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 THESECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 000-55760
MOBILE INFRASTRUCTURE CORPORATION |
(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.) |
250 E. 5th STREET, SUITE 200, LAS VEGAS, NV 89148
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (702) 534-5577
The Parking REIT, Inc.
9130 W. Post Rd., Suite 200
Las Vegas, Nevada 89148
(Former Name or Former Address, and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbols(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X][X] No [ ]
Indicate by check mark whether the registrant has submitted electronically, 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 |
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 November 16, 2020,12, 2021, the registrant had 7,327,6967,762,375 shares of common stock outstanding.
| Page | ||
EXHIBIT 31.1 | ||
EXHIBIT 31.2 | ||
EXHIBIT 32 |
ITEM 1.
FINANCIAL STATEMENTSMOBILE INFRASTUCTURE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of September 30, | As of December 31, | |||||||
| 2020 | 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
Investments in real estate | ||||||||
| Land and improvements | $ | 128,284,000 | $ | 136,607,000 | ||||
| Buildings and improvements | 163,668,000 | 170,276,000 | ||||||
| Construction in progress | 1,151,000 | 714,000 | ||||||
| Intangible assets | 2,107,000 | 2,288,000 | ||||||
295,210,000 | 309,885,000 | |||||||
| Accumulated depreciation | (15,789,000 | ) | (12,049,000 | ) | ||||
Total investments in real estate, net | 279,421,000 | 297,836,000 | ||||||
Fixed Assets, net of accumulated depreciation of $69,000 and $42,000 as of September 30, 2020 and December 31, 2019, respectively | 72,000 | 21,000 | ||||||
Assets held for sale, net of accumulated depreciation of $212,000 | -- | 3,288,000 | ||||||
Cash | 3,466,000 | 7,707,000 | ||||||
Cash – restricted | 3,428,000 | 3,937,000 | ||||||
Prepaid expenses | 1,746,000 | 1,679,000 | ||||||
Accounts receivable, net | 2,832,000 | 929,000 | ||||||
Investment in DST | 2,931,000 | 2,836,000 | ||||||
Right of use leased asset | 1,309,000 | -- | ||||||
Due from related parties | 1,000 | -- | ||||||
Other assets | 190,000 | 111,000 | ||||||
Total assets | $ | 295,396,000 | $ | 318,344,000 | ||||
| LIABILITIES AND EQUITY | ||||||||
Liabilities | ||||||||
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 | 10,551,000 | 10,883,000 | ||||||
Right of use lease liability | 1,309,000 | -- | ||||||
Deferred management internalization | 17,800,000 | 17,800,000 | ||||||
Security deposits | 138,000 | 138,000 | ||||||
Due to related parties | -- | 54,000 | ||||||
Deferred revenue | 122,000 | 104,000 | ||||||
Total liabilities | 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 September 30, 2020 and December 31, 2019) | -- | -- | ||||||
| Preferred stock Series 1, $0.0001 par value, 97,000 shares authorized, 39,811 shares issued and outstanding (stated liquidation value of $39,811,000 as of September 30, 2020 and December 31, 2019) | -- | -- | ||||||
| Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, no shares issued and outstanding | -- | -- | ||||||
| Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,327,696 and 7,332,811 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively | -- | -- | ||||||
| Additional paid-in capital | 191,759,000 | 194,137,000 | ||||||
| Accumulated deficit | (86,520,000 | ) | (66,511,000 | ) | ||||
| Total The Parking REIT, Inc. Shareholders’ Equity | 105,239,000 | 127,626,000 | ||||||
Non-controlling interest | 2,046,000 | 2,619,000 | ||||||
Total equity | 107,285,000 | 130,245,000 | ||||||
Total liabilities and equity | $ | 295,396,000 | $ | 318,344,000 | ||||
| As of September 30, 2021 (unaudited) | As of December 31, 2020 | |||
| ASSETS | ||||
| Investments in real estate | ||||
| Land and improvements | $ | 158,810,000 | $ | 128,284,000 |
| Buildings and improvements | 243,467,000 | 163,792,000 | ||
| Construction in progress | 1,665,000 | 1,320,000 | ||
| Intangible assets | 9,710,000 | 2,107,000 | ||
| 413,652,000 | 295,503,000 | |||
| Accumulated depreciation and amortization | (20,964,000) | (17,039,000) | ||
| Total investments in real estate, net | 392,688,000 | 278,464,000 | ||
| Fixed Assets, net of accumulated depreciation of $106,000 and $78,000 as of September 30, 2021 and December 31, 2020, respectively | 35,000 | 63,000 | ||
| Cash | 13,084,000 | 4,235,000 | ||
| Cash – restricted | 5,134,000 | 3,660,000 | ||
| Prepaid expenses | 1,003,000 | 1,909,000 | ||
| Accounts receivable, net allowance of doubtful accounts of $0.4 million and $0.7 million as of September 30, 2021 and December 31, 2020 | 1,713,000 | 1,114,000 | ||
| Investment in DST | -- | 2,821,000 | ||
| Due from related parties | -- | 1,000 | ||
| Other assets | 211,000 | 183,000 | ||
| Right of use leased asset | -- | 1,282,000 | ||
| Total assets | $ | 413,868,000 | $ | 293,732,000 |
| LIABILITIES AND EQUITY | ||||
| Liabilities | ||||
| Notes payable, net | $ | 207,580,000 | $ | 158,996,000 |
| Paycheck protection program loan | 328,000 | 348,000 | ||
| Accounts payable and accrued expenses | 15,192,000 | 11,967,000 | ||
| Indemnification liability | 2,000,000 | -- | ||
| Right of use lease liability | -- | 1,282,000 | ||
| Deferred management internalization | -- | 10,040,000 | ||
| Security deposits | 166,000 | 141,000 | ||
| Due to related parties | 211,000 | -- | ||
| Deferred revenue | -- | 140,000 | ||
| Total liabilities | 225,477,000 | 182,914,000 | ||
| Equity | ||||
| Mobile Infrastructure Corporation Stockholders’ Equity | ||||
Preferred stock Series A, $0.0001 par value, 50,000 shares authorized, 2,862 shares issued and outstanding (stated liquidation value of $2,862,000 as of September 30, 2021 and December 31, 2020) | -- | -- | ||
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, 2021 and December 31, 2020) | -- | -- | ||
Non-voting, non-participating convertible stock, $0.0001 par value, 1,000 shares authorized, 0 shares issued and outstanding | -- | -- | ||
Common stock, $0.0001 par value, 98,999,000 shares authorized, 7,739,951 and 7,727,696 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | -- | -- | ||
| Warrants issued and outstanding – 1,702,128 and 0 warrants as of September 30, 2021 and December 31, 2020, respectively | 3,319,000 | -- | ||
| Additional paid-in capital | 196,663,000 | 198,769,000 | ||
| Accumulated deficit | (99,485,000) | (89,985,000) | ||
| Total Mobile Infrastructure Corporation Stockholders’ Equity | 100,497,000 | 108,784,000 | ||
| Non-controlling interest | 87,894,000 | 2,034,000 | ||
| Total equity | 188,391,000 | 110,818,000 | ||
| Total liabilities and equity | $ | 413,868,000 | $ | 293,732,000 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | ||||||||||||||||
Base rent income | $ | 3,132,000 | $ | 5,036,000 | $ | 11,525,000 | $ | 15,126,000 | ||||||||
Management income | 303,000 | -- | 596,000 | -- | ||||||||||||
Percentage rent income | 75,000 | 1,045,000 | 402,000 | 1,756,000 | ||||||||||||
Total revenues | 3,510,000 | 6,081,000 | 12,523,000 | 16,882,000 | ||||||||||||
| Operating expenses | ||||||||||||||||
Property taxes | 955,000 | 734,000 | 2,460,000 | 2,254,000 | ||||||||||||
Property operating expense | 263,000 | 421,000 | 1,374,000 | 1,157,000 | ||||||||||||
Asset management expense – related party | -- | -- | -- | 854,000 | ||||||||||||
General and administrative | 1,452,000 | 1,625,000 | 4,681,000 | 3,737,000 | ||||||||||||
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 | -- | 1,000 | 3,000 | 251,000 | ||||||||||||
Depreciation and amortization | 1,305,000 | 1,285,000 | 3,948,000 | 3,876,000 | ||||||||||||
Impairment | 6,475,000 | 500,000 | 14,115,000 | 1,452,000 | ||||||||||||
Total operating expenses | 10,834,000 | 8,435,000 | 27,173,000 | 51,183,000 | ||||||||||||
| Loss from operations | (7,324,000 | ) | (2,354,000 | ) | (14,650,000 | ) | (34,301,000 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
Interest expense | (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 | -- | 50,000 | 151,000 | 81,000 | ||||||||||||
Income from DST | 44,000 | 52,000 | 143,000 | 170,000 | ||||||||||||
Total other income (expense) | (2,282,000 | ) | 21,000 | (5,922,000 | ) | (4,619,000 | ) | |||||||||
Net loss | (9,606,000 | ) | (2,333,000 | ) | (20,572,000 | ) | (38,920,000 | ) | ||||||||
Less net income (expense) attributable to non-controlling interest | (530,000 | ) | 62,000 | (563,000 | ) | 62,000 | ||||||||||
Net loss attributable to The Parking REIT, Inc.’s stockholders | $ | (9,076,000 | ) | $ | (2,395,000 | ) | $ | (20,009,000 | ) | $ | (38,982,000 | ) | ||||
Preferred stock distributions declared - Series A | (54,000 | ) | (54,000 | ) | (162,000 | ) | (162,000 | ) | ||||||||
Preferred stock distributions declared - Series 1 | (696,000 | ) | (696,000 | ) | (2,088,000 | ) | (2,088,000 | ) | ||||||||
| Net loss attributable to The Parking REIT, Inc.’s common stockholders | $ | (9,826,000 | ) | $ | (3,145,000 | ) | $ | (22,259,000 | ) | $ | (41,232,000 | ) | ||||
Basic and diluted loss per weighted average common share: | ||||||||||||||||
| Net loss per share attributable to The Parking REIT, Inc.’s common stockholders - basic and diluted | $ | (1.34 | ) | $ | (0.45 | ) | $ | (3.04 | ) | $ | (6.06 | ) | ||||
| Distributions declared per common share | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||
Weighted average common shares outstanding, basic and diluted | 7,327,697 | 6,933,520 | 7,329,499 | 6,804,228 | ||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues | ||||||||
| Base rent income | $ | 3,030,000 | $ | 3,132,000 | $ | 8,530,000 | $ | 11,525,000 |
| Management income | 1,290,000 | 303,000 | 2,294,000 | 596,000 | ||||
| Percentage rent income | 1,203,000 | 75,000 | 1,443,000 | 402,000 | ||||
| Management income | 1,290,000 | 303,000 | 2,294,000 | 596,000 | ||||
| Total revenues | 5,523,000 | 3,510,000 | 12,267,000 | 12,523,000 | ||||
| Operating expenses | ||||||||
| Property taxes | 864,000 | 955,000 | 2,656,000 | 2,460,000 | ||||
| Property operating expense | 338,000 | 263,000 | 894,000 | 1,374,000 | ||||
| General and administrative | 1,805,000 | 1,452,000 | 4,665,000 | 4,681,000 | ||||
| Professional fees, net of reimbursement of insurance proceeds | 413,000 | 384,000 | 2,243,000 | 592,000 | ||||
| Acquisition expenses | -- | -- | -- | 3,000 | ||||
| Depreciation and amortization | 1,437,000 | 1,305,000 | 3,953,000 | 3,948,000 | ||||
| Impairment | -- | 6,475,000 | -- | 14,115,000 | ||||
| Total operating expenses | 4,857,000 | 10,834,000 | 14,411,000 | 27,173,000 | ||||
| Other income (expense) | ||||||||
| Interest expense | (2,487,000) | (2,326,000) | (6,783,000) | (6,910,000) | ||||
| Income from or gain from sale of investment in real estate | -- | -- | -- | 694,000 | ||||
| PPP Loan forgiveness | -- | -- | 348,000 | -- | ||||
| Other Income | 5,000 | -- | 280,000 | 151,000 | ||||
| Income from or gain on consolidation of DST | 360,000 | 44,000 | 360,000 | 143,000 | ||||
| Settlement of deferred management internalization | 10,040,000 | -- | 10,040,000 | -- | ||||
| Transaction expenses | (12,224,000) | -- | (12,224,000) | -- | ||||
| Total other income (expense) | (4,306,000) | (2,282,000) | (7,979,000) | (5,922,000) | ||||
| Net loss | (3,640,000) | (9,606,000) | (10,123,000) | (20,572,000) | ||||
| Less net loss attributable to non-controlling interest | (613,000) | (530,000) | (623,000) | (563,000) | ||||
| Net loss attributable to Mobile Infrastructure Corporation’s stockholders | $ | (3,027,000) | $ | (9,076,000) | $ | (9,500,000) | $ | (20,009,000) |
| Preferred stock distributions declared - Series A | (54,000) | (54,000) | (162,000) | (162,000) | ||||
| Preferred stock distributions declared - Series 1 | (696,000) | (696,000) | (2,088,000) | (2,088,000) | ||||
| Net loss attributable to Mobile Infrastructure Corporation’s common stockholders | $ | (3,777,000) | $ | (9,826,000) | $ | (11,750,000) | $ | (22,259,000) |
| Basic and diluted loss per weighted average common share: | ||||||||
| Net loss per share attributable to Mobile Infrastructure Corporation’s common stockholders - basic and diluted | $ | (0.49) | $ | (1.34) | $ | (1.52) | $ | (3.04) |
| Weighted average common shares outstanding, basic and diluted | 7,739,951 | 7,327,697 | 7,737,257 | 7,329,499 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(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 | ) | ||||||||||||||||||||||
Redeemed Shares | -- | -- | (2,741 | ) | -- | (68,000 | ) | -- | -- | (68,000 | ) | |||||||||||||||||||||
Distributions – Series A | -- | -- | -- | -- | (54,000 | ) | -- | -- | (54,000 | ) | ||||||||||||||||||||||
Distributions – Series 1 | -- | -- | -- | -- | (696,000 | ) | -- | -- | (696,000 | ) | ||||||||||||||||||||||
Net loss | -- | -- | -- | -- | -- | (1,150,000 | ) | (5,000 | ) | (1,155,000 | ) | |||||||||||||||||||||
| Balance, March 31, 2020 | 42,673 | $ | -- | 7,330,070 | $ | -- | $ | 193,319,000 | $ | (67,661,000 | ) | $ | 2,604,000 | $ | 128,262,000 | |||||||||||||||||
Distributions to non-controlling interest | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Issuance of common stock | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Redeemed Shares | -- | -- | (2,374 | ) | -- | (60,000 | ) | -- | -- | (60,000 | ) | |||||||||||||||||||||
Distributions – Series A | -- | -- | -- | -- | (54,000 | ) | -- | -- | (54,000 | ) | ||||||||||||||||||||||
Distributions – Series 1 | -- | -- | -- | -- | (696,000 | ) | -- | -- | (696,000 | ) | ||||||||||||||||||||||
Net (loss) | -- | -- | -- | -- | -- | (9,783,000 | ) | (28,000 | ) | (9,811,000 | ) | |||||||||||||||||||||
| Balance, June 30, 2020 | 42,673 | $ | -- | 7,327,696 | $ | -- | $ | 192,509,000 | $ | (77,444,000 | ) | $ | 2,576,000 | $ | 117,641,000 | |||||||||||||||||
Distributions to non-controlling interest | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Issuance of common stock | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Redeemed Shares | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Distributions – Series A | -- | -- | -- | -- | (54,000 | ) | -- | -- | �� | (54,000 | ) | |||||||||||||||||||||
Distributions – Series 1 | -- | -- | -- | -- | (696,000 | ) | -- | -- | (696,000 | ) | ||||||||||||||||||||||
Net (loss) | -- | -- | -- | -- | -- | (9,076,000 | ) | (530,000 | ) | (9,606,000 | ) | |||||||||||||||||||||
| Balance, September 30, 2020 | 42,673 | $ | -- | 7,327,696 | $ | -- | $ | 191,759,000 | $ | (86,520,000 | ) | $ | 2,046,000 | $ | 107,285,000 | |||||||||||||||||
| Preferred stock | Common stock | Warrants | ||||||||||||||||||
| Number of Shares | Par Value | Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Non-controlling interest | Total | |||||||||||
| Balance, December 31, 2020 | 42,673 | $ | -- | 7,727,696 | $ | -- | -- | $ | -- | $ | 198,769,000 | $ | (89,985,000) | $ | 2,034,000 | $ | 110,818,000 | |||
| Stock awards | -- | -- | 12,255 | -- | -- | -- | 144,000 | -- | -- | 144,000 | ||||||||||
| Distributions – Series A | -- | -- | -- | -- | -- | -- | (54,000) | -- | -- | (54,000) | ||||||||||
