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”), and MVP PF Memphis Poplar 2013 (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis and MVP Memphis Poplar $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis and MVP Memphis Poplar.

The loan with Bank of America for the MVP Detroit garage requires the Company to maintain $2.3 million in liquidity at all times, which is defined as unencumbered cash and cash equivalents. As of the date of this filing, the Company was in compliance with this lender requirement.  However, if the Company is unable to sell assets it mayis likely the Company will be unable to meet this requirement beyondby the thirdend of the fourth quarter of 2020 whichor during the first quarter of 2021. The Company will need to obtain a waiver for this requirement and if it is unable to obtain a waiver, this could result in an event of default and acceleration of such loan if the lender is unwilling to waive the requirement.

The Company is in preliminary discussions with its lenders, including Bank of America,LoanCore to obtain waivers from certain liquidity requirements and defer payments due under its loansexercise the one-year extension option in lightthe loan agreement to extend the maturity of the current economic conditions and the fact that the Company expects to allow tenants to defer rents under its leases with its tenants as a result of the current COVID-19 pandemic;$39.5 million loan, due December 9, 2020; however, there can be no assurance thatthis option will be exercised. If the Company will reach anyis unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such agreement with its lenders.collateral.

The Company’s secured mortgage debt of approximately $53.4$53.8 million and $53.7$53.9 million as of March 31,September 30, 2020 and December 31, 2019, respectively, require Mr. Shustek and the former Advisor to continue to provide guarantees. In connection with the Contribution Agreement and the Internalization, Mr. Shustek and the former Advisor will continue to provide such guarantees. For additional information regarding the Company’s indebtedness, please see Note J – Notes Payable in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

The Company may establish capital reserves with respect to particular investments. The Company also may, but is not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. The Company’s lenders also may require working capital reserves.

To the extent that the working capital reserve is insufficient to satisfy the Company’s cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing, if such borrowing becomes available in the future. In addition, subject to certain exceptions and limitations, the Company may incur indebtedness in connection with the acquisition of any real estate asset to the extent such indebtedness becomes available to the Company in the future, refinance the debt thereon, arrange for the leveraging of any previously unencumbered property or reinvest the proceeds of financing or refinancing in additional properties.


The ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributed to significant volatility and negative pressure in financial markets and resulted in unprecedented job losses causing many to fear an imminent global recession. Due to these factors, the Company entered into the following loan modification agreements with its lenders during the quarters ended June 30 and September 2020.

On May 12, 2020, the Company entered into a Loan Modification Agreement with Farm Bureau Life Insurance Company for an interest-only period commencing with the payment due June 1, 2020 and continuing through the payment due August 1, 2020. During the Interest-Only Period, the monthly installments due under the Note are modified to provide for payment of accrued interest only in the amount of $13,384.

