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SQFT: Initiatives To Enhance Portfolio & Deliver Growth and Shareholder Value

05/19/2021

By M. Marin

NASDAQ:SQFT

READ THE FULL SQFT RESEARCH REPORT

Presidio Property Trust (NASDAQ:SQFT), an internally-managed REIT that has a diversified portfolio of commercial and industrial properties and model homes, reported 1Q21 results. SQFT achieved an average rental collection rate of 96% during the first quarter period. Management attributes this high rate to the diversified nature of its property portfolio. Revenue fell by roughly $1.3 million, primarily reflecting the sale of four properties subsequent to 1Q20.

Same-store rental revenue down slightly

SQFT recorded 1Q21 revenue of $5.7 million, down about 19% from $7.0 million in 1Q20, primarily reflecting the sale of several properties subsequent to 1Q20 and lower average occupancy. On what the company calls a same-store basis – looking only at properties held during both periods – rental revenue of $4.5 million was down about 5% year-over-year and occupancy of 82.4% at the end of 1Q21 was down somewhat from 86.4% on the same basis in 1Q20.

Uptick in lease activity bodes well for resumed growth

In addition, SQFT signed 15 office leases in the quarter. Of these, five were leases with new tenants and ten were renewals with existing tenants. The company believes this reflects the general resumption of business activity as markets begin to re-open following the closures mandated by the COVID-19 pandemic. Management is optimistic that it bodes well for continued tenant renewals and new lease signings going forward.

Continued Deleveraging

As SQFT has made clear through actions in recent quarters, debt reduction remains a key target. The company also repaid some $7.5 million of notes payable. In addition, following asset sales, net mortgage notes payable were 9.4% lower quarter-over-quarter at $108.7 million compared to $120.0 million.

Financing - strengthening cash position

SQFT recently filed to issue 500,000 shares of redeemable preferred stock and expects to raise net proceeds of about $11.1 million, or nearly $13 million if the underwriters’ allotment is exercised. SQFT intends to use the proceeds to acquire real estate, as well as for general corporate and working capital purposes.

The company ended 1Q21 with about $7.0 million in cash, cash equivalents and restricted cash. Pro forma for the above-noted preferred stock offering, cash, cash equivalents and restricted cash would be about $18.1 million.

Moreover, in 2021, SQFT generated nearly $15 million in proceeds from asset sales through March 30. SQFT continues to analyze its real estate portfolio for opportunities to dispose of assets in order to realize gains with which to reinvest in its portfolio.

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