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, 2021
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
|
|
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 |
|
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, 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 August 6, 2021, the registrant had 29,039,222 shares of common stock outstanding.
BROAD STREET REALTY, INC. AND SUBSIDIARIES
Table of Contents
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Page |
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PART I. |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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6 |
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8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
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Item 3. |
35 |
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Item 4. |
35 |
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PART II. |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
36 |
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Item 3. |
36 |
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Item 4. |
36 |
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Item 5. |
36 |
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Item 6. |
37 |
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38 |
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, 2021 |
|
|
December 31, 2020 |
|
||
|
|
|
(unaudited) |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Real estate properties |
|
|
|
|
|
|
|
|
|
Land |
|
$ |
46,164 |
|
|
$ |
38,458 |
|
|
Building and improvements |
|
|
149,276 |
|
|
|
122,988 |
|
|
Intangible lease assets |
|
|
29,657 |
|
|
|
20,619 |
|
|
Construction in progress |
|
|
431 |
|
|
|
2,951 |
|
|
Less accumulated depreciation and amortization |
|
|
(15,760 |
) |
|
|
(10,535 |
) |
|
Total real estate properties, net |
|
|
209,768 |
|
|
|
174,481 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
3,072 |
|
|
|
4,105 |
|
|
Restricted cash |
|
|
9,264 |
|
|
|
5,878 |
|
|
Accounts receivable, net of allowance of $81 and $523, respectively |
|
|
1,812 |
|
|
|
2,224 |
|
|
Other assets, net |
|
|
3,810 |
|
|
|
4,738 |
|
|
Total Assets |
|
$ |
227,726 |
|
|
$ |
191,426 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Mortgage and other indebtedness, net |
|
$ |
158,760 |
|
|
$ |
122,060 |
|
|
Accounts payable and accrued liabilities |
|
|
9,669 |
|
|
|
10,486 |
|
|
Unamortized intangible lease liabilities, net |
|
|
2,921 |
|
|
|
2,381 |
|
|
Payables due to related parties |
|
|
39 |
|
|
|
660 |
|
|
Deferred tax liabilities |
|
|
9,300 |
|
|
|
11,853 |
|
|
Deferred revenue |
|
|
639 |
|
|
|
502 |
|
|
Total liabilities |
|
|
181,328 |
|
|
|
147,942 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.01 par value, 20,000 shares authorized, 500 shares outstanding at June 30, 2021 and December 31, 2020 |
|
|
- |
|
|
|
- |
|
|
Common stock, $0.01 par value. Authorized 50,000,000 shares; 29,039,222 and 22,624,679 issued and outstanding at June 30, 2021 and December 31, 2020, respectively |
|
|
290 |
|
|
|
225 |
|
|
Additional paid in capital |
|
|
62,542 |
|
|
|
54,622 |
|
|
Accumulated deficit |
|
|
(14,442 |
) |
|
|
(10,035 |
) |
|
Total Broad Street Realty, Inc. stockholders' equity |
|
|
48,390 |
|
|
|
44,812 |
|
|
Noncontrolling interest |
|
|
(1,992 |
) |
|
|
(1,328 |
) |
|
Total equity |
|
|
46,398 |
|
|
|
43,484 |
|
|
Total Liabilities and Equity |
|
$ |
227,726 |
|
|
$ |
191,426 |
|
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, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
4,816 |
|
|
$ |
3,645 |
|
|
$ |
8,754 |
|
|
$ |
7,791 |
|
|
Commissions |
|
|
571 |
|
|
|
224 |
|
|
|
1,206 |
|
|
|
834 |
|
|
Management and other fees |
|
|
311 |
|
|
|
316 |
|
|
|
656 |
|
|
|
684 |
|
|
Total revenues |
|
|
5,698 |
|
|
|
4,185 |
|
|
|
10,616 |
|
|
|
9,309 |
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
446 |
|
|
|
140 |
|
|
|
789 |
|
|
|
589 |
|
|
Depreciation and amortization |
|
|
2,676 |
|
|
|
2,499 |
|
|
|
4,989 |
|
|
|
4,981 |
|
|
Property operating |
|
|
1,197 |
|
|
|
907 |
|
|
|
2,447 |
|
|
|
1,858 |
|
|
Bad debt expense (recoveries) |
|
|
(9 |
) |
|
|
24 |
|
|
|
46 |
|
|
|
165 |
|
|
General and administrative |
|
|
2,477 |
|
|
|
2,037 |
|
|
|
5,063 |
|
|
|
4,155 |
|
|
Total operating expenses |
|
|
6,787 |
|
|
|
5,607 |
|
|
|
13,334 |
|
|
|
11,748 |
|
|
Operating loss |
|
|
(1,089 |
) |
|
|
(1,422 |
) |
|
|
(2,718 |
) |
|
|
(2,439 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
7 |
|
|
|
1 |
|
|
|
7 |
|
|
|
48 |
|
|
Derivative fair value adjustment |
|
|
20 |
|
|
|
(69 |
) |
|
|
211 |
|
|
|
(704 |
) |
|
Interest expense |
|
|
(3,081 |
) |
|
|
(1,611 |
) |
|
|
(4,959 |
) |
|
|
(3,191 |
) |
|
Gain on extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
757 |
|
|
|
- |
|
|
Other expense |
|
|
(5 |
) |
|
|
(166 |
) |
|
|
(12 |
) |
|
|
(186 |
) |
|
Total other income (expense) |
|
|
(3,059 |
) |
|
|
(1,845 |
) |
|
|
(3,996 |
) |
|
|
(4,033 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
1,019 |
|
|
|
784 |
|
|
|
1,643 |
|
|
|
1,553 |
|
|
Net loss |
|
$ |
(3,129 |
) |
|
$ |
(2,483 |
) |
|
$ |
(5,071 |
) |
|
$ |
(4,919 |
) |
|
Plus: Net loss attributable to noncontrolling interest |
|
|
399 |
|
|
|
369 |
|
|
|
664 |
|
|
|
730 |
|
|
Net loss attributable to common stockholders |
|
$ |
(2,730 |
) |
|
$ |
(2,114 |
) |
|
$ |
(4,407 |
) |
|
$ |
(4,189 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.11 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
24,831,316 |
|
|
|
21,587,336 |
|
|
|
23,657,916 |
|
|
|
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, 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 |
|
|
|
|
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, 2020 |
|
|
500 |
|
|
$ |
- |
|
|
|
22,624,679 |
|
|
$ |
225 |
|
|
$ |
54,622 |
|
|
$ |
(10,035 |
) |
|
$ |
(1,328 |
) |
|
$ |
43,484 |
|
|
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21 |
|
|
|
- |
|
|
|
- |
|
|
|
21 |
|
|
Tax effect of change in ownership percentage of OP |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16 |
) |
|
|
- |
|
|
|
- |
|
|
|
(16 |
) |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,677 |
) |
|
|
(265 |
) |
|
|
(1,942 |
) |
|
Balance at March 31, 2021 |
|
|
500 |
|
|
|
- |
|
|
|
22,624,679 |
|
|
|
225 |
|
|
|
54,627 |
|
|
|
(11,712 |
) |
|
|
(1,593 |
) |
|
|
41,547 |
|
|
Issuance of common stock |
|
|
- |
|
|
|
- |
|
|
|
6,331,162 |
|
|
|
63 |
|
|
|
7,797 |
|
|
|
- |
|
|
|
- |
|
|
|
7,860 |
|
|
Grants of restricted stock |
|
|
- |
|
|
|
- |
|
|
|
90,517 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Shares surrendered for taxes upon vesting |
|
|
- |
|
|
|
- |
|
|
|
(7,136 |
) |
|
|
- |
|
|
|
(21 |
) |
|
|
- |
|
|
|
- |
|
|
|
(21 |
) |
|
Issuance of warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22 |
|
|
|
- |
|
|
|
- |
|
|
|
22 |
|
|
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
121 |
|
|
|
- |
|
|
|
- |
|
|
|
123 |
|
|
Tax effect of change in ownership percentage of OP |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,730 |
) |
|
|
(399 |
) |
|
|
(3,129 |
) |
|
Balance at June 30, 2021 |
|
|
500 |
|
|
$ |
- |
|
|
|
29,039,222 |
|
|
$ |
290 |
|
|
$ |
62,542 |
|
|
$ |
(14,442 |
) |
|
$ |
(1,992 |
) |
|
$ |
46,398 |
|
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, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,071 |
) |
|
$ |
(4,919 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
(1,643 |
) |
|
|
(1,553 |
) |
|
Depreciation and amortization |
|
|
5,352 |
|
|
|
5,221 |
|
|
Minimum return on preferred interests |
|
|
424 |
|
|
|
(488 |
) |
|
Gain on extinguishment of debt |
|
|
(757 |
) |
|
|
— |
|
|
Straight-line rent receivable |
|
|
(282 |
) |
|
|
(480 |
) |
|
Straight-line rent liability |
|
|
(14 |
) |
|
|
6 |
|
|
Stock-based compensation |
|
|
144 |
|
|
|
— |
|
|
Change in fair value of derivatives |
|
|
(211 |
) |
|
|
704 |
|
|
Bad debt expense |
|
|
46 |
|
|
|
165 |
|
|
Write-off of pre-acquisition costs |
|
|
- |
|
|
|
150 |
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
653 |
|
|
|
(617 |
) |
|
Other assets |
|
|
703 |
|
|
|
1,109 |
|
|
Receivables due from related parties |
|
|
(18 |
) |
|
|
22 |
|
|
Accounts payable and accrued liabilities |
|
|
(2,629 |
) |
|
|
(1,109 |
) |
|
Payables due to related parties |
|
|
(6 |
) |
|
|
(11 |
) |
|
Deferred revenues |
|
|
(152 |
) |
|
|
(94 |
) |
|
Net cash used in operating activities |
|
|
(3,461 |
) |
|
|
(1,894 |
) |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Acquisitions of real estate, net of cash and restricted cash received |
|
|
2,377 |
|
|
|
(1,898 |
) |
|
Capitalized pre-acquisition costs, net of refunds |
|
|
- |
|
|
|
34 |
|
|
Capital expenditures for real estate |
|
|
(1,882 |
) |
|
|
(1,131 |
) |
|
Net cash provided by (used in) investing activities |
|
|
495 |
|
|
|
(2,995 |
) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Borrowings under debt agreements |
|
|
17,908 |
|
|
|
5,063 |
|
|
Repayments under debt agreements |
|
|
(12,076 |
) |
|
|
(2,909 |
) |
|
Offering costs |
|
|
- |
|
|
|
(1 |
) |
|
Taxes remitted upon vesting of restricted stock |
|
|
(21 |
) |
|
|
— |
|
|
Debt origination and discount fees |
|
|
(675 |
) |
|
|
(63 |
) |
|
Proceeds from related parties |
|
|
671 |
|
|
|
1,139 |
|
|
Payments to related parties |
|
|
(488 |
) |
|
|
(1,040 |
) |
|
Net cash provided by financing activities |
|
|
5,319 |
|
|
|
2,189 |
|
|
Increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
2,353 |
|
|
|
(2,700 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
9,983 |
|
|
|
11,595 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
12,336 |
|
|
$ |
8,895 |
|
See accompanying notes to interim consolidated financial statements.
6
BROAD STREET REALTY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(in thousands)
(Unaudited)
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
3,648 |
|
|
$ |
2,781 |
|
|
Taxes paid, net |
|
|
2 |
|
|
|
197 |
|
|
Accrued offering costs |
|
|
457 |
|
|
|
457 |
|
|
Accrued capital expenditures for real estate |
|
|
275 |
|
|
|
- |
|
|
Accrued acquisition costs |
|
|
560 |
|
|
|
- |
|
|
Accrued pre-acquisition costs |
|
|
91 |
|
|
|
95 |
|
|
Accrued deferred loan costs |
|
|
43 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
|
Acquisition of real estate |
|
|
(39,552 |
) |
|
|
- |
|
|
Common shares issued in mergers |
|
|
8,038 |
|
|
|
- |
|
|
Debt assumed in mergers |
|
|
31,514 |
|
|
|
- |
|
|
Forgiveness of Paycheck Protection Program loan |
|
|
757 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash and cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,072 |
|
|
$ |
4,764 |
|
|
Restricted cash |
|
|
9,264 |
|
|
|
4,131 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
12,336 |
|
|
$ |
8,895 |
|
See accompanying notes to interim consolidated financial statements.
7
BROAD STREET REALTY, INC. AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Unaudited
June 30, 2021
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, street retail-based properties and mixed-use assets in the Mid-Atlantic and Denver, Colorado markets. As of June 30, 2021, the Company had real estate assets of $225.5 million, gross, in 14 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 June 30, 2021, the Company owned 91.1% 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).
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 Broad Street Realty, LLC (“BSR”), Broad Street Ventures, LLC (“BSV”) and each of the 17 separate entities that owned the properties acquired by the Company in the Initial Mergers (as defined below) and to be acquired in the additional Mergers (as defined below) (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 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 Company closed three additional Mergers whereby it acquired the Highlandtown Village Shopping Center, Cromwell Field Shopping Center and Spotswood Valley Square Shopping Center on May 21, 2021, May 26, 2021, and June 4, 2021, respectively.
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 25,992,073 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 $1.9 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 three Mergers that have not been completed. The Company expects to issue an aggregate of 4,069,621 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 three properties and receive management fees.
Liquidity and Management’s Plan
The Company’s properties are located in areas that have been subject to shelter-in-place orders and restrictions on the types of businesses that may 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 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 limited operations among its tenants, 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. Throughout the COVID-19 pandemic, the Company put into place actions to improve its financial position and maximize liquidity, as described further in “Note 1—Liquidity and Management’s Plan” in the Company’s 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2021. The Company’s contractual rent collections have generally returned to pre-COVID results, and the Company continues to maintain ongoing communications and work with its tenants to collect prior deferred rent and to monitor any additional disruptions to their business. 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 short-term mortgages 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 its debt.
8
Specifically, the Company has a mortgage on Lamar Station Plaza East with a principal balance outstanding of approximately $3.5 million that matures during the next twelve months. The Company does not project that it will have sufficient cash flow available to pay off the mortgage loan upon maturity and will seek to refinance the loan prior to maturity in July 2022. There can be no assurances that the Company will be successful in the refinance of the mortgage loan on favorable terms or at all. If the Company is unable to refinance the mortgage loan, the lender has the right to place the loan in default and ultimately foreclose on the property. Under this circumstance, the Company would not have any further financial obligation to the lender.
Based on the measures described above for the Lamar Station Plaza East mortgage, the Company believes that it is probable that it will be able to generate sufficient liquidity to satisfy its obligations over 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 and the rules and regulations of the SEC applicable to interim reports. 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 unaudited 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, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on April 15, 2021.
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, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on April 15, 2021. During the six months ended June 30, 2021, there were no material changes to these policies except as noted below.
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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic 740. The ASU also clarifies and amends existing guidance to improve consistent application. The Company adopted this guidance on January 1, 2021. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
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 August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 740-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, that simplifies the accounting for convertible instruments and simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. The guidance also provides clarifications to improve the consistency of earnings per share calculations and requires new disclosures regarding convertible instruments. The Company early adopted this guidance on January 1, 2021. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Note 3 – Real Estate
2021 Real Estate Acquisitions
On May 21, 2021, the Company completed the Merger to acquire Highlandtown Village Shopping Center. Total consideration for the property included the issuance of 1,749,008 shares of common stock and approximately $0.2 million of transaction costs that
9
were capitalized since the transaction was accounted for as an asset acquisition. The Company assumed approximately $5.5 million of indebtedness secured by the property.
On May 26, 2021, the Company completed the Merger to acquire Cromwell Field Shopping Center. Total consideration for the property included the issuance of 2,092,657 shares of common stock, the payment of approximately $0.5 million in cash to the prior investors, and approximately $0.4 million of transaction costs that were capitalized since the transaction was accounted for as an asset acquisition. The Company assumed approximately $13.65 million of indebtedness secured by the property. The Company previously acquired the fee-simple interest in the land that the Cromwell Field Shopping Center is located on under a leasehold interest and terminated the ground lease upon completion of the Merger.
On June 4, 2021, the Company completed the Merger to acquire Spotswood Valley Square Shopping Center. Total consideration for the property included the issuance of 2,489,497 shares of common stock, the payment of approximately $0.4 million in cash to the prior investors, and approximately $0.3 million of transaction costs that were capitalized since the transaction was accounted for as an asset acquisition. The Company assumed approximately $12.4 million of mortgage secured by the property.