On July 9, 2020, the Company entered into a loan modification agreement (the “Agreement”) with LoanCore Capital Credit REIT, LLC for the following notes payable: (i) MVP Raider Park Garage, LLC, (ii) MVP New Orleans Rampart, LLC, (iii) MVP Hawaii Marks Garage, LLC, (iv) MVP Milwaukee Wells, LLC, (v) MVP Indianapolis City Park, LLC, (vi) MVP Indianapolis WA Street, LLC. The Agreement defers a portion of the required monthly interest payments from June 2020 through November 2020 and reduces the LIBOR Floor from 1.95% to 0.50%, the Modified LIBOR Floor. The Company is also in preliminary discussions with LoanCore to exercise the one-year extension option in the loan agreement to extend the maturity of the $39.5 million loan due December 9, 2020; however, there can be no assurance this option will be exercised.  If the Company is unable to extend the maturity date and is unable to repay the loan at maturity, the lenders could foreclose upon the collateral securing the loan, in which case the Company would lose its significant amount of equity value in such collateral.
On July 31, 2020, the Company entered into three loan modification agreements (the “Agreements”) with American National Insurance Company (“ANICO”) for the following three loans: (i) Minneapolis City Parking, LLC, (ii) West 9th Properties II, LLC and (iii) MVP Fort Worth Taylor, LLC. The Company has entered into an Escrow Agreement with ANICO in which $950,000 in condemnation proceeds from the City of Minneapolis shall be used to pay the monthly principal and interest due each note, beginning with the payment due June 1, 2020, until the termination date. On August 6, 2020, $704,000 was wired to the ANICO escrow account. On October 23, 2020, the Company received the remaining condemnation proceeds of $596,000 from the city of Minneapolis and funded the remaining $246,000 due to the ANICO escrow account on October 26, 2020.
On August 4, 2020, the Company’s wholly owned subsidiary (Mabley Place Garage, LLC) entered into a loan modification agreement with Wells Fargo Bank, National Association, as Trustee for the Benefit of the Registered Holders of JPMBB Commercial Mortgage Securities Trust 2015-C27 (the “Lender”). Under the terms of the agreement, the Lender will permit the Company to apply funds in an amount up to $43,000 per month from a replacement reserve account, to the extent there are sufficient funds available, to pay all or any portion of the monthly debt service payment amount then due for the May, June, July and August 2020 payment dates.
Management Compensation Summary

The following table summarizes all compensation and fees incurred by us and paid or payable to the former Advisor and its affiliates in connection with the Company’s organization operations for the three and nine months ended March 31,September 30, 2020 and 2019.

 For the Three Months Ended March 31,  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
 2020  2019  2020  2019  2020  2019 
Asset Management Fees
  
--
   
854,000
  
$
--
  
$
--
  
$
--
  
$
854,000
 
Total
 
$
--
  
$
854,000
  
$
--
  
$
--
  
$
--
  
$
854,000
 

-38-
The Company ceased payment of asset management fees effective April 1, 2019, as a result of the Internalization.

Distributions and Stock Dividends

On March 22, 2018 the Company suspended the payment of distributions on its common stock. There can be no assurance that cash distributions to the Company’s common stockholders will be resumed in the future. The actual amount and timing of distributions, if any, will be determined by the Company’s board of directors in its discretion and typically will depend on the amount of funds available for distribution, which is impacted by current and projected cash requirements, tax considerations and other factors. As a result, the Company’s distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for federal income tax purposes, the Company must make distributions equal to at least 90% of its REIT taxable income each year (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). In addition, the Company will be subject to corporate income tax to the extent the Company distributes less than 100% of the net taxable income including any net capital gain.


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

Common Stock

From inception through March 31,September 30, 2020, the Company had paid approximately $1.8 million in cash, issued 83,437 shares of its common stock as DRIP and issued 153,826 shares of its common stock in distributions to the Company’s stockholders. All of the cash distributions were paid from offering proceeds and constituted a return of capital. On March 22, 2018 the Company suspended payment of distributions and as such there are currently no distributions to invest in the DRIP.

The Company’s total distributions paid for the period presented, the sources of such distributions, the cash flows provided by (used in) operations and the number of shares of common stock issued pursuant to the Company’s DRIP are detailed below.

On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.

To date, all distributions were paid from offering proceeds and therefore represent a return of capital.

 Distributions Paid in Cash  Distributions Paid through DRIP  
Total
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis)  Distributions Paid in Cash  Distributions Paid through DRIP  
Total
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2020 
$
--
  
$
--
  
$
--
  
$
(793,000
)
 
$
--
  
$
--
  
$
--
  
$
(793,000
)
2nd Quarter, 2020
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
(1,899,000
)
3rd Quarter, 2020
 
--
  
--
  
--
  
--
  
--
  
--
  
--
  
(2,656,000
)
4th Quarter, 2020
  
--
   
--
   
--
   
--
   
--
   
--
   
--
   
--
 
Total 2020 
$
--
  
$
--
  
$
--
  
$
(793,000
)
 
$
--
  
$
--
  
$
--
  
$
(5,348,000
)

