# Presidio Property Trust, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Presidio Property Trust, Inc.](/companies/sqft.md) (CIK 1080657)
- Form: 10-Q
- Filed: 2025-05-14
- Accepted by EDGAR: May 14, 2025, 20:05 ET
- Period: 2025-03-31
- Accession: 0001437749-25-016828
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1080657/000143774925016828/sqft20250331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1080657/000143774925016828/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $3.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $2.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | −$25.4k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $2.3m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.13 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$118.9k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Total assets | at 2025-03-31 | $135.4m | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $98.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $28.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,503 characters.

*The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our 2024 year end Annual Report.*

We may refer to the three months ended March 31, 2025 and March 31, 2024, as the "2025 Quarter" and the "2024 Quarter," respectively.

### Forward-Looking Statements

This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" and/or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and also of which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this 10-Q and our 2024 year end Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025, respectively. Additional factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to, the risks associated with the ownership of real estate in general and our real estate assets in particular; the economic health of the metro regions where we conduct business; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to the use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to e-commerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; weather conditions, natural disasters and pandemics; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2024 year end Annual Report. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

### OVERVIEW

The Company operates as an internally managed, diversified REIT, with primary holdings in office, industrial, retail, and triple-net leased model home properties. In October 2017, we changed our name from "NetREIT, Inc." to "Presidio Property Trust, Inc." The Company acquires, owns, and manages a geographically diversified portfolio of real estate assets, including office, industrial, retail and model home residential properties leased to homebuilders located in the United States. As of March 31, 2025, the Company owned or had an equity interest in:

- Eight office buildings and one industrial property ("Office/Industrial Properties"), which total approximately 758,175 rentable square feet;
- One retail building (“Retail Property”) with approximately 10,500 rentable square feet; and
- 84 model home residential properties ("Model Homes" or "Model Home Properties"), totaling approximately 248,412 square feet, leased back on a triple-net basis to homebuilders that are owned by four affiliated limited partnerships and one wholly-owned corporation, all of which we control.

We own three commercial properties located in Colorado, four in North Dakota, one in Southern California, one in Texas and one in Maryland. Our model home properties are located in four states. While geographical clustering of real estate enables us to reduce our operating costs through economies of scale by servicing several properties with less staff, it makes us susceptible to changing market conditions in these discrete geographic areas. We do not develop properties but acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition. We consider a property to be stabilized once it has achieved an 80% occupancy rate for a full year as of January 1 of such year or has been operating for three years.

Most of our office and retail properties are leased to a variety of tenants ranging from small businesses to large public companies, many of which are not investment grade. We have, in the past, entered into, and intend in the future to enter into, purchase agreements for real estate having net leases that require the tenant to pay all of the operating expenses or pay increases in operating expenses over specific base years. Most of our office leases are for terms of three to five years with annual rental increases. Our model homes are typically leased back for two to three years to the home builder on a triple-net lease. Under a triple-net lease, the tenant is required to pay all operating, maintenance and insurance costs and real estate taxes with respect to the leased property.

We seek to diversify our portfolio by commercial real estate segments, including office, industrial, retail and model home properties to reduce the adverse effect of a single under-performing segment and/or tenant. We further mitigate risk at the tenant level through our credit review process, which varies by tenant class. For example, our commercial and industrial tenants tend to be corporations or individually owned businesses. In these cases, we typically obtain financial records, including financial statements and tax returns (depending on the circumstance), and run credit reports for any prospective tenant to support our decision to enter into a rental arrangement. We also typically obtain security deposits from these commercial tenants. Our Model Home commercial tenants are well-known homebuilders with established credit histories. These tenants are subjected to financial review and analysis prior to us entering into a sales-leaseback transaction.