The following table provides additional information regarding the total considerations paid for the three properties acquired during the second quarter of 2021 (dollars in thousands).
|
Cash paid to prior owners |
|
$ |
840 |
|
|
Value of common shares issued |
|
|
8,038 |
|
|
Prior owner debt and preferred equity paid off at closing |
|
|
400 |
|
|
Settlement of notes payable owed to properties |
|
|
(700 |
) |
|
Transaction costs |
|
|
905 |
|
|
Cash acquired in acquisitions |
|
|
(1,241 |
) |
|
Total Cost of Acquisitions |
|
$ |
8,242 |
|
The following table reflects the relative fair value of assets acquired and liabilities assumed related to the three properties acquired by the Company during the second quarter of 2021 (dollars in thousands).
|
Land |
|
$ |
7,707 |
|
|
Building |
|
|
15,225 |
|
|
Building and site improvements |
|
|
6,396 |
|
|
Intangible lease assets |
|
|
9,037 |
|
|
Total real estate assets acquired |
|
|
38,365 |
|
|
Other assets |
|
|
3,074 |
|
|
Deferred tax assets |
|
|
1,117 |
|
|
Total assets acquired |
|
|
42,556 |
|
|
Accounts payable and accrued expenses |
|
|
(1,813 |
) |
|
Intangible lease liabilities |
|
|
(987 |
) |
|
Assumed mortgage indebtedness |
|
|
(31,514 |
) |
|
Total liabilities assumed |
|
|
(34,314 |
) |
|
Assets acquired net of liabilities assumed |
|
$ |
8,242 |
|
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, 2021, which includes rental income for the six months ended June 30, 2021 and 2020 (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income for the six months ended June 30, |
|
|||||
|
Location |
|
Number of Properties |
|
Gross Real Estate Assets at June 30, 2021 |
|
|
Percentage of Total Real Estate Assets at June 30, 2021 |
|
|
2021 |
|
|
2020 |
|
||||
|
Maryland(1) |
|
6 |
|
$ |
101,499 |
|
|
|
45.0 |
% |
|
$ |
4,298 |
|
|
$ |
3,947 |
|
|
Virginia |
|
5 |
|
|
82,726 |
|
|
|
36.7 |
% |
|
|
2,688 |
|
|
|
2,394 |
|
|
Pennsylvania |
|
1 |
|
|
26,811 |
|
|
|
11.9 |
% |
|
|
1,106 |
|
|
|
1,126 |
|
|
Washington D.C. |
|
1 |
|
|
8,393 |
|
|
|
3.7 |
% |
|
|
325 |
|
|
|
324 |
|
|
Colorado |
|
1 |
|
|
6,099 |
|
|
|
2.7 |
% |
|
|
337 |
|
|
|
- |
|
|
|
|
14 |
|
$ |
225,528 |
|
|
|
100.0 |
% |
|
$ |
8,754 |
|
|
$ |
7,791 |
|
10
|
(1) |
Rental income for each of the six months ended June 30, 2021 and 2020 include less than $0.1 million of ground rental revenue under the ground lease for the parcel of land acquired in January 2020. The ground lease was terminated upon the completion of the Cromwell Field Shopping Center Merger on May 26, 2021. |
Note 4 – Intangibles
The following is a summary of the carrying amount of the Company’s intangible assets and liabilities as of June 30, 2021 and December 31, 2020 (dollars in thousands).
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Assets: |
|
|
|
|
|
|
|
|
|
Above-market leases |
|
$ |
4,070 |
|
|
$ |
2,661 |
|
|
Above-market leases accumulated amortization |
|
|
(773 |
) |
|
|
(504 |
) |
|
In-place leases |
|
|
25,587 |
|
|
|
17,958 |
|
|
In-place leases accumulated amortization |
|
|
(6,899 |
) |
|
|
(4,841 |
) |
|
Total net real estate intangible assets |
|
$ |
21,985 |
|
|
$ |
15,274 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Below-market leases |
|
|
4,277 |
|
|
|
3,290 |
|
|
Below-market leases accumulated amortization |
|
|
(1,356 |
) |
|
|
(909 |
) |
|
Total net real estate intangible liabilities |
|
$ |
2,921 |
|
|
$ |
2,381 |
|
For the three and six months ended June 30, 2021, the Company’s net amortization related to intangibles was approximately $1.0 million and $1.9 million, respectively. For the three and six months ended June 30, 2020, the Company’s net amortization related to intangibles was approximately $1.1 million and $2.2 million, respectively.
The following table represents expected amortization of existing real estate intangible assets and liabilities as of June 30, 2021 (dollars in thousands):
|
|
Amortization of in-place leases |
|
|
Amortization of above-market leases |
|
|
Amortization of below-market leases |
|
|
Total amortization, net |
|
||||
|
Remainder of 2021 |
$ |
3,128 |
|
|
$ |
394 |
|
|
$ |
(669 |
) |
|
$ |
2,853 |
|
|
2022 |
|
5,521 |
|
|
|
764 |
|
|
|
(1,173 |
) |
|
|
5,112 |
|
|
2023 |
|
3,611 |
|
|
|
661 |
|
|
|
(542 |
) |
|
|
3,730 |
|
|
2024 |
|
2,263 |
|
|
|
466 |
|
|
|
(316 |
) |
|
|
2,413 |
|
|
2025 |
|
1,394 |
|
|
|
348 |
|
|
|
(111 |
) |
|
|
1,631 |
|
|
2026 |
|
997 |
|
|
|
224 |
|
|
|
(41 |
) |
|
|
1,180 |
|
|
Thereafter |
|
1,774 |
|
|
|
440 |
|
|
|
(69 |
) |
|
|
2,145 |
|
|
Total |
$ |
18,688 |
|
|
$ |
3,297 |
|
|
$ |
(2,921 |
) |
|
$ |
19,064 |
|
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 consolidated balance sheets as of June 30, 2021 and December 31, 2020 are detailed in the table below (dollars in thousands):
|
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
Straight-line rent receivable |
|
$ |
1,167 |
|
|
$ |
885 |
|
|
Right-of-use assets, net |
|
|
1,045 |
|
|
|
1,287 |
|
|
Prepaid assets and deposits |
|
|
1,042 |
|
|
|
1,662 |
|
|
Pre-acquisition costs |
|
|
293 |
|
|
|
519 |
|
|
Other receivables, net of allowance of $82 and $82 |
|
|
127 |
|
|
|
59 |
|
|
Corporate property, net |
|
|
84 |
|
|
|
107 |
|
|
Receivables due from related parties |
|
|
41 |
|
|
|
206 |
|
|
Lease incentives |
|
|
9 |
|
|
|
12 |
|
|
Interest rate cap asset |
|
|
2 |
|
|
|
1 |
|
|
|
|
$ |
3,810 |
|
|
$ |
4,738 |
|
11
Receivables due from related parties as of June 30, 2021 and December 31, 2020 are described further in Note 13 “Related Party Transactions”.
Note 6 – Mortgage and Other Indebtedness
The table below details the Company’s debt balance at June 30, 2021 and December 31, 2020 (dollars in thousands):
|
|
|
Maturity Date |
|
Rate Type |
|
Interest Rate (1) |
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
|||
|
Basis Term Loan (net of discount of $560 and $745) |
|
January 1, 2023 |
|
Floating (2) |
|
6.125% |
|
|
$ |
66,625 |
|
|
$ |
66,439 |
|
|
|
Basis Preferred Interest (net of discount of $112 and $150) (3) |
|
January 1, 2023 (4) |
|
Fixed |
|
14.00% (5) |
|
|
|
9,970 |
|
|
|
11,434 |
|
|
|
MVB Term Loan |
|
December 27, 2022 |
|
Fixed |
|
6.75% |
|
|
|
4,109 |
|
|
|
4,277 |
|
|
|
MVB Revolver |
|
December 27, 2022 |
|
Floating (6) |
|
6.75% |
|
|
|
1,721 |
|
|
|
2,000 |
|
|
|
Hollinswood Loan |
|
December 1, 2024 |
|
LIBOR + 2.25% (7) |
|
4.06% |
|
|
|
13,144 |
|
|
|
11,670 |
|
|
|
Avondale Shops Loan |
|
June 1, 2025 |
|
Fixed |
|
4.00% |
|
|
|
3,152 |
|
|
|
3,205 |
|
|
|
Vista Shops at Golden Mile Loan (net of discount of $52) |
|
June 24, 2023 |
|
Fixed |
|
3.83% |
|
|
|
11,648 |
|
|
|
8,902 |
|
|
|
Brookhill Azalea Shopping Center Loan |
|
January 31, 2025 |
|
LIBOR + 2.75% |
|
2.85% |
|
|
|
9,238 |
|
|
|
9,432 |
|
|
|
Lamar Station Plaza East Loan (net of discount of $1 and $7) |
|
July 17, 2022 (8) |
|
LIBOR + 3.00% (9) |
|
4.00% |
|
|
|
3,515 |
|
|
|
3,446 |
|
|
|
Cromwell Land Loan (net of discount of $0 and $10) (10) |
|
January 10, 2023 |
|
Fixed |
|
6.75% |
|
|
|
- |
|
|
|
1,415 |
|
|
|
First Paycheck Protection Program Loan |
|
April 20, 2022 (11) |
|
Fixed |
|
1.00% |
|
|
|
- |
|
|
|
757 |
|
|
|
Second Paycheck Protection Program Loan |
|
March 18, 2026 |
|
Fixed |
|
1.00% |
|
|
|
769 |
|
|
|
- |
|
|
|
Lamont Street Preferred Interest (net of discount of $86) (12) |
|
September 30, 2023 |
|
Fixed |
|
13.50% |
|
|
|
4,744 |
|
|
|
- |
|
|
|
Highlandtown Village Shopping Center Loan (net of discount of $63) |
|
May 6, 2023 |
|
Fixed |
|
4.132% |
|
|
|
5,422 |
|
|
|
- |
|
|
|
Cromwell Field Shopping Center Loan (net of discount of $227) |
|
November 15, 2022 |
|
LIBOR + 5.40%(13) |
|
5.90% |
|
|
|
12,166 |
|
|
|
- |
|
|
|
Cromwell Field Shopping Center Mezzanine Loan (net of discount of $28) |
|
November 15, 2022 |
|
Fixed |
|
10.00% |
|
|
|
1,502 |
|
|
|
- |
|
|
|
Spotswood Valley Square Shopping Center Loan (net of discount of $125) |
|
July 6, 2023 |
|
Fixed |
|
4.8235% |
|
|
|
12,219 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
159,944 |
|
|
$ |
122,977 |
|
|
Unamortized deferred financing costs |
|
|
|
|
|
|
|
|
|
|
(1,184 |
) |
|
|
(917 |
) |
|
Total Mortgage and Other Indebtedness |
|
|
|
|
|
|
|
|
|
$ |
158,760 |
|
|
$ |
122,060 |
|
|
|
(1) |
For floating rate loans tied to LIBOR, based on the one-month LIBOR rate of 0.10%, as of June 30, 2021. |
|
|
(2) |
The interest rate for the Basis Term Loan is the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. The Company has entered into an interest rate cap that caps the LIBOR rate on this loan at 3.5%. |
|
|
(3) |
The outstanding balance includes approximately $1.3 million and $1.8 million of indebtedness as of June 30, 2021 and December 31, 2020, respectively, related to the Multiple Minimum Amount owed to the Preferred Investor as described below under the heading “—Basis Preferred Interest”. |
|
|
(4) |
If the Basis Term Loan is paid in full earlier than its maturity date, the Basis Preferred Interest in the Sub-OP (as defined below) will mature at that time. |
|
|
(5) |
In June 2020, the Preferred Investor made additional capital contributions of approximately $2.9 million as described below under the heading “—Basis Preferred Interest” of which approximately $1.9 million was outstanding at June 30, 2021. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional contributions. |
|
|
(6) |
The interest rate on the MVB Revolver is the greater of (i) prime rate plus 1.5% and (ii) 6.75%. |
|
|
(7) |
The Company has entered into an interest rate swap which fixes the interest rate of the loan at 4.06%. |
|
|
(8) |
In July 2021, the Company entered into a modification to the Lamar Station Plaza East loan to extend the maturity date to July 2022 as described below under the heading “—Mortgage Indebtedness”. |
|
|
(9) |
The interest rate on the Lamar Station Plaza East loan is LIBOR plus 3.00% per annum with a minimum LIBOR rate of 1.00%. |
|
|
(10) |
The Company paid off the remaining principal balance of the Cromwell land loan during the second quarter of 2021. |
12
|
|
(11) |
During the first quarter of 2021, the Company received forgiveness for its first Paycheck Protection Program Loan as described below under the heading “—PPP Loans”. |
|
|
(12) |
The outstanding balance includes approximately $0.9 million of indebtedness as of June 30, 2021 related to the Lamont Street Minimum Multiple Amount owed to Lamont Street as described below under the heading “—Lamont Street Preferred Interest”. |
|
|
(13) |
The interest rate on the Cromwell Field Shopping Center Loan is LIBOR plus 5.40% per annum with a minimum LIBOR rate of 0.50%. |
Basis Term Loan
In December 2019, six of the Company’s subsidiaries, as borrowers (collectively, the “Borrowers”), and Big Real Estate Finance I, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC, as lender (the “Basis Lender”), entered into a loan agreement (the “Basis Loan Agreement”) pursuant to which the Basis Lender made a senior secured term loan of up to $66.9 million (the “Basis Term Loan”) to the Borrowers. Pursuant to the Basis Loan Agreement, the Basis Term Loan is secured by mortgages on the following properties: Coral Hills, Crestview, Dekalb, Midtown Colonial, Midtown Lamonticello and West Broad. The Basis Term Loan matures on January 1, 2023, subject to two one-year extension options, subject to certain conditions. The Basis Term Loan bears interest at a rate equal to the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. The Borrowers have entered into an interest rate cap that effectively caps LIBOR at 3.50% per annum. As of June 30, 2021, the interest rate of the Basis Term Loan was 6.125% and the outstanding balance was $66.9 million.
The Basis Loan Agreement includes a debt service coverage calculation based on the trailing twelve months results which includes an adjustment for tenants that are more than one-month delinquent in paying rent. A debt service coverage ratio below 1.10x is a Cash Trap Trigger Event (as defined in the loan agreement), which gives the Basis Lender the right to institute a cash management period until the trigger is cured. A debt service coverage ratio below 1.05x for two consecutive calendar quarters gives the Basis Lender the right to remove the Company as manager of the properties. The Company was in compliance with debt service coverage calculation for the twelve months ended June 30, 2021.
Basis Preferred Interest
In December 2019, the Operating Partnership and Big BSP Investments, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC (the “Preferred Investor”), entered into an amended and restated operating agreement (the “Sub-OP Operating Agreement”) of the Broad Street Big First OP LLC (the “Sub-OP”), a subsidiary of the Operating Partnership. Pursuant to the Sub-OP Operating Agreement, among other things, the Preferred Investor committed to make an investment of up to $10.7 million in the Sub-OP, of which $6.9 million had been funded as of June 30, 2021, in exchange for a 1.0% membership interest in the Sub-OP designated as Class A units.
Pursuant to the Sub-OP Operating Agreement, the Preferred Investor is entitled to a cumulative annual return of 14.0% on its initial capital contribution (the “Class A Return”), and the Preferred Investor will be entitled to a 20% return (the “Enhanced Class A Return”) on any capital contribution made to the Sub-OP in excess of the $10.7 million commitment. The Preferred Investor’s interests must be redeemed on or before the earlier of: (i) January 1, 2023 and (ii) the date on which the Basis Term Loan is paid in full (the “Redemption Date”). The Redemption Date may be extended to December 31, 2023 and December 31, 2024, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of the Preferred Investor’s net invested capital for the first extension option and a fee of 0.50% of the Preferred Investor’s net invested capital for the second extension option. If the redemption price is paid on or before the Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by the Preferred Investor, (b) all accrued but unpaid Class A Return, (c) all accrued but unpaid Enhanced Class A Return and (d) all costs and other expenses incurred by the Preferred Investor in connection with the enforcement of its rights under the Sub-OP Operating Agreement. Additionally, at the Redemption Date, the Preferred Investor is entitled to an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.4, less (b) the aggregate amount of Class A return payments made to the Preferred Investor (the “Minimum Multiple Amount”). As of June 30, 2021 and December 31, 2020, the Minimum Multiple Amount was approximately $1.3 million and $1.8 million, respectively, which is included as indebtedness on the consolidated balance sheet.
On June 16, 2020, the Preferred Investor made two additional capital contributions available to the Sub-OP in the aggregate amount of approximately $2.9 million, which is classified as debt. The two capital contributions consisted of: (i) a $2.4 million capital contribution to the Sub-OP that the Sub-OP contributed to the Borrowers for purposes of making debt service payments under the Basis Loan Agreement and (ii) a $0.5 million capital contribution to the Sub-OP that the Sub-OP contributed to certain of its other property owning subsidiaries for purposes of making debt service payments on mortgage debt secured by the properties owned by such subsidiaries and making payments of the Class A return due to the Preferred Investor pursuant to the Sub-OP Operating Agreement. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional capital contributions. As described below under the heading “—Mortgage Indebtedness,” the Company repaid approximately $0.75 million of these funds with the proceeds from the Vista mortgage refinance. Additionally, approximately $0.3 million of availability under the capital contributions was returned to the Preferred Investor and is no longer available to the Company. As of the date of these consolidated financial statements, there was approximately $1.0 million remaining available to the Company from these capital contributions, which is included in restricted cash.
13
MVB Loan
In December 2019, the Company, the Operating Partnership and BSR entered into a loan agreement (the “MVB Loan Agreement”) with MVB Bank, Inc. (“MVB”) with respect to a $6.5 million loan consisting of a $4.5 million term loan (the “MVB Term Loan”) and a $2.0 million revolving credit facility (the “MVB Revolver”). The MVB Term Loan matures on December 27, 2022 and the MVB Revolver had an original maturity date of December 27, 2020, which has been extended to December 27, 2022 under the terms described below. The MVB Term Loan has a fixed interest rate of 6.75% per annum. The MVB Revolver carries an interest rate of the greater of (i) Prime Rate plus 1.5% and (ii) 6.75%.
The Company has no additional availability under the MVB Term Loan and the MVB Revolver as of June 30, 2021.
The MVB Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The MVB Loan Agreement also requires the Company to maintain (as such terms are defined in the MVB Loan Agreement) (i) a debt service coverage ratio of at least 1.30 to 1.00, (ii) an EBITDA to consolidated funded debt ratio of at least 8.0%, (iii) an aggregate minimum unencumbered cash, including funds available under other lines of credit, of greater than $5.0 million (the “Minimum Liquidity Requirement”), and (iv) one or more deposit accounts with MVB with an aggregate minimum balance of $3.0 million (the “Deposit Requirement”). The failure to comply with the Deposit Requirement is not a default under the MVB Loan Agreement but will increase the interest rate under the MVB Term Loan and MVB Revolver by 1.0% until the Deposit Requirement has been satisfied.