| Distributions – Series 1 | -- | -- | -- | -- | -- | -- | (696,000) | -- | -- | (696,000) | ||||||||||
| Net loss | -- | -- | -- | -- | -- | -- | -- | (4,368,000) | -- | (4,368,000) | ||||||||||
| Balance, March 31, 2021 | 42,673 | $ | -- | 7,739,951 | $ | -- | -- | $ | -- | $ | 198,163,000 | $ | (94,353,000) | $ | 2,034,000 | $ | 105,844,000 | |||
| Balance, December 31, 2020 | 42,673 | -- | 7,727,696 | -- | -- | -- | 198,769,000 | (89,985,000) | 2,034,000 | 110,818,000 | ||||||||||
| Distributions – Series A | -- | -- | -- | -- | -- | -- | (54,000) | -- | -- | (54,000) | ||||||||||
| Distributions – Series 1 | -- | -- | -- | -- | -- | -- | (696,000) | -- | -- | (696,000) | ||||||||||
| Net income (loss) | -- | -- | -- | -- | -- | -- | -- | (2,105,000) | (10,000) | (2,115,000) | ||||||||||
| Balance, June 30, 2021 | 42,673 | $ | -- | 7,739,951 | $ | -- | -- | $ | -- | $ | 197,413,000 | $ | (96,458,000) | $ | 2,024,000 | $ | 102,979,000 | |||
| Balance, December 31, 2020 | 42,673 | -- | 7,727,696 | -- | -- | -- | 198,769,000 | (89,985,000) | 2,034,000 | 110,818,000 | ||||||||||
| Issuance of OP Units | -- | -- | -- | -- | -- | -- | -- | -- | 83,930,000 | 83,930,000 | ||||||||||
| Issuance of warrants | -- | -- | -- | -- | 1,702,178 | 3,319,000 | -- | -- | -- | 3,319,000 | ||||||||||
| Consolidation of DST | -- | -- | -- | -- | -- | -- | -- | -- | 2,553,000 | 2,553,000 | ||||||||||
| Distributions – Series A | -- | -- | -- | -- | -- | -- | (54,000) | -- | -- | (54,000) | ||||||||||
| Distributions – Series 1 | -- | -- | -- | -- | -- | -- | (696,000) | -- | -- | (696,000) | ||||||||||
| Net income (loss) | -- | -- | -- | -- | -- | -- | -- | (3,027,000) | (613,000) | (3,640,000) | ||||||||||
| Balance, September 30, 2021 | 42,673 | $ | -- | 7,739,951 | $ | -- | 1,702,178 | $ | 3,319,000 | $ | 196,663,000 | $ | (99,485,000) | $ | 87,894,000 | $ | 188,391,000 | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MOBILE INFRASTRUCTURE CORPORATION
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS 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 | |||||||||||||||||
| Preferred stock | Common stock | |||||||||||||||
| Number of Shares | Par Value | Number of Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Non-controlling interest | Total | |||||||||
| Balance, December 31, 2019 | 42,673 | $ | -- | 7,332,811 | $ | -- | $ | 194,137,000 | $ | (66,511,000) | $ | 2,619,000 | $ | 130,245,000 | ||
| Distributions to non-controlling interest | -- | -- | -- | -- | -- | -- | (10,000) | (10,000) | ||||||||
| Redeemed Shares | -- | -- | (2,741) | -- | (68,000) | -- | -- | (68,000) | ||||||||
| Distributions – Series A | -- | -- | -- | -- | (54,000) | -- | -- | (54,000) | ||||||||
| Distributions – Series 1 | -- | -- | -- | -- | (696,000) | -- | -- | (696,000) | ||||||||
| Net loss | -- | -- | -- | -- | -- | (1,150,000) | (5,000) | (1,155,000) | ||||||||
| Balance, March 31, 2020 | 42,673 | $ | -- | 7,330,070 | $ | -- | $ | 193,319,000 | $ | (67,661,000) | $ | 2,604,000 | $ | 128,262,000 | ||
| Balance, December 31, 2019 | 42,673 | -- | 7,332,811 | -- | 194,137,000 | (66,511,000) | 2,619,000 | 130,245,000 | ||||||||
| 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 | ||
| Balance, December 31, 2019 | 42,673 | -- | 7,332,811 | -- | 194,137,000 | (66,511,000) | 2,619,000 | 130,245,000 | ||||||||
| 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.
(UNAUDITED)
| For The Nine Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | $ | (20,572,000 | ) | $ | (38,920,000 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | 3,948,000 | 3,876,000 | ||||||
| Amortization of loan costs | 614,000 | 688,000 | ||||||
| Amortization of right of use lease assets | 84,000 | -- | ||||||
| Gain from sale of investment in real estate | (694,000 | ) | (2,294,000 | ) | ||||
| Deferred management internalization consideration | -- | 31,800,000 | ||||||
| Impairment | 14,115,000 | 1,452,000 | ||||||
| Income from DST | (143,000 | ) | (170,000 | ) | ||||
| Changes in operating assets and liabilities | ||||||||
| Due to/from related parties | (55,000 | ) | 3,000 | |||||
| Accounts payable | (1,786,000 | ) | 2,638,000 | |||||
| Lease liability | (84,000 | ) | -- | |||||
| Loan fees | (44,000 | ) | (275,000 | ) | ||||
| Assets held for sale | -- | (54,000 | ) | |||||
| Security deposits | -- | -- | ||||||
| Other assets | (79,000 | ) | (33,000 | ) | ||||
| Deferred revenue | 18,000 | 106,000 | ||||||
| Accounts receivable | (603,000 | ) | (305,000 | ) | ||||
| Prepaid expenses | (67,000 | ) | (1,715,000 | ) | ||||
| Net cash used in operating activities | (5,348,000 | ) | (3,203,000 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Building improvements | (921,000 | ) | (1,324,000 | ) | ||||
| Fixed asset purchase | (78,000 | ) | -- | |||||
| Proceeds from Investments | 48,000 | 152,000 | ||||||
| Proceeds from sale of investment in real estate | 1,436,000 | 3,674,000 | ||||||
| Payment of deposit made for purchase of investment in real estate or debt | -- | (97,000 | ) | |||||
| Deposits applied to purchase of investment in real estate or debt | -- | 97,000 | ||||||
| Net cash provided by investing activities | 485,000 | 2,502,000 | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from notes payable | 3,545,000 | 9,181,000 | ||||||
| Payments on notes payable | (2,544,000 | ) | (5,666,000 | ) | ||||
| Distribution to non-controlling interest | (10,000 | ) | (42,000 | ) | ||||
| Redeemed shares | (128,000 | ) | (234,000 | ) | ||||
| Preferred dividends paid to stockholders | (750,000 | ) | (2,250,000 | ) | ||||
| Net cash provided by financing activities | 113,000 | 989,000 | ||||||
| Net change in cash and cash equivalents and restricted cash | (4,750,000 | ) | 288,000 | |||||
| Cash and cash equivalents and restricted cash, beginning of period | 11,644,000 | 9,435,000 | ||||||
| Cash and cash equivalents and restricted cash, end of period | $ | 6,894,000 | $ | 9,723,000 | ||||
| Reconciliation of Cash and Cash Equivalents and Restricted Cash: | ||||||||
| Cash and cash equivalents at beginning of period | $ | 7,707,000 | $ | 5,106,000 | ||||
| Restricted cash at beginning of period | 3,937,000 | 4,329,000 | ||||||
| Cash and cash equivalents and restricted cash at beginning of period | $ | 11,644,000 | $ | 9,435,000 | ||||
| Cash and cash equivalents at end of period | $ | 3,466,000 | $ | 6,358,000 | ||||
| Restricted cash at end of period | 3,428,000 | 3,365,000 | ||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 6,894,000 | $ | 9,723,000 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
Interest Paid | $ | 6,297,000 | $ | 6,477,000 | ||||
| Non-cash investing and financing activities: | ||||||||
| Dividends declared not yet paid | $ | 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 | $ | -- | ||||
| For The Nine Months Ended September 30, | ||||
| 2021 | 2020 | |||
| Cash flows from operating activities: | ||||
| Net Loss | $ | (10,123,000) | $ | (20,572,000) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Depreciation and amortization expense | 3,953,000 | 3,948,000 | ||
| Amortization of loan costs | 201,000 | 614,000 | ||
| PPP Loan forgiveness | (348,000) | -- | ||
| Gain from sale of investment in real estate | -- | (694,000) | ||
| Amortization of right of use lease asset | 57,000 | 84,000 | ||
| Stock based compensation | 144,000 | -- | ||
| Impairment | -- | 14,115,000 | ||
| Income from or gain on consolidation of DST | (360,000) | (143,000) | ||
| Settlement of deferred management internalization | (10,040,000) | -- | ||
| Changes in operating assets and liabilities | ||||
| Due to/from related parties | 18,000 | (55,000) | ||
| Accounts payable | (1,985,000) | (1,786,000) | ||
| Indemnification liability | 2,000,000 | -- | ||
| Right of use lease liability | (57,000) | (84,000) | ||
| Security deposits | 16,000 | -- | ||
| Other assets | (17,000) | (79,000) | ||
| Deferred revenue | (140,000) | 18,000 | ||
| Accounts receivable | (564,000) | (603,000) | ||
| Prepaid expenses | 1,419,000 | (67,000) | ||
| Net cash used in operating activities | (15,826,000) | (5,304,000) | ||
| Cash flows from investing activities: | ||||
| Building improvements | (345,000) | (921,000) | ||
| Acquisition of real estate | (3,253,000) | (78,000) | ||
| Proceeds from Investments | -- | 48,000 | ||
| Proceeds from sale of investment in real estate | -- | 1,436,000 | ||
| Net cash (used in) provided by investing activities | (3,598,000) | 485,000 | ||
| Cash flows from financing activities | ||||
| Proceeds from notes payable | 3,867,000 | 3,545,000 | ||
| Payments on notes payable | (5,575,000) | (2,544,000) | ||
| Issuance of OP Units | 31,333,000 | -- | ||
| Loan fees | (24,000) | (44,000) | ||
| Distribution to non-controlling interest | -- | (10,000) | ||
| Redeemed shares | -- | (128,000) | ||
| Preferred dividends paid to stockholders | -- | (750,000) | ||
| Net cash provided by financing activities | 29,601,000 | 69,000 | ||
| Net change in cash and cash equivalents and restricted cash | 10,177,000 | (4,750,000) | ||
| Initial consolidation of VIE | 146,000 | -- | ||
| Cash and cash equivalents and restricted cash, beginning of period | 7,895,000 | 11,644,000 | ||
| Cash and cash equivalents and restricted cash, end of period | $ | 18,218,000 | $ | 6,894,000 |
| Reconciliation of Cash and Cash Equivalents and Restricted Cash: | ||||
| Cash and cash equivalents at beginning of period | $ | 4,235,000 | $ | 7,707,000 |
| Restricted cash at beginning of period | 3,660,000 | 3,937,000 | ||
| Cash and cash equivalents and restricted cash at beginning of period | $ | 7,895,000 | $ | 11,644,000 |
| Cash and cash equivalents at end of period | $ | 13,084,000 | $ | 3,466,000 |
| Restricted cash at end of period | 5,134,000 | 3,428,000 | ||
| Cash and cash equivalents and restricted cash at end of period | $ | 18,218,000 | $ | 6,894,000 |
| Supplemental disclosures of cash flow information: | ||||
| Interest Paid | $ | 6,582,000 | $ | 6,297,000 |
| Non-cash investing and financing activities: | ||||
| Dividends declared not yet paid | $ | 2,251,000 | $ | 1,751,000 |
| Payments on note payable through sale of investment in real estate | $ | -- | $ | (2,500,000) |
| Consolidation of variable interest entities, net | 3,181,000 | -- | ||
| Assumption of debt through acquisition | 44,478,000 | -- | ||
| Acquisition of properties through OP units and warrants | 55,916,000 | -- | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
SEPTEMBER 30, 2020
(UNAUDITED)
Note A — Organization and Business Operations
Mobile Infrastructure Corporation (formerly known as 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 has2015. The Company elected to be taxed and subject to the discussion below under the heading Income Taxes in Note B, has operated in a manner that allowed the Company to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning withand operated in a manner that allowed the taxable year ended December 31, 2017Company to qualify as a REIT 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.tenants during the year ended December 31, 2020. The income generated under these lease amendments dodid not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for the quartersyear 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 longerdid not qualify as a REIT for the year ending December 31, 2020. If we fail to qualifyin 2020 and was taxed as a REITC corporation for our taxablethe year ended December 31, 2020, we would no longer2020. The Company will be taxed as a C corporation for at least its next three taxable years unless the Company is able to otherwise remedy its REIT status through other mechanisms potentially available. The Company is currently exploring those alternatives.
As a C corporation, the Company is subject to federal income tax on its taxable income at regular corporate rates. In addition, distributions to its stockholders are not deductible by the Company. As a result, being taxed as a C corporation rather than a REIT could reduce the cash available for distribution by the Company to its stockholders. Moreover, as a C Corporation, the Company is not required to make distributions of our annual taxable income in orderdistribute any amounts 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.North America. 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 DelawareMaryland 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 soleapproximately 50.8% limited partner of the Operating Partnership. The operating agreement provides that the Operating Partnership is operated inwith Color Up, LLC, 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.
Recapitalization
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII” and together with VRMI and Mr. Shustek, the “Advisor”) and Color Up, LLC, (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”
On August 25, 2021, the closing of the Transaction occurred (the “Closing”). As a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will provide Management real-time information on the performance of assets. Management is currently working to assess the timing to implement this technology in the legacy garages. Pursuant to the Closing, the Operating Partnership issued 7,481,668 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $83.9 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.8 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. The fair value of the warrants recorded as of the Closing was approximately $3.3 million. Transaction expenses not directly related to the acquisition of the Contributed Interests or issuance of OP Units of approximately $12.2 million and the former Advisor (the “Amended and Restated Advisory Agreement”), which became effective upon consummationsettlement of the Merger (as such term is defined below). VRM IIdeferred management internalization liability of $10.0 million were recorded in transaction expenses and VRM I are Maryland corporations that tradesettlement of deferred management internalization, respectively, in the Statement of Operations.
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Management assessed the potential accounting treatment for the Transaction by applying ASC 805 and determined the Transaction did not result in a change of control. As a result, the three real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, resulting in the recognition of assets and liabilities, at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisitions.
Liquidity Matters
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the nine months ended September 30, 2021, the Company had a net loss of $10.1 million and had $18.2 million in cash, cash equivalents and restricted cash. In connection with preparing the unaudited condensed consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021, management evaluated the extent of the impact from the COVID-19 pandemic on the OTC pink sheetsCompany’s business and were managed by Vestin Mortgage, LLC, an affiliateits future liquidity for one year from the issuance of the former Advisor, priorSeptember 30, 2021 financial statements.
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to being internalized in January 2018.
