10-Q 1 brst-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

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

For the transition period from to

Commission File Number: 001-09043

 

BROAD STREET REALTY, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

36-3361229

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

11911 Freedom Drive, Suite 450

Reston, Virginia

20190

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (301) 828-1200

 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

None

 

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 ☒ 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 ☒ 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

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

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 Exchange Act). Yes ☐ No

 

As of May 8, 2024, the registrant had 34,325,565 shares of common stock outstanding.

 

 

 


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

 

Table of Contents

 

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Condensed and Unaudited)

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Equity

6

Condensed Consolidated Statements of Cash Flows

8

Notes to Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

37

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

 

Signatures

40

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

(audited)

 

Assets

 

 

 

 

 

 

Real estate properties

 

 

 

 

 

 

Land

 

$

54,936

 

 

$

54,936

 

Building and improvements

 

 

284,660

 

 

 

281,598

 

Intangible lease assets

 

 

33,261

 

 

 

33,374

 

Construction in progress

 

 

3,324

 

 

 

5,462

 

Furniture and equipment

 

 

1,733

 

 

 

1,711

 

Less accumulated depreciation and amortization

 

 

(55,617

)

 

 

(51,890

)

Total real estate properties, net

 

 

322,297

 

 

 

325,191

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

14,631

 

 

 

9,779

 

Restricted cash

 

 

2,650

 

 

 

4,018

 

Straight-line rent receivable

 

 

3,480

 

 

 

3,090

 

Tenant and accounts receivable, net of allowance of $328 and $194, respectively

 

 

1,825

 

 

 

1,918

 

Derivative assets

 

 

1,210

 

 

 

796

 

Other assets, net

 

 

5,964

 

 

 

6,327

 

Total Assets

 

$

352,057

 

 

$

351,119

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Mortgage and other indebtedness, net (includes $13,435 and $16,187, respectively, at fair value under the fair value option)

 

$

234,272

 

 

$

231,049

 

Accounts payable and accrued liabilities

 

 

15,476

 

 

 

15,457

 

Unamortized intangible lease liabilities, net

 

 

552

 

 

 

633

 

Payables due to related parties

 

 

31

 

 

 

63

 

Deferred revenue

 

 

651

 

 

 

827

 

Total liabilities

 

 

250,982

 

 

 

248,029

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Temporary Equity

 

 

 

 

 

 

Redeemable noncontrolling Fortress preferred interest

 

 

90,536

 

 

 

87,288

 

 

 

 

 

 

 

 

Permanent Equity

 

 

 

 

 

 

Preferred stock, $0.01 par value, 1,000,000 shares authorized: Series A preferred stock, 20,000 shares authorized, 500 shares issued and outstanding at each of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.01 par value, 300,000,000 shares authorized,
33,401,959 and 33,417,101 issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

334

 

 

 

334

 

Additional paid in capital

 

 

50,982

 

 

 

55,186

 

Accumulated deficit

 

 

(37,486

)

 

 

(36,387

)

Accumulated other comprehensive income

 

 

1,287

 

 

 

547

 

 Total Broad Street Realty, Inc. stockholders' equity

 

 

15,117

 

 

 

19,680

 

Noncontrolling interest

 

 

(4,578

)

 

 

(3,878

)

Total permanent equity

 

 

10,539

 

 

 

15,802

 

Total Liabilities, Temporary Equity and Permanent Equity

 

$

352,057

 

 

$

351,119

 

 

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

3


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenues

 

 

 

 

 

 

Rental income

 

$

9,511

 

 

$

10,208

 

Commissions

 

 

502

 

 

 

856

 

Management fees and other income

 

 

58

 

 

 

68

 

Total revenues

 

 

10,071

 

 

 

11,132

 

Operating Expenses

 

 

 

 

 

 

Cost of services

 

 

421

 

 

 

556

 

Property operating

 

 

3,006

 

 

 

3,061

 

Depreciation and amortization

 

 

3,819

 

 

 

5,568

 

Impairment of real estate assets

 

 

110

 

 

 

 

Bad debt expense

 

 

142

 

 

 

42

 

General and administrative

 

 

3,480

 

 

 

3,530

 

Total operating expenses

 

 

10,978

 

 

 

12,757

 

Operating loss

 

 

(907

)

 

 

(1,625

)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

Interest and other income

 

 

217

 

 

 

13

 

Derivative fair value adjustment

 

 

889

 

 

 

(179

)

Net gain on fair value change of debt held under the fair value option

 

 

2,343

 

 

 