In June 2024, the Board of Directors established the Strategic Planning and Cyber Committee (the "Strategic Committee"). The purpose of the Strategic Committee is to: assist the Board in carrying out its responsibilities of oversight over the Company's business strategy, make recommendations to the Board on the Company's strategic direction and objectives and serve as a liaison between the Board and management, and assist the Board in fulfilling its responsibilities of oversight with regard to the Company's identification, assessment, and management of the Company's cybersecurity risks. There can be no assurance that the work of the Strategic Committee will result in any transaction being pursued or consummated. In addition, there is no formal timetable for the Strategic Committee's exploration of potential strategic alternatives, and the Company does not intend to disclose any developments with respect to the Strategic Committee's activities unless and until the Company determines that further disclosure is appropriate or required by law or regulation.

For additional information regarding our Common Stock activity, see Footnote 11. Stockholders' Equity in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.

For details regarding our sponsorship of a special purpose acquisition company, Murphy Canyon Acquisition Corp. ("Murphy Canyon" or the "SPAC"), see Note 9, Investment in Conduit Pharmaceuticals, in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.

### SIGNIFICANT TRANSACTIONS IN 2025 AND 2024

### Acquisitions during the three months ended March 31, 2025

- The Company acquired 12 model homes for approximately $4.3 million. The purchase price was paid through cash payments of approximately $3.0 million and mortgage notes of approximately $1.3 million.

### Acquisitions during the three months ended March 31, 2024

- The Company acquired five model homes for approximately $2.2 million. The purchase price was paid through cash payments of approximately $0.6 million and mortgage notes of approximately $1.6 million.

### Dispositions during the three months ended March 31, 2025

- On February 7, 2025, the Company sold two commercial properties, Union Town Center and Research Parkway, to a single buyer for approximately $17.0 million and recognized a net gain of approximately $4.2 million, net of closing costs.
- The Company sold 6 model homes for approximately $2.8 million, net of sales costs, and recognized a gain of approximately $0.2 million.

### Dispositions during the three months ended March 31, 2024

- The Company sold 27 model homes for approximately $12.6 million, net of sales costs, and recognized a gain of approximately $2.0 million.

### CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies as previously disclosed in our 2024 year end Annual Report.

### MANAGEMENT EVALUATION OF RESULTS OF OPERATIONS

Management’s evaluation of operating results includes an assessment of our ability to generate the cash flow necessary to pay operating expenses, general and administrative expenses, debt service and to fund distributions to our stockholders. As a result, management’s assessment of operating results gives less emphasis to the effects of unrealized gains and losses and other non-cash charges, such as depreciation and amortization and impairment charges, which may cause fluctuations in net income for comparable periods but have no impact on cash flows. Management’s evaluation of our potential for generating cash flow includes assessments of our recently acquired properties, our non-stabilized properties, long-term sustainability of our real estate portfolio, our future operating cash flow from anticipated acquisitions, and the proceeds from the sales of our real estate assets.

In addition, management evaluates the results of the operations of our portfolio and individual properties with a primary focus on increasing and enhancing the value, quality and quantity of properties in our real estate holdings. Management focuses its efforts on improving underperforming assets through re-leasing efforts, including negotiation of lease renewals and rental rates. Properties are regularly evaluated for potential added value appreciation and cashflow and, if lacking such potential, are sold with the equity reinvested in new acquisitions or otherwise allocated in a manner we believe is accretive to our stockholders. Our ability to increase assets under management is affected by our ability to raise borrowings and/or capital, coupled with our ability to identify appropriate investments.

### RESULTS OF OPERATIONS FOR THE three MONTHS ENDED March 31, 2025 and 2024

***Revenues.*** Total revenues were approximately $4.1 million for the three months ended March 31, 2025, compared to approximately $4.8 million for the same period in 2024. As of March 31, 2025, we had approximately $117.4 million in net real estate assets including 84 model homes, compared to approximately $135.3 million in net real estate assets including 88 model homes at March 31, 2024. The average number of model homes held during the three months ended March 31, 2025 and 2024 was 81 and 99, respectively. The change in revenue is directly related to the decrease in model home rental income and transaction fees during the current period, and the sale of our two commercial properties on February 7, 2025.