  Distributions Paid in Cash  Distributions Paid through DRIP  
Total
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2019 
$
--
  
$
--
  
$
--
  
$
(1,272,000
)
2nd Quarter, 2019
  
--
   
--
   
--
   
(942,000
)
3rd Quarter, 2019
  
--
   
--
   
--
   
(989,000
)
4th Quarter, 2019
  
--
   
--
   
--
   
1,436,000
 
Total 2019 
$
--
  
$
--
  
$
--
  
$
(1,767,000
)

Preferred Series A Stock

The Company offered up to $50 million in shares of the Company’s Series A Convertible Redeemable Preferred Stock (“Series A”), par value $0.0001 per share, together with warrants to acquire the Company’s common stock, in a Regulation D 506(c) private placement to accredited investors. In connection with the private placement, on October 27, 2016, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 50,000 shares of Series A Convertible Redeemable Preferred Stock. The Company commenced the private placement of the Shares to accredited investors on November 1, 2016 and closed the offering on March 24, 2017. The Company raised approximately $2.5 million, net of offering costs, in the Series A private placements.
-39-

The offering price was $1,000 per share. In addition, each investor in the Series A received, for every $1,000 in shares subscribed by such investor, 30 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of March 5, 2019,September 30, 2020, there were 84,510 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. These warrants will expire five years from the 90th day after the occurrence of a listing event.

On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A, however, such distributions will continue to accrue in accordance with the terms of the Series A.


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

From initial issuance through March 31,September 30, 2020, the Company had declared distributions of approximately $615,000$704,000 of which approximately $597,000 had been paid to Series A stockholders.

 
Total Series A
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis)  
Total Series A
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2020 
$
54,000
  
$
(793,000
)
 
$
54,000
  
$
(793,000
)
2nd Quarter, 2020
 
--
  
--
  
--
  
(1,899,000
)
3rd Quarter, 2020
 
--
  
--
  
--
  
(2,656,000
)
4th Quarter, 2020
  
--
   
--
   
--
   
--
 
Total 2020 
$
54,000
  
$
(793,000
)
 
$
54,000
  
$
(5,348,000
)

  
Total Series A
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2019 
$
54,000
  
$
(1,272,000
)
2nd Quarter, 2019
  
54,000
   
(942,000
)
3rd Quarter, 2019
  
54,000
   
(989,000
)
4th Quarter, 2019
  
54,000
   
1,436,000
 
Total 2019 
$
216,000
  
$
(1,767,000
)

Preferred Series 1 Stock

On March 29, 2017, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary to the charter of the Company classifying and designating 97,000 shares of its authorized capital stock as shares of Series 1 Convertible Redeemable Preferred Stock (“Series 1”), par value $0.0001 per share. On April 7, 2017, the Company commenced the Regulation D 506(b) private placement of shares of Series 1, together with warrants to acquire the Company’s common stock, to accredited investors. On January 31, 2018, the Company closed this offering. As of March 5, 2019,September 30, 2020, the Company had raised approximately $36.0 million, net of offering costs, in the Series 1 private placements and had 39,811 shares of Series 1 issued and outstanding.

The offering price is $1,000 per share. In addition, each investor in the Series 1 will receive, for every $1,000 in shares subscribed by such investor, 35 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of March 5, 2019,September 30, 2020, there were 1,382,675 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. These warrants will expire five years from the 90th day after the occurrence of a listing event.

On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in accordance with the terms of the Series 1.

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

-40-

From issuance date through March 31,September 30, 2020, the Company had declared distributions of approximately $6.6$7.8 million of which approximately $6.4 million had been paid to Series 1 stockholders.

