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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2020

OR

 

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

 

For the transition period from               to

Commission File Number: 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.)

7250 Woodmont Ave, Suite 350

Bethesda, Maryland

20814

(Address of principal executive offices)

(Zip Code)

 

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

 

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

 

Title of Each Class

 

Name Of Each Exchange On Which Registered

 

Ticker Symbol

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 April 8, 2021, the registrant had 22,624,679 shares of common stock outstanding.

 


 

BROAD STREET REALTY, INC. AND SUBSIDIARIES

 

Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations

4

 

Consolidated Statements of Equity

5

 

Consolidated Statements of Cash Flows

6

 

Notes to Interim Consolidated Financial Statements

7

Item 2.

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

22

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

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Real estate properties

 

 

 

 

 

 

 

 

Land

 

$

36,632

 

 

$

34,350

 

Building and improvements

 

 

118,999

 

 

 

118,972

 

Intangible lease assets

 

 

20,124

 

 

 

20,222

 

Construction in progress

 

 

1,050

 

 

 

-

 

Less accumulated depreciation and amortization

 

 

(5,348

)

 

 

(127

)

Total real estate properties, net

 

 

171,457

 

 

 

173,417

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,764

 

 

 

9,068

 

Restricted cash

 

 

4,131

 

 

 

2,527

 

Accounts receivable, net of allowance of $225 and $92, respectively

 

 

2,300

 

 

 

1,955

 

Other assets, net

 

 

4,158

 

 

 

5,343

 

Total Assets

 

$

186,810

 

 

$

192,310

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Mortgage and other indebtedness, net

 

$

114,540

 

 

$

112,473

 

Accounts payable and accrued liabilities

 

 

8,696

 

 

 

8,692

 

Unamortized intangible lease liabilities, net

 

 

2,825

 

 

 

3,439

 

Payables due to related parties

 

 

661

 

 

 

1,052

 

Deferred tax liabilities

 

 

13,097

 

 

 

14,650

 

Deferred revenue

 

 

474

 

 

 

568

 

Total liabilities

 

 

140,293

 

 

 

140,874

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Preferred Stock, $0.01 par value, 20,000 shares authorized, 500 shares

   outstanding at June 30, 2020 and December 31, 2019

 

 

-

 

 

 

-

 

Common stock, $0.01 par value. Authorized 50,000,000 shares; 21,587,336

   issued and outstanding at June 30, 2020 and December 31, 2019

 

 

216

 

 

 

216

 

Additional paid in capital

 

 

53,059

 

 

 

53,059

 

Accumulated deficit

 

 

(6,079

)

 

 

(1,890

)

Total Broad Street Realty, Inc. stockholders' equity

 

 

47,196

 

 

 

51,385

 

Noncontrolling interest

 

 

(679

)

 

 

51

 

Total equity

 

 

46,517

 

 

 

51,436

 

Total Liabilities and Equity

 

$

186,810

 

 

$

192,310

 

 

See accompanying notes to interim consolidated financial statements.

3


BROAD STREET REALTY, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

3,645

 

 

$

-

 

 

$

7,791

 

 

$

-

 

Commissions

 

 

224

 

 

 

986

 

 

 

834

 

 

 

1,969

 

Management and other fees

 

 

316

 

 

 

630

 

 

 

684

 

 

 

1,227

 

Total revenues

 

 

4,185

 

 

 

1,616

 

 

 

9,309

 

 

 

3,196

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

140

 

 

 

718

 

 

 

589

 

 

 

1,372

 

Depreciation and amortization

 

 

2,499

 

 

 

5

 

 

 

4,981

 

 

 

9

 

Property operating

 

 

907

 

 

 

-

 

 

 

1,858

 

 

 

-

 

Bad debt expense

 

 

24

 

 

 

-

 

 

 

165

 

 

 

66

 

General and administrative

 

 

2,037

 

 

 

1,184

 

 

 

4,155

 

 

 

2,471

 

Total operating expenses

 

 

5,607

 

 

 

1,907

 

 

 

11,748

 

 

 

3,918

 

Operating loss

 

 

(1,422

)

 

 

(291

)

 

 

(2,439

)

 

 

(722

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

1

 

 

 

-

 

 

 

48

 

 

 

-

 

Merger-related expense

 

 

-

 

 

 

(28

)

 

 

-

 

 

 

(196

)

Derivative fair value adjustment

 

 

(69

)

 

 

-

 

 

 

(704

)

 

 

-

 

Interest expense

 