As of September 30, 2020,2021, the Company had 7,327,696 shareshas $67.1 million of common stock issuednotes payable which will mature within one year after the date that these condensed consolidated financial statements are issued. The Company does not have sufficient cash on hand or available liquidity to repay the maturing notes payable as they become due. These conditions and outstanding. On December 31, 2016,events raise substantial doubt about the Company’s ability to continue as a going concern.
In response, 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 dayis currently pursuing approvals to execute extension options on a portion of the Common Stock Offering. In connection with its formation,notes payable as well as a refinancing plan which would consolidate the Company sold 8,000 sharesnear-term maturities into a single, larger facility. However, the refinancing plan is subject to market conditions that are not within the Company’s control, and therefore, implementation of common stockmanagement’s plans cannot be deemed probable at this time. As a result, management has concluded that these plans do not alleviate substantial doubt about the Company’s ability to MVP Capital Partners II, LLC (the “Sponsor”) for $200,000.
The condensed consolidated financial statements do not include any adjustments relating to the charterrecoverability of recorded asset amounts or the Company classifying and designating 50,000 sharesamounts of Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “Series A”). The Company commenced a private placementliabilities that might result from the outcome 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 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 September 30, 20202021, 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 with2021. There were no significant changes to our significant accounting policies during the financial statements and notes thereto included in the Company’snine months ended September 30, 2021, except for those disclosed below. For a full summary of our accounting policies, refer to our 2020 Annual Report on Form 10-K foras originally filed with the year ended DecemberSEC on March 31, 2019.
The condensed consolidated balance sheet as of December 31, 20192020 contained herein has been derived from the audited financial statements as of December 31, 20192020 but does not include all disclosures required by GAAP.
Consolidation
The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows for the near future. For the nine months ended September 30, 2020, the Company had a net loss of $20.6 million and had $6.9 million in cash, cash equivalents and restricted cash. In connection with preparing the condensed consolidated financial statements for the three and nine months ended September 30, 2020, management evaluated the extent of the impact from the COVID-19 pandemic on the Company’s business and its future liquidity for the next twelve months through November 16, 2021.
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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,asset impairment, purchase price allocations to record investments in real estate, and derivative financial instruments and hedging activities, as applicable.
Concentration
The Company had fourteen17 and sixteen14 parking tenants/operators during the nine months ended September 30, 20202021 and 2019,2020, respectively. One tenant/operator, SP Plus+ Corporation (Nasdaq: SP) (“SP+”), represented 79.3% and 61.0% of the Company’s rental revenue from base parking rental revenueand management agreements for the nine months ended September 30, 2020.
| For The Nine Months Ended September 30, | ||||||||
| Parking Tenant | 2020 | 2019 | ||||||
SP + | 61.0 | % | 58.1 | % | ||||
Premier Parking | 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 | 0.7 | % | 4.3 | % | ||||
Riverside Parking | 0.6 | % | 1.0 | % | ||||
Denver School | 0.2 | % | 0.2 | % | ||||
Secure | 0.1 | % | 0.1 | % | ||||
Premium Parking | -- | 1.3 | % | |||||
In addition, the Company had concentrations in various cities based on parking rental revenue for the nine months ended September 30, 2020Detroit (14.3% and 2019, as well as concentrations in various cities18.9%), Houston (8.8% and 11.6%) and Cincinnati (21.1% and 8.1%) based on the real estate the Company owned, as of September 30, 2021 and September 30, 2020, respectively.
Acquisitions
All assets acquired and December 31, 2019. The below tables summarize this informationliabilities assumed in an acquisition of real estate accounted for as a business combination are measured at their acquisition date fair values. For acquisitions of real estate accounted for as an asset acquisition, the fair value of consideration transferred by city.
| City Concentration for Parking Rental Revenue | ||||||||
| For the Nine Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Detroit | 24.3 | % | 17.4 | % | ||||
| Houston | 12.2 | % | 12.8 | % | ||||
| Fort Worth | 10.1 | % | 7.8 | % | ||||
| Cincinnati | 8.2 | % | 8.9 | % | ||||
| Indianapolis | 6.4 | % | 6.2 | % | ||||
| Lubbock | 5.1 | % | 4.1 | % | ||||
| Cleveland | 4.5 | % | 6.9 | % | ||||
| Honolulu | 4.4 | % | 4.8 | % | ||||
| Milwaukee | 3.7 | % | 3.2 | % | ||||
| Nashville | 3.7 | % | 3.5 | % | ||||
| St. Louis | 3.6 | % | 5.2 | % | ||||
| Minneapolis | 2.9 | % | 4.1 | % | ||||
| St Paul | 2.8 | % | 2.9 | % | ||||
| New Orleans | 2.0 | % | 3.1 | % | ||||
| Bridgeport | 1.4 | % | 2.1 | % | ||||
| Memphis | 1.4 | % | 1.6 | % | ||||
| San Jose | 1.0 | % | 2.3 | % | ||||
| Denver | 0.7 | % | 0.8 | % | ||||
| Louisville | 0.6 | % | 1.0 | % | ||||
| Clarksburg | 0.4 | % | 0.3 | % | ||||
| Wildwood | 0.3 | % | 0.4 | % | ||||
| Canton | 0.3 | % | 0.2 | % | ||||
| Ft. Lauderdale | -- | 0.4 | % | |||||
| Real Estate Investment Concentration by City | ||||||||
| As of September 30, 2020 | As of December 31, 2019 | |||||||
| Detroit | 18.9 | % | 17.6 | % | ||||
| Houston | 11.6 | % | 12.0 | % | ||||
| Fort Worth | 9.3 | % | 8.8 | % | ||||
| Cincinnati | 8.1 | % | 8.7 | % | ||||
| Honolulu | 6.7 | % | 6.7 | % | ||||
| Indianapolis | 6.1 | % | 5.8 | % | ||||
| Cleveland | 5.7 | % | 6.2 | % | ||||
| Lubbock | 4.5 | % | 3.7 | % | ||||
| St Louis | 4.2 | % | 4.4 | % | ||||
| Minneapolis | 3.9 | % | 4.4 | % | ||||
| Nashville | 3.9 | % | 3.7 | % | ||||
| Milwaukee | 3.8 | % | 3.8 | % | ||||
| St Paul | 2.8 | % | 2.7 | % | ||||
| Bridgeport | 2.8 | % | 2.6 | % | ||||
| New Orleans | 2.6 | % | 2.6 | % | ||||
| Memphis | 1.2 | % | 1.3 | % | ||||
| San Jose | 1.2 | % | 1.1 | % | ||||
| Denver | 1.1 | % | 1.0 | % | ||||
| Louisville | 1.0 | % | 1.0 | % | ||||
| Clarksburg | 0.2 | % | 0.2 | % | ||||
| Canton | 0.2 | % | 0.2 | % | ||||
| Wildwood | 0.2 | % | 0.4 | % | ||||
| Fort Lauderdale | -- | 1.1 | % | |||||
The Company recordsallocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their relative 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 valuations 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 and below-market lease intangibles are amortized as a decrease or increase, respectively, to rental income over the remaining term of the lease.
In determining the amortization period for lease intangibles, the Company initially will consider 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 value of in-place leases is amortized to expense over the initial term of the respective leases. The value of 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 intangibles is charged to expense.
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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 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 0 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, 20202021 and 2019, respectively.$6.5 million and $14.1 million, respectively, for the three and nine months ended September 30, 2020. These charges were recorded to write down the carrying value of these assetsinvestments in real estate to their current appraised values net of estimated closing costs. The appraisals were performed byfair values. Management used an independent third-party appraisersto determine the fair value 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.
Income Taxes
Deferred tax assets and liabilities are recognized 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 | |||
| 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 | |||
The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions would be sustained upon examination; thus, the Company has not recorded any uncertain tax positions as of September 30, 2020.
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, warrants, 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 duringOutstanding warrants were antidilutive as a result of the net loss for the three and nine months ended September 30, 20202021 and 2019.
Non-controlling Interests
Noncontrolling interests represent the portion of equity that we do not own in the entities we consolidate. The Company classifies noncontrolling interests within permanent equity on the Company’s common stock at any time. As of 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.
Note C — Commitments and Contingencies
The Company had previously agreed to indemnify the former Advisor for certain legal costs. As part of the Transaction, the former Advisor’s rights to indemnification by the Company, with respect to the Advisor’s SEC investigation, was limited to $2 million. Management anticipates the former Advisor will seek indemnification, up to the $2 million cap, and has therefore concluded that the indemnification liability should be accrued in accordance with ASC 450. This indemnification liability was recognized by the Company upon the closing of the Transaction and is included in indemnification liability. See Note K—Legal.
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.
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 September 30, 2020,2021, the Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations. The Company, however, cannot predict the impact of any unforeseen environmental contingencies or new or changed laws or regulations on properties in which the Company holds an interest, or on properties that may be acquired directly or indirectly in the future.
Note D – Investments in Real Estate
| Property Name | Location | Date Acquired | Property Type | # Spaces | Property Size (Acres) | Retail Sq. Ft | Investment Amount | Parking Tenant / Operator | ||||||||||||
| MVP Cleveland West 9th (1) | Cleveland, OH | 5/11/2016 | Lot | 260 | 2 | N/A | $ | 5,845,000 | SP + | |||||||||||
| 33740 Crown Colony (1) | Cleveland, OH | 5/17/2016 | Lot | 82 | 0.54 | N/A | $ | 2,954,000 | SP + | |||||||||||
| MCI 1372 Street | Canton, OH | 7/8/2016 | Lot | 66 | 0.44 | N/A | $ | 700,000 | ABM | |||||||||||
| MVP Cincinnati Race Street Garage | Cincinnati, OH | 7/8/2016 | Garage | 350 | 0.63 | N/A | $ | 5,848,000 | SP + | |||||||||||
| MVP St. Louis Washington | St Louis, MO | 7/18/2016 | Lot | 63 | 0.39 | N/A | $ | 1,637,000 | SP + | |||||||||||
| MVP St. Paul Holiday Garage | St Paul, MN | 8/12/2016 | Garage | 285 | 0.85 | N/A | $ | 8,396,000 | Interstate Parking | |||||||||||
| MVP Louisville Station Broadway | Louisville, KY | 8/23/2016 | Lot | 165 | 1.25 | N/A | $ | 3,007,000 | Riverside Parking | |||||||||||
| White Front Garage Partners | Nashville, TN | 9/30/2016 | Garage | 155 | 0.26 | N/A | $ | 11,672,000 | Premier Parking | |||||||||||
| Cleveland Lincoln Garage | Cleveland, OH | 10/19/2016 | Garage | 536 | 1.14 | 45,272 | $ | 8,272,000 | SP + | |||||||||||
| MVP Houston Preston Lot | Houston, TX | 11/22/2016 | Lot | 46 | 0.23 | N/A | $ | 2,820,000 | Premier Parking | |||||||||||
| MVP Houston San Jacinto Lot | Houston, TX | 11/22/2016 | Lot | 85 | 0.65 | 240 | $ | 3,250,000 | Premier Parking | |||||||||||
| MVP Detroit Center Garage | Detroit, MI | 2/1/2017 | Garage | 1,275 | 1.28 | N/A | $ | 55,477,000 | SP + | |||||||||||
| St. Louis Broadway | St Louis, MO | 5/6/2017 | Lot | 161 | 0.96 | N/A | $ | 2,400,000 | St. Louis Parking | |||||||||||
| St. Louis Seventh & Cerre | St Louis, MO | 5/6/2017 | Lot | 174 | 1.06 | N/A | $ | 3,300,000 | St. Louis Parking | |||||||||||
| MVP Preferred Parking (4) | Houston, TX | 8/1/2017 | Garage/Lot | 528 | 0.98 | 784 | $ | 20,479,000 | Premier Parking | |||||||||||
| MVP Raider Park Garage | Lubbock, TX | 11/21/2017 | Garage | 1,495 | 2.15 | 20,536 | $ | 13,517,000 | ISOM Management | |||||||||||
| MVP PF Memphis Poplar | Memphis, TN | 12/15/2017 | Lot | 127 | 0.87 | N/A | $ | 3,669,000 | Best Park | |||||||||||
| MVP PF St. Louis | St Louis, MO | 12/15/2017 | Lot | 183 | 1.22 | N/A | $ | 5,041,000 | SP + | |||||||||||
| Mabley Place Garage (2) | Cincinnati, OH | 12/15/2017 | Garage | 775 | 0.9 | 8,400 | $ | 18,210,000 | SP + | |||||||||||
| MVP Denver Sherman | Denver, CO | 12/15/2017 | Lot | 28 | 0.14 | N/A | $ | 705,000 | Denver School | ||||||||||||||
| MVP Fort Worth Taylor | Fort Worth, TX | 12/15/2017 | Garage | 1,013 | 1.18 | 11,828 | $ | 27,663,000 | SP + | ||||||||||||||
| MVP Milwaukee Old World | Milwaukee, WI | 12/15/2017 | Lot | 54 | 0.26 | N/A | $ | 2,044,000 | SP + | ||||||||||||||
| MVP Houston Saks Garage | Houston, TX | 12/15/2017 | Garage | 265 | 0.36 | 5,000 | $ | 7,923,000 | Premier Parking | ||||||||||||||
| MVP Milwaukee Wells | Milwaukee, WI | 12/15/2017 | Lot | 148 | 1.07 | N/A | $ | 4,463,000 | Symphony | ||||||||||||||
| MVP Wildwood NJ Lot 1 (3) | Wildwood, NJ | 12/15/2017 | Lot | 29 | 0.26 | N/A | $ | 278,000 | SP + | ||||||||||||||
| MVP Wildwood NJ Lot 2 (3) | Wildwood, NJ | 12/15/2017 | Lot | 45 | 0.31 | N/A | $ | 419,000 | SP+ | ||||||||||||||
| MVP Indianapolis City Park | Indianapolis, IN | 12/15/2017 | Garage | 370 | 0.47 | N/A | $ | 10,934,000 | Denison | ||||||||||||||
| MVP Indianapolis WA Street | Indianapolis, IN | 12/15/2017 | Lot | 141 | 1.07 | N/A | $ | 5,749,000 | Denison | ||||||||||||||
| MVP Minneapolis Venture | Minneapolis, MN | 12/15/2017 | Lot | 195 | 1.65 | N/A | $ | 4,013,000 | N/A | ||||||||||||||
| Minneapolis City Parking | Minneapolis, MN | 12/15/2017 | Lot | 268 | 1.98 | N/A | $ | 7,718,000 | SP + | ||||||||||||||
| MVP Indianapolis Meridian | Indianapolis, IN | 12/15/2017 | Lot | 36 | 0.24 | N/A | $ | 1,551,000 | Denison | ||||||||||||||
| MVP Milwaukee Clybourn | Milwaukee, WI | 12/15/2017 | Lot | 15 | 0.06 | N/A | $ | 262,000 | Secure | ||||||||||||||
| MVP Milwaukee Arena Lot | Milwaukee, WI | 12/15/2017 | Lot | 75 | 1.11 | N/A | $ | 4,631,000 | SP + | ||||||||||||||
| MVP Clarksburg Lot | Clarksburg, WV | 12/15/2017 | Lot | 94 | 0.81 | N/A | $ | 625,000 | ABM | ||||||||||||||
| MVP Denver Sherman 1935 | Denver, CO | 12/15/2017 | Lot | 72 | 0.43 | N/A | $ | 2,533,000 | SP + | ||||||||||||||
| MVP Bridgeport Fairfield | Bridgeport, CT | 12/15/2017 | Garage | 878 | 1.01 | 4,349 | $ | 8,268,000 | SP + | ||||||||||||||
| MVP New Orleans Rampart | New Orleans, LA | 2/1/2018 | Lot | 78 | 0.44 | N/A | $ | 7,835,000 | 342 N. Rampart | ||||||||||||||
| MVP Hawaii Marks Garage | Honolulu, HI | 6/21/2018 | Garage | 311 | 0.77 | 16,205 | $ | 19,951,000 | SP + | ||||||||||||||
| Construction in progress | $ | 1,151,000 | |||||||||||||||||||||
| Total Investment in real estate and fixed assets | $ | 295,210,000 | |||||||||||||||||||||
The transactions described in this Note were approved by a majority of the Company’s boardBoard of directorsDirectors (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.