 
Total Series 1
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis)  
Total Series 1
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2020 
$
696,000
  
$
(793,000
)
 
$
696,000
  
$
(793,000
)
2nd Quarter, 2020
 
--
  
--
  
--
  
(1,899,000
)
3rd Quarter, 2020
 
--
  
--
  
--
  
(2,656,000
)
4th Quarter, 2020
  
--
   
--
   
--
   
--
 
Total 2020 
$
696,000
  
$
(793,000
)
 
$
696,000
  
$
(5,348,000
)

  
Total Series 1
Distributions Paid
  Cash Flows provided by (used in) Operations (GAAP basis) 
1st Quarter, 2019 
$
697,000
  
$
(1,272,000
)
2nd Quarter, 2019
  
695,000
   
(942,000
)
3rd Quarter, 2019
  
696,000
   
(989,000
)
4th Quarter, 2019
  
696,000
   
1,436,000
 
Total 2019 
$
2,784,000
  
$
(1,767,000
)


Related-Party Transactions and Arrangements

The Company had entered into agreements with affiliates of its Sponsor, whereby the Company paid certain fees or reimbursements to the former Advisor or its affiliates prior to the Internalization. For additional information see Note E — Related Party Transactions and Arrangements in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various related party transactions, agreements and fees.

Inflation

The Company expects to include provisions in its tenant leases designed to protect the Company from the impact of inflation. These provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. Due to the generally long-term nature of these leases, annual rent increases may not be sufficient to cover inflation and rent may be below market.

Income Taxes

Commencing with the taxable year ended December 31, 2017 through December 31, 2019, the Company believes it has been organized and conductsconducted operations to qualify as a REIT under Sections 856 to 860 of the Code. As a result of the COVID-19 pandemic, the Company has entered into temporary lease amendments with some of its tenants. The income generated under these lease amendments do not constitute qualifying REIT income for purposes of the REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the quarters ended June 30, 2020 and September 30, 2020.  As discussed below, unless the Company chooses and is able to successfully implement an alternative operating strategy, it is highly likely that the Company will no longer qualify as a REIT for the year ending December 31, 2020.  A REIT is generally not subject to federal income tax on that portion of its REIT taxable income, which is distributed to its stockholders, provided that at least 90% of such taxable income is distributed and provided that certain other requirements are met. The Company’s REIT taxable income may substantially exceed or be less than the income calculated according to GAAP. In addition, the Company will be subject to corporate income tax to the extent that less than 100% of the net taxable income is distributed, including any net capital gain.

The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of March 31,September 30, 2020.

A full valuation allowance for deferred tax assets was provided since the Company believes that it is more likely than not that it will not realize the benefits of its deferred tax assets. A change in circumstances may cause the Company to change its judgment about whether deferred tax assets should be recorded, and further whether any such assets would more likely than not be realized. The Company would generally report any change in the valuation allowance through its income statement in the period in which such changes in circumstances occur. To the extent the Company qualifies as a REIT, it will generally not be subject to corporate level federal income taxes on its taxable income distributed to the Company’s stockholders and therefore may not realize any benefit from deferred tax assets arising during any period in which a valid REIT election was in effect. The Company currently intends to distribute at least 100% of its taxable income annually for all periods in which it is taxable as a REIT. The Company has placed a full valuation allowance on all of its deferred tax assets, and thus no asset is recorded on the Company’s balance sheet. As a result of the amendments made to certain of the Company’s leases in response to the COVID-19 pandemic crisis, it is possible that the Company will fail to qualify as a REIT in 2020.


REIT Compliance

The Company elected to be treated as a REIT for federal income tax purposes for the year ended December 31, 2017 and has continued to operate in a manner to qualify as a REIT for federal income tax purposes for the years ended December 31, 2018 2019 and through the quarter ended March 31, 2020.2019. As long as the Company continues to maintain REIT status, the Company generally will not be subject to federal income tax on income that the Company distributes to its stockholders. If

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

If we fail to qualify as a REIT in anyfor our taxable year including and after the taxable year in which the Company initially electsended December 31, 2020, unless entitled to relief under specific statutory or administrative provisions, we would be ineligible to elect to be taxed as a REIT, the Company will be subject to federal income tax on the taxable income at regular corporate rates and will not be permitted to qualify for treatmenttreated as a REIT for federal income tax purposes forthe four taxable years following the year in which qualification is denied. Failing2020.  We believe that we may not be entitled to this statutory relief, and there can be no assurances that we will be able to obtain such relief.