 

(1,611

)

 

 

(82

)

 

 

(3,191

)

 

 

(151

)

Other expense

 

 

(166

)

 

 

(31

)

 

 

(186

)

 

 

(88

)

Total other income (expense)

 

 

(1,845

)

 

 

(141

)

 

 

(4,033

)

 

 

(435

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

784

 

 

 

-

 

 

 

1,553

 

 

 

-

 

Net loss

 

$

(2,483

)

 

$

(432

)

 

$

(4,919

)

 

$

(1,157

)

Plus: Net loss attributable to noncontrolling interest

 

 

369

 

 

 

432

 

 

 

730

 

 

 

1,157

 

Net loss attributable to common stockholders

 

$

(2,114

)

 

$

-

 

 

$

(4,189

)

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.10

)

 

$

-

 

 

$

(0.19

)

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

21,587,336

 

 

 

-

 

 

 

21,587,336

 

 

 

-

 

 

 

 

See accompanying notes to interim consolidated financial statements.

4


BROAD STREET REALTY, INC. AND SUBSIDIARIES

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

 

 

Non-

controlling

Interest

 

 

Total Equity

 

Balance at December 31, 2018

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(5,044

)

 

$

(5,044

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(725

)

 

 

(725

)

Member distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(138

)

 

 

(138

)

Balance at March 31, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,907

)

 

 

(5,907

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(432

)

 

 

(432

)

Member distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(23

)

 

 

(23

)

Balance at June 30, 2019

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(6,362

)

 

$

(6,362

)

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Non-

controlling

Interest

 

 

Total Equity

 

Balance at December 31, 2019

 

 

500

 

 

$

-

 

 

 

21,587,336

 

 

$

216

 

 

$

53,059

 

 

$

(1,890

)

 

$

51

 

 

$

51,436

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,075

)

 

 

(361

)

 

 

(2,436

)

Balance at March 31, 2020

 

 

500

 

 

 

-

 

 

 

21,587,336

 

 

 

216

 

 

 

53,059

 

 

 

(3,965

)

 

 

(310

)

 

 

49,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,114

)

 

 

(369

)

 

 

(2,483

)

Balance at June 30, 2020

 

 

500

 

 

$

-

 

 

 

21,587,336

 

 

$

216

 

 

$

53,059

 

 

$

(6,079

)

 

$

(679

)

 

$

46,517

 

 

 

 

See accompanying notes to interim consolidated financial statements.

5


BROAD STREET REALTY, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(4,919

)

 

$

(1,157

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Income tax benefit

 

 

(1,553

)

 

 

 

Depreciation and amortization

 

 

5,221

 

 

 

9

 

Minimum return on basis preferred interest

 

 

(488

)

 

 

 

Straight-line rent receivable

 

 

(480

)

 

 

 

Straight-line rent liability

 

 

6

 

 

 

3

 

Change in fair value of derivatives

 

 

704

 

 

 

 

Bad debt expense

 

 

165

 

 

 

66

 

Write-off of pre-acquisition costs

 

 

150

 

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(617

)

 

 

(386

)

Other assets

 

 

1,109

 

 

 

300

 

Receivables due from related parties

 

 

22

 

 

 

(110

)

Accounts payable and accrued liabilities

 

 

(1,109

)

 

 

140

 

Payables due to related parties

 

 

(11

)

 

 

35

 

Deferred revenues

 

 

(94

)

 

 

(61

)

Net cash used in operating activities

 

 

(1,894

)

 

 

(1,161

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisitions of real estate

 

 

(1,898

)

 

 

 

Capitalized pre-acquisition costs, net of refunds

 

 

34

 

 

 

(483

)

Capital expenditures for real estate

 

 

(1,131

)

 

 

 

Capital expenditures for corporate property

 

 

-

 

 

 

(4

)

Net cash used in investing activities

 

 

(2,995

)

 

 

(487

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Borrowings under debt agreements

 

 

5,063

 

 

 

 

Repayments under debt agreements

 

 

(2,909

)

 

 

(146

)

Offering costs

 

 

(1

)

 

 

(83

)

Debt origination and discount fees

 

 

(63

)

 

 

 

Distributions to members

 

 

-

 

 

 

(161

)

Proceeds from related parties

 

 

1,139

 

 

 

2,342

 

Payments to related parties

 

 

(1,040

)

 

 

(15

)

Net cash provided by financing activities

 

 

2,189

 

 

 

1,937

 

(Decrease) increase in cash, cash equivalents, and restricted cash

 

 

(2,700

)

 

 

289

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

11,595

 

 

 

138

 

Cash, cash equivalents and restricted cash at end of period

 

$

8,895

 

 

$

427

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Interest paid

 

$

2,781

 

 

$

182

 

Taxes paid, net

 

 

197

 

 

 

 

Accrued offering costs

 

 

457

 

 

 

870

 

Accrued pre-acquisition costs

 

 

95

 

 

 

360

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,764

 

 

$

427

 

Restricted cash

 

 

4,131

 

 

 

 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

8,895

 

 

$

427

 

 

See accompanying notes to interim consolidated financial statements.