Two of the Company’s outstanding common stock.
The Company including accounting services and investor relations. In addition, the Sponsor paid selling commissionshas an investment 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.
Note E – Acquisitions
As described in Note A, on August 25, 2021, the Company is dependent upon the former Advisor and its affiliates. If these companies are unable to provideacquired three parking assets with an estimated fair value of $98.8 million. In addition, on September 9, 2021, the Company withacquired the respective services, including loan guaranties,rights to a property in Miami, Florida, which consists of 118 individual parking stalls in the Financial District of Miami, Florida. The fair value of the perpetual right to operate the parking facility is considered an indefinite-lived asset that enables the Company may be required to find alternative providersoperate these parking stalls in perpetuity.
The following table is a summary of these services.
| Property | Location | Date Acquired | Property Type | # Spaces | Size / Acreage | Retail Sq. Ft. | Purchase Price |
| 1W7 Carpark, LLC, LLC | Cincinnati, OH | 8/25/2021 | Garage | 765 | 1.21 | 18,385 | $32,071,000 |
| 222W7, LLC | Cincinnati, OH | 8/25/2021 | Garage | 1,625 | 1.84 | -- | $28,269,000 |
| 322 Streeter, LLC | Chicago, IL | 8/25/2021 | Garage | 1,154 | 2.81 | -- | $38,421,000 |
| 2nd Street, LLC | Miami, FL | 9/09/2021 | Contract | 118 | N/A | -- | $3,253,000 |
The following table is a summary of the allocated acquisition value of all properties acquired by the Company for the quarter ended September 30, 2021.
| Assets | ||||||||||
| Land and Improvements | Building and improvements | In-Place Lease Value | Contract Value | Total assets acquired | ||||||
| 1W7 Carpark (a) | $ | 2,995,000 | $ | 28,768,000 | $ | 308,000 | $ | -- | $ | 32,071,000 |
| 222W7 | 4,391,000 | 23,878,000 | -- | -- | 28,269,000 | |||||
| 322 Streeter | 11,387,000 | 27,034,000 | -- | -- | 38,421,000 | |||||
| 2nd Street (a) | 93,000 | -- | -- | 3,160,000 | 3,253,000 | |||||
| $ | 19,066,000 | $ | 79,475,000 | $ | -- | $ | 3,160,000 | $ | 102,014,000 | |
(a) | The value of In-place lease assets and Contracts are included in Intangible assets on the Condensed Consolidated Balance Sheets. The life of the in-place lease at 1W7 is 5 years. The life of the contract at 2nd Street is indefinite. |
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Note GF — Stock-Based Compensation
On October 14, 2020, the Compensation Committee of the Board of Directors of the Company approved the award of non-restricted shares to the Company’s four independent directors and to the Company’s chief financial officer, J. Kevin Bland. Total stock-compensation expense for the year ended December 31, 2020 was approximately $144,000.
The non-restricted shares were issued by the Company on March 1, 2021 at a price of $11.75 per share. This price equals the net asset value of the Company, which was approved by the Board of Directors.
The shares awarded fully vested immediately upon issuance and these shares are not from the Company’s Long-Term Incentive Plan. No share-based compensation awards were granted during 2021.
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 boardBoard of directorsDirectors or a committee appointed by its boardBoard of directorsDirectors 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 boardBoard of directors,Directors, no award granted under the long-term incentive plan will be transferable except through the laws of descent and distribution.
The Company has authorized and reserved an aggregate maximum number of 500,000 common shares for issuance under the long-term incentive plan. In the event of a transaction between 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 boardBoard of directorsDirectors 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 boardBoard of directorsDirectors and stockholders, unless extended or earlier terminated by the boardBoard of directors.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 boardBoard of directorsDirectors 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 September 30, 2020 and 2019,There are no grants were madeawards outstanding under the long-term incentive plan.
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Note H – Recent Accounting Pronouncements
| 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 | ) | ||||||
As of September 30, 2020,2021, the principal balances on notes payable are as follows:
| Property | Original Debt Amount | Monthly Payment | Balance as of 09/30/20 | Lender | Term | Interest Rate | Loan Maturity | ||||||||||||
| MVP Cincinnati Race Street, LLC (6) | $ | 2,550,000 | Interest Only | $ | 2,550,000 | Multiple | 1 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 | MetaBank | 1 Year | 3.60 | % | 2/28/2021 | ||||||||
| Minneapolis Venture (6) | $ | 2,000,000 | Interest Only | $ | 2,000,000 | Multiple | 1 Year | 8.00 | % | 04/30/2021 | |||||||||
| MVP Raider Park Garage, LLC (4) | $ | 7,400,000 | Interest Only | $ | 7,400,000 | LoanCore | 2 Year | Variable | 12/9/2020 | ||||||||||
| MVP New Orleans Rampart, LLC (4) | $ | 5,300,000 | Interest Only | $ | 5,300,000 | LoanCore | 2 Year | Variable | 12/9/2020 | ||||||||||
| MVP Hawaii Marks Garage, LLC (4) | $ | 13,500,000 | Interest Only | $ | 13,500,000 | LoanCore | 2 Year | Variable | 12/9/2020 | ||||||||||
| MVP Milwaukee Wells, LLC (4) | $ | 2,700,000 | Interest Only | $ | 2,700,000 | LoanCore | 2 Year | Variable | 12/9/2020 | ||||||||||
| MVP Indianapolis City Park, LLC (4) | $ | 7,200,000 | Interest Only | $ | 7,200,000 | LoanCore | 2 Year | Variable | 12/9/2020 | ||||||||||
| MVP Indianapolis WA Street, LLC (4) | $ | 3,400,000 | Interest Only | $ | 3,400,000 | LoanCore | 2 Year | Variable | 12/9/2020 | ||||||||||
| MVP Clarksburg Lot (6) | $ | 476,000 | Interest Only | $ | 476,000 | Multiple | 1 Year | 7.50 | % | 5/21/2021 | |||||||||
| MCI 1372 Street (6) | $ | 574,000 | Interest Only | $ | 574,000 | Multiple | 1 Year | 7.50 | % | 5/27/2021 | |||||||||
| MVP Milwaukee Old World (6) | $ | 771,000 | Interest Only | $ | 771,000 | Multiple | 1 Year | 7.50 | % | 5/27/2021 | |||||||||
| Property | Original Debt Amount | Monthly Payment | Balance as of 9/30/21 | Lender | Term | Interest Rate | Loan Maturity | |
| Parking REIT, Inc (5) | $1,200,000 | (5) | $0 | Color Up, LLC | 7 months | 7.00% | 12/31/2021 | |
| MVP Clarksburg Lot | $476,000 | Interest Only | $476,000 | Vestin Realty Mortgage I | 1 Year | 7.00% | 8/25/2022 | |
| MCI 1372 Street | $574,000 | Interest Only | $574,000 | Vestin Realty Mortgage I | 1 Year | 7.00% | 8/25/2022 | |
| MVP Milwaukee Old World | $771,000 | Interest Only | $1,871,000 | Vestin Realty Mortgage I | 1 Year | 7.00% | 8/25/2022 | |
| MVP Milwaukee Clybourn | $191,000 | Interest Only | $191,000 | Vestin Realty Mortgage I | 1 Year | 7.00% | 8/25/2022 | |
| MVP Wildwood NJ Lot, LLC | $1,000,000 | Interest Only | $1,000,000 | Vestin Realty Mortgage I | 1 Year | 7.00% | 8/25/2022 | |
| MVP Raider Park Garage, LLC (4) | $7,400,000 | Interest Only | $6,931,000 | LoanCore | 1 Year | Variable | 12/9/2021 | |
| MVP New Orleans Rampart, LLC (4) | $5,300,000 | Interest Only | $4,965,000 | LoanCore | 1 Year | Variable | 12/9/2021 | |
| MVP Hawaii Marks Garage, LLC (4) | $13,500,000 | Interest Only | $12,646,000 | LoanCore | 1 Year | Variable | 12/9/2021 | |
| MVP Milwaukee Wells, LLC (4) | $2,700,000 | Interest Only | $2,529,000 | LoanCore | 1 Year | Variable | 12/9/2021 | |
| MVP Indianapolis City Park, LLC (4) | $7,200,000 | Interest Only | $6,744,000 | LoanCore | 1 Year | Variable | 12/9/2021 | |
| MVP Indianapolis WA Street, LLC (4) | $3,400,000 | Interest Only | $3,185,000 | LoanCore | 1 Year | Variable | 12/9/2021 | |
| MVP Cincinnati Race Street, LLC | $2,550,000 | Interest Only | $3,450,000 | Vestin Realty Mortgage II | 1 Year | 7.00% | 8/25/2022 | |
| Minneapolis Venture | $2,000,000 | Interest Only | $4,000,000 | Vestin Realty Mortgage I | 1 Year | 7.00% | 8/25/2022 | |
| SBA PPP Loan | $329,000 | *** | $329,000 | Small Business Administration | 5 Year | 1.00% | 5/3/2026 | |
| MVP Memphis Poplar (3) | $1,800,000 | Interest Only | $1,800,000 | LoanCore | 5 Year | 5.38% | 3/6/2024 | |
| MVP St. Louis (3) | $3,700,000 | Interest Only | $3,700,000 | LoanCore | 5 Year | 5.38% | 3/6/2024 | |
| Mabley Place Garage, LLC | $9,000,000 | $44,000 | $7,864,000 | Barclays | 10 year | 4.25% | 12/6/2024 | |
| MVP Houston Saks Garage, LLC | $3,650,000 | $20,000 | $3,087,000 | Barclays Bank PLC | 10 year | 4.25% | 8/6/2025 | |
| Minneapolis City Parking, LLC | $5,250,000 | $29,000 | $4,553,000 | American National Insurance, of NY | 10 year | 4.50% | 5/1/2026 | |
| MVP Bridgeport Fairfield Garage, LLC | $4,400,000 | $23,000 | $3,818,000 | FBL Financial Group, Inc. | 10 year | 4.00% | 8/1/2026 | |
| West 9th Properties II, LLC | $5,300,000 | $30,000 | $4,668,000 | American National Insurance Co. | 10 year | 4.50% | 11/1/2026 | |
| MVP Fort Worth Taylor, LLC | $13,150,000 | $73,000 | $11,613,000 | American National Insurance, of NY | 10 year | 4.50% | 12/1/2026 | |
| MVP Detroit Center Garage, LLC | $31,500,000 | $194,000 | $28,503,000 | Bank of America | 10 year | 5.52% | 2/1/2027 | |
| MVP St. Louis Washington, LLC (1) | $1,380,000 | $8,000 | $1,311,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| St. Paul Holiday Garage, LLC (1) | $4,132,000 | $24,000 | $3,924,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| Cleveland Lincoln Garage, LLC (1) | $3,999,000 | $23,000 | $3,797,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Denver Sherman, LLC (1) | $286,000 | $2,000 | $271,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Milwaukee Arena Lot, LLC (1) | $2,142,000 | $12,000 | $2,034,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Denver 1935 Sherman, LLC (1) | $762,000 | $4,000 | $723,000 | KeyBank | 10 year | * | 4.90% | 5/1/2027 |
| MVP Louisville Broadway Station, LLC (2) | $1,682,000 | Interest Only | $1,682,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Whitefront Garage, LLC (2) | $6,454,000 | Interest Only | $6,454,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Houston Preston Lot, LLC (2) | $1,627,000 | Interest Only | $1,627,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Houston San Jacinto Lot, LLC (2) | $1,820,000 | Interest Only | $1,820,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| St. Louis Broadway, LLC (2) | $1,671,000 | Interest Only | $1,671,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| St. Louis Seventh & Cerre, LLC (2) | $2,057,000 | Interest Only | $2,058,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Indianapolis Meridian Lot, LLC (2) | $938,000 | Interest Only | $938,000 | Cantor Commercial Real Estate | 10 year | ** | 5.03% | 5/6/2027 |
| MVP Preferred Parking, LLC | $11,330,000 | Interest Only | $11,330,000 | Key Bank | 10 year | ** | 5.02% | 8/1/2027 |
| 1W7 Carpark, LLC | $11,000,000 | $19,000 | $10,336,000 | Associated Bank | 1 year | Variable | 5/1/2022 | |
| 222W7, LLC | $8,250,000 | $15,000 | $8,208,000 | Associated Bank | 1 year | Variable | 10/1/2022 | |
| 322 Streeter LLC | $25,900,000 | Interest Only | $25,900,000 | American National Insurance Co. | 5 year | * | 3.50% | 2/12/2025 |
| Corporate D&O Insurance (6) | $450,000 | $38,000 | $338,000 | MetaBank | 1 year | 3.95% | 7/31/2022 | |
| St Louis Cardinal Lot DST, LLC (7) | $6,000,000 | Interest Only | $6,000,000 | Cantor Commercial Real Estate | 10 year | ** | 5.25% | 5/31/2027 |
| Less unamortized loan issuance costs | (1,011,000) | |||||||
| $207,908,000 | ||||||||
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| MVP Milwaukee Clybourn (6) | $ | 191,000 | Interest Only | $ | 191,000 | Multiple | 1 Year | 7.50 | % | 5/27/2021 | |||||||||
| SBA PPP Loan | $ | 348,000 | $ | 14,700 | $ | 348,000 | Small Business Administration | 2 Year | 1.00 | % | 10/22/2022 | ||||||||
| MVP Memphis Poplar (3) | $ | 1,800,000 | Interest Only | $ | 1,800,000 | LoanCore | 5 Year | 5.38 | % | 3/6/2024 | |||||||||
| MVP St. Louis (3) | $ | 3,700,000 | Interest Only | $ | 3,700,000 | LoanCore | 5 Year | 5.38 | % | 3/6/2024 | |||||||||
| Mabley Place Garage, LLC (8) | $ | 9,000,000 | $ | 44,000 | $ | 8,052,000 | Barclays | 10 year | 4.25 | % | 12/6/2024 | ||||||||
| MVP Houston Saks Garage, LLC | $ | 3,650,000 | $ | 20,000 | $ | 3,189,000 | Barclays Bank PLC | 10 year | 4.25 | % | 8/6/2025 | ||||||||
| Minneapolis City Parking, LLC (7) | $ | 5,250,000 | $ | 29,000 | $ | 4,694,000 | American National Insurance, of NY | 10 year | 4.50 | % | 5/1/2026 | ||||||||
| MVP Bridgeport Fairfield Garage, LLC (5) | $ | 4,400,000 | $ | 23,000 | $ | 3,965,000 | 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 NY | 10 year | 4.50 | % | 12/1/2026 | ||||||||
| MVP Detroit Center Garage, LLC | $ | 31,500,000 | $ | 194,000 | $ | 29,212,000 | Bank of America | 10 year | 5.52 | % | 2/1/2027 | ||||||||
| MVP St. Louis Washington, LLC (1) | $ | 1,380,000 | $ | 8,000 | $ | 1,341,000 | KeyBank | 10 year * | 4.90 | % | 5/1/2027 | ||||||||
| St. Paul Holiday Garage, LLC (1) | $ | 4,132,000 | $ | 24,000 | $ | 4,013,000 | KeyBank | 10 year * | 4.90 | % | 5/1/2027 | ||||||||
| Cleveland Lincoln Garage, LLC (1) | $ | 3,999,000 | $ | 23,000 | $ | 3,884,000 | KeyBank | 10 year * | 4.90 | % | 5/1/2027 | ||||||||
| MVP Denver Sherman, LLC (1) | $ | 286,000 | $ | 2,000 | $ | 277,000 | KeyBank | 10 year * | 4.90 | % | 5/1/2027 | ||||||||
| MVP Milwaukee Arena Lot, LLC (1) | $ | 2,142,000 | $ | 12,000 | $ | 2,081,000 | KeyBank | 10 year * | 4.90 | % | 5/1/2027 | ||||||||
| MVP Denver Sherman 1935, LLC (1) | $ | 762,000 | $ | 4,000 | $ | 740,000 | KeyBank | 10 year * | 4.90 | % | 5/1/2027 | ||||||||
| MVP Louisville Broadway Station, LLC (2) | $ | 1,682,000 | Interest Only | $ | 1,682,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| MVP Whitefront Garage, LLC (2) | $ | 6,454,000 | Interest Only | $ | 6,454,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| MVP Houston Preston Lot, LLC (2) | $ | 1,627,000 | Interest Only | $ | 1,627,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| MVP Houston San Jacinto Lot, LLC (2) | $ | 1,820,000 | Interest Only | $ | 1,820,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| St. Louis Broadway, LLC (2) | $ | 1,671,000 | Interest Only | $ | 1,671,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| St. Louis Seventh & Cerre, LLC (2) | $ | 2,057,000 | Interest Only | $ | 2,057,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| MVP Indianapolis Meridian Lot, LLC (2) | $ | 938,000 | Interest Only | $ | 938,000 | Cantor Commercial Real Estate | 10 year ** | 5.03 | % | 5/6/2027 | |||||||||
| MVP Preferred Parking, LLC | $ | 11,330,000 | Interest Only | $ | 11,330,000 | Key Bank | 10 year ** | 5.02 | % | 8/1/2027 | |||||||||
| Less unamortized loan issuance costs | $ | (1,257,000 | ) | ||||||||||||||||
| $ | 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 1935 Sherman, |
(2) | The Company issued a promissory note to Cantor Commercial Real Estate Lending, L.P. (“CCRE”) for $16.25 million secured by a pool of properties, including (i) MVP Indianapolis Meridian Lot, LLC, (ii) MVP Louisville Station Broadway, LLC, (iii) MVP White Front Garage Partners, LLC, (iv) MVP Houston Preston Lot, LLC, (v) MVP Houston San Jacinto Lot, LLC, (vi) St. Louis Broadway Group, LLC, and (vii) St. Louis Seventh & Cerre, LLC. |
(3) | On February 8, 2019, subsidiaries of the Company, consisting of MVP PF St. Louis 2013, LLC (“MVP St. Louis”), and MVP PF Memphis Poplar 2013 (“MVP Memphis Poplar”), LLC entered into a loan agreement, dated as of February 8, 2019, with LoanCore Capital Credit REIT LLC (“LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan MVP St. Louis and MVP Memphis Poplar $5.5 million to repay and discharge the outstanding KeyBank loan agreement. The loan is secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing on each of the properties owned by MVP St. Louis and MVP Memphis Poplar. |
(4) | On November 30, 2018, subsidiaries of the Company, consisting of MVP Hawaii Marks Garage, LLC, MVP Indianapolis City Park Garage, LLC, MVP Indianapolis Washington Street Lot, LLC, MVP New Orleans Rampart, LLC, MVP Raider Park Garage, LLC, and MVP Milwaukee Wells LLC (the “Borrowers”) entered into a loan agreement, dated as of November 30, 2018 (the “Loan Agreement”), with LoanCore Capital Credit REIT LLC (the “LoanCore”). Under the terms of the Loan Agreement, LoanCore agreed to loan the Borrowers $39.5 million to repay and discharge the outstanding KeyBank Revolving Credit Facility. |
(5) | During 2021, pursuant to the Purchase Agreement, the Company requested and received a $1,200,000 loan from Color Up, LLC the Purchaser under the Purchase Agreement, evidenced by a convertible promissory note. In connection with the closing of the Transaction, the principal then outstanding and all accrued and unpaid interest was converted into limited partner interests of the Operating Partnership. This note was paid in full on |
(6) | On September 30, 2021, the Company entered into a |
| (7) |
* 2 Year Interest Only
** 10 Year Interest Only
*** To be determined by Lender if request for eachforgiveness is denied by the Small Business Administration (SBA)
Reserve funds are generally required for repairs and replacements, real estate taxes, and insurance premiums. Some notes contain various terms and conditions including debt service coverage ratios and debt yield limits. Borrowers for six of the three months endedCompany’s loans totaling $90.0 million and two loans totaling $47.5 million failed to meet loan covenants as of September 30, 2021 and December 31, 2020, respectively. As a result, these borrowers are subject to additional cash management procedures, which resulted in approximately $309,000 and $79,000 of restricted cash at September 30, 2021 and December 31, 2020, respectively. In order to exit these procedures, certain debt service coverage ratios or debt yield tests must be exceeded for two consecutive quarters to return to less restrictive cash management procedures.