In December 2020, the Company entered into an amendment to the MVB Loan Agreement, which extended the maturity date of the MVB Revolver to December 27, 2021, and in March 2021, the Company entered into another amendment to the MVB Loan Agreement which extended the maturity date of the MVB Revolver to December 27, 2022. The amendments also eliminate the revolving nature of the facility, require monthly principal payments as calculated over a 10-year amortization schedule, and require the repayment of $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 $250,000 payment owed by March 31, 2021 has been paid. Additionally, the amendments (i) deferred testing for covenants related to the Deposit Requirement, Minimum Liquidity Requirement and debt service coverage ratio covenant until June 30, 2021, (ii) deferred testing for the covenant related to the Company’s EBITDA to consolidated funded debt ratio until December 31, 2021, (iii) modified the debt service coverage ratio to 1.00 to 1 and (iv) modified the Minimum Liquidity Requirement to $3.0 million. These amendments were treated as modifications under applicable accounting standards.
Lamont Street Preferred Interest
In connection with the closing of the Highlandtown and Spotswood Mergers on May 21, 2021 and June 4, 2021, Lamont Street Partners LLC (“Lamont Street”) contributed an aggregate of $3.9 million in exchange for a 1.0% preferred membership interest in BSV Highlandtown Investors LLC (“BSV Highlandtown”) and BSV Spotswood Investors LLC (“BSV Spotswood”) designated as Class A units.
Lamont Street is entitled to a cumulative annual return of 13.5% (the “Lamont Street Class A Return”), of which 10.0% is paid current and 3.5% is accrued. Lamont Street’s interests must be redeemed on or before September 30, 2023 (the “Lamont Street Redemption Date”). The Lamont Street Redemption Date may be extended to September 30, 2024 and September 30, 2025, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of Lamont Street’s net invested capital for the first extension option and a fee of 0.50% of Lamont Street’s net invested capital for the second extension option. If the redemption price is paid on or before the Lamont Street Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by Lamont Street, (b) all accrued but unpaid Lamont Street Class A Return, and (c) all costs and other expenses incurred by Lamont Street in connection with the enforcement of its rights under the agreements. Additionally, at the Lamont Street Redemption Date, Lamont Street is entitled to (i) a redemption fee of 0.50% of the capital contributions returned and (ii) an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.26, less (b) the aggregate amount of Lamont Street Class A Return payments made to Lamont Street (the “Lamont Street Minimum Multiple Amount”). The Lamont Street Minimum Multiple Amount of approximately $1.0 million was recorded as interest expense in the consolidated statement of operations during the three months ended June 30, 2021. As of June 30, 2021, the remaining Lamont Street Minimum Multiple Amount was approximately $0.9 million, which is included in indebtedness on the consolidated balance sheet.
The Operating Partnership serves as the managing member of BSV Highlandtown and BSV Spotswood. However, Lamont Street has approval rights over certain major decisions, including, but not limited to (i) the incurrence of new indebtedness or modification of existing indebtedness by BSV Highlandtown and BSV Spotswood, or their direct or indirect subsidiaries, (ii) capital expenditures over $100,000, (iii) any proposed change to a property directly or indirectly owned by BSV Highlandtown and BSV Spotswood, (iv) direct or indirect acquisitions of new properties by BSV Highlandtown or BSV Spotswood, (v) the sale or other disposition of any property directly or indirectly owned by BSV Highlandtown and BSV Spotswood, (vi) the issuance of additional membership interests in BSV Highlandtown and BSV Spotswood, (vii) any amendment to an existing material lease related to the properties and (viii) decisions regarding the dissolution, winding up or liquidation of BSV Highlandtown or BSV Spotswood or the filing of any bankruptcy petition by BSV Highlandtown and BSV Spotswood or their subsidiaries.
14
Under certain circumstances, including an event whereby Lamont Street’s interests are not redeemed on or prior to the Lamont Street Redemption Date (as it may be extended), Lamont Street may remove the Operating Partnership as the manager of BSV Highlandtown and BSV Spotswood.
Mortgage Indebtedness
In addition to the indebtedness described above, as of June 30, 2021 and December 31, 2020, the Company had approximately $72.0 million and $38.1 million, respectively, of outstanding mortgage indebtedness secured by individual properties. The Hollinswood mortgage, Vista mortgage, Brookhill mortgage, Highlandtown mortgage, Cromwell mortgage, and Spotswood mortgage require the Company to maintain a debt service coverage ratio (as such terms are defined in the respective loan agreements) of at least 1.40 to 1.00, 1.50 to 1.00, 1.35 to 1.00, 1.30 to 1.00, 1.00 to 1.00 and 1.15 to 1.00, respectively. The debt service coverage ratio required for the Lamar Station Plaza East mortgage was modified with the loan amendment and is described below.
In March 2021, the Company completed the refinance of the Vista Shops mortgage loan. The new loan has a principal balance of $11.7 million, matures in June 2023, and carries an interest rate of 3.83% per annum. The Company deposited approximately $1.9 million of the proceeds from the refinance with the Basis Lender, which was applied as follows during the second quarter of 2021: (i) repaid approximately $0.75 million of the outstanding principal balance on the capital contributions, which are treated as debt, provided to the Company in June 2020 under the Basis Preferred Interest as described above under the heading “—Basis Preferred Interest”, (ii) paid approximately $46,000 in accrued interest on these funds and (iii) contributed approximately $1.1 million into an escrow account with the Basis Lender which will be used to pay down the outstanding principal balance of the capital contributions upon satisfaction of certain conditions.
In July 2021, the Company entered into a modification of the Lamar Station Plaza East mortgage loan, which extended the maturity date of the loan to July 2022. The amendment also waived the debt service coverage ratio test for the period ending June 30, 2021 and requires a debt service coverage ratio of (i) 1.05 to 1.0 for the three months ended September 30, 2021; (ii) 1.15 to 1.0 for the six months ended December 31, 2021; and (ii) 1.25 to 1.0 for the twelve months ended March 31, 2022.
PPP Loans
On April 20, 2020, a wholly owned subsidiary of the Company entered into a promissory note (the “PPP Note”) with MVB with respect to an unsecured loan of approximately $0.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the “SBA”). The PPP Loan bears interest at a rate of 1.0% per year. During the first quarter of 2021, the Company received forgiveness for its entire balance of the PPP Loan from the SBA, which is recognized as a gain on debt extinguishment in the Company’s statement of operations.
On March 18, 2021, a wholly owned subsidiary of the Company entered into a promissory note (the “Second PPP Note”) with MVB with respect to an unsecured loan of approximately $0.8 million (the “Second PPP Loan”) pursuant to the PPP. The Second PPP Loan bears interest at a rate of 1.0% per year. The Second PPP Note contains certain events of default relating to, among other things, failure to make any payment when due and material adverse changes in the borrower’s financial condition. The occurrence of an event of default, following any applicable cure period, would permit MVB to declare the unpaid principal, accrued and unpaid interest and all other amounts payable under the PPP Note to be immediately due and payable.
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of a loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs and certain mortgage interest, rent and utility expenses. The terms of any forgiveness may also be subject to further requirements under any regulations and guidelines the SBA may adopt. The Company can provide no assurances that it will obtain forgiveness of the Second PPP Loan in whole or in part. If the Company does not obtain forgiveness it is required to make equal monthly payments of principal and interest to repay the loan in full upon maturity on March 18, 2026.
Deferred Financing Costs and Debt Discounts
The total amount of deferred financing costs associated with the Company’s debt as of June 30, 2021 and December 31, 2020 was $1.9 million, gross ($1.2 million, net) and $1.4 million, gross ($0.9 million, net), respectively. Debt discounts associated with the Company’s debt as of June 30, 2021 and December 31, 2020 were $2.0 million, gross ($1.3 million, net) and $1.4 million, gross ($0.9 million, net), respectively. Deferred financing costs and debt discounts are netted against the debt balance outstanding on the Company’s consolidated balance sheets and will be amortized to interest expense through the maturity date of the related debt.
The Company recognized amortization expense of deferred financing costs and debt discounts, included in interest expense in the consolidated statement of operations, of approximately $0.3 million and $0.5 million for the three and six months ended June 30, 2021, respectively. The Company recognized amortization expense of deferred financing costs and debt discounts of approximately $0.2 million and $0.4 million for the three and six months ended June 30, 2020, respectively.
15
Debt Maturities
The following table details the Company’s scheduled principal repayments and maturities during each of the next five years and thereafter as of June 30, 2021 (dollars in thousands):
|
Year |
|
Amount Due |
|
|
|
Remainder of 2021 (1) |
|
$ |
4,707 |
|
|
2022 |
|
|
20,914 |
|
|
2023 |
|
|
111,733 |
|
|
2024 |
|
|
13,133 |
|
|
2025 |
|
|
10,665 |
|
|
2026 |
|
|
46 |
|
|
Thereafter |
|
|
- |
|
|
|
|
|
161,198 |
|
|
Unamortized debt discounts and issuance costs, net |
|
|
(2,438 |
) |
|
Total |
|
$ |
158,760 |
|
|
|
(1) |
Includes the maturity of the Lamar Station Plaza East loan of approximately $3.5 million that was modified in July 2021 to extend the maturity date to July 2022 as described above under the heading “—Mortgage Indebtedness”. |
Interest Rate Cap and Interest Rate Swap Agreements
To mitigate exposure to interest rate risk, the Company entered into an interest rate cap agreement, effective December 27, 2019, on the full $66.9 million Basis Term Loan to cap the variable LIBOR interest rate at 3.5%. The Basis Term Loan bears interest at a rate equal to the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. As of June 30, 2021, the interest rate of the Basis Term Loan was 6.125%. The Company also entered into two interest rate swap agreements on the Hollinswood Loan to fix the interest rate at 4.06%. The swap agreements are effective as of December 27, 2019 on the outstanding balance of $10.2 million and on July 1, 2021 for the additional availability of $3.0 million under the Hollinswood Loan.
The Company recognizes all derivative instruments as assets or liabilities at their fair value in the consolidated balance sheets. The changes in the fair value of the Company’s derivatives, which do not qualify for hedge accounting, are recognized in earnings. For the three and six months ended June 30, 2021, the Company recognized less than $0.1 million and approximately $0.2 million, respectively, in income related to fair value adjustments on derivatives. For the three and six months ended June 30, 2020, the Company recognized approximately $0.1 million and $0.7 million, respectively, in expense related to the fair value adjustments on derivatives.
The fair value of the Company’s derivative financial instruments as of June 30, 2021 and December 31, 2020 was an interest rate cap asset of less than $0.1 million for each period and an interest rate swap liability of approximately $0.5 million and $0.7 million, respectively. The interest rate cap asset is included in Other assets, net and the interest rate swap liability is included in Accounts payable and accrued expenses on the consolidated balance sheet, respectively.
Covenants
The Company’s loan agreements contain customary financial and operating covenants including debt service coverage ratios and aggregate minimum unencumbered cash covenants. As described above under the heading “—MVB Loan”, the lender under the MVB Loan Agreement deferred covenant tests until June 30, 2021 and December 31, 2021. As of June 30, 2021, the Company has been in compliance with all covenants under its debt agreements except for the debt service coverage ratio covenant under the Lamar Station Plaza East mortgage which was waived by the lender for the period ending June 30, 2021, as described above under the heading “—Mortgage Indebtedness”.
Note 7 - Commitments and Contingencies
Commitments
As detailed in Note 1 under the heading “—Merger with MedAmerica Properties Inc.”, there are three Mergers that have not been completed. The Company expects to issue an aggregate of 4,069,621 shares of common stock and 573,529 OP units as consideration for the additional Mergers. Until the closing of the remaining Mergers, the Company will continue to manage these three properties and earn management fees.
16
Contingencies
Impact of COVID-19
The Company continues to monitor the impact of the COVID-19 pandemic on all aspects of its business, including the impact on its tenants and rental revenue. The Company has observed the impact of COVID-19 manifest in the form of limited operations among its tenants, which has resulted, and may in the future result in, a decline in on-time rental payments and requests from tenants for temporary rental relief. In some cases, the Company may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to the Company as those currently in place. The extent of the COVID-19 pandemic’s effect on the Company’s future operational and financial performance, financial condition and liquidity will depend on future developments, including the duration and intensity of the pandemic, the effectiveness, including the deployment, of COVID-19 vaccines and treatments, the duration of government measures to mitigate the pandemic and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and difficult to predict. Given this uncertainty, the Company cannot accurately predict the effect on future periods.
Beginning in April 2020 and through the date of these financial statements, 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. To date, the weighted average payback period of deferred rent is approximately seven months which commences at various times beginning in July 2020 through June 2021. Rent deferrals to date may not be indicative of rent deferrals in any future period.
Litigation
From time to time, the Company or its properties may be subject to claims and suits in the ordinary course of business. The Company’s lessees and borrowers have indemnified, and are obligated to continue to indemnify, the Company against all liabilities arising from the operations of the properties and are further obligated to indemnify it against environmental or title problems affecting the real estate underlying such facilities. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on its consolidated financial condition, results of operations or cash flows.
Note 8 - Equity
Noncontrolling Interest
As of June 30, 2021, the Company owned a 91.1% interest in the Operating Partnership and investors in the Broad Street Entities receiving OP units as consideration for the Initial Mergers collectively owned an 8.9% interest in the Operating Partnership. Commencing on the 12-month anniversary of the date on which the OP units were issued, each limited partner of the Operating Partnership (other than the Company) has the right, subject to certain terms and conditions, to require the Operating Partnership to redeem all or a portion of the OP units held by such limited partner in exchange for cash based on the market price of the Company’s common stock or, at the Company’s option and sole discretion, for shares of the Company’s common stock on a one-for-one basis. As of June 30, 2021, no OP units have been redeemed.
2020 Equity Incentive Plan
The Company’s 2020 Equity Incentive Plan (the “Plan”) provides for the grant of stock options, share awards (including restricted stock and restricted stock units), share appreciation rights, dividend equivalent rights, performance awards, annual cash incentive awards and other equity-based awards, including LTIP units, which are convertible on a one-for-one basis into OP units. As of June 30, 2021, the Plan had 3,620,000 shares authorized for issuance with 3,376,283 shares available for future issuance, subject to certain adjustments set forth in the Plan. Each share subject to an award granted under the Plan will reduce the available shares under the Plan on a one-for-one basis. The Plan is administered by the compensation committee of the Company’s board of directors.
Restricted Stock
Awards of restricted stock are awards of the Company’s common stock that are subject to restrictions on transferability and other restrictions as established by the Company’s compensation committee on the date of grant that are generally subject to forfeiture if employment (or service as a director) terminates prior to vesting. Upon vesting, all restrictions would lapse. Except to the extent restricted under the award agreement, a participant awarded restricted stock will have all the rights of a stockholder as to those shares, including, without limitation, the right to vote and the right to receive dividends on the shares. The value of the awards is determined based on the market value of the Company’s common stock on the date of grant. The Company expenses the cost of restricted stock ratably over the vesting period.
The following table summarizes the stock-based award activity under the Plan for the six months ended June 30, 2021. There was no activity during the six months ended June 30, 2020.
17
|
|
|
Restricted Stock Awards |
|
|
Weighted-Average Grant Date Fair Value Per Restricted Stock Award |
|
||
|
Outstanding as of December 31, 2020 |
|
|
153,200 |
|
|
$ |
0.55 |
|
|
Granted |
|
|
90,517 |
|
|
|
2.95 |
|
|
Vested |
|
|
(30,172 |
) |
|
|
2.95 |
|
|
Outstanding as of June 30, 2021 |
|
|
213,545 |
|
|
$ |
1.23 |
|
Of the restricted shares that vested during the six months ended June 30, 2021, 7,136 shares were surrendered by certain employees to satisfy their tax obligations.
Compensation expense related to these share-based payments for each of the three and six months ended June 30, 2021 was approximately $0.1 million and was included in general and administrative expenses on the consolidated statement of operations. The remaining unrecognized costs from stock-based awards as of June 30, 2021 was approximately $0.2 million and will be recognized over a weighted-average period of 0.7 years.
Option Awards
In connection with the completion of the Initial Mergers, the Company assumed option awards previously issued to directors and officers of MedAmerica. Details of these options for the six months ended June 30, 2021 and 2020 are presented in the tables below.
|
|
|
Number of Shares Underlying Options |
|
|
Weighted Average Exercise Price Per Share |
|
|
Weighted Average Fair Value at Grant Date |
|
|
Weighted Average Remaining Contractual Life |
|
|
Intrinsic Value |
|
|||||
|
Balance at December 31, 2020 |
|
|
70,000 |
|
|
$ |
7.71 |
|
|
$ |
- |
|
|
|
1.76 |
|
|
$ |
- |
|
|
Options granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Options exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Options expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Balance at June 30, 2021 |
|
|
70,000 |
|
|
$ |
7.71 |
|
|
$ |
- |
|
|
|
1.26 |
|
|
$ |
- |
|
|
|
|
Number of Shares Underlying Options |
|
|
Weighted Average Exercise Price Per Share |
|
|
Weighted Average Fair Value at Grant Date |
|
|
Weighted Average Remaining Contractual Life |
|
|
Intrinsic Value |
|
|||||
|
Balance at December 31, 2019 |
|
|
70,000 |
|
|
$ |
7.71 |
|
|
$ |
- |
|
|
|
2.76 |
|
|
$ |
- |
|
|
Options granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Options exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Options expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Balance at June 30, 2020 |
|
|
70,000 |
|
|
$ |
7.71 |
|
|
$ |
- |
|
|
|
2.26 |
|
|
$ |
- |
|
The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk-free interest rate. The risk-free interest rate is the five-year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant. All 70,000 outstanding options were fully vested at grant date. The exercise price of the outstanding options exceeded the closing price of the Company’s common stock at June 30, 2021. The intrinsic value is not material.