6


BROAD STREET REALTY, INC. AND SUBSIDIARIES

Notes to Interim Consolidated Financial Statements

Unaudited

June 30, 2020

Note 1 - Organization and Nature of Business

Broad Street Realty, Inc. (the “Company”) is a fully integrated real estate company that owns, operates, develops and redevelops primarily grocery-anchored shopping centers and street retail-based properties in the Mid-Atlantic and Denver, Colorado markets. As of June 30, 2020, the Company had real estate assets of $176.8 million, gross, in ten real estate properties and a parcel of land on which another shopping center is located. 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 June 30, 2020, the Company owned 88.4% of the units of limited partnership interest in its Operating Partnership (“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). As described further below, the financial statements presented herein for all periods prior to December 27, 2019 are those of Broad Street Realty, LLC (“BSR”). References herein to “the Company” for periods prior to December 27, 2019 refer to BSR.

Prior to the Initial Mergers, BSR was a real estate management and brokerage company, which was 50% owned by Michael Z. Jacoby, the Company’s chairman and chief executive officer, and 50% owned by Thomas M. Yockey, one of the Company’s directors. BSR provided property management services for the substantial majority of the properties in the Company’s portfolio and the additional properties to be acquired by the Company upon the completion of the additional Mergers (as defined below). BSR also provided real estate brokerage services for the properties acquired or to be acquired by the Company as well as for third parties. BSR owned no real property, so all of its revenues were derived from its property management and brokerage businesses. The properties acquired by the Company in the Initial Mergers and to be acquired in the additional Mergers were or are owned by 17 separate entities (the “Broad Street Entities”). Prior to the Initial Mergers, Broad Street Ventures, LLC (“BSV”) served, directly or indirectly and either alone or with co-managers or co-managing members as the manager or managing member of each of the Broad Street Entities.

Merger with MedAmerica Properties Inc.

On May 28, 2019, MedAmerica Properties Inc. and certain of its subsidiaries (“MedAmerica”) entered into 19 separate agreements and plans of merger (collectively, the “Merger Agreements”) with each of BSR, BSV and each of the Broad Street Entities. The Merger Agreements relate to a series of 19 mergers (“Mergers”) whereby BSR, BSV and each Broad Street Entity has or will become subsidiaries of the Company.

On December 27, 2019 (the “Merger Date”), the Company completed 11 of the Mergers (the “Initial Mergers”), including the Mergers with BSR and BSV and the Mergers with nine Broad Street Entities. Upon completion of the Initial Mergers, MedAmerica’s name was changed to “Broad Street Realty, Inc.”

On December 31, 2019, the Company completed one additional Merger whereby it acquired Brookhill Azalea Shopping Center. On July 2, 2020, the Company closed one Merger whereby it acquired Lamar Station Plaza East.

The Merger between BSR and a wholly owned subsidiary of MedAmerica was accounted for as a reverse acquisition and recapitalization, with BSR being treated as the accounting acquirer. As a result, these consolidated financial statements reflect the financial condition, the results of operations and cash flows of BSR prior to the Merger Date. Subsequent to the Merger Date, the information relates to the consolidated entities of Broad Street Realty, Inc. All share and per share amounts in the consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the exchange ratio applied in connection with the Merger. As OP units were issued as consideration for the BSR Merger, the activities of BSR have been adjusted to reflect a noncontrolling interest in the Company for all periods presented.

The Mergers with the Broad Street Entities that have closed were accounted for as asset acquisitions.

As consideration for the Mergers that have closed as of the date of the issuance of these financial statements, the Company has issued an aggregate 19,660,911 shares of common stock and 2,827,904 OP units to prior investors in the Broad Street Entities party to the Mergers. In addition, certain prior investors in the Broad Street Entities received an aggregate of approximately $1.1 million in cash as a portion of the consideration for the Mergers.