Moreover, if we fail to qualify as a REIT, could materially and adversely affect the Company’s net income. In addition,we would no longer be required to make distributions of our annual taxable income to our stockholders in order to maintain our REIT status and any year in which the Company failsdistributions made to qualify as a REITour stockholders will not be deductible by the Company.  As a result, the failure to qualify as a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, if the Company were to fail to qualify as a REIT, it would not be required to distribute any amounts to its stockholders andIn addition, all distributions to stockholders would be taxable as regular corporate dividends to the extent of its current and accumulated earnings and profits.  In such event, corporateCorporate stockholders may be eligible for the dividends-received deduction.  In addition, non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income.  Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026 for purposes of determining their U.S. federal income tax (but not for purposes of the 3.8% Medicare tax),  subject to certain limitations.

To qualify as a REIT for tax purposes, the Company is required to distribute at least 90% of its REIT taxable income to the Company’s stockholders. The Company must also meet certain asset and income tests, as well as other requirements. The Company will monitor the business and transactions that may potentially impact the Company’s REIT status. As noted above, the Company has amended many of its lease agreements in response to the COVID-19 pandemic crisis. As a result of these amendments, it is possible that the Company will fail to qualify as a REIT in 2020 and would no longer be required to pay distributions of its annual taxable income in order to maintain REIT status. Given projected losses in 2020, as well as the potential tax benefit of net operating loss carryforwards that the Company does not anticipate utilizing as long as it maintains its status as a REIT, the Company will continue to evaluate its current and deferred income tax situation (including the appropriateness of recording a deferred tax asset for net operating losses) throughout the 2020 year as there is additional clarity about the impact of the COVID-19 pandemic to the Company’s ongoing operations, including whether the Company expects tocan maintain its REIT status for the 2020 year.

Off-Balance Sheet Arrangements

Series A Preferred Stock

Each investor in the Series A received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of March 31,September 30, 2020, there were detachable warrants that may be exercised for 84,510 shares of the Company’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at March 31,September 30, 2020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, the Company would issue an additional 84,510 shares of common stock and would receive gross proceeds of approximately $2.1 million.

On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series A, however, such distributions will continue to accrue in accordance with the terms of the Series A.

On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.

For additional information see “— Liquidity and Capital Resources” and “—Preferred Series A Stock” above and Note O — Preferred Stock and Warrants in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

Series 1 Preferred Stock

Each investor in the Series 1 received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. As of March 31,September 30, 2020, there were detachable warrants that may be exercised for approximately 1,382,675 shares of the Company’s common stock after the 90th day following the occurrence of a listing event. These potential warrants will expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at March 31,September 30, 2020 became exercisable because of a listing event and were exercised at the minimum price of $25 per share, the Company would issue an additional 1,382,675 shares of common stock and would receive gross proceeds of approximately $34.6 million.

On March 24, 2020, the Company’s board of directors unanimously authorized the suspension of the payment of distributions on the Series 1, however, such distributions will continue to accrue in accordance with the terms of the Series 1.

On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.

For additional information see “— Liquidity and Capital Resources” and “—Preferred Series A Stock” above and Note O — Preferred Stock and Warrants in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.

Critical Accounting Policies

The Company’s accounting policies have been established in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions is different, it is possible that different accounting policies will be applied, or different amounts of assets, liabilities, revenues and expenses will be recorded, resulting in a different presentation of the financial statements or different amounts reported in the financial statements.

Additionally, other companies may utilize different estimates that may impact comparability of the Company’s results of operations to those of companies in similar businesses. Below is a discussion of the accounting policies that management considers to be most critical once the Company commences significant operations. These policies require complex judgment in their application or estimates about matters that are inherently uncertain.