Warrants
On June 4, 2021, the Company issued to Lamont Street warrants to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.50 per share (the “Warrants”). The Warrants were issued in connection with Lamont Street’s contribution of the Lamont Street Preferred Investment described in Note 6 under the heading “—Lamont Street Preferred Interest.”
18
Note 9 – Revenues
Disaggregated Revenue
The following tables represents a disaggregation of revenues from contracts with customers for the three and six months ended June 30, 2021 and 2020 by type of service (dollars in thousands):
|
|
|
Topic 606 |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
Revenue Recognition |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Topic 606 Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing commissions |
|
Point in time |
|
$ |
477 |
|
|
$ |
224 |
|
|
$ |
1,066 |
|
|
$ |
815 |
|
|
Property and asset management fees |
|
Over time |
|
|
149 |
|
|
|
151 |
|
|
|
346 |
|
|
|
342 |
|
|
Sales commissions |
|
Point in time |
|
|
94 |
|
|
|
- |
|
|
|
140 |
|
|
|
19 |
|
|
Development fees |
|
Over time |
|
|
88 |
|
|
|
88 |
|
|
|
177 |
|
|
|
181 |
|
|
Engineering services |
|
Over time |
|
|
74 |
|
|
|
65 |
|
|
|
133 |
|
|
|
141 |
|
|
Equity fees |
|
Point in time |
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
4 |
|
|
Topic 606 Revenue |
|
|
|
|
882 |
|
|
|
532 |
|
|
|
1,862 |
|
|
|
1,502 |
|
|
Out of Scope of Topic 606 revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
|
|
$ |
4,816 |
|
|
$ |
3,645 |
|
|
$ |
8,754 |
|
|
$ |
7,791 |
|
|
Sublease income |
|
|
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
16 |
|
|
Total Out of Scope of Topic 606 revenue |
|
|
|
|
4,816 |
|
|
|
3,653 |
|
|
|
8,754 |
|
|
|
7,807 |
|
|
Total Revenue |
|
|
|
$ |
5,698 |
|
|
$ |
4,185 |
|
|
$ |
10,616 |
|
|
$ |
9,309 |
|
Leasing Operations
Minimum cash rental payments due to the Company in future periods under executed non-cancelable operating leases in place for the Company’s properties as of June 30, 2021 are as follows (dollars in thousands):
|
Remainder of 2021 |
|
$ |
8,507 |
|
|
2022 |
|
|
16,644 |
|
|
2023 |
|
|
15,167 |
|
|
2024 |
|
|
12,284 |
|
|
2025 |
|
|
10,062 |
|
|
2026 |
|
|
7,680 |
|
|
Thereafter |
|
|
19,747 |
|
|
Total |
|
$ |
90,091 |
|
Note 10 - Earnings per Share
Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined based on the weighted average number of shares outstanding during the period combined with the incremental average shares that would have been outstanding assuming the conversion of all potentially dilutive common shares into common shares as of the earliest date possible. Potentially dilutive securities include stock options, convertible preferred stock, restricted stock, warrants and OP units, which, subject to certain terms and conditions, may be tendered for redemption by the holder thereof for cash based on the market price of the Company’s common stock or, at the Company’s option and sole discretion, for shares of the Company’s common stock on a one-for-one basis. Stock options, convertible preferred stock, restricted stock, warrants and OP units have been omitted from the Company’s denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the denominator would have no dilutive impact due to the net loss position.
19
The following table sets forth the computation of earnings per common share for the three and six months ended June 30, 2021 and 2020 (amounts in thousands, except per share amounts):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
Numerator: |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Net loss |
|
$ |
(3,129 |
) |
|
$ |
(2,483 |
) |
|
$ |
(5,071 |
) |
|
$ |
(4,919 |
) |
|
Plus: Net loss attributable to noncontrolling interest |
|
|
399 |
|
|
|
369 |
|
|
|
664 |
|
|
|
730 |
|
|
Net loss attributable to common stockholders |
|
$ |
(2,730 |
) |
|
$ |
(2,114 |
) |
|
$ |
(4,407 |
) |
|
$ |
(4,189 |
) |
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares |
|
|
24,831 |
|
|
|
21,587 |
|
|
|
23,658 |
|
|
|
21,587 |
|
|
Dilutive potential common shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Diluted weighted-average common shares |
|
|
24,831 |
|
|
|
21,587 |
|
|
|
23,658 |
|
|
|
21,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share- basic and diluted |
|
$ |
(0.11 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.19 |
) |
Note 11 - Fair Value of Financial Instruments
Financial Assets and Liabilities Measured at Fair Value
The Company’s financial assets and liabilities measured at fair value on a recurring basis currently include derivative financial instruments. These derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate caps and interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy. The fair value of the Company’s interest rate cap, which is included in Other assets, net on the consolidated balance sheets was less than $0.1 million at both June 30, 2021 and December 31, 2020. The fair value of the Company’s interest rate swap liabilities, which are included in Accounts payable and accrued liabilities on the consolidated balance sheets, was approximately $0.5 million and $0.7 million at June 30, 2021 and December 31, 2020, respectively. See Note 6 “—Interest Rate Cap and Interest Rate Swap Agreements” for further discussion regarding the Company’s interest rate cap and interest rate swap agreements.
Financial Assets and Liabilities Not Carried at Fair Value
The carrying amounts of cash and cash equivalents, restricted cash, receivables and payables are reasonable estimates of their fair value as of June 30, 2021 and December 31, 2020, respectively, due to the short-term nature of these instruments (Level 1).
At June 30, 2021 and December 31, 2020, the Company’s indebtedness was comprised of borrowings that bear interest at LIBOR plus a margin and borrowings at fixed rates. The fair value of the Company’s $106.4 million and $101.9 million in borrowings under variable rates at June 30, 2021 and December 31, 2020, respectively, approximate their carrying values as the debt is at variable rates currently available and resets on a monthly basis.
The fair value of the Company’s fixed rate debt as of June 30, 2021 and December 31, 2020 is estimated by using Level 2 inputs such as discounting the estimated future cash flows using current market rates for similar loans that would be made to borrowers with similar credit ratings and for the same remaining maturities. As of June 30, 2021, the fair value of the Company’s $53.5 million fixed rate debt was estimated to be approximately $53.8 million. As of December 31, 2020, the fair value of the Company’s $21.1 million fixed rate debt was estimated to be approximately $21.6 million.
Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement at such fair value amounts may not be possible.
Note 12 – Taxes
The provision for income taxes for the three and six months ended June 30, 2021 reflects an income tax benefit of approximately $1.0 million and $1.6 million, respectively, at an effective tax rate of 24.5% for each period. The provision for income taxes for the three and six months ended June 30, 2020 reflects an income tax benefit of approximately $0.8 million and $1.6 million, respectively, at an effective tax rate of 24% for each period. The difference between the Company’s effective tax rate and the federal statutory rate is primarily due to the loss attributable to the partnership not subject to tax and state income taxes.
Note 13 – Related Party Transactions
Receivables and Payables
As of June 30, 2021, the Company had less than $0.1 million in receivables due from related parties, included in Other assets, net on the consolidated balance sheet, which relates to receivables due from properties managed by the Company which were provided to
20
the properties for working capital. Additionally, the Company had less than $0.1 million in payables due to properties managed by the Company related to amounts borrowed by the Company for working capital, which are reflected in Payables due to related parties on the consolidated balance sheet.
As of December 31, 2020, the Company had $0.2 million in receivables due from related parties, included in Other assets, net on the consolidated balance sheet, which relates to receivables due from properties managed by the Company which were provided to the properties for working capital. Additionally, the Company had $0.7 million in payables due to properties managed by the Company related to amounts borrowed by the Company for working capital, which are reflected in Payables due to related parties on the consolidated balance sheet.
Approximately $0.3 million and $0.8 million of the Company’s total revenue for the three and six months ended June 30, 2021, respectively, was generated from related parties. Approximately $0.4 million and $0.8 million of the Company’s total revenue for the three and six months ended June 30, 2020, respectively, was generated from related parties. Additionally, approximately $0.4 million and $0.5 million of the Company’s accounts receivable, net balance at June 30, 2021 and December 31, 2020, respectively, was owed from related parties.
During 2019, the Company agreed to pay $1.5 million of consideration to Mr. Yockey in exchange for repurchasing a portion of his ownership interest in BSR prior to the Mergers. Approximately $1.0 million of this consideration was paid to Mr. Yockey in January 2020 and the remaining $0.5 million was paid to Mr. Yockey in the second quarter of 2021.
The Mergers
As consideration in the Mergers that have closed as of the date of these financial statements, as a result of their interests in the Broad Street Entities party to such Mergers, (i) Mr. Jacoby received 2,366,950 shares of the Company’s common stock and 856,805 OP units, (ii) Mr. Yockey received 2,366,950 shares of the Company’s common stock and 420,523 OP units, (iii) Alexander Topchy, the Company’s Chief Financial Officer, received an aggregate of 120,584 shares of the Company’s common stock and 48,320 OP units, (iv) Daniel J.W. Neal, a member of the Company’s Board of Directors, received, directly or indirectly, 774,189 shares of the Company’s common stock, and (v) Samuel M. Spiritos, a director of the Company, indirectly received 13,827 shares of the Company’s common stock. As consideration in the remaining three Mergers as a result of their interests in the remaining Broad Street Entities, (i) Mr. Jacoby will receive an aggregate of approximately 184,685 shares of the Company’s common stock and 136,213 OP units, (ii) Mr. Yockey will receive an aggregate of approximately 184,685 shares of the Company’s common stock and 136,213 OP units, (iii) Mr. Topchy will receive 18,695 shares of the Company’s common stock and 14,338 OP units and (iv) Mr. Neal will receive, directly or indirectly, an aggregate of approximately 120,431 shares of the Company’s common stock.
Management Fees
The Company provides management services for the three properties to be acquired as of June 30, 2021 in the remaining Mergers. For each property, the Company receives a management fee ranging from 3.0% to 4.0% of such property’s gross income. As described above, Messrs. Jacoby, Yockey, Topchy and Neal have interests in some or all of the Broad Street Entities that own the three properties.
Messrs. Jacoby and Yockey, along with Mr. Topchy, Jeffrey H. Foster, a member of the Company’s Board of Directors, and Aras Holden, the Company’s vice president of asset management and acquisitions, own an interest in BBL Current Investors LLC (“BBL”). BBL is redeveloping a property adjacent to the Company’s Midtown Colonial property into a mixed-use facility with retail on the ground floor and multi-family above. When the redevelopment is complete, the Company will manage the retail portion of the property and will receive management fees from BBL. However, the Company will have no ownership interest in the property.
Ground Lease
The Company owns the fee-simple interest in the land that the Cromwell Field Shopping Center, a property previously managed by the Company, is located on under a leasehold interest. The Company leased the land to the owner of the Cromwell Field Shopping Center pursuant to a ground lease and recognized less than $0.1 million of revenue under the ground lease for each of the three and six months ended June 30, 2021 and 2020. The ground lease was terminated upon the acquisition of Cromwell Field Shopping Center as described in Note 3 “—2021 Real Estate Acquisitions”.
Tax Protection Agreements
On December 27, 2019, pursuant to the Merger Agreements, the Company and the Operating Partnership entered into tax protection agreements (the “Tax Protection Agreements”) with each of the prior investors in BSV Colonial Investor LLC, BSV Lamonticello Investors LLC and BSV Patrick Street Member LLC, including Mr. Jacoby, Mr. Yockey and Mr. Topchy, in connection with their receipt of OP units in certain of the Initial Mergers. Pursuant to the Tax Protection Agreements, until the seventh anniversary of the completion of the Initial Mergers, the Company and the Operating Partnership may be required to indemnify the other parties thereto for their tax liabilities related to built-in gain that exists with respect to the properties known as Midtown Colonial, Midtown Lamonticello and Vista Shops at Golden Mile (the “Protected Properties”). Furthermore, until the seventh anniversary of the completion of the Initial Mergers, the Company and the Operating Partnership will be required to use commercially reasonable efforts to avoid any event, including a sale of the Protected Properties, that triggers built-in gain to the other parties to the Tax Protection Agreements, subject to certain exceptions, including like-kind exchanges under Section 1031 of the Internal Revenue Code.
21
Guarantees
The Company’s subsidiaries’ obligations under the Basis Term Loan Agreement, the Sub-OP Operating Agreement, the Brookhill mortgage loan, and the Spotswood mortgage loan are guaranteed by Mr. Jacoby and Mr. Yockey. We have agreed to indemnify Mr. Yockey for any losses he incurs as a result of his guarantee of the Basis Term Loan, the Sub-OP Operating Agreement, and the Brookhill mortgage loan. Mr. Jacoby is also a guarantor under the MVB Loan Agreement, the Lamont Street Preferred Interest, the Highlandtown mortgage loan and the Cromwell mortgage loan.
Consulting Agreement
The Company has engaged Timbergate Ventures, LLC, an entity wholly owned by Mr. Yockey, as a consultant for a two-year term beginning December 27, 2019. Pursuant to this arrangement, the Company pays Timbergate Ventures, LLC a consulting fee of $0.2 million per year. During each of the three months ended June 30, 2021 and 2020, approximately $50,000 was recorded in general and administrative expenses related to this consulting agreement. During each of the six months ended June 30, 2021 and 2020, approximately $0.1 million was recorded in general and administrative expenses related to this consulting agreement.
Legal Fees
Samuel M. Spiritos, a member of the Company’s Board of Directors, is the managing partner of Shulman Rogers LLP, which represents the Company in certain real estate matters, including with matters related to the Mergers. During each of the three and six months ended June 30, 2021, the Company paid approximately $0.2 million in legal fees to Shulman Rogers LLP. During each of the three and six months ended June 30, 2020, the Company paid less than $0.1 million in legal fees to Shulman Rogers LLP.
Note 14 – Subsequent Events
2021 Debt Amendments
The Company modified the Lamar Station Plaza East loan as described in Note 6 under the heading “—Mortgage Indebtedness”.
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read together with the consolidated financial statements and notes thereto appearing elsewhere is this report. References to “we,” “our,” “us,” and “Company” refer to Broad Street Realty, Inc., together with its consolidated subsidiaries.
Forward-Looking Statements
We make statements in this report that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). These forward-looking statements include, without limitation, statements about our estimates, expectations, predictions and forecasts of our future business plans and financial and operating performance and/or results, as well as statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. When we use the words “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense, we intend to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance, and our actual financial and operating results could differ materially from those set forth in the forward-looking statements. You are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Factors that may impact forward-looking statements include, among others, the following:
|
|
• |
uncertainties related to the COVID-19 pandemic, including the unknown duration and economic, operational and financial impacts of the COVID-19 pandemic and the actions taken or contemplated by U.S. and local governmental authorities or others in response to the pandemic on the Company’s business, employees and tenants; |
|
|
• |
our limited access to capital and our ability to repay, refinance, restructure and/or extend our indebtedness as it becomes due; |
|
|
• |
risks associated with our ability to consummate the pending merger transactions (described further herein), the timing and closing of such transactions and unexpected costs or unexpected liabilities that may arise from the transactions, whether or not consummated; |
|
|
• |
risks related to disruption of management’s attention from its ongoing business operations due to the pending merger transactions; |
|
|
• |
our ability to recognize the benefits of the completed and pending mergers; |
|
|
• |
our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate acquisitions or investments; |
|
|
• |
adverse economic or real estate developments, either nationally or in the markets in which the Company’s properties are located; |
|
|
• |
changes in financial markets and interest rates, or to our business or financial condition; |
|
|
• |
the nature and extent of our competition; |
|
|
• |
other factors affecting the retail industry or the real estate industry generally; |
|
|
• |
availability of financing and capital; |
|
|
• |
the performance of our portfolio; and |
|
|
• |
the impact of any financial, accounting, legal or regulatory issues or litigation, including any legal proceedings, regulatory matters or enforcement matters that have been or in the future may be instituted relating to the merger transactions or that may affect us. |
See Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020 for further discussion of these and other risks, as well as the risks, uncertainties and other factors discussed in this report and identified in other documents we file with the Securities and Exchange Commission from time to time. You should carefully consider these risks before making any investment decisions in the Company. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us.
23
Overview
We are a fully integrated real estate company that owns, operates, develops and redevelops primarily grocery-anchored shopping centers, street retail-based properties and mixed-use assets in the Mid-Atlantic and Denver, Colorado markets. As of June 30, 2021, we owned 14 properties with an additional three properties under contract to be acquired. The properties in our portfolio and the properties we have under contract are dispersed in sub-markets that we believe generally have high population densities, high traffic counts, good visibility and accessibility, which provide our tenants with attractive locations to serve the necessity-based needs of the surrounding communities. We intend to focus on acquiring additional strategically positioned properties in established and developing neighborhoods primarily leased to necessity-based tenants that meet the needs of the surrounding communities in our existing markets, as well as acquiring properties in new markets that meet our investment criteria, including the Southeastern United States and major university communities. In addition, we provide commercial real estate brokerage services for our own portfolio and third-party office, industrial and retail operators and tenants.