As of the date of the issuance of these financial statements, there are six Mergers that have not been completed. The Company expects to issue an aggregate of 10,400,779 shares of common stock and 573,529 OP units as consideration for the additional Mergers as agreed to in the merger agreements. Until the closing of the remaining Mergers, the Company will continue to manage these six properties and receive management fees.

7


Liquidity and Management’s Plan

The Company’s properties are located in areas that are or have been subject to shelter-in-place orders and restrictions on the types of businesses that may continue to operate due to the COVID-19 pandemic. 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, and the government-imposed measures, coupled with customers reducing their purchasing activity in light of health concerns or personal financial distress, have resulted in significant disruptions to the Company and its tenants’ businesses. The Company has observed the impact of COVID-19 manifest in the form of temporary closures or significantly limited operations among its tenants, with the exception of tenants operating in certain “essential” businesses, which has resulted, and may in the future result in, a decline in on-time rental payments and increased requests from tenants for temporary rental relief. The Company believes the ongoing effects of the COVID-19 pandemic on its operations have had, and will continue to have, a material negative impact on its financial results and liquidity, and such negative impact may continue beyond the containment of the pandemic.

Additionally, the Company has been delayed in closing the remaining six Mergers, has been unable to meet and anticipates being unable to meet certain debt covenants included in the Company’s loan agreements, and has certain debt maturities occurring within the next twelve months. Specifically, as described further in Note 5 under the heading Forbearance Agreements and Debt Amendments”, the Company was in default of the debt service coverage ratio included in the Lamar Station Plaza East mortgage upon assumption of the mortgage with the closing of the property merger in July 2020. The Company entered into a first modification agreement with the lender upon assumption of the mortgage in which the lender agreed to forbear enforcement of the events of default subject to certain conditions. The Company expected to remain in default of the debt service coverage ratio as of December 31, 2020 and did not expect to meet all of the conditions included in the first modification agreement; therefore, the Company entered into a second modification agreement in November 2020 in which the lender agreed to forbear enforcement of the events of default subject to certain conditions which the Company has subsequently met.

The Company has developed a plan and has taken a number of proactive measures to manage the impacts of the COVID-19 pandemic on its operations and liquidity, including the following:

 

it has maintained ongoing communication with its tenants and assisted them in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including the stimulus packages that have been signed into law to date;

 

it has dedicated significant resources to monitor the performance of its portfolio, including rent collections and negotiating requests for rent relief. The Company has entered into lease modifications that deferred approximately $0.4 million of contractual revenue and waived approximately $0.3 million of contractual revenue due from April 2020 through March 2021;

 

it has received an unsecured loan in April 2020 of approximately $0.8 million pursuant to the paycheck protection program which was forgiven in the first quarter of 2021. In March 2021, it received a second unsecured loan of approximately $0.8 million pursuant to the paycheck protection program (as described in Note 5 PPP Loans”);

 

it has negotiated loan payment deferrals. The lenders for the Company’s mortgage loans secured by the Hollinswood and Vista properties agreed to defer payments of principal and interest for six months, the lender for the Company’s mortgage loan secured by the Brookhill property agreed to defer payments of principal and interest for three months, the lender for the Company’s mortgage loan secured by the Avondale property agreed to require interest-only payments for four months, and the lender under the MVB Loan Agreement (as described in Note 5 under the heading “Forbearance Agreements and Debt Amendments”) agreed to require interest-only payments for three months. The deferred amount for the Hollinswood mortgage is due in six equal monthly installments beginning November 2020. The deferred amounts for all of the other loans will be due at loan maturity;

 

it has amended the MVB Loan Agreement (as defined in Note 5) to extend the maturity date of the $2.0 million MVB Revolver to December 27, 2022 and to defer the requirement to comply with certain financial covenants until June 30, 2021 and December 31, 2021, as applicable. The amendment also eliminates the revolving nature of the facility, requires monthly principal payments as calculated over a 10-year amortization schedule and requires the repayment a $250,000 on each of the following dates (a) the earlier of March 31, 2021 or the closing of the Company’s pending mergers of the Highlandtown and Spotswood properties, (b) the earlier of September 30, 2021 or the closing of the Company’s pending merger of the Greenwood property, (c) March 31, 2022, and (d) September 30, 2022. The payment owed by March 31, 2021 has been paid;

 

it has negotiated the forbearance of certain mortgage covenant defaults, subject to the satisfaction of certain conditions that the Company met (as described in Note 5 Forbearance Agreements and Debt Amendments”);

 

it has obtained additional liquidity from the Preferred Investor (as defined in Note 5 Basis Preferred Interest”). The Preferred Investor made additional capital contributions, which are treated as debt, available of approximately $2.9 million in the aggregate in order to assist in debt service under the Basis Term Loan (as defined in Note 5Basis Term Loan”) and certain other property level debt. There is approximately $1.2 million of remaining availability to the Company from these funds which is included in restricted cash; and

8


 

it has deferred certain capital expenditures and paused acquisition and investment activity other than working to close the remaining six Mergers.