3,235

 

Interest expense

 

 

(4,333

)

 

 

(4,781

)

Loss on extinguishment of debt

 

 

(7

)

 

 

 

Other expense

 

 

(6

)

 

 

(6

)

Total other expense

 

 

(897

)

 

 

(1,718

)

Net loss before income taxes

 

 

(1,804

)

 

 

(3,343

)

Income tax (expense) benefit

 

 

(134

)

 

 

1,683

 

Net loss

 

$

(1,938

)

 

$

(1,660

)

Less: Preferred equity return on Fortress preferred equity

 

 

(3,022

)

 

 

(3,427

)

Less: Preferred equity accretion to redemption value

 

 

(1,379

)

 

 

(415

)

Less: Preferred OP units return

 

 

(139

)

 

 

(112

)

Plus: Net loss attributable to noncontrolling interest

 

 

839

 

 

 

1,014

 

Net loss attributable to common stockholders

 

$

(5,639

)

 

$

(4,600

)

 

 

 

 

 

 

Net loss attributable to common stockholders per share

 

 

 

 

 

 

Basic and diluted

 

$

(0.16

)

 

$

(0.13

)

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

Basic and diluted

 

 

35,875,326

 

 

 

35,374,216

 

 

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

4


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(1,938

)

 

$

(1,660

)

Other comprehensive income:

 

 

 

 

 

 

Change in fair value due to credit risk on debt held under the fair value option

 

 

740

 

 

 

1,732

 

Total other comprehensive income

 

 

740

 

 

 

1,732

 

Comprehensive (loss) income

 

$

(1,198

)

 

$

72

 

 

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

 

 

5


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Accumulated Other Comprehensive Income

 

 

Non-
controlling
Interest

 

 

Total Equity

 

Balance at December 31, 2022

 

 

500

 

 

$

 

 

 

32,256,974

 

 

$

323

 

 

$

72,097

 

 

$

(33,294

)

 

$

56

 

 

$

(437

)

 

$

38,745

 

Forfeiture of restricted stock

 

 

 

 

 

 

 

 

(6,695

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares surrendered for taxes upon vesting

 

 

 

 

 

 

 

 

(4,126

)

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

(6

)

Stock-based compensation

 

 

 

 

 

 

 

 

166,125

 

 

 

1

 

 

 

213

 

 

 

 

 

 

 

 

 

 

 

 

214

 

Preferred equity return on preferred equity investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,427

)

 

 

 

 

 

 

 

 

 

 

 

(3,427

)

Preferred equity accretion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(415

)

 

 

 

 

 

 

 

 

 

 

 

(415

)

Preferred OP Units return

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(112

)

 

 

 

 

 

 

 

 

66

 

 

 

(46

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,732

 

 

 

 

 

 

1,732

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(646

)

 

 

 

 

 

(1,014

)

 

 

(1,660

)

Balance at March 31, 2023

 

 

500

 

 

 

 

 

 

32,412,278

 

 

 

324

 

 

 

68,350

 

 

 

(33,940

)

 

 

1,788

 

 

 

(1,385

)

 

 

35,137

 

 

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

 

 

 

6


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity (Continued)

(in thousands, except share amounts)

(Unaudited)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Accumulated Other Comprehensive Income

 

 

Non-
controlling
Interest

 

 

Total Equity

 

Balance at December 31, 2023

 

 

500

 

 

$

 

 

 

33,417,101

 

 

$

334

 

 

$

55,186

 

 

$

(36,387

)

 

$

547

 

 

$

(3,878

)

 

$

15,802

 

Shares surrendered for taxes upon vesting

 

 

 

 

 

 

 

 

(27,087

)

 

 

 

 

 

(24

)

 

 

 

 

 

 

 

 

 

 

 

(24

)

Stock-based compensation

 

 

 

 

 

 

 

 

11,945

 

 

 

 

 

 

360

 

 

 

 

 

 

 

 

 

 

 

 

360

 

Preferred equity return on preferred equity investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,022

)

 

 

 

 

 

 

 

 

 

 

 

(3,022

)

Preferred equity accretion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,379

)

 

 

 

 

 

 

 

 

 

 

 

(1,379

)

Preferred OP Units return

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(139

)

 

 

 

 

 

 

 

 

139

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

740

 

 

 

 

 

 

740

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,099

)

 

 

 

 

 

(839

)

 

 

(1,938

)

Balance at March 31, 2024

 

 

500

 

 

 

 

 

 

33,401,959

 

 

 

334

 

 

 