We are structured as an “Up-C” corporation with substantially all of our operations conducted through our Operating Partnership and its direct and indirect subsidiaries. As of June 30, 2021, we owned 91.1% of the units of limited partnership interest (“OP units”) in our Operating Partnership, and we are the sole member of the sole general partner of our Operating Partnership.
Mergers with MedAmerica Properties Inc.
On December 27, 2019 (the “Merger Date”), subsidiaries of MedAmerica Properties Inc. (“MedAmerica”) completed 11 mergers (the “Initial Mergers”), including the mergers with Broad Street Realty, LLC (“BSR”) and Broad Street Ventures, LLC (“BSV”) and mergers with nine Broad Street Entities. Prior the Initial Mergers, Broad Street Realty, LLC (“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 current portfolio and the additional properties to be acquired by the Company upon the completion of the additional Mergers. BSR also provided real estate brokerage services for the properties acquired or to be acquired by the Company as well as for third party clients. 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 entities (the “Broad Street Entities”) for which Broad Street Ventures, LLC (“BSV”) served or serves, directly or indirectly and either alone or with other co-managers or co-managing members as the manager or managing member.
Upon completion of the Initial Mergers and in accordance with the applicable merger agreements, Mr. Jacoby was appointed as the chairman and chief executive officer of the Company, Alexander Topchy was appointed as the chief financial officer of the Company, and each of the employees of BSR became employees of the Company. In addition, 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 the Brookhill Azalea Shopping Center. On July 2, 2020, the Company closed one merger whereby it acquired Lamar Station Plaza East. The Company closed on three additional Mergers whereby it acquired the Highlandtown Village Shopping Center, Cromwell Field Shopping Center and Spotswood Valley Square Shopping Center on May 21, 2021, May 26, 2021, and June 4, 2021, respectively.
As consideration for the mergers with the Broad Street Entities that have closed as of the date of this report, the Company has issued an aggregate of 25,992,073 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 $1.9 million in cash as a portion of the consideration for the mergers.
As of the date of this report, there are three mergers that have not been completed. The Company expects to issue an aggregate of 4,069,621 shares of common stock and 573,529 OP units as consideration for the additional mergers. Until the closing of the remaining mergers, the Company will continue to manage these three properties and receive management fees.
Impact of COVID-19
We continue to monitor and address risks related to the COVID-19 pandemic. Since March 2020 when the World Health Organization declared COVID-19 a pandemic and the United States declared a national emergency with respect to COVID-19, we have been impacted by COVID-19 and the actions taken by federal, state, and local authorities, including restrictions on freedom of movement and business operations, such as travel bans, border closings, business closures, quarantines and shelter-in-place or similar orders. The extent of the COVID-19 pandemic’s effect on our future operational and financial performance, financial condition and liquidity will depend on future developments, including the duration and intensity of the pandemic, the effectiveness, including the deployment, of COVID-19 vaccines and treatments, the duration of government measures to mitigate the pandemic and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and difficult to predict. Given this uncertainty, we cannot accurately predict the effect on future periods.
All of our properties are located in areas that have been subject to shelter-in-place orders and restrictions on the types of businesses that operate. Our rental revenue and operating results depend significantly on the occupancy levels at our properties and the ability of our tenants to meet their rent and other obligations to us, and the government-imposed measures have resulted in significant disruptions
24
to our and our tenants’ businesses. We have observed the impact of COVID-19 manifest in the form of limited operations among our tenants, 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.
As of August 6, 2021, we have collected, deferred and forgiven, respectively, the percentage of contractual revenue (base rent and expense reimbursements) due from April 2020 through June 2021 as outlined in the table below:
|
Period |
|
Percentage of Contractual Rent Collected |
|
|
Percentage of Contractual Rent Deferred |
|
|
Percentage of Contractual Rent Forgiven |
|
|
Q2 2020 |
|
85.6% |
|
|
6.6% |
|
|
6.6% |
|
|
Q3 2020 |
|
95.2% |
|
|
3.1% |
|
|
0.3% |
|
|
Q4 2020 |
|
97.1% |
|
|
0.1% |
|
|
0.0% |
|
|
Q1 2021 |
|
97.3% |
|
|
0.0% |
|
|
0.1% |
|
|
Q2 2021 |
|
94.5% |
|
|
0.0% |
|
|
0.0% |
|
We have entered into lease modifications that deferred approximately $0.4 million and waived approximately $0.3 million of contractual rent, respectively. To date, the weighted average payback period of deferred rent is approximately seven months which commences at various times beginning in July 2020 through June 2021.
Collections and rent deferrals to date may not be indicative of collections or rent deferrals in any future period. Even as governmental restrictions are lifted, our tenants may continue to be impacted by economic conditions resulting from COVID-19 or public perception of the risk of COVID-19, which could adversely affect foot traffic to our tenants’ businesses and our tenants’ ability to adequately staff their businesses. If the impacts of the pandemic continue, we expect that certain tenants will experience greater financial distress, which could result in additional tenants being unable to pay contractual rent (including deferred rent) on a timely basis, or at all, additional requests for rental relief, early lease terminations, tenant bankruptcies, decreases in occupancy, reductions in rent, or increases in rent concessions or other accommodations. In some cases, we may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place. These factors also may adversely affect the value of our properties. The extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted.
We believe that the actions we have taken to improve our financial position and maximize our liquidity, as described further in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report on Form 10-K will continue to mitigate the impact to our cash flow caused by tenants not timely paying contractual rent. We will continue to actively monitor the implications of the COVID-19 pandemic on our and our tenants’ businesses and may take further actions to alter our business practices if we determine that such changes are in the best interests of our employees, tenants and stockholders, or as required by federal, state, or local authorities.
Portfolio Summary
As of June 30, 2021, our portfolio was comprised of 14 retail properties consisting of 1,537,516 total square feet of gross leasable area (“GLA”). The following table provides additional information about the properties in our portfolio (dollars in thousands).
|
Property Name |
|
City/State |
|
GLA |
|
|
Percent Leased(1) |
|
|
Gross Real Estate Assets |
|
|||
|
Avondale Shops |
|
Washington, D.C. |
|
|
28,044 |
|
|
|
76.5 |
% |
|
$ |
8,393 |
|
|
Brookhill Azalea Shopping Center |
|
Richmond, VA |
|
|
163,363 |
|
|
|
81.6 |
% |
|
|
17,262 |
|
|
Coral Hills Shopping Center |
|
Capitol Heights, MD |
|
|
85,928 |
|
|
|
100.0 |
% |
|
|
16,682 |
|
|
Cromwell Field Shopping Center |
|
Glen Burnie, MD |
|
|
233,486 |
|
|
|
85.3 |
% |
|
|
18,590 |
|
|
Crestview Square |
|
Landover Hills, MD |
|
|
74,694 |
|
|
|
98.7 |
% |
|
|
18,592 |
|
|
Dekalb Plaza |
|
East Norriton, PA |
|
|
178,815 |
|
|
|
81.5 |
% |
|
|
26,811 |
|
|
Highlandtown Village Shopping Center |
|
Baltimore, MD |
|
|
57,513 |
|
|
|
85.5 |
% |
|
|
7,383 |
|
|
Hollinswood Shopping Center |
|
Baltimore, MD |
|
|
112,698 |
|
|
|
91.9 |
% |
|
|
25,340 |
|
|
Lamar Station Plaza East |
|
Lakewood, CO |
|
|
42,700 |
|
|
|
59.8 |
% |
|
|
6,099 |
|
|
Midtown Colonial |
|
Williamsburg, VA |
|
|
98,043 |
|
|
|
71.9 |
% |
|
|
14,827 |
|
|
Midtown Lamonticello |
|
Williamsburg, VA |
|
|
63,173 |
|
|
|
90.6 |
% |
|
|
16,162 |
|
|
Spotswood Valley Square |
|
Harrisonburg, VA |
|
|
190,650 |
|
|
|
99.3 |
% |
|
|
14,650 |
|
|
Vista Shops at Golden Mile |
|
Frederick, MD |
|
|
98,858 |
|
|
|
96.8 |
% |
|
|
14,912 |
|
|
West Broad Commons |
|
Richmond, VA |
|
|
109,551 |
|
|
|
81.3 |
% |
|
|
19,825 |
|
|
Total |
|
|
|
|
1,537,516 |
|
|
|
87.1 |
% |
|
$ |
225,528 |
|
|
(1) |
Percent leased is calculated as (a) GLA under commenced leases as of June 30, 2021, divided by (b) total GLA, expressed as a percentage.
|
25
Geographic Concentration
The following table contains information regarding the geographic concentration of the properties in our portfolio as of June 30, 2021, which includes rental income for the six months ended June 30, 2021 and 2020 (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income for the six months ended June 30, |
|
|||||
|
Location |
|
Number of Properties |
|
Gross Real Estate Assets at June 30, 2021 |
|
|
Percentage of Total Real Estate Assets at June 30, 2021 |
|
|
2021 |
|
|
2020 |
|
||||
|
Maryland(1) |
|
6 |
|
$ |
101,499 |
|
|
|
45.0 |
% |
|
$ |
4,298 |
|
|
$ |
3,947 |
|
|
Virginia |
|
5 |
|
|
82,726 |
|
|
|
36.7 |
% |
|
|
2,688 |
|
|
|
2,394 |
|
|
Pennsylvania |
|
1 |
|
|
26,811 |
|
|
|
11.9 |
% |
|
|
1,106 |
|
|
|
1,126 |
|
|
Washington D.C. |
|
1 |
|
|
8,393 |
|
|
|
3.7 |
% |
|
|
325 |
|
|
|
324 |
|
|
Colorado |
|
1 |
|
|
6,099 |
|
|
|
2.7 |
% |
|
|
337 |
|
|
|
- |
|
|
|
|
14 |
|
$ |
225,528 |
|
|
|
100.0 |
% |
|
$ |
8,754 |
|
|
$ |
7,791 |
|
|
(1) |
Rental income for each of the six months ended June 30, 2021 and 2020 includes less than $0.1 million of ground rental revenue under the ground lease for the parcel of land acquired in January 2020. The ground lease was terminated upon the completion of the Cromwell Field Shopping Center Merger on May 26, 2021. |
Critical Accounting Policies
Refer to our audited consolidated financial statements and notes thereto for the year ended December 31, 2020 for a discussion of our accounting policies, including the critical accounting policies of revenue recognition, real estate investments, asset impairment, income taxes, and our accounting policy on consolidation, which are included in our 2020 Annual Report on Form 10-K, which was filed with the SEC on April 15, 2021. During the six months ended June 30, 2021, there were no material changes to these policies. See Note 2 “—Recent Accounting Pronouncements” for recently-adopted accounting pronouncements.
Factors that May Impact Future Results of Operations
Rental Income
Growth in rental income will depend on our ability to acquire additional properties that meet our investment criteria and on filling vacancies and increasing rents on the properties in our portfolio. The amount of rental income generated by the properties in our portfolio depends on our ability to renew expiring leases or re-lease space upon the scheduled or unscheduled termination of leases, lease currently available space and maintain or increase rental rates at our properties. In addition to the factors regarding the COVID-19 pandemic described above, our rental income in future periods could be adversely affected by local, regional, or national economic conditions, an oversupply of or a reduction in demand for retail space, changes in market rental rates, our ability to provide adequate services and maintenance at our properties, and fluctuations in interest rates. In addition, economic downturns affecting our markets or downturns in our tenants’ businesses that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments to us, including as a result of the COVID-19 pandemic, could adversely affect our ability to maintain or increase rent and occupancy.
Scheduled Lease Expirations
Our ability to re-lease expiring space at rental rates equal to or greater than that of current rental rates will impact our results of operations. Our properties are marketed to smaller tenants that generally desire shorter-term leases. As of June 30, 2021, approximately 36.0% of our portfolio (based on GLA) was leased to tenants occupying less than 10,000 square feet. In addition, as of June 30, 2021, approximately 12.9% of our GLA was vacant and approximately 4.8% of our leases (based on GLA) were month-to-month or scheduled to expire on or before December 31, 2021. Although we maintain ongoing dialogue with our tenants, we generally raise the issue of renewal at least 12 months prior to lease renewal often providing concessions for early renewal. If our current tenants do not renew their leases or terminate their leases early, we may be unable to re-lease the space to new tenants on favorable terms or at all, including as a result of the COVID-19 pandemic and related government measures described above. Our vacancy trends will be impacted by new properties that we acquire, which may include properties with higher vacancy where we identified opportunities to increase occupancy.
26
Acquisitions
Over the long-term, we intend to grow our portfolio through the acquisition of additional strategically positioned properties in established and developing neighborhoods primarily leased to necessity-based tenants that meet the needs of the surrounding communities in our existing markets, as well as acquiring properties in new markets that meet our investment criteria, including the Southeastern United States and major university communities. We have established relationships with a wide variety of market participants, including tenants, leasing agents, investment sales brokers, property owners and lenders, in our target markets and beyond, and, over the long-term, we believe that we will have opportunities to acquire properties that meet our investment criteria at attractive prices.
General and Administrative Expenses
General and administrative expenses include employee compensation costs, professional fees, consulting, and other general administrative expenses. We expect an increase in general and administrative expenses in the future related to stock issuances to employees. We expect that our general and administrative expenses will rise in some measure as our portfolio grows but that such expenses as a percentage of our revenue will decrease over time due to efficiencies and economies of scale.
Capital Expenditures
We incur capital expenditures at our properties that vary in amount and frequency based on each property’s specific needs. We expect our capital expenditures will be for recurring maintenance to ensure our properties are in good working condition, including parking and roof repairs, façade maintenance and general upkeep. We also will incur capital expenditures related to repositioning and refurbishing properties where we have identified opportunities to improve our properties to increase occupancy, and we may incur capital expenditures related to redevelopment or development consistent with our business and growth strategies.
Results of Operations
Comparison of the three months ended June 30, 2021 to the three months ended June 30, 2020 (dollars in thousands)
|
|
|
For the Three Months Ended |
|
|
Change |
|
||||||||||
|
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
$ |
|
|
% |
|
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
4,816 |
|
|
$ |
3,645 |
|
|
$ |
1,171 |
|
|
|
32 |
% |
|
Commissions |
|
|
571 |
|
|
|
224 |
|
|
|
347 |
|
|
|
155 |
% |
|
Management and other fees |
|
|
311 |
|
|
|
316 |
|
|
|
(5 |
) |
|
|
(2 |
%) |
|
Total revenues |
|
|
5,698 |
|
|
|
4,185 |
|
|
|
1,513 |
|
|
|
36 |
% |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
446 |
|
|
|
140 |
|
|
|
306 |
|
|
|
219 |
% |
|
Depreciation and amortization |
|
|
2,676 |
|
|
|
2,499 |
|
|
|
177 |
|
|
|
7 |
% |
|
Property operating |
|
|
1,197 |
|
|
|
907 |
|
|
|
290 |
|
|
|
32 |
% |
|
Bad debt expense (recoveries) |
|
|
(9 |
) |
|
|
24 |
|
|
|
(33 |
) |
|
|
(138 |
%) |
|
General and administrative |
|
|
2,477 |
|
|
|
2,037 |
|
|
|
440 |
|
|
|
22 |
% |
|
Total operating expenses |
|
|
6,787 |
|
|
|
5,607 |
|
|
|
1,180 |
|
|
|
21 |
% |
|
Operating loss |
|
|
(1,089 |
) |
|
|
(1,422 |
) |
|
|
333 |
|
|
|
(23 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
7 |
|
|
|
1 |
|
|
|
6 |
|
|
|
600 |
% |
|
Derivative fair value adjustment |
|
|
20 |
|
|
|
(69 |
) |
|
|
89 |
|
|
|
(129 |
%) |
|
Interest expense |
|
|
(3,081 |
) |
|
|
(1,611 |
) |
|
|
(1,470 |
) |
|
|
91 |
% |
|
Gain on extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
Other expense |
|
|
(5 |
) |
|
|
(166 |
) |
|
|
161 |
|
|
|
(97 |
%) |
|
Total other income (expense) |
|
|
(3,059 |
) |
|
|
(1,845 |
) |
|
|
(1,214 |
) |
|
|
66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
1,019 |
|
|
|
784 |
|
|
|
235 |
|
|
|
30 |
% |
|
Net loss |
|
$ |
(3,129 |
) |
|
$ |
(2,483 |
) |
|
$ |
(646 |
) |
|
|
26 |
% |
|
Plus: Net loss attributable to noncontrolling interest |
|
|
399 |
|
|
|
369 |
|
|
|
30 |
|
|
|
8 |
% |
|
Net loss attributable to common stockholders |
|
$ |
(2,730 |
) |
|
$ |
(2,114 |
) |
|
$ |
(616 |
) |
|
|
29 |
% |
Revenues for the three months ended June 30, 2021 increased approximately $1.5 million, or 36%, from the prior year period as a result of an approximately $1.2 million increase in rental income and an approximately $0.3 million increase in commissions. The increase in rental income is mainly attributable to an increase of $0.8 million related to the acquisition of one property in July 2020 and three properties in the second quarter of 2021 and an approximately $0.2 million increase related to rent waived during the three months
27
ended June 30, 2020 related to COVID-19. The increase in commissions is mainly attributable to a larger transaction volume due to transactions delayed in 2020 related to COVID-19.
Total operating expenses for the three months ended June 30, 2021 increased approximately $1.2 million, or 21%, over the prior period primarily from: (i) an increase in general and administrative expenses of approximately $0.4 million mainly attributable to an increase in professional service fees, including legal, audit and tax fees of approximately $0.4 million and an increase in stock compensation expense of approximately $0.1 million; (ii) an increase in property operating expense of approximately $0.3 million which is related to the four properties acquired since July 2020; (iii) an increase in cost of services of approximately $0.3 million related to a larger transaction volume due to transactions delayed in 2020 related to COVID-19; and (iv) an increase in depreciation and amortization expense of approximately $0.2 million, which is comprised of an increase in depreciation and amortization expense of approximately $0.5 million related to the four properties acquired since July 2020, partially offset by a decrease in amortization of in-place lease intangibles that were fully amortized during 2020 of approximately $0.4 million.