Real Estate Investments

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

The Company is required to make subjective assessments as to the useful lives of the Company’s properties for purposes of determining the amount of depreciation to record on an annual basis with respect to the Company’s investments in real estate. These assessments have a direct impact on the Company’s net income because if the Company were to shorten the expected useful lives of the Company’s investments in real estate, the Company would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

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, considering 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.
-43-

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 the Company’s 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 several sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company will also consider information obtained about each property as a result of the pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

Deferred Costs

Deferred costs may consist of deferred financing costs, deferred offering costs and deferred leasing costs. Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Subsequent Events

See Note R — Subsequent Events in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for a discussion of the various subsequent events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item not required for Smaller Reporting Companies.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

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

(b) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the firstthird quarter of 2020, that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II OTHER INFORMATION

None.

ITEM 1. LEGAL PROCEEDINGS

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

The nature of the Company’s business exposes its properties, the Company, its Operating Partnership and its other subsidiaries to the risk of claims and litigation in the normal course of business. Other than as noted above or routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company.
-44-

ITEM 1A. RISK FACTORS

The following risk factors are material changes onlydiscussed under the heading “Risk Factors” and should be read in conjunction with the risk factorselsewhere in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

The ongoing COVID-19 pandemic, restrictions intended to prevent its spread and local governments’ actions impacting our ability to collect rent could adversely impact our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.  The ongoing COVID-19 pandemic and restrictions intended to prevent its spread has already had a significant adverse impact on economic and market conditions around the world, including the United States, to date in 2020 and could further trigger a period of sustained global and U.S. economic downturn or recession.  In particular, many of our properties are located near government buildings and sports centers, which depend in large part on customer traffic, and conditions that lead to a decline in customer traffic will have a material and adverse impact on those businesses.  Several such conditions already exist and may intensify.  Many state and local governments are currently restricting public gatherings or requiring people to shelter in place, which has in some cases eliminated or severely reduced the demand for parking.  Such events are adversely impacting and may continue to adversely impact our tenants’ sales and/or cause the temporary closure of our tenants’ businesses, which could significantly disrupt or cause a closure of their operations and, in turn, significantly impact or eliminate the rental revenue we generate from our leases with them. In particular, a majority of our property leases call for additional percentage rent, which will be adversely impacted by a decline in the demand for parking.  These trends may influence the immediate ability or willingness of certain of our tenants to pay rent in full on a timely basis.

As of May 13, 2020, we have entered into lease amendments with eight tenants. The terms of such lease amendments generally provide for one of (i) a reduction in rent for a period of four to seven months, (ii) conversion of the lease to a management agreement pursuant to which the operator will receive a monthly fee; or (iii) extension of the lease. We expect to receive requests from tenants for additional rent relief in addition to those that we have already received.  There can be no assurance as to if or when tenants who request or receive rent relief and/or fail to timely make rent payments for any particular month will resume making payments at all or that such tenants will not default on their obligations under their respective leases or rent relief agreements.

At this time, we cannot predict whether tenants who have paid or will pay rent for April 2020 will continue to do so thereafter, including with respect to our largest tenants. As the COVID-19 pandemic continues, additional tenants may cease to pay their rent obligations to us in full or at all, and tenants may elect not to renew their leases, seek to terminate their leases, seek relief from their leases (including through negotiation, restructuring or bankruptcy), or decline to renew expiring leases or enter into new leases, all of which may adversely impact our rental revenue, generate additional expenses, and adversely impact our results of operations and financial condition.  Likewise, the deterioration of global economic conditions as a result of the pandemic may ultimately lead to a further decrease in rental rates across our portfolio as tenants reduce or defer their spending, institute restructuring plans or file for bankruptcy. In addition, the measures taken to prevent the spread of COVID-19 (including quarantine, shelter-in-place or similar orders requiring that people remain in their homes) have led and may lead to further closures, or other operational issues at, our properties.