50,982

 

 

 

(37,486

)

 

 

1,287

 

 

 

(4,578

)

 

 

10,539

 

 

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

7


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(1,938

)

 

$

(1,660

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

 

 

 

 

 

 

Deferred income taxes

 

 

 

 

 

(1,683

)

Depreciation and amortization

 

 

3,819

 

 

 

5,568

 

Amortization of deferred financing costs and debt discounts

 

 

193

 

 

 

279

 

Amortization of above and below market lease intangibles, net

 

 

81

 

 

 

48

 

Minimum multiple on preferred interests

 

 

 

 

 

(77

)

Loss on extinguishment of debt

 

 

7

 

 

 

 

Impairment of real estate assets

 

 

110

 

 

 

 

Straight-line rent revenue

 

 

(352

)

 

 

(446

)

Straight-line rent expense

 

 

66

 

 

 

(9

)

Stock-based compensation

 

 

360

 

 

 

214

 

Change in fair value of derivatives

 

 

(889

)

 

 

179

 

Change in fair value of debt held under the fair value option

 

 

(2,343

)

 

 

(3,235

)

Bad debt expense

 

 

142

 

 

 

42

 

Write-off related party receivables

 

 

4

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

(49

)

 

 

(94

)

Other assets

 

 

262

 

 

 

560

 

Accounts payable and accrued liabilities

 

 

2,031

 

 

 

(584

)

Payables due to related parties

 

 

(32

)

 

 

10

 

Deferred revenues

 

 

(176

)

 

 

276

 

Net cash from operating activities

 

 

1,296

 

 

 

(612

)

Cash flows from investing activities

 

 

 

 

 

 

Capitalized pre-acquisition costs, net of refunds

 

 

5

 

 

 

 

Insurance proceeds

 

 

516

 

 

 

 

Capital expenditures for real estate

 

 

(2,806

)

 

 

(1,086

)

Net cash from investing activities

 

 

(2,285

)

 

 

(1,086

)

Cash flows from financing activities

 

 

 

 

 

 

Borrowings under debt agreements

 

 

17,869

 

 

 

 

Repayments under debt agreements

 

 

(11,706

)

 

 

(459

)

Preferred equity return on preferred equity investment

 

 

(1,153

)

 

 

(1,014

)

Capitalized pre-refinancing costs

 

 

(125

)

 

 

(8

)

Taxes remitted upon vesting of restricted stock

 

 

(24

)

 

 

(6

)

Debt origination and discount fees

 

 

(388

)

 

 

 

Net cash from financing activities

 

 

4,473

 

 

 

(1,487

)

Increase (decrease) in cash, cash equivalents, and restricted cash

 

 

3,484

 

 

 

(3,185

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

13,797

 

 

 

17,031

 

Cash, cash equivalents and restricted cash at end of period

 

$

17,281

 

 

$

13,846

 

 

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

 

8


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Reconciliation of cash and cash equivalents and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,631

 

 

$

8,496

 

Restricted cash

 

 

2,650

 

 

 

5,350

 

Cash, cash equivalents and restricted cash at end of period

 

$

17,281

 

 

$

13,846

 

Supplemental Cash Flow Information

 

 

 

 

 

 

Interest paid

 

$

3,773

 

 

$

4,135

 

Taxes paid, net of refunds

 

$

8

 

 

$

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

Capitalized Preferred Return

 

$

(1,860

)

 

$

(2,404

)

Accrued Current Preferred Return

 

$

(399

)

 

$

(356

)

Capitalized interest on Mezzanine loan

 

$

(331

)

 

$

 

Accrued capital expenditures for real estate

 

$

148

 

 

$

643

 

 

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

9


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

Notes to Interim Condensed Consolidated Financial Statements

Unaudited

March 31, 2024

Note 1 - Organization and Nature of Business

Broad Street Realty, Inc. (the “Company”) is focused on owning and managing essential grocery-anchored and mixed-use assets located in densely populated technology employment hubs and higher education centers within the Mid-Atlantic, Southeast and Colorado markets. As of March 31, 2024, the Company had gross real estate assets of $374.8 million (gross real estate properties less gross real estate intangibles liabilities) in 15 real estate properties. In addition, the Company provides commercial real estate brokerage services for its own portfolio and third-party office, industrial and retail operators and tenants.