As of December 31, 2020, the Company had mortgages on two properties with principal balances outstanding of approximately $12.3 million that mature during the next 12 months. During the first quarter of 2021, the Company refinanced the approximately $8.9 million Vista Shops mortgage loan as described in Note 5 under the heading 2021 Debt Agreements and Modifications”. The Company does not project that it will have sufficient cash available to pay off the $3.4 million Lamar Station Plaza East mortgage upon maturity and is currently in discussions with the lender to exercise a 12-month extension for the mortgage. There can be no assurances that the Company will be successful on the extension or refinance of the mortgage on favorable terms or at all. If the Company is unable to extend or refinance this mortgage, the lender has the right to place their loan in default and ultimately foreclose on the property, in which case the property could be sold and the sale proceeds would be used to pay off the loan. Under this circumstance, the Company would not have any further financial obligations to the lender as the value of this property is in excess of the outstanding mortgage balance.

Based on the measures described above, the Company believes that it is probable that it will be able to generate sufficient liquidity to satisfy its obligations for the next twelve months.

Note 2 - Accounting Policies and Related Matters

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements. In the opinion of management, the accompanying unaudited 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 consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. These interim 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, 2019, included in the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2020.

The interim consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and subsidiaries in which the Company has a controlling interest. All material 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, 2019 included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC on December 22, 2020. During the six months ended June 30, 2020, there were no material changes to these policies except as noted below.

Reclassifications

Certain reclassifications have been made to the consolidated balance sheet as of December 31, 2019 to conform to the 2020 presentation.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The standard also requires additional disclosures related to significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.  Operating lease receivables are excluded from the scope of this guidance. The amended guidance is effective for the Company for fiscal years, and interim periods within those years, beginning January 1, 2023. The Company is evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply elections as applicable as changes in the market occur.

In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the coronavirus pandemic (“COVID-19”). Prior to issuance of the Lease Modification Q&A, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A clarifies that entities may elect not to evaluate whether lease-related relief provided to mitigate the economic effects of COVID-19 is a lease modification under Accounting Standards Codification (“ASC”) 842. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether

9


to apply the modification guidance (i.e., assume relief was always contemplated by the contract or assume the relief was not contemplated by the contract), with such election applied consistently to leases with similar characteristics and similar circumstances. The Company evaluated its election on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar circumstances.

Beginning in April 2020, the Company provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Company has made an election to account for such lease concessions consistent with how those concessions would be accounted for under ASC 842 if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the Company’s rights as lessor, including concessions that results in total payments required by the modified lease being substantially the same or less than total payments required by the original lease.

Substantially all of the Company’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its receivables as tenant payments accrue and continues to recognize rental income. The Company accounted for forgiven rents as a reduction to rental income in the period the rent was forgiven.

Note 3 – Real Estate

2020 Real Estate Acquisitions

On January 10, 2020, the Company completed the acquisition of the fee-simple interest in the land that the Cromwell Field Shopping Center is located on under a leasehold interest for approximately $2.3 million, which includes less than $0.1 million of transaction costs that were capitalized since this transaction was accounted for as an asset acquisition. Upon acquisition of the land, the Company leased the land to the owner of the Cromwell Field Shopping Center pursuant to a ground lease. Once the Company completes the Merger to acquire the Cromwell Field Shopping Center leasehold interest, the ground lease will be terminated. The Company has a mortgage on the land of approximately $1.4 million.

On July 2, 2020, the Company completed the Merger to acquire Lamar Station Plaza East. Total consideration for the property included the issuance of 884,143 common shares, the payment of approximately $0.2 million in cash to the prior investors and approximately $0.1 million of transaction costs that were capitalized since the transaction was accounted for as an asset acquisition. The Company assumed a $2.5 million mortgage on the property and, on July 2, 2020, entered into a loan modification agreement that increased the maximum principal amount available under the assumed loan agreement to $4.1 million. Additional discussion of this loan modification agreement is included in Note 5 under the heading “Forbearance Agreements and Debt Amendments”.  