***Rental Operating Costs.*** Rental operating costs totaled approximately $1.6 million for the three months ended March 31, 2025, compared to approximately $1.6 million for the same period in 2024. Rental operating costs as a percentage of total revenue was 39.1% and 32.6% for the three months ended March 31, 2025 and 2024, respectively. We expect rental operating costs to go down in future quarters due to the sale of our retail properties UTC and Research Parkway during the three months ended March 31, 2025; however, if we purchase additional properties, our rental operating costs will increase.

***General and Administrative Expenses.*** G&A expenses for the three months ended March 31, 2025 and 2024 totaled approximately $1.7 million and $2.1 million, respectively. G&A expenses as a percentage of total revenue was 40.3% and 43.5% for the three months ended March 31, 2025 and 2024, respectively. G&A expenses for the three months ended March 31, 2025 decreased by approximately $0.4 million partially related to consulting fees in 2024 including a one-time payment for the setup of DMH 207, and additional legal fees related to Zuma Capital Management, LLC (Zuma Capital"), which was not repeated in 2025. Additionally, stock compensation was down by approximately $0.3 million due to the reduction of new restricted stock grants in 2025, slightly offset by an increase in accrued board compensation of $0.1 million related to estimated cash payment in-lieu-of restricted stock grants.

***Depreciation and Amortization.*** Depreciation and amortization expense was approximately $1.2 million and $1.4 million for the three months ended March 31, 2025 and 2024, respectively.

***Asset Impairments.*** We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the three months ended March 31, 2025 and 2024, we recognized non-cash impairment charges of approximately $26,943 related to two model homes properties and approximately $0.1 million related to four model homes, respectively, based on estimated selling prices.

***Interest Expense - mortgage notes.*** Interest expense, including amortization of deferred finance charges was approximately $1.5 million for the three months ended March 31, 2025, compared to approximately $1.5 million for the same period in 2024. The weighted average interest rate on our outstanding debt was 5.83% and 5.23% as of March 31, 2025 and 2024, respectively. Mortgage notes payable totaled approximately $94.4 million and $102.3 million as of March 31, 2025 and 2024, respectively. The decrease in mortgage notes payable is a direct result of the sale of our two commercial properties during February 2025 and the change in the number of model homes.

***Gain on Sale of Real Estate Assets, net.*** The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. S ee "Significant Transactions in 2025 and 2024 " above for further detail.

***Income allocated to non-controlling interests.*** Income allocated to non-controlling interests for the three months ended March 31, 2025 and 2024 totaled approximately $0.1 million and $1.5 million, respectively. This was directly related to the gain on sales of model homes held by our affiliated limited partnerships.

***Loss on Conduit remeasurement.*** As of March 31, 2025 we held 29,431 shares of CDT, as a result of their 1-for-100 reverse stock split in January 2025, 709,000 public common stock warrants of CDTTW, and 540,000 private common stock warrants, with a combined value of approximately $29,519. Conduit's common stock (CDT) and public common stock warrants (CDTTW) and Private CDT Warrants presented on the consolidated balance sheets were measured at fair value using Level 1 and Level 3 market prices, taking into account the adoption of ASU 2022-03 *Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.* The fair value adjusted during the three months ended March 31, 2025 resulted in the Company recording a loss of approximately $0.2 million as compared to a loss of approximately $3.9 million recorded during the three months ended March 31, 2024.