Moreover, the ongoing COVID-19 pandemic and restrictions intended to prevent its spread could have significant adverse impacts on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations in a variety of ways that are difficult to predict. Such adverse impacts could depend on, among other factors:
our tenants’ ability or willingness to pay rent in full on a timely basis;
state, local, federal and industry-initiated efforts that may adversely affect landlords, including us, and their ability to collect rent and/or enforce remedies for the failure to pay rent;
our need to restructure leases with our tenants and our ability to do so on favorable terms or at all;
our ability to renew leases or re-lease available space in our proprieties on favorable terms or at all in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant, including as a result of a deterioration in the economic and market conditions in the markets where we own properties or due to restrictions intended to prevent the spread of COVID-19 that frustrate our leasing activities, particularly in light of the adverse impact to the financial health of many of our tenants or potential tenants that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which potential tenants will be able to operate in future;
a severe and prolonged disruption and instability in the global financial markets, including the debt and equity capital markets, all of which have already experienced and may continue to experience significant volatility, or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary to fund our respective business operations or retire, replace or renew maturing liabilities on a timely basis, on attractive terms or at all and may adversely affect the valuation of financial assets and liabilities, any of which could affect our and our tenants’ ability to meet liquidity and capital expenditure requirements;


the broader impact of the severe economic contraction due to the COVID-19 pandemic and restrictions intended to prevent its spread, the resulting increase in unemployment that has occurred and its effect on consumer behavior, and negative consequences that will occur if these trends are not timely reversed
our ability to avoid delays or cost increases associated with building materials or construction services necessary for construction that could adversely impact our ability to continue or complete construction as planned, on budget or at all;
our and our tenants’ ability to manage our respective businesses to the extent our and their management or personnel are impacted in significant numbers by the COVID-19 pandemic and are not willing, available or allowed to conduct work; and;
our and our tenants’ ability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during the COVID-19 pandemic.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present material risks and uncertainties with respect to our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and could also have a material adverse effect on the value and trading price of our common stock.  Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in this “Risk Factors” section and in our Annual Report on Form 10-K for the year ended December 31, 2019.

Historical data regarding2019, as updated by the risk factors in our business, properties, results of operations, financial conditionQuarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and liquidity does not reflectSeptember 30, 2020 under the impact of the COVID-19 pandemic and related containment measures and therefore does not purportheading “Risk Factors”, continue to be representative of our future performance.

The information included in this quarterly report and our other reports filed with the SEC includes information regarding our business, properties, results of operations, financial condition and liquidity as of dates and for periods before the impact of COVID-19 and related containment measures (including quarantines and governmental orders requiring the closure of certain businesses, limiting travel, requiring that individuals stay at home or shelter in place and closing borders). This historical information therefore does not reflect the adverse impacts of the COVID-19 pandemic and the related containment measures. Accordingly, investors are cautioned notapply to unduly rely on historical information regarding our business, properties, results of operations, financial condition or liquidity, as that data does not reflect the adverse impact of COVID-19 and therefore does not purport to be representative of the future results of operations, financial condition, liquidity or other financial or operating results of us, our properties or our business.

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

Share Repurchase Program

On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for hardship repurchases in connection with a shareholder’s death. Repurchase requests made in connection with the death of a stockholder were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company had established an estimated NAV per share, 100% of such amount as determined by the Company’s board of directors, subject to any special distributions previously made to the Company’s stockholders. The Company repurchased 2,7415,115 shares of common stock pursuant to the hardship exception under this program during the threenine months ended March 31,September 30, 2020.

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

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

Since inception, there have been 33,232 hardship repurchases in connection with a shareholder’s death through filing date. On March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.

Recent Sales of Unregistered Securities

The Company did not sell any of its equity securities during the quarter ended March 31,September 30, 2020 that were not registered under the Securities Act.

Use of Offering Proceeds

As of May 13,November 16, 2020, the Company had 7,327,6977,327,696 shares of common stock issued and outstanding, 2,862 shares of preferred Series A stock outstanding and 39,811 shares of preferred Series 1 stock outstanding for total gross proceeds of approximately $197.2 million, less offering costs.