Concentrations of Credit Risks

The following table contains information regarding the geographic concentration of the properties in the Company’s portfolio as of June 30, 2020, which includes rental income for the six months ended June 30, 2020 (dollars in thousands). The Company did not own any properties and therefore did not have any rental income during the six months ended June 30, 2019.

 

Location

 

Number of

Properties

 

Gross Real

Estate Assets

at June 30, 2020

 

 

Percentage of Total

Real Estate Assets

at June 30, 2020

 

 

Rental income for the

six months ended

June 30, 2020

 

Maryland(1)

 

4

 

$

74,285

 

 

 

42.1

%

 

$

3,947

 

Virginia

 

4

 

 

67,383

 

 

 

38.1

%

 

 

2,394

 

Pennsylvania

 

1

 

 

26,744

 

 

 

15.1

%

 

 

1,126

 

Washington D.C.

 

1

 

 

8,393

 

 

 

4.7

%

 

 

324

 

 

 

10

 

$

176,805

 

 

 

100.0

%

 

$

7,791

 

 

(1) Rental income for the six months ended June 30, 2020 includes less than $0.1 million of ground rental revenue under the ground lease for the parcel of land acquired in January 2020 as described above under the heading “2020 Real Estate Acquisitions”.  

 

10


 

Note 4 - Other Assets

Items included in other assets, net on the Company’s consolidated balance sheets as of June 30, 2020 and December 31, 2019 are detailed in the table below (dollars in thousands):

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Right-of-use assets, net

 

$

1,498

 

 

$

1,284

 

Prepaid assets and deposits

 

 

1,302

 

 

 

2,144

 

Pre-acquisition costs

 

 

637

 

 

 

1,130

 

Straight-line rent receivable

 

 

510

 

 

 

30

 

Corporate property, net

 

 

120

 

 

 

101

 

Interest rate cap asset

 

 

34

 

 

 

16

 

Receivables due from related parties

 

 

24

 

 

 

525

 

Other receivables, net of allowance of $87 and $193

 

 

19

 

 

 

113

 

Lease incentives

 

 

14

 

 

 

-

 

 

 

$

4,158

 

 

$

5,343

 

 

Receivables due from related parties as of June 30, 2020 and December 31, 2019 are described further in Note 12 “Related Party Transactions”.

Note 5 – Debt

The table below details the Company’s debt balance at June 30, 2020 and December 31, 2019 (in thousands):

 

 

Maturity Date

 

 

Rate Type

 

 

Interest

Rate (1)

 

 

June 30, 2020

 

 

December 31, 2019

 

Basis Term Loan (net of discount of $932 and $1,118)

 

January 1, 2023

 

 

Floating (2)

 

 

6.125%

 

 

$

63,182

 

 

$

62,996

 

Basis Preferred Interest (net of discount of $187 and $224) (3)

 

January 1, 2023 (4)

 

 

Fixed

 

 

14.00% (5)

 

 

 

11,890

 

 

 

9,471

 

MVB Term Loan

 

December 27, 2022

 

 

Fixed

 

 

6.75%

 

 

 

4,424

 

 

 

4,500

 

MVB Revolver

 

December 27, 2021 (6)

 

 

Floating (7)

 

 

6.75%

 

 

 

2,000

 

 

 

2,000

 

Hollinswood Loan

 

December 1, 2024

 

 

LIBOR + 2.25% (8)

 

 

4.06%

 

 

 

10,200

 

 

 

10,200

 

Avondale Shops Loan

 

June 1, 2025

 

 

Fixed

 

 

4.00%

 

 

 

3,241

 

 

 

3,275

 

Vista Shops at Golden Mile Loan

 

January 25, 2021(9)

 

 

LIBOR + 2.50%

 

 

2.66%

 

 

 

8,950

 

 

 

8,950

 

Brookhill Azalea Shopping Center Loan

 

January 31, 2025

 

 

LIBOR + 2.75%

 

 

2.91%

 

 

 

9,595

 

 

 

9,650

 

Cromwell Land Loan (net of discount of $12)

 

January 10, 2023

 

 

Fixed

 

 

6.75%

 

 

 

1,418

 

 

 

-

 

Paycheck Protection Program Loan

 

April 20, 2022 (10)

 

 

Fixed

 

 

1.00%

 

 

 

757

 

 

 

-

 

Mezzanine Loans (11)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,738