### Geographic Diversification Tables

The following tables show a list of commercial properties owned by the Company grouped by state and geographic region as of March 31, 2025:

| State | No. of Properties | Aggregate Square Feet | Approximate % of Square Feet | Current Base Annual Rent | Approximate % of Aggregate Annual Rent |
| --- | ---: | ---: | ---: | ---: | ---: |
| California | 1 | 57,807 | 7.5% | $1,546,117 | 14.6% |
| Colorado | 3 | 269,503 | 35.1% | 4,347,958 | 41.1% |
| Maryland | 1 | 31,752 | 4.1% | 739,050 | 7.0% |
| North Dakota | 4 | 399,113 | 51.8% | 3,585,035 | 34.0% |
| Texas | 1 | 10,500 | 1.4% | 349,546 | 3.3% |
| Total | 10 | 768,675 | 99.9% | $10,567,706 | 100.0% |

The following tables show a list of our Model Home properties by geographic region as of March 31, 2025:

| State | No. of Properties | Aggregate Square Feet | Approximate % of Square Feet | Current Base Annual Rent | Approximate of Aggregate % Annual Rent |
| --- | ---: | ---: | ---: | ---: | ---: |
| Alabama | 9 | 20,804 | 8.4% | $309,456 | 8.7% |
| Arizona | 2 | 6,822 | 2.7% | $149,196 | 4.2% |
| Florida | 2 | 5,337 | 2.2% | $89,844 | 2.5% |
| Texas | 71 | 215,449 | 86.7% | $3,007,512 | 84.6% |
| Total | 84 | 248,412 | 100.0% | $3,556,008 | 100.0% |

36

### LIQUIDITY AND CAPITAL RESOURCES

### Overview

Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, and the sale of our equity or issuance of debt securities or bonds. Our cash and restricted cash at March 31, 2025 was approximately $12.0 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. We also are actively seeking model home investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

Our short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of our existing mortgages, completing tenant improvements, paying leasing commissions, and funding dividends to stockholders. Future principal payments due on mortgage notes payable, during the last three quarters of 2025 and in the year ending December 31, 2026 total approximately $27.8 million and $18.4 million, respectively, of which $6.7 million in 2025 and $1.7 million in 2026 are related to model home properties. See Note 7. Mortgage Notes Payable, in Part I - Financial Information for additional information on the Dakota Center loan that matured on July 6, 2024. Management expects certain model home properties can be sold, and that the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes can be refinanced, as the Company has historically been able to do in the past with all model home properties. Additional principal payments will be made with cash flows from ongoing operations.

As the Company continues its operations, it may re-finance or seek additional financing. However, there can be no assurance that any such re-financing or additional financing will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company's ability to achieve its intended business objectives. Management believes that the combination of working capital on hand and the ability to refinance commercial and model home mortgages will fund operations through at least the next twelve months from the date of the issuance of these unaudited interim financial statements.

Management has begun discussions with various lenders to either restructure, extend or refinance the other three loans. Additionally, management may consider selling these properties if we are unsuccessful in extending the maturity dates or are unable to raise additional funds to pay these non-recourse loans in full. Management expects certain model homes will be sold, and that the underlying mortgage notes will be paid off with sales proceeds, while other mortgage notes will be refinanced as the Company has done in the past. Additional principal payments will be made with cash flows from ongoing operations.

While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market. Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently. In November 2023, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock which expired in November 2024. In December 2024, the Board of Directors authorized a stock repurchase program of up to $6.0 million of outstanding shares of our Series A Common Stock and up to $4.0 million of our Series D Preferred Stock, which shall expire in December 2025. During the three months ended March 31, 2025, we did not repurchase any shares of our Series A Common Stock. During the three months ended March 31, 2025, the Company repurchased 12,844 shares of our Series D Preferred Stock at an average price of approximately $15.18 per share, including a commission of $0.035 per share, for a total cost of $194,971 for the Series D Preferred Stock. Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost.

There can be no assurance that the Company will refinance loans, take out additional financing or capital will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans, reduce certain discretionary spending or even sell properties, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2024 and 2025 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months. If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we plan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we may reduce or suspend the rate of dividends to our stockholders.

Our long-term liquidity needs include the capital necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and while seeking to reinvest the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives.