-46-

The following is a table of summary of offering proceeds from inception through March 31,September 30, 2020:

Type Number of Shares Preferred  Number of Shares Common  Value  Number of Shares Preferred  Number of Shares Common  Value 
Issuance of common stock 
--
  
3,251,238
  
$
75,281,000
  
--
  
3,251,238
  
$
75,281,000
 
Redeemed shares 
--
  
(45,944
)
 
(1,125,000
)
 
--
  
(48,318
)
 
(1,185,000
)
DRIP shares 
--
  
83,437
  
2,086,000
  
--
  
83,437
  
2,086,000
 
Issuance of Series A preferred stock 
2,862
  
--
  
2,544,000
  
2,862
  
--
  
2,544,000
 
Issuance of Series 1 preferred stock 
39,811
  
--
  
35,981,000
  
39,811
  
--
  
35,981,000
 
Dividend shares 
--
  
153,826
  
3,845,000
  
--
  
153,826
  
3,845,000
 
Distributions 
--
  
--
  
(11,055,000
)
 
--
  
--
  
(12,555,000
)
Deferred offering costs 
--
  
--
  
(1,086,000
)
 
--
  
--
  
(1,086,000
)
Contribution from advisor 
--
  
--
  
1,147,000
  
--
  
--
  
1,147,000
 
Shares added for merger  
--
   
3,887,513
   
85,701,000
   
--
   
3,887,513
   
85,701,000
 
Total  
42,673
   
7,330,070
  
$
193,319,000
   
42,673
   
7,327,696
  
$
191,759,000
 

From October 22, 2015 through December 31, 2019,September 30, 2020, the Company incurred organization and offering costs in connection with the issuance and distribution of the registered securities of approximately $1.1 million, which were paid to unrelated parties by the Sponsor. From October 22, 2015 through March 31,September 30, 2020, the net proceeds to the Company from its offerings, after deducting the total expenses and deferred offering costs incurred and paid by the Company as described above, were approximately $193.3$192.5 million. A majority of these proceeds were used, along with other sources of debt financing, to make investments in parking facilities, of which the Company’s portion of the total purchase price for these parking facilities was approximately $320.0 million, which includes its $2.8 million investment in the DST. In addition, a portion of these proceeds were used to make cash distributions of approximately $1.8 million to the Company's stockholders. The ratio of the costs of raising capital to the capital raised is approximately 0.6%.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE AND SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

The Company is not aware of any information that was required to be disclosed in a report on Form 8-K during the first quarter of 2020, that was not disclosed in a report on Form 8-K.

None.

ITEM 6. EXHIBITS

Articles of Amendment and Restatement of THE PARKING REIT, Inc.
Articles of Amendment of THE PARKING REIT, Inc.
Articles Supplementary for Series A Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc.
Articles Supplementary for Series 1 Convertible Redeemable Preferred Stock of THE PARKING REIT, Inc.
Bylaws of THE PARKING REIT, Inc.
10.1
First Amendment to Loan Agreement with LoanCore dated July 9,2020
31.1(*)
 Certification of Chief Executive Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2(*)
 Certification of Chief Financial Officer pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and Section 302 of the Sarbanes-Oxley Act of 2002.
32(*)
 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101(*)
 
The following materials from the Company’s Quarterly Report on Form 10-Q for the threenine months ended Marc 31,September 30, 2020, formatted in XBRL (extensible Business Reporting Language (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statement of Stockholder’s Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Financial Statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
104

C		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 *
Filed concurrently herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 The Parking REIT, Inc.
   
 By:/s/ Michael V. Shustek
  Michael V. Shustek
  Chief Executive Officer and Chairman
 Date:May 13,November 16, 2020
   
 By:/s/ J. Kevin Bland
  J. Kevin Bland
  Chief Financial Officer
 Date:May 13,November 16, 2020
   
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