Derivative fair value adjustment, related to the interest rate cap and interest rate swaps the Company entered into in December 2019, was less than $0.1 million of income for the three months ended June 30, 2021, as compared to approximately $0.1 million of expense for the prior year period. Interest expense for the three months ended June 30, 2021 increased approximately $1.5 million over the prior year period. This increase is mainly attributable the recognition of approximately $1.0 million of interest expense related to the Lamont Street Minimum Multiple Amount described below under the heading “Liquidity and Capital Resources—Consolidated Indebtedness and Preferred Equity —Lamont Street Preferred Interest”, as well as additional net borrowings of approximately $43.4 million. The approximately $0.2 million decrease in other expense is mainly attributable to a decrease in expensed due diligence costs for acquisitions no longer being pursued by the Company.
Comparison of the six months ended June 30, 2021 to the six months ended June 30, 2020 (dollars in thousands)
|
|
|
For the Six Months Ended |
|
|
Change |
|
||||||||||
|
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
$ |
|
|
% |
|
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
8,754 |
|
|
$ |
7,791 |
|
|
$ |
963 |
|
|
|
12 |
% |
|
Commissions |
|
|
1,206 |
|
|
|
834 |
|
|
|
372 |
|
|
|
45 |
% |
|
Management and other fees |
|
|
656 |
|
|
|
684 |
|
|
|
(28 |
) |
|
|
(4 |
%) |
|
Total revenues |
|
|
10,616 |
|
|
|
9,309 |
|
|
|
1,307 |
|
|
|
14 |
% |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
789 |
|
|
|
589 |
|
|
|
200 |
|
|
|
34 |
% |
|
Depreciation and amortization |
|
|
4,989 |
|
|
|
4,981 |
|
|
|
8 |
|
|
|
0 |
% |
|
Property operating |
|
|
2,447 |
|
|
|
1,858 |
|
|
|
589 |
|
|
|
32 |
% |
|
Bad debt expense |
|
|
46 |
|
|
|
165 |
|
|
|
(119 |
) |
|
|
(72 |
%) |
|
General and administrative |
|
|
5,063 |
|
|
|
4,155 |
|
|
|
908 |
|
|
|
22 |
% |
|
Total operating expenses |
|
|
13,334 |
|
|
|
11,748 |
|
|
|
1,586 |
|
|
|
14 |
% |
|
Operating loss |
|
|
(2,718 |
) |
|
|
(2,439 |
) |
|
|
(279 |
) |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
7 |
|
|
|
48 |
|
|
|
(41 |
) |
|
|
(85 |
%) |
|
Derivative fair value adjustment |
|
|
211 |
|
|
|
(704 |
) |
|
|
915 |
|
|
|
(130 |
%) |
|
Interest expense |
|
|
(4,959 |
) |
|
|
(3,191 |
) |
|
|
(1,768 |
) |
|
|
55 |
% |
|
Gain on extinguishment of debt |
|
|
757 |
|
|
|
- |
|
|
|
757 |
|
|
- |
|
|
|
Other expense |
|
|
(12 |
) |
|
|
(186 |
) |
|
|
174 |
|
|
|
(94 |
%) |
|
Total other income (expense) |
|
|
(3,996 |
) |
|
|
(4,033 |
) |
|
|
37 |
|
|
|
(1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
1,643 |
|
|
|
1,553 |
|
|
|
90 |
|
|
|
6 |
% |
|
Net loss |
|
$ |
(5,071 |
) |
|
$ |
(4,919 |
) |
|
$ |
(152 |
) |
|
|
3 |
% |
|
Plus: Net loss attributable to noncontrolling interest |
|
|
664 |
|
|
|
730 |
|
|
|
(66 |
) |
|
|
(9 |
%) |
|
Net loss attributable to common stockholders |
|
$ |
(4,407 |
) |
|
$ |
(4,189 |
) |
|
$ |
(218 |
) |
|
|
5 |
% |
Revenues for the six months ended June 30, 2021 increased approximately $1.3 million, or 14%, from the prior year period as a result of an approximately $1.0 million increase in rental income and an approximately $0.4 million increase in commissions. Rental income increased as a result of the acquisition of one property in July 2020 and three properties in the second quarter of 2021. The increase in commissions is mainly attributable to a larger transaction volume due to transactions delayed in 2020 related to COVID-19.
Total operating expenses for the six months ended June 30, 2021 increased approximately $1.6 million, or 14%, over the prior period primarily from: (i) an increase in general and administrative expenses of approximately $0.9 million mainly attributable to an increase in professional service fees, including legal, audit, and tax fees of approximately $0.7 million, an increase in stock compensation
28
expense of approximately $0.1 million and higher payroll and related expenses of approximately $0.1 million; (ii) an increase in property operating expense of approximately $0.6 million, of which approximately $0.4 million is related to the four properties acquired since July 2020, and $0.2 million is related to an increase in snow removal expense; and (iii) an increase in cost of services of approximately $0.2 million related to a larger transaction volume due to transactions delayed in 2020 related to COVID-19. The increase was partially offset by a decrease in bad debt expense of approximately $0.1 million.
Derivative fair value adjustment, related to the interest rate cap and interest rate swaps the Company entered into in December 2019, was approximately $0.2 million of income for the six months ended June 30, 2021, as compared to approximately $0.7 million of expense for the prior year period. Interest expense for the six months ended June 30, 2021 increased approximately $1.8 million over the prior year period. This increase is mainly attributable the recognition of approximately $1.0 million of interest expense related to the Lamont Street Minimum Multiple Amount described below under the heading “Liquidity and Capital Resources—Consolidated Indebtedness and Preferred Equity —Lamont Street Preferred Interest”, as well as additional net borrowings of approximately $43.4 million. The gain on extinguishment of debt of approximately $0.8 million for the six months ended June 30, 2021 is related to the forgiveness of the PPP Loan described below under the heading “Liquidity and Capital Resources—Consolidated Indebtedness and Preferred Equity —PPP Loans.”. The approximately $0.2 million decrease in other expense is mainly attributable to a decrease in expensed due diligence costs for acquisitions no longer being pursued by the Company.
Net loss attributable to noncontrolling interest decreased approximately $0.1 million over the prior year period. The net loss attributable to noncontrolling interest reflects the proportionate share of the OP units held by outside investors in the operating results of the Operating Partnership from the completion of the Mergers on December 27, 2019, described above under the heading “—Mergers with MedAmerica Properties Inc.”.
Liquidity and Capital Resources
Overview
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay any outstanding borrowings, fund and maintain our assets and operations and other general business needs.
Our short-term liquidity requirements consist primarily of debt service requirements, operating expenses, recurring capital expenditures (such as repairs and maintenance of our properties), and non-recurring capital expenditures (such as capital improvements and tenant improvements). We expect to meet our short-term liquidity requirements through cash on hand and cash reserves. As of June 30, 2021 and August 6, 2021, we had unrestricted cash and cash equivalents of approximately $3.1 million and $2.8 million, respectively, available for current liquidity needs and restricted cash of approximately $9.3 million and $9.7 million, respectively, which is available for debt service shortfall requirements, certain capital expenditures, real estate taxes and insurance. As described further in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report on Form 10-K, we have taken a number of proactive measures to maintain the strength of our business and manage the impacts of the COVID-19 pandemic on our operations and liquidity.
As of August 6, 2021, we have collected 94.5% of contractual rent due for the three months ended June 30, 2021. We expect that our rent collections will continue to be below our tenants’ contractual rent obligations for so long as certain businesses limit operations and public perception of the risk of COVID-19 persists, which will adversely impact our cash flows and liquidity. If the impacts of the pandemic continue, we expect that certain tenants will experience greater financial distress, which could result in additional tenants being unable to pay contractual rent (including deferred rent) on a timely basis, or at all, additional requests for rental relief, early lease terminations, tenant bankruptcies, decreases in occupancy, reductions in rent, or increases in rent concessions or other accommodations. In some cases, we may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place. The extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted.
We have a mortgage loan secured by Lamar Station Plaza East totaling approximately $3.5 million that was scheduled to mature in July 2021. We entered into a modification to the loan to extend the maturity date to July 2022. We do not project that we will have sufficient cash available to pay off the mortgage balance upon maturity and will seek to refinance the mortgage. There can be no assurances that we will be successful on the refinance of the mortgage on favorable terms or at all. If we are unable to refinance this mortgage, the lender has the right to place the loan in default and ultimately foreclose on the property. Under this circumstance, we would not have any further financial obligations to the lender.
Our long-term liquidity requirements are expected to consist primarily of funds necessary for the repayment of debt at or prior to maturity, capital improvements, development and/or redevelopment of properties and property acquisitions. We expect to meet our long-term liquidity requirements through net cash from operations, additional secured and unsecured debt and, subject to market conditions, the issuance of additional shares of common stock, preferred stock, or OP units.
We have encountered difficulties obtaining the necessary capital to service and refinance our existing indebtedness. Our access to capital depends upon a number of factors over which we have little or no control, including general market conditions, the market’s perception of our current and potential future earnings and cash distributions, our current debt levels and the market price of the shares of our common stock. Although our common stock is quoted on the OTC, there is a very limited trading market for our common stock,
29
and if a more active trading market is not developed and sustained, we will be limited in our ability to issue equity to fund our capital needs. The severe economic, market and other disruptions, worldwide, including in the bank lending, capital, and other financial markets, caused by the COVID-19 pandemic and the impact on the retail industry have exacerbated the issues we have encountered obtaining financing. If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet the capital and operating needs of our existing properties, satisfy our debt service obligations, or pay dividends to our stockholders. Until we have greater access to capital, we will likely structure future acquisitions through joint ventures or other syndicated structures in which outside investors will contribute a majority of the capital and we will manage the assets.
As described below, under our existing debt agreements, we are subject to continuing covenants. As of June 30, 2021, we have been in compliance with all covenants under our debt agreements except for the debt service coverage ratio covenant under the Lamar Station Plaza East mortgage which was waived by the lender for the period ending June 30, 2021, as described below under the heading “—Consolidated Indebtedness and Preferred Equity—Mortgage Indebtedness.”
Consolidated Indebtedness and Preferred Equity
Indebtedness Summary
The following table sets forth certain information regarding our outstanding indebtedness as of June 30, 2021 (dollars in thousands):
|
|
|
Maturity Date |
|
Rate Type |
|
Interest Rate (1) |
|
|
Balance Outstanding at June 30, 2021 |
|
||
|
Basis Term Loan (net of discount of $560) |
|
January 1, 2023 |
|
Floating (2) |
|
6.125% |
|
|
$ |
66,625 |
|
|
|
Basis Preferred Interest (net of discount of $112) (3) |
|
January 1, 2023 (4) |
|
Fixed |
|
14.00% (5) |
|
|
|
9,970 |
|
|
|
MVB Term Loan |
|
December 27, 2022 |
|
Fixed |
|
6.75% |
|
|
|
4,109 |
|
|
|
MVB Revolver |
|
December 27, 2022 |
|
Floating (6) |
|
6.75% |
|
|
|
1,721 |
|
|
|
Hollinswood Loan |
|
December 1, 2024 |
|
LIBOR + 2.25% (7) |
|
4.06% |
|
|
|
13,144 |
|
|
|
Avondale Shops Loan |
|
June 1, 2025 |
|
Fixed |
|
4.00% |
|
|
|
3,152 |
|
|
|
Vista Shops at Golden Mile Loan (net of discount of $52) |
|
June 24, 2023 |
|
Fixed |
|
3.83% |
|
|
|
11,648 |
|
|
|
Brookhill Azalea Shopping Center Loan |
|
January 31, 2025 |
|
LIBOR + 2.75% |
|
2.85% |
|
|
|
9,238 |
|
|
|
Lamar Station Plaza East Loan (net of discount of $1) |
|
July 17, 2022 (8) |
|
LIBOR + 3.00% (9) |
|
4.00% |
|
|
|
3,515 |
|
|
|
Paycheck Protection Program Loan |
|
March 18, 2026 |
|
Fixed |
|
1.00% |
|
|
|
769 |
|
|
|
Lamont Street Preferred Interest (net of discount of $86) (10) |
|
September 30, 2023 |
|
Fixed |
|
13.50% |
|
|
|
4,744 |
|
|
|
Highlandtown Village Shopping Center Loan (net of discount of $63) |
|
May 6, 2023 |
|
Fixed |
|
4.132% |
|
|
|
5,422 |
|
|
|
Cromwell Field Shopping Center Loan (net of discount of $227) |
|
November 15, 2022 |
|
LIBOR + 5.40%(11) |
|
5.90% |
|
|
|
12,166 |
|
|
|
Cromwell Field Shopping Center Mezzanine Loan (net of discount of $28) |
|
November 15, 2022 |
|
Fixed |
|
10.00% |
|
|
|
1,502 |
|
|
|
Spotswood Valley Square Shopping Center Loan (net of discount of $125) |
|
July 6, 2023 |
|
Fixed |
|
4.8235% |
|
|
|
12,219 |
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
159,944 |
|
|
|
(1) |
For floating rate loans tied to LIBOR, based on the one-month LIBOR rate of 0.10%, as of June 30, 2021. |
|
|
(2) |
The interest rate for the Basis Term Loan is the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. The Company has entered into an interest rate cap that caps the LIBOR rate on this loan at 3.5%. |
|
|
(3) |
The outstanding balance includes approximately $1.3 million of indebtedness related to the Multiple Minimum Amount owed to the Preferred Investor as described below under the heading “—Basis Preferred Interest”. |
|
|
(4) |
If the Basis Term Loan is paid in full earlier than its maturity date, the Basis Preferred Interest in the Sub-OP will mature at that time. |
|
|
(5) |
In June 2020, the Preferred Investor made additional capital contributions of approximately $2.9 million as described below under the heading “—Basis Preferred Interest” of which approximately $1.9 million was outstanding at June 30, 2021. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional contributions. |
|
|
(6) |
The interest rate on the MVB Revolver is the greater of (i) prime rate plus 1.5% and (ii) 6.75%. |
|
|
(7) |
We have entered into an interest rate swap which fixes the interest rate of the loan at 4.06%. |
|
|
(8) |
In July 2021, we entered into a modification to the Lamar Station Plaza East loan to extend the maturity date to July 2022 as described below under the heading “—Mortgage Indebtedness”. |
|
|
(9) |
The interest rate on the Lamar Station Plaza East loan is LIBOR plus 3.00% per annum with a minimum LIBOR rate of 1.00%. |
|
|
(10) |
The outstanding balance includes approximately $0.9 million of indebtedness as of June 30, 2021 related to the Lamont Street Minimum Multiple Amount owed to Lamont Street as described below under the heading “—Lamont Street Preferred Interest”. |
30
|
|
(11) |
The interest rate on the Cromwell Field Shopping Center Loan is LIBOR plus 5.40% per annum with a minimum LIBOR rate of 0.50%. |
Basis Term Loan
In December 2019, six of our subsidiaries, as borrowers (collectively, the “Borrowers”), and Big Real Estate Finance I, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC, as lender (the “Basis Lender”), entered into a loan agreement (the “Basis Loan Agreement”) pursuant to which the Basis Lender made a senior secured term loan of up to $66.9 million (the “Basis Term Loan”) to the Borrowers. Pursuant to the Basis Loan Agreement, the Basis Term Loan is secured by mortgages on the following properties: Coral Hills, Crestview, Dekalb, Midtown Colonial, Midtown Lamonticello and West Broad. The Basis Term Loan matures on January 1, 2023, subject to two one-year extension options, subject to certain conditions. The Basis Term Loan bears interest at a rate equal to the greater of (i) LIBOR plus 3.850% per annum and (ii) 6.125% per annum. The Borrowers have entered into an interest rate cap that effectively caps LIBOR at 3.50% per annum. As of June 30, 2021, the interest rate of the Basis Term Loan was 6.125% and the outstanding balance was $66.9 million.
The Basis Loan Agreement includes a debt service coverage calculation based on the trailing twelve months results which includes an adjustment for tenants that are more than one-month delinquent in paying rent. A debt service coverage ratio below 1.10x is a Cash Trap Trigger Event (as defined in the loan agreement), which gives the Basis Lender the right to institute a cash management period until the trigger is cured. A debt service coverage ratio below 1.05x for two consecutive calendar quarters gives the Basis Lender the right to remove the Company as manager of the properties. The debt service coverage calculation for the twelve months ended June 30, 2021 was approximately 1.27x.
Basis Preferred Interest
In December 2019, the Operating Partnership and Big BSP Investments, LLC, a subsidiary of a real estate fund managed by Basis Management Group, LLC (the “Preferred Investor”), entered into an amended and restated operating agreement (the “Sub-OP Operating Agreement”) of the Broad Street Big First OP LLC (the “Sub-OP”), a subsidiary of the Operating Partnership. Pursuant to the Sub-OP Operating Agreement, among other things, the Preferred Investor committed to make an investment of up to $10.7 million in the Sub-OP, of which $6.9 million had been funded as of June 30, 2021, in exchange for a 1.0% membership interest in the Sub-OP designated as Class A units.