For the three months ended March 31, 2025 and 2024 the Company did not declare a cash dividend on shares of Series A Common Stock. For the three months ended March 31, 2025 and 2024, the Company declared and paid approximately $0.6 million and $0.5 million, respectively, in cash dividends on shares of Series D Preferred Stock. Cash permitting, the Company intends to continue to pay dividends on a monthly basis to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends. The Company has not decided when it will resume dividends to our common stockholders on a quarterly basis. The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the three months ended March 31, 2025 and 2024.

#### Series A Common Stock:

| Quarter Ended | 2025 Distributions Declared | 2024 Distributions Declared |
| --- | ---: | ---: |
| March 31 | $— | $— |
| Total | $— | $— |

#### Series D Preferred Stock:

| Month | 2025 Distributions Declared | 2024 Distributions Declared |
| --- | ---: | ---: |
| January | $0.19531 | $0.19531 |
| February | 0.19531 | 0.19531 |
| March | 0.19531 | 0.19531 |
| Total | $0.58593 | $0.58593 |

38

### Cash Equivalents and Restricted Cash

At March 31, 2025, and December 31, 2024, we had approximately $12.0 million and $8.0 million in cash equivalents, respectively, including $4.0 million and $5.0 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts, short-term bonds and cash held in bank accounts at third-party institutions. During 2025 and 2024, we did not experience any loss or lack of access to our cash or cash equivalents. Approximately $1.5 million of our cash balance was used in our Tender Offer that closed on May 5, 2025. Approximately $1.5 million to 2.0 million of our cash balance is intended for capital expenditures on existing properties, net of any construction financing (some of which is held in deposits reserve accounts by our lenders) during the rest of the year. We intend to use the remainder of our existing cash and cash equivalents for asset/property acquisitions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditions are met), or dividends to our stockholders.

### Secured Debt

As of March 31, 2025, all our commercial properties, except 300 N.P. which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $67.4 million, collateralized by a total of 9 commercial properties with loan terms at issuance ranging from 5 to 10 years. The weighted-average interest rate on these mortgage notes payable as of March 31, 2025, was approximately 5.38%, and our debt to estimated market value for our commercial properties was approximately 67.6%. During the next 12 months, three of our commercial property loans, totaling approximately $28.2 million, will mature, with an estimated combined loan to value of approximately 69.3% as of March 31, 2025. The non-recourse loan on the Dakota Center property matured on July 6, 2024. During October 2024, management has agreed with the lender to sell the property to settle the loan balance. Due to the uncertainties in the Fargo market, we have decided to impair the property’s book value, in accordance with ASC 360-10 impairment of long-lived assets and for long-lived assets to be disposed of, to be in line with the current loan balance and estimated closing costs, which is the expected sales price. As such, we recorded an impairment charge of approximately $0.7 million, as of December 31, 2024. During December 2024, the lender agreed to the broker the Company would use to sell the property to settle the non-recourse debt. As of March 31, 2025, the property was included in the real estate assets held for sale, net on the consolidated balance sheet. Any purchase offers will be subject to lender approval. The loan is considered non-recourse and we will not be required to make up the difference if the property sells for less than the loan balance.

As of March 31, 2025, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $27.1 million, collateralized by a total of 84 Model Homes. These loans generally have a term at issuance of three to five years. As of March 31, 2025, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $322,340 and 6.97%, respectively. Our debt to estimated market value on all our model home properties is approximately 64.5%. We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions. The Company anticipates that any new mortgages used to acquire commercial properties or model homes in the near future will be at rates higher than our currently weighted average interest rate.

### Cash Flow for the three months ended March 31, 2025, and March 31, 2024

*Operating Activities:* Net cash used in operating activities for the three months ended March 31, 2025, totaled approximately $0.1 million, as compared to cash used in operating activities of $0.9 million for the three months ended March 31, 2024. The change in net cash used in operating activities is mainly due to changes in net income, which fluctuates due to new leases, leasing renewals, tenant move outs and model home sales and acquisitions, as well as changes in non-cash addbacks or subtractions such as straight-line rent.