The Company is structured as an “Up-C” corporation with substantially all of its operations conducted through Broad Street Operating Partnership, LP (the “Operating Partnership”) and its direct and indirect subsidiaries. As of March 31, 2024, the Company owned 85.7% of the Class A common units of limited partnership interest in the Operating Partnership (“Common OP units”) and Series A preferred units of limited partnership interest in the Operating Partnership (“Preferred OP units”) and, together with the Common OP units, “OP units”) and is the sole member of the sole general partner of the Operating Partnership. The Company began operating in its current structure on December 27, 2019, upon the completion of the Initial Mergers (as defined below) and operates as a single reporting segment.

Liquidity, Management’s Plan and Going Concern

The Company’s rental revenue and operating results depend significantly on the occupancy levels at its properties and the ability of its tenants to meet their rent and other obligations to the Company. The Company’s projected operating model reflects sufficient cash flow to cover its obligations over the next twelve months, except as noted below.

The Company’s financing is generally comprised of mortgage loans secured by the Company’s properties that typically mature within three to five years of origination. The Company is currently in contact with lenders and brokers in the marketplace to restructure the Company’s debt.

Specifically, as of March 31, 2024, the Company had two mortgage loans with a combined principal balance outstanding of approximately $21.6 million that mature within twelve months of the date that these condensed consolidated financial statements are issued. The Company is seeking to refinance these loans prior to maturity in December 2024 and January 2025. Management is in discussions with the current lenders as well as various other lenders to extend or refinance these two mortgage loans prior to maturity. Although the Company has a history of demonstrating its ability to successfully refinance its loans as they come due, there can be no assurances that the Company will be successful in its efforts to refinance the loans on favorable terms or at all. While it is not the Company's current plan, the Company also has the option to sell properties securing the loans and use the proceeds to satisfy the outstanding loan obligations. If the Company is ultimately unable to repay or refinance these loans or sell the properties prior to maturity, the lender has the right to place the loans in default and ultimately foreclose on the properties securing the loans. Under this circumstance, the Company would not have any further financial obligations to the lenders as the current estimated market values of these properties are in excess of the outstanding loan balances.

In addition, as of March 31, 2024, the Basis Term Loan (as defined below) had an outstanding principal balance of $8.5 million and had a maturity date of July 1, 2024. On April 30, 2024, the Company received a loan secured by the properties that were collateral for the Basis Term Loan and paid off the Basis Term Loan with proceeds from the new mortgage loan.

The Company's access to capital depends upon a number of factors over which the Company has little or no control, including general market conditions, the market's perception of the Company's current and potential future earnings and cash distributions, the Company's current debt levels and the market price of the shares of the Company's common stock. Although the Company's common stock is quoted on the OTCQX Best Market, an over-the-counter stock market, there is a very limited trading market for the Company's common stock, and if a more active trading market is not developed and sustained, the Company will be limited in its ability to issue equity to fund its capital needs. If the Company cannot obtain capital from third-party sources, the Company may not be able to meet the capital and operating needs of its properties, satisfy its debt service obligations or pay dividends to its stockholders.

Under the Company's debt agreements, the Company is subject to certain covenants. In the event of a default, the lenders could accelerate the timing of payments under the applicable debt obligations and the Company may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on the Company's liquidity, financial condition and results of operations. The Company was in compliance with all covenants under its debt agreements as of March 31, 2024.

10


 

Note 2 - Accounting Policies and Related Matters

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim reports. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for a full year. The unaudited condensed consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023, included in the Company’s 2023 Annual Report on Form 10-K filed with the SEC on April 1, 2024.

The interim condensed consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and subsidiaries in which the Company has a controlling interest. All intercompany transactions and balances have been eliminated in consolidation.

For information about significant accounting policies, refer to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s 2023 Annual Report on Form 10-K filed with the SEC on April 1, 2024. During the three months ended March 31, 2024, there were no material changes to these policies.

Change in Presentation

The Company has made certain reclassifications to prior period financial statements in order to enhance the comparability with current period condensed consolidated financial statements. These reclassifications had no effect on net loss or cash flows from operations.

Accounting Guidance

Adoption of Accounting Standards

There were no adopted pronouncements during the three months ended March 31, 2024 that impacted the Company.

Issued Accounting Standards Not Yet Adopted

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires entities to annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). This ASU is effective for the Company for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of the guidance.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which requires entities to provide disclosures of significant segment expenses and other significant segment items, as well as provide in interim periods all disclosures about a reportable segments' profit or loss and assets that are currently required annually. Additionally, entities with a single reportable segment have to provide all of the disclosures required by ASC 280, including the significant segment expense disclosures. The ASU is applied retrospectively to all periods presented in the financial statements, unless it is impracticable. This ASU is effective for the Company for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of this guidance.