Pursuant to the Sub-OP Operating Agreement, the Preferred Investor is entitled to a cumulative annual return of 14.0% on its initial capital contribution (the “Class A Return”), and the Preferred Investor will be entitled to a 20% return (the “Enhanced Class A Return”) on any capital contribution made to the Sub-OP in excess of the $10.7 million commitment. The Preferred Investor’s interests must be redeemed on or before the earlier of: (i) January 1, 2023 and (ii) the date on which the Basis Term Loan is paid in full (the “Redemption Date”). The Redemption Date may be extended to December 31, 2023 and December 31, 2024, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of the Preferred Investor’s net invested capital for the first extension option and a fee of 0.50% of the Preferred Investor’s net invested capital for the second extension option. If the redemption price is paid on or before the Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by the Preferred Investor, (b) all accrued but unpaid Class A Return, (c) all accrued but unpaid Enhanced Class A Return and (d) all costs and other expenses incurred by the Preferred Investor in connection with the enforcement of its rights under the Sub-OP Operating Agreement. Additionally, at the Redemption Date, the Preferred Investor is entitled to an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.4, less (b) the aggregate amount of Class A return payments made to the Preferred Investor (the “Minimum Multiple Amount”). As of June 30, 2021 and December 31, 2020, the Minimum Multiple Amount was approximately $1.3 million and $1.8 million, respectively, which is included as indebtedness on the consolidated balance sheet.
On June 16, 2020, the Preferred Investor made two additional capital contributions, which are classified as debt, available to the Sub-OP in the aggregate amount of approximately $2.9 million. The two capital contributions consisted of: (i) a $2.4 million capital contribution to the Sub-OP that the Sub-OP contributed to the Borrowers under the Basis Loan Agreement for purposes of making debt service payments under the Basis Loan Agreement and (ii) a $0.5 million capital contribution to the Sub-OP that the Sub-OP contributed to certain of its other property owning subsidiaries for purposes of making debt service payments on mortgage debt secured by the properties owned by such subsidiaries and making payments of the Class A return due to the Preferred Investor pursuant to the Sub-OP Operating Agreement. As described below under the heading “—Mortgage Indebtedness”, we repaid approximately $0.75 million of these funds with the proceeds from the Vista mortgage refinance. Additionally, approximately $0.3 million of availability under the capital contributions was returned to the Preferred Investor and is no longer available to the Company. As of August 6, 2021, there was approximately $1.0 million of remaining availability to the Sub-OP under these additional capital contributions, which is included in restricted cash. The Preferred Investor is entitled to a cumulative annual return of 13.0% on the additional capital contributions.
31
MVB Loan
In December 2019, the Company, the Operating Partnership and BSR entered into a loan agreement (the “MVB Loan Agreement”) with MVB Bank, Inc. (“MVB”) with respect to a $6.5 million loan consisting of a $4.5 million term loan (the “MVB Term Loan”) and a $2.0 million revolving credit facility (the “MVB Revolver”). The MVB Term Loan matures on December 27, 2022 and the MVB Revolver had an original maturity date of December 27, 2020, which has been extended to December 27, 2022 under the terms described below. The MVB Term Loan has a fixed interest rate of 6.75% per annum. The MVB Revolver carries an interest rate of the greater of (i) Prime Rate plus 1.5% and (ii) 6.75%.
The Company has no additional availability under the MVB Term Loan and the MVB Revolver as of June 30, 2021.
The MVB Loan Agreement is secured by certain personal property of the Company, the Operating Partnership and BSR. In addition, Mr. Jacoby has pledged the shares of Common Stock and OP units received as consideration in the Initial Mergers as collateral under the MVB Loan Agreement. The obligations of the Company and the Operating Partnership under the MVB Loan Agreement are guaranteed by a subsidiary of the Company and Michael Z. Jacoby, in his individual capacity.
The MVB Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The MVB Loan Agreement also requires the Company to maintain (as such terms are defined in the MVB Loan Agreement) (i) a debt service coverage ratio of at least 1.30 to 1.00, (ii) an EBITDA to consolidated funded debt ratio of at least 8.0%, (iii) an aggregate minimum unencumbered cash, including funds available under other lines of credit, of greater than $5.0 million (the “Minimum Liquidity Requirement”), and (iv) one or more deposit accounts with MVB with an aggregate minimum balance of $3.0 million (the “Deposit Requirement”). The failure to comply with the Deposit Requirement is not a default under the MVB Loan Agreement but will increase the interest rate under the MVB Term Loan and MVB Revolver by 1.0% until the Deposit Requirement has been satisfied.
In December 2020, we entered into an amendment to the MVB Loan Agreement, which extended the maturity date of the MVB Revolver to December 27, 2021 and in March 2021, we entered into another amendment to the MVB Loan Agreement which further extended the maturity date of the MVB Revolver to December 27, 2022. The amendments also eliminate the revolving nature of the facility, require monthly principal payments as calculated over a 10-year amortization schedule, and require the repayment of $250,000 on each of the following dates (a) the earlier of March 31, 2021 or the closing date of our pending mergers of the Highlandtown and Spotswood properties, (b) the earlier of September 30, 2021 or the closing date of the pending merger of the Greenwood property, (c) March 31, 2022, and (d) September 30, 2022. The $250,000 payment owed by March 31, 2021 has been paid. Additionally, the amendments (i) deferred testing for covenants related to the Deposit Requirement, Minimum Liquidity Requirement and the debt service coverage ratio until June 30, 2021, (ii) deferred testing for the covenant related to the Company’s EBITDA to consolidated funded debt ratio until December 31, 2021, (iii) modified the debt service coverage ratio to 1.00 to 1 and (iv) modified the Minimum Liquidity Requirement to $3.0 million.
Lamont Street Preferred Interest
In connection with the closing of the Highlandtown and Spotswood Mergers on May 21, 2021 and June 4, 2021, Lamont Street Partners LLC (“Lamont Street”) contributed an aggregate of $3.9 million in exchange for a 1.0% preferred membership interest in BSV Highlandtown Investors LLC (“BSV Highlandtown”) and BSV Spotswood Investors LLC (“BSV Spotswood”) designated as Class A units.
Lamont Street is entitled to a cumulative annual return of 13.5% (the “Lamont Street Class A Return”), of which 10.0% is paid current and 3.5% is accrued. Lamont Street’s interests must be redeemed on or before September 30, 2023 (the “Lamont Street Redemption Date”). The Lamont Street Redemption Date may be extended to September 30, 2024 and September 30, 2025, in each case subject to certain conditions, including the payment of a fee equal to 0.25% of Lamont Street’s net invested capital for the first extension option and a fee of 0.50% of Lamont Street’s net invested capital for the second extension option. If the redemption price is paid on or before the Lamont Street Redemption Date, then the redemption price will be equal to (a) all unreturned capital contributions made by Lamont Street, (b) all accrued but unpaid Lamont Street Class A Return, and (c) all costs and other expenses incurred by Lamont Street in connection with the enforcement of its rights under the agreements. Additionally, at the Lamont Street Redemption Date, Lamont Street is entitled to (i) a redemption fee of 0.50% of the capital contributions returned and (ii) an amount equal to (a) the product of (i) the aggregate amount of capital contributions made and (ii) 0.26, less (b) the aggregate amount of Lamont Street Class A Return payments made to Lamont Street (the “Lamont Street Minimum Multiple Amount”). The Lamont Street Minimum Multiple Amount of approximately $1.0 million was recorded as interest expense in the consolidated statement of operations during the three months ended June 30, 2021. As of June 30, 2021, the remaining Lamont Street Minimum Multiple Amount was approximately $0.9 million, which is included in indebtedness on the consolidated balance sheet.
The Operating Partnership serves as the managing member of BSV Highlandtown and BSV Spotswood. However, Lamont Street has approval rights over certain major decisions, including, but not limited to (i) the incurrence of new indebtedness or modification of existing indebtedness by BSV Highlandtown and BSV Spotswood, or their direct or indirect subsidiaries, (ii) capital expenditures over $100,000, (iii) any proposed change to a property directly or indirectly owned by BSV Highlandtown and BSV Spotswood, (iv) direct or indirect acquisitions of new properties by BSV Highlandtown or BSV Spotswood, (v) the sale or other disposition of any property directly or indirectly owned by BSV Highlandtown and BSV Spotswood, (vi) the issuance of additional membership interests in BSV
32
Highlandtown and BSV Spotswood, (vii) any amendment to an existing material lease related to the properties and (viii) decisions regarding the dissolution, winding up or liquidation of BSV Highlandtown or BSV Spotswood or the filing of any bankruptcy petition by BSV Highlandtown and BSV Spotswood or their subsidiaries.
Under certain circumstances, including in the event that Lamont Street’s interests are not redeemed on or prior to the Lamont Street Redemption Date (as it may be extended), Lamont Street may remove the Operating Partnership as the manager of BSV Highlandtown and BSV Spotswood.
Mortgage Indebtedness
In addition to the indebtedness described above, as of June 30, 2021 and December 31, 2020, we had approximately $72.0 million and $38.1 million, respectively, of outstanding mortgage indebtedness secured by individual properties. The Hollinswood mortgage, Vista mortgage, Brookhill mortgage, Highlandtown mortgage, Cromwell mortgage and Spotswood mortgage require the Company to maintain a debt service coverage ratio (as such terms are defined in the respective Loan Agreements) of at least 1.40 to 1.00, 1.50 to 1.00, 1.35 to 1.00, 1.30 to 1.00, 1.00 to 1.00, and 1.15 to 1.00, respectively. The debt service coverage ratio required for the Lamar Station Plaza East mortgage was modified with the loan amendment and is described below.
In March 2021, we completed the refinance of the Vista Shops mortgage loan. The new loan has a principal balance of $11.7 million, matures in June 2023, and carries an interest rate of 3.83%. We deposited approximately $1.9 million of the proceeds from the refinance with the Basis Lender, which was applied as follows during the second quarter of 2021: (i) repaid approximately $0.75 million of the outstanding principal balance on the capital contributions, which are treated as debt, provided to us in June 2020 under the Basis Preferred Interest as described above under the heading “—Basis Preferred Interest”, (ii) paid approximately $46,000 in accrued interest on these funds and (iii) contributed approximately $1.1 million into an escrow account with the Basis Lender which will be used to pay down the outstanding principal balance of the capital contributions upon satisfaction of certain conditions.
In July 2021, we modified the Lamar Station Plaza East mortgage loan, which extended the maturity date of the loan to July 2022. The amendment also waived the debt service coverage ratio test for the period ending June 30, 2021 and requires a debt service coverage ratio of (i) 1.05 to 1.0 for the three months ended September 30, 2021; (ii) 1.15 to 1.0 for the six months ended December 31, 2021; and (ii) 1.25 to 1.0 for the twelve months ended March 31, 2022.
In connection with the closings of the three remaining Mergers, we expect to incur or assume approximately $47.9 million of additional mortgage indebtedness.
PPP Loans
On April 20, 2020, a wholly owned subsidiary of the Company entered into a promissory note (the “PPP Note”) with MVB with respect to an unsecured loan of approximately $0.8 million (the “PPP Loan”) pursuant to the PPP, which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the “SBA”). The PPP Loan bears interest at a rate of 1.0% per year. During the first quarter of 2021, the Company received forgiveness for its entire balance of the PPP Loan from the SBA, which was recognized as a gain on debt extinguishment in the Company’s statement of operations.
On March 18, 2021, a wholly owned subsidiary of the Company entered into a promissory note (the “Second PPP Note”) with MVB with respect to an unsecured loan of approximately $0.8 million (the “Second PPP Loan”) pursuant to the PPP. The Second PPP Loan bears interest at a rate of 1.0% per year. The Second PPP Note contains certain events of default relating to, among other things, failure to make any payment when due and material adverse changes in the borrower’s financial condition. The occurrence of an event of default, following any applicable cure period, would permit MVB to declare the unpaid principal, accrued and unpaid interest and all other amounts payable under the PPP Note to be immediately due and payable.
Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of a loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs and certain mortgage interest, rent and utility expenses. The terms of any forgiveness may also be subject to further requirements under any regulations and guidelines the SBA may adopt. The Company can provide no assurances that it will obtain forgiveness of the Second PPP Loan in whole or in part. If the Company does not obtain forgiveness it is required to make equal monthly payments of principal and interest to repay the loan in full upon maturity on March 18, 2026.
Interest Rate Derivatives
We may use interest rate derivatives from time to time to manage our exposure to interest rate risks. On December 27, 2019, we entered into an interest rate cap agreement on the full $66.9 million Basis Term Loan to cap the variable LIBOR interest rate at 3.5%. We also entered into two interest rate swap agreements on the Hollinswood Loan to fix the interest rate at 4.06%. The swap agreements are effective as of December 27, 2019 on the outstanding balance of $10.2 million and on July 1, 2021 for the additional availability of $3.0 million under the Hollinswood Loan.
33
Sources and Uses of Cash
The sources and uses of cash reflected in our consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are summarized below (dollars in thousands). As described above, our cash flows in future periods may be significantly impacted by the effects of the COVID-19 pandemic.
|
|
|
For the Six Months Ended June 30, |
|
|
|
|
|
|||||
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
Cash and cash equivalents and restricted cash at beginning of period |
|
$ |
9,983 |
|
|
$ |
11,595 |
|
|
$ |
(1,612 |
) |
|
Net cash used in operating activities |
|
|
(3,461 |
) |
|
|
(1,894 |
) |
|
|
(1,567 |
) |
|
Net cash provided by (used in) investing activities |
|
|
495 |
|
|
|
(2,995 |
) |
|
|
3,490 |
|
|
Net cash provided by financing activities |
|
|
5,319 |
|
|
|
2,189 |
|
|
|
3,130 |
|
|
Cash and cash equivalents and restricted cash at end of period |
|
$ |
12,336 |
|
|
$ |
8,895 |
|
|
$ |
3,441 |
|
Operating Activities- Cash used in operating activities decreased by approximately $1.6 million during the six months ended June 30, 2021, compared to the corresponding period in 2020. Operating cash flows were primarily impacted by a decrease in net cash provided by operating activities, before net changes in operating assets and liabilities, of approximately $0.8 million and a net increase in changes in operating assets and liabilities of approximately $0.8 million, which was mainly attributable to the change in accounts receivable and accounts payable and accrued liabilities.
Investing Activities- Cash provided by investing activities during the six months ended June 30, 2021 was approximately $0.5 million, as compared to cash used in investing activities of approximately $3.0 million during the corresponding period in 2020. During the six months ended June 30, 2021, the Company closed on three Mergers which resulted in a net cash inflow of approximately $2.4 million. During the six months ended June 30, 2021, the Company completed the acquisition of a parcel of land totaling approximately $1.9 million. This is partially offset by an increase in capital expenditures for real estate during the six months ended June 30, 2021 of approximately $0.8 million.
Financing Activities- Cash provided by financing activities increased by approximately $3.1 million during the six months ended June 30, 2021, compared to the corresponding period in 2020. The change resulted primarily from an increase in net borrowings under debt agreements of approximately $3.7 million, which includes (i) a $3.9 million increase related to the Lamont Street Preferred interest as described above under the heading “—Lamont Street Preferred Interest”, (ii) a net increase in the Vista Shops mortgage loan of approximately $2.8 million from the refinance of the loan as described above under the heading “—Mortgage Indebtedness”, and (iii) a net decrease of $2.9 million related the payoff of the approximately $1.4 million Cromwell land loan during 2021 which was originated in January 2020. Additionally, debt origination and discount fees increased by approximately $0.6 million during the six months ended June 30, 2021, as compared to the prior year period.
Off-Balance Sheet Arrangements
As of June 30, 2021, we had no off-balance sheet arrangements.
34
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company” as defined in Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As initially disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2019, management concluded that there were material weaknesses in our internal control over financial reporting. We are in the process of remediating the material weaknesses as of the end of the period covered by this Quarterly Report on Form 10-Q.
Management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the reporting period covered in this Quarterly Report on Form 10-Q, as a result of the materials weaknesses referred to above. Notwithstanding the identified material weaknesses, our management has concluded that the unaudited condensed consolidated financial statements in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows as of and for the periods presented in conformity with GAAP.
Changes in Internal Control Over Financial Reporting
Ongoing Remediation Plan
Management, under the oversight of the Audit Committee of the Board of Directors, has continued to implement measures designed to improve our internal control over financial reporting to remediate the identified material weaknesses. The Company began remediating the material weaknesses during the first quarter of 2020 and continues to do so through the date of this report. The Company’s remediation efforts have included initial assessments of existing internal control over financial reporting and its internal and external accounting resources. While the Company has completed the initial assessments, it will continue monitoring and assessing on a continuing basis.
As part of the Company’s initial assessment of its existing internal control over financial reporting, the Company identified missing or inadequately designed controls and is in the process of remediating. The Company anticipates that its control improvement efforts will be completed during 2021. Once all appropriately designed controls are in place, they will need to be operating for a sufficient period of time prior to concluding they are operating effectively.
The Company engaged outside consultants to assist with various accounting and financial reporting matters in the first quarter of 2020 and began assessing the need for hiring of additional accounting and financial reporting resources. As of the date of the filing of this report, the Company has hired several internal resources, including a vice president of finance and reporting and a controller. The Company will continue assessing its needs for both internal and external resources going forward.
While we believe that these efforts have improved and will continue to improve our internal control over financial reporting, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We cannot assure you that the measures we have taken to date, or that we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.
35
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any material legal proceedings outside the ordinary course of our business.
Item 1A. Risk Factors
There have been no material changes to the risk factors that were disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In connection with the closing of the Mergers whereby the company acquired the Highlandtown Village Shopping Center, the Cromwell Field Shopping Center and Spotswood Valley Square Shopping Center, the Company issued an aggregate of 6,331,162 shares of its common stock to the prior investors in the respective Broad Street Entity that owned the Highlandtown Village Shopping Center, the Cromwell Field Shopping Center and the Spotswood Valley Square Shopping Center. The shares of common stock were issued upon the closing of the Mergers pursuant to exemptions from registration under Section 4(a)(2) of the Securities Act, and/or Rule 506 of Regulation D thereunder. Issuances of common stock were only to persons who qualify as “accredited investors” as defined under the Securities Act.