*Investing Activities:* Net cash provided by investing activities for the three months ended March 31, 2025, was approximately $13.6 million compared to approximately $9.2 million used in investing activities during the same period in 2024. The change from each period was primarily related to the sale of our commercial properties in February 2025 for approximately $16.95 million. There were no similar commercial property sales during the three months ended March 31, 2024. Proceeds from the sale of real estate assets total approximately $18.4 million, net of selling costs, while cash used in real estate acquisition and capital improvement totaled approximately $4.8 million, for the three months ended March 31, 2025.

We currently project that we could spend up to $1.8 million (some of which is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio during the next 12 months. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties. We may spend more on capital expenditures in the future due to rising construction costs. Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

*Financing Activities:* Net cash used in financing activities during the three months ended March 31, 2025, was $9.5 million compared to $7.7 million provided by financing activities for the same period in 2024 and was primarily due to the following activities for the three months ended March 31, 2025:

- Proceeds from mortgage notes payable, net of issuance costs totaled approximately $2.9 million.
- Proceeds used for the repurchase of Series D Preferred Stock, totaled approximately $0.2 million.
- Repayment of mortgage notes payable totaled approximately $11.4 million for the three months ended March 31, 2025.
- Distributions to noncontrolling interest of approximately $0.2 million for the three months ended March 31, 2025.
- Dividends paid to Series D Preferred Stockholders of approximately $0.5 million for the three months ended March 31, 2025.

### Off-Balance Sheet Arrangements

On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S. institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock. Each share of Common Stock and accompanying Common Stock Warrants were sold together at a combined offering price of $5.00, and each share of Common Stock and accompanying Pre-Funded Warrant were sold together at a combined offering price of $4.99. The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $0.01 per share. The Common Stock Warrants have an exercise price of $5.50 per share, exercisable upon issuance and will expire five years from the date of issuance.

In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares of Series A Common Stock, representing 4.0% of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants. The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $6.25 and will expire five years from the date of issuance.

#### Common Stock Warrants:

If all the potential Common Stock Warrants outstanding at March 31, 2025, were exercised at the price of $5.00 per share, gross proceeds to us would be approximately $10.0 million and we would as a result issue an additional 2,000,000 shares of common stock.

#### Placement Agent Warrants:

If all the potential Placement Agent Warrants outstanding at March 31, 2025, were exercised at the price of $6.25 per share, gross proceeds to us would be approximately $0.5 million and we would as a result issue an additional 80,000 shares of common stock.

January 14, 2022, was the record date with respect to the distribution of five-year listed warrants (the “Series A Warrants”). The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022. The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. The Series A Warrants give the holder the right to purchase one share of common stock at $7.00 per share, for a period of five years. Should warrant holders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares.

#### Series A Warrants:

If all the potential Series A Warrants outstanding at March 31, 2025, were exercised at the price of $7.00 per share, gross proceeds to us would be approximately $101.2 million and we would as a result issue an additional 14,450,069 shares of common stock.

### Inflation

Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the clients’ sales volumes. We expect that inflation will cause these lease provisions to result in rent increases over time. During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation.

However, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Inflation and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue.

## Market risk

As filed, 762 characters.

On March 13, 2025, we received notice of a maturity date default of a loan in the original principal amount of $11.1 million evidenced by a promissory note issued on June 9, 2014. The loan is secured by the Dakota Center in Fargo, North Dakota.

As a result of the default, the Company is required to pay the default interest rate that is 5% above the original interest rate and the lender’s expenses related to the loan, including third party report fees, attorneys’ fees and loan servicing expenses. As of the date of this report, the amount of the default is approximately $9.1 million and the total arrearage is approximately $0.4 million. Additionally, the lender is holding approximately $1.6 million in restricted cash sweep accounts as of March 31, 2025.

## Controls and procedures

As filed, 1,841 characters.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed May 14, 2025.
Source: SEC EDGAR, the filing index for accession 0001437749-25-016828. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.