Note 3 – Real Estate

Concentrations of Credit Risks

The following table contains information regarding the geographic concentration of the properties in the Company’s portfolio as of March 31, 2024, which includes rental income for the three months ended March 31, 2024 and 2023.

(dollars in thousands)

 

Number
of
Properties

 

Gross Real Estate Assets

 

 

Percentage of Total Real Estate Assets

 

 

Rental income for the three months ended March 31,

 

Location

 

March 31, 2024

 

March 31, 2024

 

 

March 31, 2024

 

 

2024

 

 

2023

 

Maryland

 

6

 

$

102,282

 

 

 

27.3

%

 

$

3,074

 

 

$

3,150

 

Virginia (1)

 

5

 

 

198,900

 

 

 

53.1

%

 

 

3,965

 

 

 

4,222

 

Pennsylvania (2)

 

 

 

 

 

 

 

 

 

 

 

 

683

 

Washington D.C.

 

1

 

 

8,422

 

 

 

2.2

%

 

 

183

 

 

 

182

 

Colorado

 

3

 

 

65,164

 

 

 

17.4

%

 

 

2,289

 

 

 

1,971

 

 

15

 

$

374,768

 

 

 

100.0

%

 

$

9,511

 

 

$

10,208

 

 

11


 

(1)
Rental income includes Spotswood Valley Square Shopping Center, which was sold on June 30, 2023 and had rental income of $0.6 million for the three months ended March 31, 2023.
(2)
Rental income related solely to Dekalb Plaza, which was sold on July 20, 2023.

Note 4 – Intangibles

The following is a summary of the carrying amount of the Company’s intangible assets and liabilities as of March 31, 2024 and December 31, 2023.

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Assets:

 

 

 

 

 

 

Above-market leases

 

$

4,153

 

 

$

4,153

 

Above-market leases accumulated amortization

 

 

(2,631

)

 

 

(2,469

)

In-place leases

 

 

29,108

 

 

 

29,221

 

In-place leases accumulated amortization

 

 

(20,860

)

 

 

(20,094

)

Total real estate intangible assets, net

 

$

9,770

 

 

$

10,811

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Below-market leases

 

$

3,146

 

 

$

3,146

 

Below-market leases accumulated amortization

 

 

(2,594

)

 

 

(2,513

)

Total real estate intangible liabilities, net

 

$

552

 

 

$

633

 

For the three months ended March 31, 2024 and 2023, the Company recognized amortization related to in-place leases of approximately $0.9 million and $2.3 million, respectively, and net amortization related to above-market leases and below-market leases for the three months ended March 31, 2024 and 2023 of approximately $0.1 million in its condensed consolidated statements of operations.

The following table represents expected amortization of existing real estate intangible assets and liabilities as of March 31, 2024:

(in thousands)

Amortization of
in-place leases

 

 

Amortization of
above-market leases

 

 

Amortization of
below-market leases

 

 

Total amortization, net

 

Remainder of 2024

$

1,980

 

 

$

396

 

 

$

(202

)

 

$

2,174

 

2025

 

2,069

 

 

 

449

 

 

 

(161

)

 

 

2,357

 

2026

 

1,479

 

 

 

253

 

 

 

(91

)

 

 

1,641

 

2027

 

962

 

 

 

167

 

 

 

(47

)

 

 

1,082

 

2028

 

520

 

 

 

112

 

 

 

(26

)

 

 

606

 

2029

 

390

 

 

 

80

 

 

 

(14

)

 

 

456

 

Thereafter

 

848

 

 

 

65

 

 

 

(11

)

 

 

902

 

Total

$

8,248

 

 

$

1,522

 

 

$

(552

)

 

$

9,218

 

The Company amortizes the value of in-place leases to amortization expense, the value of above-market leases as a reduction of rental income and the value of below-market leases as an increase to rental income over the initial term of the respective leases.

Note 5 - Other Assets

Items included in other assets, net on the Company’s condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 are detailed in the table below:

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Prepaid assets and deposits

 

$

952

 

 

$

1,380

 

Leasing commission costs and incentives, net

 

 

2,256

 

 

 

2,141

 

Right-of-use assets, net

 

 

1,423

 

 

 

1,494

 

Pre-acquisition costs

 

 

126

 

 

 

6

 

Other receivables, net

 

 

20

 

 

 

35

 

Corporate property, net

 

 

64

 

 

 

144

 

Receivables from related parties

 

 

1,123

 

 

 

1,127