On June 4, 2021, the Company issued to Lamont Street Partners LLC (“Lamont Street”) warrants to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.50 per share (the “Warrants”). The Warrants were issued in connection with Lamont Street’s contribution of an aggregate of $3.9 million to BSV Spotswood Investors LLC (“BSV Spotswood”) and BSV Highlandtown Investors LLC (“BSV Highlandtown”) in exchange for a 1.0% preferred membership interest in each of BSV Spotswood and BSV Highlandtown. The Warrants were issued pursuant to exemptions from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D thereunder. Lamont Street qualifies as an “accredited investor” as defined under the Securities Act.
Company Purchases of Equity Securities
During the three months ended June 30, 2021, certain of our employees surrendered shares of common stock owned by them to satisfy their minimum statutory federal and state tax obligations associated with the vesting of restricted shares of common stock issued under our 2020 Equity Incentive Plan (the “Plan”). The following table summarizes all of these repurchases during the three months ended June 30, 2021.
|
Period |
|
Total Number of Shares Purchased (1) |
|
|
Average Price Paid Per Share |
|
|
Total Number of Shares as Part of Publicly Announced Plans or Programs |
|
Maximum Number of Shares That May Yet be Purchased Under the Plan or Programs |
||
|
April 1 through April 30, 2021 |
|
|
- |
|
|
$ |
- |
|
|
N/A |
|
N/A |
|
May 1 through May 31, 2021 |
|
|
- |
|
|
|
- |
|
|
N/A |
|
N/A |
|
June 1 through June 30, 2021 |
|
|
7,136 |
|
|
|
2.95 |
|
|
N/A |
|
N/A |
|
Total |
|
|
7,136 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
The number of shares purchased represents shares of common stock surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares of common stock issued under the Plan. With respect to these shares, the price paid per share is based on the fair value at the time of surrender. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
36
Item 6. Exhibits
|
Exhibit Number |
|
Description |
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
3.3 |
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
|
|
3.5 |
|
|
|
|
|
|
|
3.6 |
|
|
|
|
|
|
|
10.1 |
|
First Amendment to Operating Agreement of Broad Street BIG First OP, LLC, dated as of May 10, 2021 |
|
|
|
|
|
10.2 |
|
Second Amendment to Basis Loan Agreement, dated May 10, 2021 |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
101 |
|
Inline XBRL (Extensible Business Reporting Language). The following materials from this Quarterly Report on Form 10-Q for the periods ended June 30, 2021, formatted in Inline XBRL: (i) consolidated balance sheets of Broad Street Realty, Inc., (ii) consolidated statements of operations of Broad Street Realty, Inc.., (iii) consolidated statements of comprehensive income/(loss) of Broad Street Realty, Inc., (iv) consolidated statements of changes in equity of Broad Street Realty, Inc., (v) consolidated statements of cash flows of Broad Street Realty, Inc. and (vi) notes to consolidated financial statements of Broad Street Realty, Inc. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
Broad Street Realty, Inc. |
|
|
|
|
|
|
|
Date: August 16, 2021 |
|
By: |
/s/ Michael Z. Jacoby |
|
|
|
|
Michael Z. Jacoby |
|
|
|
|
Chief Executive Officer |
|
|
|
|
(principal executive officer) |
|
|
|
|
|
|
Date: August 16, 2021 |
|
By: |
/s/ Alexander Topchy |
|
|
|
|
Alexander Topchy |
|
|
|
|
Chief Financial Officer and Secretary |
|
|
|
|
(principal financial and accounting officer) |
38
Exhibit 10.1
FIRST AMENDMENT TO OPERATING AGREEMENT OF BROAD STREET BIG FIRST OP LLC
THIS FIRST AMENDMENT TO OPERATING AGREEMENT (this “First Amendment’’) is entered into as of this 10th day of May, 2021, among BIG BSP INVESTMENTS, LLC, a Delaware limited liability company (the “Class A Member”) and BROAD STREET OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Class B Member”, and together with the Class A Member, collectively, the “Parties”).
PRELIMINARY STATEMENTS
|
|
A. |
The Parties entered into that certain Operating Agreement of Broad Street BIG First OP LLC, effective as of December 27, 2019 (the “Operating Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Operating Agreement. Section references contained herein shall be to sections of the Operating Agreement. |
|
|
B. |
The Parties now desire to amend the Operating Agreement as set forth herein. |
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
1.The following definitions are added to the Glossary in Exhibit A:
Anchor Tenant Rollover Reserve Account – shall mean the reserve established pursuant to Section 3.5.3 of the Loan Agreement.
Bridge Special Capital Contribution – shall mean the Capital Contribution in the amount of $2,428,000 made by the Class A Member to the Company pursuant to a letter agreement dated June 16, 2020 among the Class A Member, the Class B Member and the Manager (the “Bridge Letter Agreement”).
Loan Agreement – shall mean that certain Loan Agreement dated as of December 27, 2019 between BSV Colonial Owner LLC, BSV Lamonticello Owner LLC and BSV West Broad Commons LLC, each a Virginia limited liability company, BSV Crestview Square LLC and BSV Coral Hills LLC, each a Maryland limited liability company, and BSV Dekalb LLC, a Pennsylvania limited liability company, collectively as Borrower, and BIG Real Estate Finance I, LLC, a Delaware limited liability company, as Lender, as amended from time to time.
Preferred Equity Special Capital Contribution – shall mean the Capital Contribution in the amount of $442,000.00 made by the Class A Member to the Company pursuant to a letter agreement dated June 16, 2020 among the Class A Member, the Class B Member and the Manager (the “Preferred Equity Letter Agreement”), of which there is an unreturned balance of $266,224.87, and an accrued and unpaid Enhanced Class A Return of $46,287.19 as of the date hereof.
Vista Loan – shall mean that certain mortgage loan in the original principal amount
7980597 v5
of $11,700,000.00 made by Sandy Spring Bank to the owner of the Vista Property, of which net proceeds in the amount of $1,936,313.01 were provided to the Class A Member.
Vista Property – shall mean the property located at 1080 West Patrick Street, Frederick, Maryland owned by BSV Patrick Street LLC.
2.The Class A Member hereby approves the Vista Loan.
|
3. |
The net proceeds of the Vista Loan shall be applied in the following order of priority: (i) first, the sum of $1,140,000.00 to fund the Anchor Tenant Rollover Reserve Account (which amount constitutes the Anchor Tenant Rollover Reserve Cap set forth in the definition of such term in the Loan Agreement) pursuant to the terms of the
|
|
4. |
Upon the Class A Member’s receipt of the payment described in clause (ii) of Section 3 above, the unapplied portion of the Preferred Equity Special Capital Contribution shall be returned to Class A Member, and the Preferred Equity Letter Agreement shall be of no further force or effect. |
|
5. |
After taking into account the reduction of the Bridge Special Capital Contribution pursuant to paragraph 3 above, the remaining balance of the Bridge Special Capital Contribution remains available to the Company for the purposes set forth in, and in accordance with the terms and conditions of, the Bridge Letter Agreement. |
|
6. |
Except as amended hereby, the Operating Agreement shall remain in full force and effect in accordance with its terms and is hereby ratified. |
7.This First Amendment may be executed in any number of counterparts, provided each of the parties hereto executes at least one counterpart. Each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute a single agreement. Executed counterparts of this First Amendment may be exchanged by electronic mail, which shall be sufficient to bind the parties.
[signature page follows]
7980597 v5
IN WITNESS WHEREOF, the Parties have executed and delivered this First Amendment to Operating Agreement as of the day and year first above written.
CLASS A MEMBER:
BIG BSP INVESTMENTS, LLC, a Delaware limited liability company
By: BIG Real Estate PE I, LLC, its Managing Member
By: _/s/ Richard Cadigan_________________
Name: Richard Cadigan
Title:Authorized Signatory
CLASS B MEMBER AND MANAGER:
BROAD STREET OPERATING PARTNERSHIP, L.P.
By: Broad Street OP GP, its General Partner
By: /s/ Michael Z. Jacoby________________
Name: Michael Z. Jacoby
Title: Chief Executive Officer
The undersigned hereby reaffirm their obligations and liabilities under that certain Guaranty of Recourse Obligations dated as of December 27, 2019 in favor of the Class A Member, and agree that such Guaranty of Recourse Obligations remains in full force and effect.
/s/ Michael Z. Jacoby
Michael Jacoby
/s/ Thomas Yockey
Thomas Yockey
Broad Street Realty, Inc., a
Delaware corporation
By: /s/ Michael Z. Jacoby
Name:Michael Z. Jacoby
Title: Manager
7980597 v5
Exhibit 10.2
THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of the 10th day of May, 2021 (this “Amendment”), by and among BSV COLONIAL OWNER LLC, BSV LAMONTICELLO OWNER LLC AND BSV WEST BROAD COMMONS LLC, each a Virginia limited liability company, BSV CRESTVIEW SQUARE LLC AND BSV CORAL HILLS LLC, each a Maryland limited liability company, and BSV DEKALB LLC, a Pennsylvania limited liability company (individually and collectively, as the context may require, together with their permitted successors and assigns, “Borrower”), and BIG REAL ESTATE FINANCE I, LLC, a Delaware limited liability company (together with its successors and assigns, “Lender”; and together with Borrower, the “Parties”).
W I T N E S S E T H
WHEREAS, on December 27, 2019, Lender made a loan to Borrower, secured by the Property, in the maximum principal amount of Sixty-Six Million Eight Hundred Fifty Thousand and No/100 Dollars ($66,850,000.00) pursuant to that certain Loan Agreement dated December 27, 2019, by and among Lender and Borrower, which Loan Agreement was amended by that certain Amendment to Loan Agreement (the “First Amendment”) dated as of June 16, 2020 (as so amended, the “Loan Agreement”); and
WHEREAS, Borrower and Lender desire and intend by this Amendment, to amend and modify the Loan Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the covenants set forth in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, represent and warrant as follows:
1.(a)The Parties acknowledge that an Anchor Tenant Trigger Event has occurred by reason of a default by Pena Holding Group LLC under its lease (described below) at the property located at 4801 Marlboro Pike, Capital Heights, Maryland, owned by BSV Coral Hills LLC. Pursuant to that certain Assignment and Assumption of Lease Agreement dated as of January 21, 2020 by and between Shoppers Food Warehouse Corp., as assignor, and Pena Holding Group LLC, as assignee, Pena Holding Group LLC is the assignee of that certain Lease dated December 1, 1986 by and between BSV Coral Hills LLC, as successor in interest, as landlord, and Shoppers Food Warehouse Corp., as successor in interest, as tenant, which Lease is an Anchor Tenant Lease under the Loan Agreement. Accordingly, the parties hereto acknowledge and agree that Pena Holding Group LLC is an Anchor Tenant under the Loan Agreement.
(b)By reason of the Anchor Tenant Trigger Event described in clause (a) above, Borrower is obligated, pursuant to Section 3.5.3 of the Loan Agreement, to deposit Excess Cash into the Anchor Tenant Rollover Reserve Account until such time that Excess Cash equal to the applicable Anchor Tenant Rollover Reserve Cap (namely, $1,140,000.00) has been deposited into the Anchor Tenant Rollover Reserve Account. In lieu of sweeping Excess Cash into the Anchor Tenant Rollover Reserve Account pursuant to Section 3.5.3 of the Loan Agreement, Borrower has elected to deposit the sum of $1,140,000.00 (the “Compare Foods Deposit”) into the Anchor Tenant Rollover Reserve Account for the purpose of funding the Anchor Tenant Rollover Reserve Account in the amount of the Anchor Tenant Rollover Reserve Cap relative to the Anchor Tenant Lease described in clause (a) above. The funds deposited into the Anchor
7984811 v4
Tenant Rollover Reserve Account pursuant to this clause (b) shall be governed by the terms and conditions of the Loan Agreement accordingly; provided, however, notwithstanding the terms and conditions of the Loan Agreement (including, without limitation, Section 3.5.3 thereof) to the contrary, upon an Anchor Tenant Trigger Cure Event with respect to the Anchor Tenant Trigger Event described in clause (a) above, the Compare Foods Deposit or such portion thereof remaining on deposit in the Anchor Tenant Rollover Reserve Account shall be applied to the outstanding balance of the “$2,428,000 Contribution” (as hereinafter defined). Borrower hereby acknowledges and agrees that, notwithstanding the terms and conditions of Section 3.5.3 of the Loan Agreement, such remaining balance of the Compare Foods Deposit will be applied to the $2,428,000 Contribution, as required hereby, rather than disbursed to Borrower pursuant to the terms of Section 3.5.3 of the Loan Agreement. Any such payment shall be applied first to the capital (principal) balance of the $2,428,000 Contribution, and thereafter to the Class A Return on the $2,428,000 Contribution. The “$2,428,000 Contribution” shall mean that certain capital contribution made by BIG BSP Investments, LLC to BIG First Op LLC, the sole member of Borrower, on or about June 16, 2020, in the amount of $2,428,000.00, pursuant to that certain side letter agreement by and between BIG BSP Investments, LLC and Broad Street Operating Partnership, L.P. dated June 16, 2020.
2.The Parties and Guarantor hereby represent and warrant to each other that the Loan Documents constitute valid and legally binding obligations of the Parties and Guarantor and are enforceable as set forth therein in accordance with their terms. There are no modifications, verbal or written, to the Loan Documents other than those, if any, described herein. Borrower and Guarantor, by their execution of this Amendment, waive and release all defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever which have accrued as of the date hereof against Lender, and each of Lender’s predecessors in interest, and each and all of their respective past and present partners, members, officers, directors, certificate holders, employees, agents, contractors, representatives, participants and heirs and each and all of the successors and assigns of each of the foregoing (collectively, "Lender Parties") with respect to (i) the Loan, (ii) the Loan Documents, (iii) the Debt, or (iv) the Property.
3.In consideration of Lender’s agreement to the terms of this Amendment, Borrower and Guarantor, on behalf of themselves and their partners and members and each of their respective heirs, successors and assigns, remise, release, acquit, satisfy and forever discharge all of the Lender Parties, from any and all manner of liabilities, expenses, damages, judgments, executions, actions, claims, demands and causes of action of any nature whatsoever, at law or in equity, known or unknown, either now accrued or subsequently maturing, which any of them now has or hereafter can, shall or may have by reason of any matter, cause or thing, from the beginning of the world to and including the date of this Amendment, including, without limitation, matters arising out of or relating to (a) the Loan, (b) the Loan Documents, (c) the Debt, (d) the Property, and (e) any other agreement or transaction between Borrower and/or Guarantor and any of the Lender Parties concerning matters arising out of or relating to the items set forth in subsections (a) - (d) above. Borrower and Guarantor, on behalf of themselves and their partners and members and each of their respective heirs, successors and assigns, covenant and agree never to institute or cause to be instituted or continue prosecution of any suit or other form of action or proceeding of any kind or nature whatsoever against any of Lender Parties by reason of or in connection with any of the foregoing matters, claims or causes of action.
4.Borrower hereby agrees to reimburse Lender for its legal fees with respect to this Amendment.
5.Other than as specifically set forth herein, the Loan Agreement remains unmodified and is hereby ratified and remains in full force and effect.
6.This Amendment may be executed in one or more counterparts, each of which when so executed and delivered shall be deemed an original, but all of which when taken together shall constitute but one and the same instrument.
7.Capitalized terms and Section references used but not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.
[Signatures appear on the next page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized representatives, all as of the day and year first above written.
LENDER:
BIG REAL ESTATE FINANCE I, LLC,
a Delaware limited liability company
By:__/s/ Richard Cadigan______________
Name:Richard Cadigan
Title: Authorized Signatory
BORROWER:
BSV COLONIAL OWNER LLC,
BSV LAMONTICELLO OWNER LLC,
BSV WEST BROAD COMMONS LLC,
each a Virginia limited liability company
BSV CRESTVIEW SQUARE LLC,
BSV CORAL HILLS LLC,
each a Maryland limited liability company
BSV DEKALB LLC,
a Pennsylvania limited liability company
By: _/s/ Michael Z. Jacoby_____________
Name: Michael Z. Jacoby
Title: Chief Executive Officer
Acknowledged and Agreed to by Guarantor:
_/s/ Michael Z. Jacoby________
Michael Z. Jacoby, individually
_/s/ Thomas M. Yockey_______
Thomas M. Yockey, individually
BROAD STREET REALTY, INC., a Delaware corporation
By: __/s/ Michael Z. Jacoby_______________________
Michael Z. Jacoby, Chief Executive Officer
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Z. Jacoby, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of the registrant, Broad Street Realty, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: August 16, 2021 |
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By: |
/s/ Michael Z. Jacoby |
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Michael Z. Jacoby |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexander Topchy, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of the registrant, Broad Street Realty, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: August 16, 2021 |
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By: |
/s/ Alexander Topchy |
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Alexander Topchy |
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Chief Financial Officer and Secretary |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, for the purposes of 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that, to the undersigned’s best knowledge and belief, the Quarterly Report on Form 10-Q of Broad Street Realty, Inc. (“Company”) for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”):
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: August 16, 2021 |
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By: |
/s/ Michael Z. Jacoby |
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Michael Z. Jacoby |
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Chief Executive Officer |
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By: |
/s/ Alexander Topchy |
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Alexander Topchy |
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Chief Financial Officer and Secretary
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