During 2020, the Company and the lenders modified loan agreements to defer or cancel payments into repair and replacement reserves commencing between April 2020 and 2019 was approximately $2.1 million. Total loan amortization cost for each of theAugust 2020 and lasting three months endedto six months. At September 30, 2021 and December 31, 2020, the Company had $0 and 2019, was approximately $0.2 million. Total interest expense incurred for the nine months ended September 30, 2020$172,000 in deferred repair and 2019, was approximately $6.3 million and $6.5 million,maintenance reserve payments, 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.
As of September 30, 2020,2021, future principal payments on notes payable are as follows:
| 2021 (remainder) | $ | 38,156,000 |
| 2022 | 32,408,000 | |
| 2023 | 2,499,000 | |
| 2024 | 15,282,000 | |
| 2025 | 31,012,000 | |
| Thereafter | 89,562,000 | |
| Total | $ | 208,919,000 |
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2020 | $ | 48,654,000 | ||
2021 | 2,087,000 | |||
2022 | 2,252,000 | |||
2023 | 2,498,000 | |||
2024 | 15,283,000 | |||
Thereafter | 88,674,000 | |||
Less unamortized loan issuance costs | (1,257,000 | ) | ||
| Total | $ | 158,191,000 |
The following table shows notes payable paid in full during the nine months ended September 30, 2020:
| Property | Original Debt Amount | Monthly Payment | Balance as of 09/30/20 | Lender | Term | Interest Rate | Loan Maturity | ||||||||||||
MVP San Jose 88 Garage, LLC | $ | 1,645,000 | Interest Only | -- | Multiple | 1 Year | 7.50 | % | 6/30/2020 | ||||||||||
The Parking REIT D&O Insurance | $ | 1,681,000 | $ | 171,000 | -- | MetaBank | 1 Year | 8.00 | % | 4/30/2020 | |||||||||
| Loan | Original Debt Amount | Monthly Payment | Balance as of 09/30/2021 | Lender | Term | Interest Rate | Loan Maturity |
| Corporate D&O Insurance | $1,185,000 | $150,000 | -- | MetaBank | 1 Year | 3.60% | 02/28/2021 |
| SBA PPP Loan (1) | $348,000 | $14,700 | -- | Small Business Administration | 2 Year | 1.00% | 10/22/2022 |
| Color Up, LLC | $400,000 | N/A | -- | Color Up, LLC | 7 months | 7.00% | 12/31/2021 |
(1) – Full amount of loan forgiven during May 2021.
Note KH — 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 and accounts payable and accrued expenses.payable. 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 LI – Investment In DST
The Company, through a wholly owned subsidiary of its Operating Partnership, purchasedowns 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,.
At the hometime 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.
Pursuant to the closing of the Transaction on August 25, 2021, the former advisor of the Company, MVP Realty Advisors, LLC (“Signature Trustee”(the “Former Advisor”) transferred ownership of the Manager to Manuel Chavez, III, the CEO of the Company. This change in structure was deemed a reconsideration event and therefore the Company reevaluated whether it had control. Based on the Company's evaluation, the Company began consolidating the investment in MVP St. Louis and MVP St. Louis Cardinal Lot Master Tenant, LLC, (the “Master Tenant”), who have no direct or indirect ownershipwhich had total assets and liabilities of approximately $12.0 million and approximately $6.2 million, respectively, as of August 25, 2021. These assets and liabilities were recorded at fair value as of the date of consolidation, and a gain of $360,000 was recognized in the Company. The Signature Trustee and the Master Tenant can direct the most significant activitiesStatement of the DST.
Amounts related 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 interestMVP St. Louis included 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.
| 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 | ||||
September 30, 2021 | ||
ASSETS | (Unaudited) | |
Investments in real estate | $ | 11,790,000 |
Cash | 105,000 | |
Cash – restricted | 41,000 | |
Accounts receivable | 51,000 | |
Prepaid expenses | 11,000 | |
Total assets | $ | 11,998,000 |
LIABILITIES | ||
Notes payable | $ | 5,961,000 |
Accounts payable and accrued liabilities | 78,000 | |
Due to related party | 193,000 | |
Total liabilities | 6,232,000 |
- 14 -
| 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, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue | $ | 182,000 | $ | 183,000 | $ | 547,000 | $ | 556,000 | ||||||||
Expenses | (99,000 | ) | (91,000 | ) | (279,000 | ) | (269,000 | ) | ||||||||
Net income | $ | 83,000 | $ | 92,000 | $ | 268,000 | $ | 287,000 | ||||||||
For the three months ended September 30, 2021 | For the three months ended September 30, 2020 | For the nine months ended September 30, 2021 | For the nine months ended September 30, 2020 | |||||
Revenue | $ | 122,000 | $ | 183,000 | $ | 488,000 | $ | 365,000 |
Expenses | (61,000) | (91,000) | (434,000) | (180,000) | ||||
Net income | $ | 61,000 | $ | 92,000 | $ | 54,000 | $ | 185,000 |
Note MJ – Right of Use Leased Asset and Lease Liability
The Company executed a lease agreement for its office space at 9130 W. Post Rd., Suite 200, Las Vegas, NV 89148 with a commencement date of January 10, 2020. The lease hashad 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”)ROU Lease Liability on the lease commencement date. TheThrough the discounting of the remaining lease payments at the Company’s incremental borrowing rate of 5.382%, the value of both the ROU asset and ROU liability recognized at commencement date was approximately $1.4 million. As a result of the Closing of the Transaction on August 25, 2021, the Company terminated this lease effective September 30, 2020, was2021. The unamortized value of the ROU Lease Asset and a ROU Lease liability, on this date, were each approximately $1,309,000. $1.2 million. These balances were written off and the company paid a $961,000 lease termination fee at Closing included in Transaction expenses in the consolidated statement of operations.
The Company recognized approximately $54,000 and $45,000 of operating lease expense during the three months ended September 30, 2021 and 2020, respectively.
The Company recognized approximately $163,000 and $135,000 of operating lease expense during the three and nine months ended September 30, 2021 and 2020, respectively. This expense is included in general and administrative expense.
2020 | $ | 37,000 | ||
2021 | 114,000 | |||
2022 | 121,000 | |||
2023 | 127,000 | |||
2024 | 134,000 | |||
Thereafter | 776,000 | |||
| Total | $ | 1,309,000 |
Note NK — Legal
The Company has previously disclosed pending 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.
SEC Investigation
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.
The SEC investigation also relates to the Company and itsconduct of the Company’s former chairman and chief executive officer, Michael V. Shustek. On July 29, 2021, the SEC filed a civil lawsuit against Michael V. Shustek and since then has requested more information.his advisory firm Vestin Mortgage LLC, alleging violations of the securities laws (Case 2-21-civ-01416-JCM-BNW, U.S. District Court, District of Nevada). The SEC seeks disgorgement, injunctions, and bars against Mr. Shustek, and related penalties. Pursuant to the Closing of the Transaction, the Company cannot predict the outcome or the duration ofis required to indemnify Mr. Shustek for certain claims related to the SEC investigation or any other legal proceedings or any enforcement actions or other remedies, if any, that may be imposedin an amount not to exceed $2 million. This liability was recognized by the Company upon the Closing and is included in indemnification liability.
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As a result of the Transaction on August 25, 2021, Mr. Shustek the Company or any other entity arising outresigned as Chief Executive Officer and director of the SEC investigation.
Note OL — 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 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:
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.
Each investor in the Series A received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 30 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2020,2021, there were detachable warrants that maycould be exercised for 84,510 shares of the Company’s common stock, if a listing event occurs on or before March 22, 2022, after the 90th day following the occurrence of a listing event. TheseIf a listing event does occur before the anniversary date, these potential warrants will then expire five years from the 90th day after the occurrence of a listing event. If all the potential warrants outstanding at September 30, 20202021 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.
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On March 24, 2020, the Company’s boardBoard of directorsDirectors unanimously authorized the suspension of the payment of distributions on the Series A,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 September 30, 2020,2021, the increased dividend rate costs the Company approximately $150,000 more per quarter in Series 1 dividends.
Subject to the Company’s redemption rights as described below, each Series 1 share will be convertible into shares of the Company’s common stock, at the election of the holder thereof by written notice to the Company (each, a “Series 1 Conversion Notice”) containing the information required by the charter, at any time beginning upon the earlier of (i) 45 days after the occurrence of a Listing Event or (ii) April 7, 2019 (whether or not a Listing Event has occurred). Each Series 1 share will convert into a number of shares of the Company’s common stock determined by dividing (i) the sum of (A) 100% of the Stated Value, initially $1,000, plus (B) any accrued but unpaid dividends to, but not including, the date of conversion, by (ii) the conversion price for each share of the Company’s common stock (the “Series 1 Conversion Price”) determined as follows:
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.
Each investor in the Series 1 received, for every $1,000 in shares subscribed by such investor, detachable warrants to purchase 35 shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before January 31, 2023, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2020,2021, 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 September 30, 20202021 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.
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On March 24, 2020, the Company’s boardBoard of directorsDirectors 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.
Warrants
On March 29, 2019,August 25, 2021, in connection with 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 supervisionClosing 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.
The Company assesses its warrants as either equity or a liability based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Management estimates the fair value of these warrants using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate. As of September 30, 2021, all outstanding warrants 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 notwere classified as equity.
Note M — Subsequent Events
On October 5, 2021, Color Up, LLC (“Purchaser”) initiated a Tender Offer (the “Offer”) to sell, pledge or otherwise transfer or disposepurchase up to 900,506 shares of any of the Internalization Consideration for a period not to exceed the lock-up period that otherwise would apply to other stockholderscommon stock of the Company, at a price of $11.75 per share (the “Shares”). The Offer expired at 5:00 pm Eastern Time on November 5, 2021. A total of 878,082 Shares were validly tendered and not validly withdrawn pursuant to the Offer (the “Tendered Shares”), and the Purchaser accepted for purchase all such Tendered Shares. The Purchaser initiated payment of an aggregate of approximately $10.3 million to the Company stockholders participating in connection with such capital raise. See the Current Report on Form 8-K filedOffer.
Effective November 8, 2021, the Purchaser executed a subscription agreement with the SEC on April 3, 2019 and Contribution Agreement in Part I, Item 2 Management’s Discussion and AnalysisCompany pursuant to which the Purchaser acquired the remaining 22,424 Shares not purchased through the Offer at $11.75 per share. As a result of Financial Condition and Results of Operations for more information regarding the Management Internalization.
| Number of shares | Internalization Contribution | |||||||||||
Internalization consideration in common stock at $17.50 | 1,100,000 | (1 | ) | $ | 19,250,000 | |||||||
Internalization consideration in common stock at $25.10 | 500,000 | (2 | ) | 12,550,000 | ||||||||
Total internalization consideration | 1,600,000 | $ | 31,800,000 | |||||||||
Internalization consideration issued April 1, 2019 at $17.50 | (400,000 | ) | (7,000,000 | ) | ||||||||
Shares issued December 31, 2019 at $17.50 | (400,000 | ) | (7,000,000 | ) | ||||||||
Deferred management internalization at September 30, 2020 | 800,000 | $ | 17,800,000 | |||||||||
On November 13, 2020,2, 2021, the Company, entered into a settlementsecurities purchase agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, and HSCP Strategic III, L.P., a Delaware limited partnership (“HS3”) affiliated with ABM Industry Groups, LLC.Purchaser, pursuant to which the Operating Partnership issued and sold to HS3(a) 1,702,128 newly issued common units of limited partnership of the Operating Partnership (“OP Units”); and (b) 425,532 newly-issued Class A units of limited partnership of the Operating Partnership (“Class A Units”) which entitle HS3 to purchase up to 425,532 additional OP Units (the “Additional OP Units”) at an exercise price equal to $11.75 per Additional OP Unit, subject to adjustment as provided in the Class A Unit Agreement, and HS3 paid to the Operating Partnership cash consideration of $20.0 million. The settlement is in considerationCompany intends to use proceeds from the Purchase Agreement for the release of ABM for any and all issues arising out of disputesworking capital purposes, including expenses related to the leases for MVP Indianapolis City ParkPurchase Agreement and the acquisition of two parking lots and related assets. The Additional OP Units are available to be exercised only upon completion of a liquidity event, as defined in the Purchase Agreement.
