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Organization | 6 Months Ended
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Jun. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Organization | 1. ORGANIZATION Organization. Presidio Property Trust, Inc. (“we”, “our”, “us” or the “Company”) is a self-managed real estate investment trust (“REIT”). We were incorporated in the State of California on September 28, 1999, and in August 2010, we reincorporated as a Maryland corporation. In October 2017, we changed our name from “NetREIT, Inc.” to “Presidio Property Trust, Inc.” The Company’s portfolio includes the following properties:
| • | Thirteen office buildings and one industrial property (“Office/Industrial Properties”) which total approximately 1,273,788 rentable square feet;
| • | Four retail shopping centers (“Retail Properties”) which total approximately 131,722 rentable square feet; and
| • | 136 model home residential properties (“Model Homes”) leased back to homebuilders that are owned by five affiliated limited partnerships and one wholly-owned corporation (“Model Home Properties”).
The Company operates in the following partnerships during the periods covered by these condensed consolidated financial statements:
| • | The Company is the sole general partner in two limited partnerships (NetREIT Palm Self-Storage LP and NetREIT Casa Grande LP), all with ownership interest in real estate income producing properties.
| • | The Company is the general and/ or limited partner in five limited partnerships that purchase Model Homes and lease them back to homebuilders (Dubose Model Home Investors #202, LP, Dubose Model Home Investors #203, LP, Dubose Model Home Investors #204, LP, Dubose Model Homes Investor #205, LP and NetREIT Dubose Model Home REIT, LP). The Company refers to these entities collectively, as the “Model Home Partnerships”.
The Company has determined that the limited partnerships in which it owns less than 100%, should be included in the Company’s consolidated financial statements as the Company directs their activities and has control of such limited partnerships. We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (“Code”), for federal income tax purposes. To maintain our qualification as a REIT, we are required to distribute at least 90% of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we maintain our qualification for taxation as a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to maintain our qualification as a REIT in any taxable year and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax. We are subject to certain state and local income taxes. We, together with one of our entities, have elected to treat our subsidiaries as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes. Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to federal and state income taxes. The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any major tax jurisdictions. Liquidity. The Company’s 16,000 shares of its Series B Preferred Stock are mandatorily redeemable by the Company on August 1, 2019 (“Mandatory Redemption Date”) for $16.0 million in cash. On August 2, 2019, the Company received a notice from PFP III Sub II, LLC (“Prime”), the sole holder of the Company’s Series B Preferred Stock, that an event of default occurred when the Company failed to redeem the Series B Preferred Stock on its Mandatory Redemption Date pursuant to the terms of the Investor Agreement dated August 4, 2014 and the corresponding Articles Supplementary. This event of default triggered an annual cash dividend payable per share equal to 24% of the liquidation preference of $1,000 per share, effective as of the Mandatory Redemption Date. Prime demanded immediate payment of all amounts due and reiterated the Company’s recourse obligation for costs and expenses in connection with Prime’s enforcement of its rights and remedies. Prime has not waived the event of default and has expressly reserved its rights and remedies. Prime has certain rights and remedies following the occurrence and during the continuation of an event of default and additional rights and remedies that commence on the Mandatory Redemption Date. Subject to certain limitations under certain agreements (including mortgage loan documents), the Maryland General Corporation Law and/or the Company’s charter, Prime’s right to take unilateral action to, or cause the Company to, among other rights, include the following:
| • | Replace property managers and leasing agents;
| • | Terminate contracts between the Company and/or any of its subsidiaries and any affiliate of the Company to the extent that such contracts relate to the ownership, leasing, management, or use of the Company’s real property:
| • | Replace any managing member or general partner;
| • | Following 180 days after the Mandatory Redemption Date, sell any real property;
| • | Sell any property (in addition to real property);
| • | Implement Major Decisions (as defined in the Investor Agreement), including the suspension of dividend payments to common stockholders;
| • | Refinance, repay or prepay any indebtedness, including existing mortgage loans secured by real property;
| • | Cure any default under any indebtedness, including mortgages; and
| • | Elect six individuals to serve as members of the Board of Directors of the Company.
Except for the annual cash dividend rate of 24%, which is 10% in excess of the 14% dividend rate that the Company had been accruing and paying, the Company has not received any notice or other communication from Prime that it intends to exercise any of the rights or remedies available to it in connection with the event of default. The exercise of additional rights and remedies by Prime, including its right to replace a majority of the Company’s board of directors (and, in effect, take control of the Company) and its right to sell real property, may have a material adverse effect on the Company, including its business, results of operations, cash flows, and financial condition. The foregoing descriptions of Prime’s rights and remedies and the Company’s recourse obligations in an event of default are only summaries and are qualified in their entirety by reference to the Investor Agreement and Articles Supplementary (which designates the preferences, powers, rights and other terms of the Series B Preferred Stock), copies of which were filed as exhibits to the Form 8-K filed on August 8, 2014. On August 14, 2019, the Company redeemed 2,000 shares of its Series B Preferred Stock for $2.0 million and 14,000 shares of Series B Preferred Stock remaining outstanding. The Company is pursuing financing alternatives to redeem the outstanding shares of Series B Preferred Stock, and the Company expects such financing and redemption to be completed before the end of the Company’s third fiscal quarter, September 30, 2019. The Company also continues to review its portfolio of real property to determine which properties to sell in order to generate sufficient net proceeds to redeem its Series B Preferred Stock. However, there is no guarantee that the Company will be able to obtain the financing necessary to redeem any or all Series B Preferred Stock outstanding or sell real property on terms favorable to the Company or on any terms. For the six months remaining in 2019 and the year ending December 31, 2020, we have $5.2 million and $11.5 million of mortgage notes payable maturing, respectively, related to the model home properties. We plan to sell the model home properties or refinance a significant portion of the mortgage notes payable to repay the mortgage notes payable.

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