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Note 4 - Real Estate Assets

12 Months Ended

Dec. 31, 2024

4. REAL ESTATE ASSETS

The Company owns a diverse portfolio of real estate assets. The primary types of properties the Company invests in are office, industrial, retail, and triple-net leased model home properties. We have five commercial properties located in Colorado, four in North Dakota, one in Southern California, one in Texas and one in Maryland. Our model home properties are located in three states. As of December 31, 2024, the Company owned or had an equity interest in:

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Eight office buildings and one industrial building (“Office/Industrial Properties”);

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Three retail shopping centers (“Retail Properties”);

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78 model home residential properties (“Model Homes” or “Model Home Properties”), leased back on a triple-net basis to homebuilders, which are owned by five affiliated limited partnerships and one wholly-owned corporation, all of which we control. During the third quarter of 2024, all of the model homes in Dubose Model Home Investors #202 and #206, LP had been sold.

A summary of the properties owned by the Company, including their lease intangibles, as of December 31, 2024 and 2023 is as follows:

	*Date*		*Real estate assets and lease intangibles, net*
Property Name	*Acquired*	*Location*	*December 31, 2024*		*December 31, 2023*
Genesis Plaza (1)	August 2010	San Diego, CA	$	7,363,571	$	7,542,725
Dakota Center (2)	May 2011	Fargo, ND		8,154,951		9,201,883
Grand Pacific Center (3)	March 2014	Bismarck, ND		8,413,926		8,274,454
Arapahoe Center	December 2014	Centennial, CO		9,298,534		9,341,991
Union Town Center (4)	December 2014	Colorado Springs, CO		8,922,943		8,918,742
West Fargo Industrial	August 2015	Fargo, ND		6,599,953		6,819,765
300 N.P.	August 2015	Fargo, ND		1,963,000		2,774,176
Research Parkway (4)	August 2015	Colorado Springs, CO		2,220,284		2,266,173
One Park Center (5)	August 2015	Westminster, CO		5,580,950		5,700,000
Shea Center II (6)	December 2015	Highlands Ranch, CO		18,820,370		19,367,289
Mandolin (7)	August 2021	Houston, TX		4,600,562		4,692,274
Baltimore	December 2021	Baltimore, MD		8,241,456		8,466,165
Commercial properties				90,180,500		93,365,637
Model Home properties (8)	2019 - 2024	AZ, FL, TX		37,416,000		50,790,147
Total real estate assets and lease intangibles, net			$	127,596,500	$	144,155,784

(1)	Genesis Plaza is owned by two tenants-in-common, NetREIT Genesis and NetREIT Genessis II, each of which own 57% and 43%, respectively, and we beneficially own an aggregate of 92.0%, based on our ownership of each entity. We have 100% ownership of NetREIT Genesis and 81.5% ownership of NetREIT Genesis II, and we have control of both entities. During July 2024, the Company completed a minority ownership conversion option as result of a death in a noncontrolling trust within NetREIT Genesis II. The Company issued the trust 86,232 shares of SQFT Series A Common Stock in exchange for their 36.4% ownership in NetREIT Genesis II, as per the original exchange agreement.
(2)	The non-recourse loan on the Dakota Center property matured on July 6, 2024. During October 2024, management has agreed with the lender to sell the property to settle the loan balance. Due to the uncertainties in the Fargo market, we have impaired the property’s book value and recorded an impairment charge of approximately $0.7 million as of September 30, 2024. During December 2024, the lender had agreed on the broker the Company would use to sell the property to settle the non-recourse debt. As of December 31, 2024, the property was included in the real estate assets held for sale, net on the consolidated balance sheet. Any purchase offers will be subject to lender approval.
(3)	Grand Pacific Center, Bismarck, ND, was removed from held-for-sale after signing a major lease with KLJ Engineering on December 7, 2022 for approximately 33,296 usable square feet, a term of 122 months, and starting annualized rent of $532,736. KLJ Engineering moved into the building during December 2023, with rent that commenced on February 28, 2024.
(4)	As of September 30, 2024, Union Town Center and Research Parkway were listed for sale, and included in the real estate assets held for sale, net on the consolidated balance sheet as of December 31, 2024. The sale of UTC and Research Parkway took place in February 2025, to a single buyer for a combined sales price of $16.95 million, and the Company recorded a combined gain of approximately $4.0 million.
(5)	During the year ended December 31, 2023, we recorded a $2.0 million impairment charge for One Park Center that reflects management’s revised estimate of the fair market value based on sales comparable of like properties in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement. No additional impairment was deemed necessary during the year ended December 31, 2024.
(6)	On December 31, 2022, the lease for our largest tenant, Halliburton, expired. Halliburton was located in our Shea Center II property in Colorado, and made up approximately $536,080 of our annual base rent. Halliburton did not renew the lease and we placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary, none of which has been used as of December 31, 2024.
(7)	A portion of the proceeds from the sale of Highland Court were used in like-kind exchange transactions pursued under Section 1031 of the Code for the acquisition of our Mandolin property. Mandolin is owned by NetREIT Palm Self-Storage LP, through its wholly owned subsidiary NetREIT Highland LLC, and the Company is the sole general partner and owns 61.3% of NetREIT Palm Self-Storage LP.
(8)	Includes Model Homes listed as held for sale as of December 31, 2024. During the year ended December 31, 2024, we recorded an impairment charge for model homes totaling $0.4 million, which reflects the estimated sales prices for these specific model homes. The short hold period, less than two years, and the builder changing their model style after we purchased the homes, contributed to the lower than expected sales price.

For the years ended December 31, 2024 and 2023, depreciation and amortization expense, excluding amortization of deferred leasing cost, totaled approximately $5.0 million and $4.9 million, respectively.