On November 3, 2021, the Company, through Denver 1725 Champa Street Garage, LLC, MCI 1372 Street, LLCan entity wholly owned by the Company, acquired a multi-level parking garage consisting of approximately 450 parking spaces, located in downtown Denver, Colorado, for a purchase price of approximately $16.1 million, plus acquisition and MVP Clarksburg Lot, LLC.
Effective as of November 12, 2021, the Company changed its name from “The Parking REIT, Inc.” to “Mobile Infrastructure Corporation”, pursuant to Articles of Amendment to its Articles of Amendment and Restatement filed with the Maryland State Department of Assessments and Taxation.
Also, effective November 12, 2021, the Company amended its Amended and Restated Bylaws to reflect the change of its name described above. The Company’s new website is www.mobileit.com.
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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 September 30, 20202021 and 2019.2020. 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, 2019.2020. As used herein, the terms "we," "our" and "us" refer to The Parking REIT, Inc.,Mobile Infrastructure Corporation, 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, including economic trends impacting parking facilities; | |
| • | 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 ability to successfully integrate pending acquisitions and 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); | |
| • | the Company’s ability to remediate its loss of REIT status under U.S. tax law; 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.real estate and parking industries. Although the Company is responsible for all of the disclosuredisclosures 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
The Company was incorporatedfocuses primarily on acquiring, owning and managing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout North America and owns 43 parking facilities in Maryland on May 4, 2015 and is the sole member of the Operating Partnership.17 states. The Company owns substantially all of its assets and conductconducts its operations through the Operating Partnership.
Impact of COVID-19
The ongoing COVID-19 pandemic has significantly adversely impacted global economic activity, contributed to significant volatility and negative pressure in financial markets and resulted in unprecedented job losses causing many to fear an imminent global recession. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified, many countries, including the United States, have reacted by instituting quarantines, density limitations and social distancing measures, mandating business and school closures and restricting travel.
The Company experienced certain disruptions in base rent revenue and percentage rent revenue during the quarternine months ended September 30, 2020.2021. For further information regarding the impact of COVID-19 on the Company’sCompany see Results of operations for the three and nine months ended September 30, 20202021 compared to the three and nine months ended September 30, 2019. 2020. While the Company is currently unable to completely estimate the future impact that the COVID-19 pandemic and efforts to contain its spread will have on the Company’s business and on its tenants, as of November 16, 2020,September 30, 2021, the Company had entered into thirty five lease amendments with eightcertain tenants/operators. The terms of such lease amendments generally provide for one of (i) a reduction in rent initially from May 2020 through July 2020 and certain second amendments that provide for a period of four to seven months,reduced rent through October 2021; (ii) conversion of the leasecertain leases to a management agreementagreements 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.certain leases. 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 theany new 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
In response to the Condensed Consolidated Financial Statements of this Quarterly Report and Part II, Item 1A titled “Risk Factors.”
Recapitalization
On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Michael V. Shustek (“Mr. Shustek”), Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII” and together with VRMI and Mr. Shustek, the “Advisor”) and Color Up, LLC, a Delaware limited liability company (the “Purchaser”) affiliated with Bombe Asset Management LLC, a Cincinnati, Ohio based alternative asset management firm (“Bombe”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”
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On August 25, 2021, the closing of the Transaction occurred (the “Closing”). As a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will provide Management real-time information on the performance of assets. Management is currently working with employees to assess the timing to implement this technology in the legacy garages. Pursuant to the Closing, the Operating Partnership issued 7,481,668 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $87.5 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.8 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. Of the 7,481,668 OP Units issued, 4,127,952 and 340,426 OP Units were issued for the Contributed Interests and technology, respectively. transaction expenses of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations.
Management assessed the potential accounting treatment for the Transaction by applying ASC 805 and determined the Transaction did not result in a change of control. As a result, the three real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, resulting in the recognition of assets and liabilities, at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisitions.
Objectives
The Company closed on the Transaction on August 25, 2021, which included significant changes in the management team, including naming a new Chief Executive Officer, Manuel Chavez and President, Stephanie Hogue (the “New Management Team”). As a result, the objectives of the Company over the next twelve months will be focused predominantly on the following:
| • | Identifying paths for remediation of REIT status, which is necessary as the Company moves towards a liquidity event; | |
| • | Working with the third-party operators to optimize the performance of the assets to move towards cash flow positivity; | |
| • | Reducing corporate overhead to move the company towards profitability; and | |
| • | Pursuing options for refinancing the near-term debt maturities. |
The Company’s strategic plan includes pursuing acquisitions as well as a potential listing on a national stock exchange to provide liquidity to shareholders. The above four objectives are the immediate steps in moving towards a listing event in the medium term, which is expected to provide the Company scale and capacity to grow beyond its current asset base.
The New Management Team expects to work closely with our tenant-operators to evaluate capital requirements of the assets, with a view to understanding current and future demand drivers of those assets. The Company has been implementing the recently contributed proprietary technology which will provide real-time information on the performance of assets. Going forward under new leases, the Company will now be active and responsible for all capital expenditures related to upgrades and optimization of the assets, including but not limited to gate arm systems, lighting, and large capital improvements to structure and concrete. We expect to maintain an active dialogue with our tenant operators for the betterment of the Company’s assets.
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.North America. 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 and health centers | |
| • | Hotels |
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.time with an uneven return to downtown cores across the Company’s located properties. Many state and local governments are currently restrictinghave restricted 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
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We are working closely with our current operator tenants to understand the impactreturn to each individual market, both as we consider the demand drivers of COVID-19 on the Company, see Part II, Item 1A titled “Risk Factors.”
The Company historicallyis focused on acquiring properties that met the following criteria:
In the event of a future acquisition, the Company would expect the foregoing criteria to serve as guidelines, however, Managementmanagement and the Company’s boardBoard of directorsDirectors may vary from these guidelines to acquire properties which they believe represent value opportunities.
Results of Operations for the three months ended September 30, 20202021, compared to the three months ended September 30, 2019.
| For the Three Months Ended September 30, | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Revenues | ||||||||||||||||
Base rent income | $ | 3,132,000 | $ | 5,036,000 | $ | (1,904,000 | ) | (38 | %) | |||||||
Management income | 303,000 | -- | 303,000 | 100 | % | |||||||||||
Percentage rent income | 75,000 | 1,045,000 | (970,000 | ) | (93 | %) | ||||||||||
Total revenues | $ | 3,510,000 | $ | 6,081,000 | $ | (2,571,000 | ) | (42 | %) | |||||||
| For the Three Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Revenues | ||||||||
| Base rent income | $ | 3,030,000 | $ | 3,132,000 | $ | (102,000) | (3.3%) | |
| Percentage rent income | 1,203,000 | 75,000 | 1,128,000 | 1504.0% | ||||
| Management income | 1,290,000 | 303,000 | 987,000 | 325.7% | ||||
| Total revenues | $ | 5,523,000 | $ | 3,510,000 | $ | 2,013,000 | 57.4% | |
Rental revenue
The increase in rental revenues is primarily attributable to (1) the operating leaseacquisition of MVP PF Memphis Poplar 2013, LLC (“MVP Memphis Poplar”) by Premium Parking was terminated. Accordingthree parking assets on August 25, 2021 and (2) increasing demand for parking during the three months ended September 30, 2021 compared 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 monthlysame period in the amountprior year as a result of $3,000 commencing March 1,partial recovery from COVID-19 restrictions, implemented during 2020, intended to prevent its spread, including restrictions on public gatherings and continuing through February 1, 2024.
During the three months ended September 30, 2021 and 2020 the Company earned percentage rent on the following properties:
| For the Three Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Percentage rent income | ||||||||
| MVP St Louis 2013 | $ | 23,000 | $ | -- | $ | 23,000 | 100.0% | |
| Mabley Place Garage | 155,000 | -- | 155,000 | 100.0% | ||||
| MVP Ft Worth Taylor | 142,000 | -- | 142,000 | 100.0% | ||||
| MVP Milwaukee Old World | 21,000 | -- | 21,000 | 100.0% | ||||
| MVP Mini Venture | 20,000 | -- | 20,000 | 100.0% | ||||
| MVP Milwaukee Arena | 136,000 | -- | 136,000 | 100.0% | ||||
| Denver Sherman | 5,000 | -- | 5,000 | 100.0% | ||||
| MVP Bridgeport Fairfield Garage | 39,000 | -- | 39,000 | 100.0% | ||||
| Minneapolis City Parking | 30,000 | -- | 30,000 | 100.0% | ||||
| Cleveland Lincoln | 1,000 | -- | 1,000 | 100.0% | ||||
| MVP St Paul Holiday | 56,000 | -- | 56,000 | 100.0% | ||||
| MVP St Louis 7th & Cere | 65,000 | -- | 65,000 | 100.0% | ||||
| Raider Park | 29,000 | 75,000 | (46,000) | -61.3% | ||||
| MVP Detroit Center Garage | 401,000 | -- | 401,000 | 100.0% | ||||
| St. Louis Broadway | 30,000 | -- | 30,000 | 100.0% | ||||
| MVP New Orleans Rampart | - | -- | - | |||||
| MVP Hawaii Marks | 50,000 | -- | 50,000 | 100.0% | ||||
| Total revenues | $ | 1,203,000 | $ | 75,000 | $ | 1,128,000 | 1504.0% | |
Variances in percentage rent earnings in 2021 compared to 2020 are due primarily to the conversion of property management agreements back to leases and fluctuations in transient parking business as a result of restrictions intended to slow the spread of COVID-19 and varying speeds of the opening of cities.
- 22 -
| For the Three Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Operating expenses | ||||||||
| Property taxes | $ | 864,000 | $ | 955,000 | $ | (91,000) | (9.5%) | |
| Property operating expense | 338,000 | 263,000 | 75,000 | 28.5% | ||||
| General and administrative | 1,805,000 | 1,452,000 | 353,000 | 24.3% | ||||
| Professional fees | 413,000 | 384,000 | 29,000 | 7.6% | ||||
| Depreciation and amortization expenses | 1,437,000 | 1,305,000 | 132,000 | 10.1% | ||||
| Impairment | -- | 6,475,000 | (6,475,000) | (100.0%) | ||||
| Total operating expenses | 4,857,000 | 10,834,000 | (5,977,000) | (55.2%) | ||||
| Income (loss) from operations | $ | 666,000 | $ | (7,324,000) | $ | 7,990,000 | (109.1%) | |
Property taxes
The decrease in property taxes in 2021 compared to 2020 is attributable primarily to the lease amendments which increased the property tax burden on the Company in 2020 which resulted in certain one-time increases in expense during the three months ended September 30, 2020. For leases that are executed after the Transaction, it is the Company’s intent to be responsible for asset level property taxes.
Property operating expense
The increase in property operating expense in 2021 compared to 2020 is attributable primarily to COVID-19 restrictions in 2020, that reduced the demand for parking in certain locations which in turn reduced required repairs and maintenance expenses and other property operating expenses.
General and administrative
The increase in general and administrative expenses from 2020 to 2021 of approximately $350,000 was primarily attributable to an increase in payroll and related expenses of approximately $230,000 and increases in other office and administrative expenses.
Professional fees
Professional fees increased approximately $29,000 in the three months ended September 30, 2021 compared to the same period in the prior year. The increase was primarily due to additional consultation fees of approximately $21,000 during the three months ended September 30, 2021.
Depreciation and amortization expenses
The increase in depreciation and amortization expenses was due to properties acquired during the third quarter of 2021.
Impairment
During the three months ended September 30, 2021, no impairment was recorded. During the three months ended September 30, 2020 the Company recorded approximately $6.5 million of asset impairment charges. These charges were recorded to write down the carrying value of these assets to their current fair market values. 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, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Other income (expense) | ||||||||
| Interest expense | $ | (2,487,000) | $ | (2,326,000) | $ | (161,000) | 6.9% | |
| PPP Round #1 forgiveness | -- | -- | -- | -- | ||||
| Gain from sale of investment in real estate | -- | -- | -- | -- | ||||
| Income from DST | -- | 44,000 | (44,000) | (100.0%) | ||||
| Settlement of deferred management internalization | 10,040,000 | -- | 10,040,000 | 100.0% | ||||
| Transaction expenses | (12,224,000) | -- | (12,224,000) | (100.0%) | ||||
| Gain on consolidation of DST | 122,000 | -- | 122,000 | 100.0% | ||||
| Other income | 5,000 | -- | 5,000 | 100.0% | ||||
| Total other expense | $ | (4,544,000) | $ | (2,282,000) | $ | (2,262,000) | 99.1% | |
- 23 -
Interest expense
The increase of interest expense of approximately $130,000 was primarily attributable to the new loans assumed as part of the Transaction and due to higher private loan balances and higher interest rates on the Company’s private loan balances of approximately $11.6 million partially offset by a lower interest rate on the Company’s $55.5 million variable rate loans. Total loan amortization cost for the three months ended September 30, 2021 and 2020, was approximately $100,000 and $200,000, respectively.
For additional information see Note G – Notes Payable and Paycheck Protection Program Loan 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
There were no sales of investments in real estate during the three months ended September 30, 2021 or 2020.
Income from DST and Gain on DST consolidation
The decrease in income from MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”), is due to the impact of COVID-19. Beginning in March 2020, MVP St. Louis did not generate distributable net income due to the delay of the opening of the major league baseball season and the fact that many stateno fans were allowed to attend the games in 2020 when the season opened. Due to prior losses, MVP St. Louis did not generate distributable net income during the three months ended September 30, 2021.
Pursuant to the closing of the Transaction on August 25, 2021, management determined the change in structure of its investment in MVP St. Louis, DST lot, was deemed a reconsideration event. Based on the Company's evaluation, the Company began consolidating the investment in MVP St. Louis, respectively, as of August 25, 2021 and local governments are currently restrictingthis change in structure resulted in a gain of approximately $0.1 million.
For additional information see Note I – Variable Interest Entities in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Transaction Expenses
Pursuant to the Closing of the Transaction on August 25, 2021, transaction expenses of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations during the three months ended September 30, 2021.
Results of Operations for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
| For the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Revenues | ||||||||
| Base rent income | $ | 8,530,000 | $ | 11,525,000 | $ | (2,995,000) | (26.0%) | |
| Percentage rent income | 1,443,000 | 402,000 | 1,698,000 | 284.9% | ||||
| Management income | 2,294,000 | 596,000 | 1,041,000 | 259.0% | ||||
| Total revenues | $ | 12,267,000 | $ | 12,523,000 | $ | (256,000) | (2.0%) | |
Rental revenue
The decrease in rental revenues is primarily attributable to the continued decreased demand for parking as a result of COVID-19 and restrictions intended to prevent its spread, including restrictions on public gatherings requiring people to shelter in place and implementing social distancing measures, which 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 closureIn addition, as a result 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 revenueCOVID-19, the Company generates from itstransitioned certain leases with them.to management agreements. Per these management agreements, the tenant now operates the property on behalf of the Company and pays their operating expenses from gross parking revenue and is required to remit an agreed upon percentage of the remainder to the Company instead of base rent payments. Revenues from these properties are recorded as management income.
- Notes to the Condensed Consolidated Financial Statements of this Quarterly Report.
