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Note 7 - Mortgage Notes Payable

9 Months Ended

Sep. 30, 2024

Mortgage Notes Payable Disclosure [Text Block]

7. MORTGAGE NOTES PAYABLE

Mortgage notes payable consist of the following:

	*Principal as of*
	*September 30,*			*December 31,*			*Loan*	*Interest*
Mortgage note property	*2024*			*2023*			*Type*	*Rate (1)*			*Maturity*
Dakota Center (2)	$	9,091,395		$	9,197,346		Fixed		4.74	%	7/6/2024
Research Parkway (6)		1,542,559			1,588,742		Fixed		3.94	%	1/5/2025
Arapahoe Service Center (6)		7,289,903			7,426,088		Fixed		4.34	%	1/5/2025
Union Town Center (6)		7,751,042			7,870,468		Fixed		4.28	%	1/5/2025
One Park Centre (6)		5,951,566			6,043,882		Fixed		4.77	%	9/5/2025
Genesis Plaza (6)		5,845,630			5,937,251		Fixed		4.71	%	9/6/2025
Shea Center II		16,735,875			16,951,095		Fixed		4.92	%	1/5/2026
West Fargo Industrial (3)		5,750,000			3,922,829		Fixed		7.14	%	7/6/2029
Grand Pacific Center (4)		6,477,723			5,470,305		Fixed		6.35	%	5/5/2033
Baltimore		5,670,000			5,670,000		Fixed		4.67	%	4/6/2032
Mandolin		3,525,307			3,573,201		Fixed		4.35	%	4/20/2029
Subtotal, Presidio Property Trust, Inc. Properties	$	75,631,000		$	73,651,207
Model Home mortgage notes (5)		27,537,755			34,815,699		Fixed					2024 - 2029
Mortgage Notes Payable	$	103,168,755		$	108,466,906
Unamortized loan costs		(849,536	)		(753,633	)
Mortgage Notes Payable, net	$	102,319,219		$	107,713,273

(1)	Interest rates as of September 30, 2024.
(2)	The non-recourse loan on the Dakota Center property matured on July 6, 2024. Management has been in negotiations with the special servicer of the loan in modifying and/or extending the loan or possibly selling the building. We have not been able to come to an agreement regarding a situation in which the loan is modified or extended. As such, in October 2024 we have offered the property for sale in conjunction with the lender’s approval in attempts to make the lender whole, although there is no guarantee we will be able to do so. The loan is considered non-recourse and we will not be required to make up the difference if the property sells for less than the loan balance. See Note 4. Real Estate Assets above for further discussion on impairment of the property.
(3)	On June 20, 2024, the Company, through its subsidiary, refinanced the mortgage loan on our West Fargo Industrial properties, and entered into a loan agreement for approximately $5.75 million, a term of five years, with an interest rate of 7.14%. The loan agreement has a Debt Service Coverage Ratio ("DSCR") minimum of 1.20 to 1.00 as calculated by Lender, in which: (a) the numerator is the Underwritten Net Cash Flow, and (b) the denominator is the annual Debt Service, tested at the end of each fiscal quarter.
(4)	On May 5, 2023, the Company, through its subsidiary, refinanced the mortgage loan on our Grand Pacific Center property and entered into a construction loan related to the tenant improvement associated with the KLJ Engineering LLC lease to occupy 33,296 square feet of the building. The refinanced loan is for approximately $3.8 million, a term of 10 years, with an interest rate of 6.35%, for the first 60 months. The interest rate is subject to reset in year five on June 10, 2028. The construction loan is for approximately $2.7 million, a term of 10 years, and will begin amortizing in year three, with an interest rate of 6.35%, for the first 60 months. The interest rate is subject to reset in year five on June 10, 2028. As of September 30, 2024, we had fully drawn down the loan amount of approximately $2.7 million on the construction loan.
(5)	As of September 30, 2024, there were 5 model homes included as real estate assets held for sale. Our model homes have stand-alone mortgage notes at interest rates ranging from 4.51% to 8.0% per annum as of September 30, 2024.
(6)	These mortgage loans mature within the next twelve months and management is reviewing various options for the loan maturity, including but not limited to refinancing, restructuring and or selling these properties. As we get closer to the loan maturity date, the Company will finalize our plans. Union Town Center and Research Parkway have been listed for sale, and included in the real estate assets held for sale, net on the consolidated balance sheet as of September 30, 2024. We expect a sale to take place during the fourth quarter of 2024, prior to the maturity of the loans for Union Town Center and Research Parkway. If the sales take longer than expected, we have options available to extend the maturity of the loan to accommodate for a longer sales period. As of September 30, 2024, we were reviewing terms sheets to refinance the loan on Arapahoe Service Center from third party lenders.

The loan agreement between NetREIT Model, Homes, Inc. (“NRMH”) and its Lender has a covenant for a Fixed Charge Coverage Ratio (“FCCR”) as defined for NRMH as of any date that equals (a) the sum of (i) EBITDA for the period ended as of such date minus (ii) distributions for the period ended as of such date divided by (b) the sum of (i) principal payments paid for the period ended as of such date plus (ii) interest expense for period ended as of such date. The FCCR is to be no less than 1.10 to 1.00, tested at the end of each fiscal quarter. As of December 31, 2023, NRMH was in compliance with this covenant. The Company and standalone subsidiaries have other various quarterly and annual reporting requirements to the individual property lenders and the Company is in compliance with all material conditions and covenants on those mortgage notes payable as of September 30, 2024, with the exception for Dakota Center's loan maturity.

Scheduled principal payments of mortgage notes payable were as follows as of September 30, 2024:

	*Commercial*		*Model*
	*Properties*		*Homes*		*Total Principal*
Years ending December 31:	*Notes Payable*		*Notes Payable*		*Payments*
2024	$	9,367,570	$	2,321,811	$	11,689,381
2025		28,644,941		8,885,311		37,530,252
2026		16,521,100		1,008,650		17,529,750
2027		157,739		551,267		709,006
2028		168,907		9,119,969		9,288,876
Thereafter		20,770,743		5,650,747		26,421,490
Total	$	75,631,000	$	27,537,755	$	103,168,755