During the threenine months ended September 30, 20202021 and 20192020 the Company receivedearned percentage rent on the following properties:
| For the Three Months Ended September 30 | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Percentage rent income | ||||||||||||||||
MVP PF Ft. Lauderdale(a) | $ | -- | $ | 33,000 | $ | (33,000 | ) | (100 | %) | |||||||
Mabley Place Garage | -- | 316,000 | (316,000 | ) | (100 | %) | ||||||||||
MVP Indianapolis Washington | -- | 36,000 | (36,000 | ) | (100 | %) | ||||||||||
MVP Milwaukee Arena | -- | 16,000 | (16,000 | ) | (100 | %) | ||||||||||
MVP St Paul Holiday | -- | 57,000 | (57,000 | ) | (100 | %) | ||||||||||
MVP Detroit Center Garage (d) | -- | 566,000 | (566,000 | ) | (100 | %) | ||||||||||
St. Louis Broadway | -- | 4,000 | (4,000 | ) | (100 | %) | ||||||||||
MVP Raider Park Garage | 75,000 | 17,000 | 58,000 | 341 | % | |||||||||||
Total revenues | $ | 75,000 | $ | 1,045,000 | $ | (970,000 | ) | (92.8 | %) | |||||||
| For the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Percentage rent income | ||||||||
| MVP St Louis 2013 | $ | 29,000 | $ | -- | $ | 29,000 | 100.0% | |
| Mabley Place Garage | 192,000 | -- | 192,000 | 100.0% | ||||
| MVP Ft Worth Taylor | 183,000 | 94,000 | 89,000 | 94.7% | ||||
| MVP Milwaukee Old World | 21,000 | -- | 21,000 | 100.0% | ||||
| MVP Mini Venture | 42,000 | -- | 42,000 | 100.0% | ||||
| MVP Milwaukee Arena | 136,000 | -- | 136,000 | 100.0% | ||||
| Denver Sherman | 6,000 | 31,000 | (25,000) | -80.6% | ||||
| MVP Bridgeport Fairfield Garage | 49,000 | -- | 49,000 | 100.0% | ||||
| Minneapolis City Parking | 47,000 | -- | 47,000 | 100.0% | ||||
| Cleveland Lincoln | 1,000 | -- | 1,000 | 100.0% | ||||
| MVP St Paul Holiday | 56,000 | -- | 56,000 | 100.0% | ||||
| MVP St Louis 7th & Cere | 65,000 | -- | 65,000 | 100.0% | ||||
| Raider Park | 29,000 | 75,000 | (46,000) | -61.3% | ||||
| MVP Detroit Center Garage | 493,000 | 153,000 | 340,000 | 222.2% | ||||
| St. Louis Broadway | 30,000 | 5,000 | 25,000 | 500.0% | ||||
| MVP New Orleans Rampart | - | 44,000 | (44,000) | -100.0% | ||||
| MVP Hawaii Marks | 64,000 | -- | 64,000 | 100.0% | ||||
| Total revenues | $ | 1,443,000 | $ | 402,000 | $ | 1,041,000 | 259.0% |
Variances in percentage rent isearnings in 2021 compared to 2020 are due primarily to lease amendments entered into duethe conversion of property management agreements back to COVID-19. The Company does not expect to receive any additional percentage rent for the remainder of 2020.
| For the Three Months Ended September 30, | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Operating expenses | ||||||||||||||||
Property taxes | $ | 955,000 | $ | 734,000 | $ | 221,000 | 30 | % | ||||||||
Property operating expense | 263,000 | 421,000 | (158,000 | ) | (38 | %) | ||||||||||
General and administrative | 1,452,000 | 1,625,000 | (173,000 | ) | (11 | %) | ||||||||||
Professional fees | 384,000 | 3,869,000 | (3,485,000 | ) | (90 | %) | ||||||||||
Acquisition expenses | -- | 1,000 | (1,000 | ) | (100 | %) | ||||||||||
Depreciation and amortization expenses | 1,305,000 | 1,285,000 | 20,000 | 2 | % | |||||||||||
Impairment | 6,475,000 | 500,000 | 5,975,000 | 1195 | % | |||||||||||
Total operating expenses | 10,834,000 | 8,435,000 | 2,770,000 | 33 | % | |||||||||||
Loss from operations | $ | (7,324,000 | ) | $ | (2,354,000 | ) | $ | (4,970,000 | ) | 211 | % | |||||
| For the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Operating expenses | ||||||||
| Property taxes | $ | 2,656,000 | $ | 2,460,000 | $ | 196,000 | 8.0% | |
| Property operating expense | 894,000 | 1,374,000 | (480,000) | (34.9%) | ||||
| General and administrative | 4,665,000 | 4,681,000 | (16,000) | (0.3%) | ||||
| Professional fees | 2,243,000 | 592,000 | 1,651,000 | 278.9% | ||||
| Acquisition expenses | -- | 3,000 | (3,000) | (100.0%) | ||||
| Depreciation and amortization expenses | 3,953,000 | 3,948,000 | 5,000 | 0.1% | ||||
| Impairment | -- | 14,115,000 | (14,115,000) | (100.0%) | ||||
| Total operating expenses | 14,411,000 | 27,173,000 | (12,763,000) | (47.0%) | ||||
| Income (loss) from operations | $ | (2,144,000) | $ | (14,650,000) | $ | 12,506,000 | (85.4%) | |
Property taxes
The increase in property taxes in 2020during the nine-months ended 2021 compared to 20192020 is attributable primarily to thecertain new lease amendmentsagreements which have decreasedincreased the property tax burden on the Company’s tenantsCompany in 2021. These agreements were entered into during the second quarter of 2020. As a result, the impact is larger during the nine months ended September 30, 2021 than during the same period in the prior year. These new agreements generally allocate a larger portion of the properties’ annual property tax expense to the Company than previous agreements.
Property operating expense
The decrease in property operating expense in 2021 compared to 2020 is attributable primarily to COVID-19 restrictions that reduced the demand for 2020.parking in certain locations which in turn reduced required repairs and maintenance expenses and other property operating expenses.
- 25 -
General and administrative
The decrease in general and administrative expenses from 20192020 to 2020 of $173,0002021 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$300,000 offset by an increase in investor services expenseexpenses of approximately $31,000. The decrease$100,000 and increases in other expenses.
Professional fees
Professional fees increased approximately $1.7 million in the director and officer insurance expense is duenine months ended September 30, 2021 compared to the fact thatsame period in 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.
See Note NK – Legal in Part I, Item 1 -Notes to the Condensed Consolidated Financial Statementsof this Quarterly Report for additional information.
Impairment
No impairment 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.
| 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 | %) | ||||||
| For the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | $ Change | % Change | |||||
| Other income (expense) | ||||||||
| Interest expense | $ | (6,783,000) | $ | (6,910,000) | $ | 127,000 | (1.8%) | |
| Other income | 280,000 | 151,000 | 129,000 | 85.4% | ||||
| Gain from sale of investment in real estate | -- | 694,000 | (694,000) | (100.0%) | ||||
| PPP Round #1 forgiveness | 348,000 | -- | 348,000 | 100.0% | ||||
| Income from DST | -- | 143,000 | (143,000) | (100.0%) | ||||
| Settlement of deferred management internalization | 10,040,000 | -- | 10,040,000 | 100.0% | ||||
| Gain DST | 122,000 | -- | 122,000 | 100.0% | ||||
| Transaction expenses | (12,224,000) | -- | �� | (12,224,000) | (100.0%) | |||
| Total other expense | $ | (8,217,000) | $ | (5,922,000) | $ | (2,295,000) | 38.8% | |
Interest expense
The decrease inof interest expense of approximately $150,000 was primarily due to a lower interest rate on the Company’s $55.5 million variable rate loans partially offset by higher rates and balances in the approximately $11.6 million of private loans. Total loan amortization cost 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.
For additional information see Note JG – Notes Payable and Paycheck Protection Program Loan in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
Other income
During September 2019,February 2021, the Company soldreceived a one-time cost of contract payment of $275,000 from SP+.
During May 2021, the surface parking lot and office building in Fort Lauderdale for $6.1 million, which resulted in a gainCompany received notification from sale of investments of approximately $2.3 million.
| 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 | %) | |||||||
During January 2020, and continuing through February 1, 2024.
During February 2020, the Company received approximately $6,000 for the energy efficiency fee at Detroit Center Garage. Upon the completion of the lease is 50 months. Best Park willlighting 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 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.
- 26 -
Income from DST and Gain DST
The decrease in income from MVP St. Louis Cardinal Lot, DST, a Delaware Statutory Trust (“MVP St. Louis”), is due to the impact of COVID-19. Beginning in March 2020, MVP St. Louis did not generate distributable net income due to the delay of the opening of the major league baseball season and the fact that many state and local governments are currently restricting public gatherings, requiring peopleno fans were allowed to shelterattend the games in place and implementing social distancing measures, which has in some cases eliminated or severely reduced2020 when the demand for parking. This reduced demand for parking is adversely impacting and may continueseason opened. Due 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 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 | %) | |||||||
| 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 | %) | ||||||
Pursuant to these lease amendments and the impactclosing of the COVID-19 pandemic duringTransaction on August 25, 2021, management determined the second quarterchange in structure of 2020. In particular, many of the Company’s properties are locatedits investment in urban centers, near government buildings and sports centers, which depend in large part on customer traffic, and conditions that lead toMVP St. Louis, DST lot, was deemed 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 informationreconsideration event. Based on the effect of COVID-19 on our business, see Part II, Item 1A titled “Risk Factors.”
For additional information see Note E — Related Party Transactions and ArrangementsI – Variable Interest Entities in Part I, Item 1 Notes to the Condensed Consolidated Financial Statements of this Quarterly Report for additional information.
| For the Nine Months Ended September 30, | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Other income (expense) | ||||||||||||||||
Interest expense | $ | (6,910,000 | ) | $ | (7,164,000 | ) | $ | 254,000 | (4 | %) | ||||||
Gain from sale of investment in real estate | 694,000 | 2,294,000 | (1,600,000 | ) | (70 | %) | ||||||||||
Other income | 151,000 | 81,000 | 70,000 | 86 | % | |||||||||||
Income from DST | 143,000 | 170,000 | (27,000 | ) | (16 | %) | ||||||||||
Total other expense | $ | (5,922,000 | ) | $ | (4,619,000 | ) | $ | (1,303,000 | ) | (28 | %) | |||||
Gain from sale of investment in real estate
There were no sales of investments in real estate during the nine months ended September 30, 2021. 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 iswas approximately $0.7 million.
Transaction Expenses
Pursuant to the Company soldClosing of the surface parking lot and office building in Fort Lauderdale for $6.1 million, which resulted in a gain from sale of investmentsTransaction on August 25, 2021, transaction expenses of approximately $2.3 million.
Liquidity and the Company expects that the amount of percentage rent to be earned in future periods will be significantly reduced if restrictions intended to prevent the spread of COVID-19 continue.
The Company believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the valueowns substantially all 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.
The Company views fair value adjustments of derivatives, impairment chargeshas incurred net losses since its inception and gainsanticipates net losses 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.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss attributable to The Parking REIT, Inc. common shareholders | $ | (9,826,000 | ) | $ | (3,145,000 | ) | $ | (22,259,000 | ) | $ | (41,232,000 | ) | ||||
Add (Subtract): | ||||||||||||||||
Gain on Sale of real estate | -- | (2,294,000 | ) | (694,000 | ) | (2,294,000 | ) | |||||||||
Impairment of real estate | 6,475,000 | 500,000 | 14,115,000 | 1,452,000 | ||||||||||||
Depreciation and amortization expenses of real estate assets | 1,305,000 | 1,285,000 | 3,948,000 | 3,876,000 | ||||||||||||
| FFO | $ | (2,046,000 | ) | $ | (3,654,000 | ) | $ | (4,890,000 | ) | $ | (38,198,000 | ) | ||||
| Add (subtract): | ||||||||||||||||
Acquisition fees and expenses | -- | 1,000 | 3,000 | 251,000 | ||||||||||||
Change in Deferred Rental Assets | (56,000 | ) | (10,000 | ) | (80,000 | ) | (32,000 | ) | ||||||||
| MFFO attributable to The Parking REIT, Inc. shareholders | $ | (2,102,000 | ) | $ | (3,663,000 | ) | $ | (4,967,000 | ) | $ | (37,979,000 | ) | ||||
| Distributions paid to Common Shareholders | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the paymentsatisfaction 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 propertiesliabilities in the Company’s portfolio and through third party financing and the assumptionnormal course of debt on acquired properties.
As of September 30, 2020,2021, the Company has $67.1 million of notes payable which will mature within one year after the date that these condensed consolidated financial statements are issued. The Company does not have sufficient cash on hand or available liquidity to repay the maturing notes payable as they become due. These conditions and events raise substantial doubt about the Company’s debt consistedability to continue as a going concern.
In response, the Company is currently pursuing approvals to execute extension options on a portion of approximately $120.0 million in fixed rate debt and $39.5 million in variable rate debt, net of loan issuance costs andthe notes payable as well as a refinancing plan which would consolidate the near-term maturities into a single, larger facility. However, the refinancing plan is subject to market conditions that are not within the Company’s cashcontrol, and cash equivalents and restricted cash were approximately $6.9 million ($3.4 milliontherefore, implementation of which was restricted cash). Themanagement’s plans cannot be deemed probable at this time. As a result, management has concluded that these plans do not alleviate substantial doubt about the Company’s unrestricted cash balance was approximately $3.1 million as of the date of filing.
The condensed consolidated financial statements do not include any adjustments relating to the Company’s only sourcerecoverability of near-term liquidity is from operating activitiesrecorded asset amounts or the saleamounts of assets. In order to enhance liquidity,liabilities that might result from 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 outcome of this Quarterly Report.uncertainty.
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Sources and Uses of Cash
The following table summarizes our cash flows for the nine months ended September 30, 20202021 and 2019:
| For the nine months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
Net cash used in operating activities | $ | (5,348,000 | ) | $ | (3,203,000 | ) | ||
Net cash provided by investing activities | 485,000 | 2,502,000 | ||||||
Net cash provided by financing activities | 113,000 | 989,000 | ||||||
| For the Nine Months Ended September 30, | ||||
| 2021 | 2020 | |||
| Net cash used in operating activities | $ | (15,826,000) | $ | (5,304,000) |
| Net cash provided by (used in) investing activities | (3,598,000) | 485,000 | ||
| Net cash provided by financing activities | 29,601,000 | 69,000 | ||
Comparison of the nine months ended September 30, 20202021 to the nine months ended September 30, 2019:
The Company’s cash and cash equivalents and restricted cash were approximately $6.9$18.2 million as of September 30, 2020,2021, which was a decreasean increase of approximately $2.8$11.3 million from the balance at September 30, 2019.
Cash flows from operating activities
Net cash used in operating activities for the nine months ended September 30, 2020 was approximately $5.3 million, compared to approximately $3.2 million 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, 20202021 was approximately $15.8 million, compared to approximately $5.3 million for the same period in 2020. The increase was primarily due to the Transaction expenses of approximately $12.2 million contributing to a higher net loss, adjusted for impairment and internalization expensenet of non-cash items, than 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 byused in investing activities for the nine months ended September 30, 20202021 was approximately $0.5$3.6 million, compared to approximately $2.5 million for$500,000 during the same period in 2019. The decrease in cash provided by investing activities wasnine months ended September 30, 2020. This increase is due primarily to lower proceeds from the salepurchase of investments inan additional real estate.
Cash flows from financing activities
Net cash provided by financing activities for the nine months ended September 30, 20202021 was approximately $0.1$29.6 million compared to approximately $1.0 million$70,000 net cash provided by financing activities during the same period in 2019.2020. The decreasechange in cash provided by financing activities was primarily due to the fact that there were less proceeds from notes payable acquired duringcash contribution at the period and payments on notes payable of approximately $3.0 million.
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 approximately $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 is likely the Company will be unable to meet this requirement by the end of the fourth quarter of 2020 or 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 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.future or sale or issuance of OP Units. 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.
In response to the 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 followingcertain temporary loan modification agreements and new loan agreements with itscertain lenders during the quarters ended2020. All of these loans had reverted back to their normal payment terms on or before June 30, 2021. These modification agreements are described in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Loan modification agreements and September 2020.new loan agreements entered into during 2021, through the date of this filing, are described below.
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Pursuant to the Closing of the Transaction, the Company refinanced the following loans with Vestin Realty Mortgage I and II. Each loan is interest only, bears interest at 7.0% and matures on August 25, 2022.
| Loan | Lender | Balance as of 9/30/21 | |
| MVP Clarksburg Lot | Vestin Realty Mortgage I | $ | 476,000 |
| MCI 1372 Street | Vestin Realty Mortgage I | 574,000 | |
| MVP Milwaukee Old World | Vestin Realty Mortgage I | 1,871,000 | |
| MVP Milwaukee Clybourn | Vestin Realty Mortgage I | 191,000 | |
| MVP Wildwood NJ Lot, LLC | Vestin Realty Mortgage I | 1,000,000 | |
| MVP Cincinnati Race Street, LLC | Vestin Realty Mortgage II | 3,450,000 | |
| Minneapolis Venture | Vestin Realty Mortgage I | 4,000,000 | |
| Total | $ | 11,562,000 |
On May 12, 2020,February 8, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into a Loan Modificationan Amended and Restated Promissory Note Agreement with Farm Bureau Life Insurance Company formultiple lenders. The agreement increased the interest rate from 8% to 9%, an interest-only period commencingadditional $845,000 was funded increasing the note balance to $1,807,000 and the maturity date of the note was extended to December 31, 2021. This loan was refinanced with Vestin Realty Mortgage I at the payment due June 1, 2020Closing of the Transaction and continuing through the payment duebears interest at 7.0% and matures on August 1, 2020. During the Interest-Only Period, the monthly installments due under the Note are modified to provide for payment25, 2022.
On March 12, 2021, MVP Cincinnati Race St., LLC, a subsidiary of accrued interest only in the amount of $13,384.
On June 2, 2021, the Company would lose its significantissued a $400,000 Convertible Promissory Note (the “Note) to the Purchaser. The Note accrued interest at a rate of 7.0% per annum and has a maturity date of December 31, 2021, unless an amount equal to the principal and accrued interest is converted into limited partnership interests of equity value in such collateral.
On July 14, 2021, MVP Milwaukee Old World, LLC, and MVP Milwaukee Clybourn, LLC, subsidiaries of the Company, entered into an Amended and Restated Promissory Note Agreement with ANICO in which $950,000 in condemnation proceeds frommultiple lenders. An additional $255,000 was funded increasing the Citynote balance to $2,062,000. All other terms of Minneapolis shall be used to paythis note remained the monthly principal and interest due each note, beginningsame. This loan was refinanced with Vestin Realty Mortgage I at 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.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Asset Management Fees | $ | -- | $ | -- | $ | -- | $ | 854,000 | ||||||||
Total | $ | -- | $ | -- | $ | -- | $ | 854,000 | ||||||||
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.
| Distributions Paid in Cash | Distributions Paid through DRIP | Total Distributions Paid | Cash Flows provided by (used in) Operations (GAAP basis) | |||||||||||||
| 1st Quarter, 2020 | $ | -- | $ | -- | $ | -- | $ | (793,000 | ) | |||||||
2nd Quarter, 2020 | -- | -- | -- | (1,899,000 | ) | |||||||||||
3rd Quarter, 2020 | -- | -- | -- | (2,656,000 | ) | |||||||||||
4th Quarter, 2020 | -- | -- | -- | -- | ||||||||||||
| Total 2020 | $ | -- | $ | -- | $ | -- | $ | (5,348,000 | ) | |||||||
| Distributions Paid in Cash | Distributions Paid through DRIP | Total Distributions Paid | Cash Flows 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.
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The offering price was $1,000 per share. In addition, each investor in the Series A received, for every $1,000 in shares subscribed by such investor, 30 detachable warrants to purchase shares of the Company’s common stock if the Company’s common stock is listed on a national securities exchange. The warrants’ exercise price is equal to 110% of the volume weighted average closing stock price of the Company’s common stock over a specified period as determined in accordance with the terms of the warrant; however, in no event shall the exercise price be less than $25 per share. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series A offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before March 24, 2022, the five-year anniversary date, these warrants will then expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2020,2021, there were 84,510 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. TheseIf all the potential warrants will expire five years from the 90th day after the occurrenceoutstanding at September 30, 2021 became exercisable because 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 OL —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 September 30, 2020,2021, the Company had declared distributions of approximately $704,000$937,000 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) | |||||||
| 1st Quarter, 2020 | $ | 54,000 | $ | (793,000 | ) | |||
2nd Quarter, 2020 | -- | (1,899,000 | ) | |||||
3rd Quarter, 2020 | -- | (2,656,000 | ) | |||||
4th Quarter, 2020 | -- | -- | ||||||
| Total 2020 | $ | 54,000 | $ | (5,348,000 | ) | |||
Total Series A Distributions Paid | Cash Flows 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 September 30, 2020, theThe 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. If a listing event does not occur on or prior to the fifth anniversary of the final closing date of the Series 1 offering, the outstanding warrants expire automatically on such anniversary date without being exercisable by the holders thereof. If a listing event does occur on or before January 31, 2023, the five-year anniversary date, these warrants then will expire five years from the 90th day after the occurrence of a listing event. The Company engaged a third-party expert to value these warrants and the estimated value as of September 30, 2021 is immaterial. As of September 30, 2020,2021, there were 1,382,675 detachable warrants that may be exercised after the 90th day following the occurrence of a listing event. TheseIf all the potential warrants will expire five years from the 90th day after the occurrenceoutstanding at September 30, 2021 became exercisable because 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 OL —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 issuance date through September 30, 2020,2021, the Company had declared distributions of approximately $7.8$10.8 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) | |||||||
| 1st Quarter, 2020 | $ | 696,000 | $ | (793,000 | ) | |||
2nd Quarter, 2020 | -- | (1,899,000 | ) | |||||
3rd Quarter, 2020 | -- | (2,656,000 | ) | |||||
4th Quarter, 2020 | -- | -- | ||||||
| Total 2020 | $ | 696,000 | $ | (5,348,000 | ) | |||
Total Series 1 Distributions Paid | Cash Flows 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 | ) | |||
Warrants
On August 25, 2021, in connection with the Closing of the Transaction, the Company entered into a warrant agreement (the “Warrant Agreement”) pursuant to which it issued warrants (the “Warrants”) to the Purchaser to purchase up to 1,702,128 shares of Common Stock, at an exercise price of $11.75 per share for an aggregate cash purchase price of up to $20.0 million. Each whole Warrant entitles the registered holder thereof to purchase one whole share of Common Stock at a price of $11.75 per share (the “Warrant Price”), subject to customary adjustments, at any time following a “Liquidity Event,” which is defined as an initial public offering and/or listing of the Common Stock on the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange. The Warrants will expire five years after the date of the Warrant Agreement.
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The Company had entered into agreements with affiliatesassesses its warrants as either equity or a liability based upon the characteristics and provisions of its Sponsor, wherebyeach instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s balance sheet and no further adjustments to their valuation are made. Management estimates the fair value of these warrants using option pricing models and assumptions that are based on the individual characteristics of the warrants or other instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield and risk-free interest rate. As of September 30, 2021, all outstanding warrants issued by 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
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable year ended December 31, 2017 through December 31, 2019,income in the Company believesyears in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when management determines that it is more likely than not that all or some portion of the deferred tax asset will not be realized. A full valuation allowance has been organized and conducted 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 incomerecorded 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 incomedeferred 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 taxassets due to the extent that less than 100%Company’s history 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 September 30, 2020.
Critical Accounting Policies
Our 2020 Annual Report 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.
Subsequent Events
See Note OM — Preferred Stock and Warrants Subsequent Events in Part I, Item 1 -Notes to the Condensed Consolidated Financial Statementsof this Quarterly Report for additional information.
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing the Company’s business plan, the Company expects that the primary market risk to which the Company will be exposed is interest rate risk. The Company’s primary interest rate exposure will be the one-month LIBOR rate. In order to mitigate this risk, the Company entered into an Interest Rate Protection Agreement for Smaller Reporting Companies.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
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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 third quarter of 2020,2021, that have materially affected, or are reasonably likely to materially affect, the company’sCompany’s internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
See Note NK —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.
On April 6, 2021, a Stipulation and Agreement of Compromise, Settlement and Release was approved by the Circuit Court for Baltimore County (the “Stipulation”) for the resolution of putative class action litigation in which the Company was a defendant (the “Settlement”). The Settlement was a condition to the Closing of the Transaction. The Stipulation also provides that Purchaser has agreed to commence the Tender Offer. The Tender Offer commenced on October 5, 2021 and expired on November 5, 2021
The Company has previously disclosed pending class action legal proceedings facing the Company and the Former Advisor and/or Mr. Shustek prior to the completion of the Transaction. Pursuant to the Closing of the Transaction, the Settlement Agreement (as defined in the Purchase Agreement) was entered into subject to completion of Color Up’s Tender Offer for up to 900,506 shares of the Company’s outstanding common stock at $11.75 per share. Color Up launched the Tender Offer on October 5, 2021 and it expired on November 5, 2021. Upon the expiration of the Tender Offer, the terms of the Settlement Agreement were satisfied and the prior lawsuits settled.
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.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors discussed under the heading “Risk Factors” and elsewhereset forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as updated by the risk factors in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 under the heading “Risk Factors”, continue to apply to our business.
Share Repurchase Program
On May 29, 2018, the Company’s Board of Directors suspended the Share Repurchase Program, other than for hardship repurchases in connection with a shareholder’s death. Repurchase requests made in connection with the death of a stockholder were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, or once the Company had established an estimated NAV per share, 100% of such amount as determined by the Company’s board of directors, subject to any special distributions previously made to the Company’s stockholders. The Company repurchased 5,115did not repurchase shares of common stock pursuant to the hardship exception under this program during the ninethree months ended September 30, 2020.
As of the date of this filing, 48,318 shares have been redeemed of which 33,232 shares were hardship repurchases.
March 24, 2020, the Board of Directors suspended all repurchases, even in the case of a shareholder’s death.
Recent Sales of Unregistered Securities
Effective November 8, 2021, Purchaser executed a subscription agreement with the Company did not sell anypursuant to which Purchaser acquired the remaining 22,424 shares of its equity securities during the quarter ended September 30, 2020 that were not registered underCompany’s common stock pursuant to the Securities Act.
| Type | Number of Shares Preferred | Number of Shares Common | Value | |||||||||
| Issuance of common stock | -- | 3,251,238 | $ | 75,281,000 | ||||||||
| Redeemed shares | -- | (48,318 | ) | (1,185,000 | ) | |||||||
| DRIP shares | -- | 83,437 | 2,086,000 | |||||||||
| Issuance of Series A preferred stock | 2,862 | -- | 2,544,000 | |||||||||
| Issuance of Series 1 preferred stock | 39,811 | -- | 35,981,000 | |||||||||
| Dividend shares | -- | 153,826 | 3,845,000 | |||||||||
| Distributions | -- | -- | (12,555,000 | ) | ||||||||
| Deferred offering costs | -- | -- | (1,086,000 | ) | ||||||||
| Contribution from advisor | -- | -- | 1,147,000 | |||||||||
| Shares added for merger | -- | 3,887,513 | 85,701,000 | |||||||||
| Total | 42,673 | 7,327,696 | $ | 191,759,000 | ||||||||
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Not applicable
Not applicable
Effective November 18, 2021, the Company appointed Stephanie Hogue, President, as a co-principal financial officer for purposes of the certifications required on this Form 10-Q and other reports required by the Securities Exchange Act of 1934, as amended. In connection with this appointment, there is no additional compensation awarded or changes to Ms. Hogue’s compensation package disclosed in her employment agreement filed as Exhibit 10.11 to the Form 8-K filed on August 31, 2021. Ms. Hogue’s biographical information is included in the Form 8-K filed on August 31, 2021.
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3.1(1) | Articles of Amendment and Restatement of THE PARKING REIT, Inc. | ||
3.2(2) | Articles of Amendment of THE PARKING REIT, Inc. | ||
| Articles of Amendment of MOBILE INFRASTRUCTURE CORPORATION | |||
| 3.4(3) | 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. | |||
| Amended & Restated Bylaws of | |||
| 3.7(6) | Second Amended and Restated Agreement of Limited Partnership of MVP REIT II Operating Partnership, LP. Dated November 2, 2021 | ||
| 10.1(7) | Tax Matters Agreement, dated August 25, 2021, by and between The Parking REIT, Inc., MVP REIT II Operating Partnership, L.P. and each Protected Partner | ||
| 10.2(7) | Stockholders Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and The Investors Identified on the Signature pages thereto. | ||
| 10.3(7) | Assignment of Claims, Causes of Action, and Proceeds, dated August 25, 2021, by The Parking REIT, Inc. in favor of Michael V. Shustek, MVP Realty Advisors, LLC, Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc. and their designees, successors, representatives, heirs and assigns. | ||
| 10.4(7) | Warrant Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and Color Up, LLC. | ||
| 10.5(7) | Amended and Restated Registration Rights Agreement, dated November 2, 2021, by and among The Parking REIT, Inc. and the Holders. | ||
| 10.6(7) | Termination of Registration Rights Agreement, dated August 25, 2021, by and among The Parking REIT, Inc., MVP Realty Advisors, LLC, Michael V. Shustek, Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc. | ||
| Software License and Development Agreement, dated August 25, 2021, by and between The Parking REIT, Inc. and DIA Land Co., LLC. | |||
| 10.8(7) | First Amendment to | ||
| First Amendment to Contribution Agreement, dated August 25, 2021, by and among The Parking REIT, Inc., Vestin Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc., MVP Realty Advisors, LLC and Michael V. Shustek. | |||
| 10.10(7)** | Employment Agreement, dated August 25, 2021, by and between the Company and Manuel Chavez. | ||
| 10.11(7)** | Employment Agreement, dated August 25, 2021, by and between the Company and Stephanie Hogue. | ||
| 10.12(6) | Securities Purchase Agreement, dated as November 2, 2021, by and among The Parking REIT, Inc., MVP REIT II Operating Partnership, L.P. and HSCP Strategic III, L.P. | ||
| 10.13(6) | Class A Unit Agreement, dated November 2, 2021, by and MVP REIT II Operating Partnership, L.P. and HSCP Strategic III, L.P. | ||
| 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. | ||
| 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. | |||
| 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 | ||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||
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* | Filed concurrently herewith. | |
| Management compensatory agreement. | ||
| (1) | Filed previously with Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 on September 24, 2015 and incorporated herein by reference. | |
(2) | Filed previously on Form 8-K on December 18, 2017 and incorporated herein by reference. | |
(3) | Filed previously on Form 8-K on October 28, 2016 and incorporated herein by reference. | |
(4) | Filed previously on Form 8-K on March 30, 2017 and incorporated herein by reference. | |
(5) | Filed previously with the Registration Statement on Form S-11 on July 28, 2015 and incorporated herein by reference. | |
| (6) | Filed previously on Form 8-K on November 4, 2021 and incorporated herein by reference. | |
| (7) | Filed previously on Form 8-K on August 31, 2021 and incorporated herein by reference. | |
| (8) | Filed previously on Form 8-K on November 12, 2021 and incorporated herein by reference. |
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.
| By: | /s/ | |
| Chief Executive Officer | ||
| Date: | November | |
| By: | /s/ Stephanie Hogue | |
| Stephanie Hogue | ||
| President | ||
| Date: | November 18, 2021 | |
| By: | /s/ J. Kevin Bland | |
| J. Kevin Bland | ||
| Chief Financial Officer | ||
| Date: | November | |
| 18, 2021 | ||