Presidio Property Trust, Inc. 10-K

ITEM 2. PROPERTIES     General Information   We invest in a diverse multi-tenant portfolio of real estate assets primarily consisting of office/industrial, retail, and model home properties located primarily in the western United States. As of December 31, 2022, we owned or had an equity interest in nine office/industrial buildings totaling approximately 756,265 rentable square feet and three retail centers totaling approximately 65,242 rentable square feet. In addition, through our Model Home subsidiary and our investments in five limited partnerships and one corporation, we own a total of 92 Model Home properties located in three states. We directly manage the operations and leasing of our properties. Substantially all of our revenues consist of base rents received under leases that generally have terms that range from one to five years.  Th e majority of our ex isting leases as of December 31, 2022 contain contractual rent increases that provide for increases in the base rental payments. Our tenants consist of local, regional and national businesses. Our properties generally attract a mix of diversified tenants creating lower risk in periods of economic fluctuations. Our largest tenant represented approximately 8.57% of total revenues for the year ended December 31, 2022.   38 Table of Contents   Geographic Diversification Table   The following table shows a list of properties we owned as of December 31, 2022, grouped by the state where each of our investments is located.   Office/Industrial and Retail Properties:   State   No. of Properties     Aggregate Square Feet     Approximate % of Square Feet     Current Base Annual Rent     Approximate % of Aggregate Annual Rent   California     1       57,807       7.0 %   $ 1,217,582       11.0 % Colorado (1)     5       324,245       39.4 %     5,476,502       49.7 % Maryland     1       31,752       3.9 %     696,321       6.3 % North Dakota     4       397,203       48.4 %     3,303,274       30.0 % Texas     1       10,500       1.3 %     329,385       3.0 % Total     12       821,507       100.0 %   $ 11,023,064       100.0 %     (1) In February 2023, the Annual Base Rent for Colorado dropped to approximately $4.9 million due to the loss of Halliburton Energy Services, Inc. which was located in our Shea Center II property.     Model Home Properties:   Geographic Region   No. of Properties     Aggregate Square Feet     Approximate % of Square Feet     Current Base Annual Rent     Approximate % of Aggregate Annual Rent   Midwest     2       6,153       2.2 %   $ 80,844       2.7 % Southeast     2       3,978       1.4 %     78,492       2.6 % Southwest     88       268,749       96.4 %     2,824,404       94.7 % Total     92       278,880       100.0 %   $ 2,983,740       100.0 %   39 Table of Contents   The following table summarizes information relating to our properties (excluding model homes) at December 31, 2022:   Property Summary   ($ in000's) Property Location   Sq., Ft.   Date Acquired   Year Property Constructed     Purchase Price (1)     Occupancy     Percent Ownership     Mortgage On property   Office/Industrial Properties:                                                 Genesis Plaza, San Diego, CA (2)   57,807   08/10   1989     10,000     96.2 %   76.4 %   6,056   Dakota Center, Fargo, ND   119,434   05/11   1982     9,575     71.8 %   100.0 %   9,443   Grand Pacific Center, Bismarck, ND (4)   93,153   03/14   1976     5,350     56.4 %   100.0 %   3,496   Arapahoe Center, Colorado Springs, CO   79,023   12/14   2000     11,850     100.0 %   100.0 %   7,602   West Fargo Industrial, West Fargo, ND   150,099   08/15   1998/2005     7,900     94.3 %   100.0 %   4,030   300 N.P., West Fargo, ND   34,517   08/15   1922     3,850     75.5 %   100.0 %   -   One Park Centre, Westminster CO   69,174   08/15   1983     9,150     84.9 %   100.0 %   6,163   Shea Center II, Highlands Ranch, CO (5)   121,306   12/15   2000     25,325     95.4 %   100.0 %   17,230   Baltimore, Baltimore, MD   31,752   12/21   2006     8,892     100.0 %   100.0 %   5,670   Total Office/Industrial Properties   756,265             $91,892     85.5 %         $59,690                                                     Retail Properties:                                                 Union Town Center, Colorado Springs, CO   44,042   12/14   2003     11,212     72.9 %   100.0 %   8,025   Research Parkway, Colorado Springs, CO   10,700   08/15   2003     2,850     88.8 %   100.0 %   1,648   Mandolin, Houston, TX (3)   10,500   08/21   2021     4,892     100.0 %   61.3 %   3,636   Total Retail Properties   65,242             $18,954     79.9 %         $13,309     (1) Prior to January 1, 2009, “Purchase Price” includes our acquisition related costs and expenses for the purchase of the property. After January 1, 2009, acquisition related costs and expenses were expensed when incurred. (2) Genesis Plaza is owned by two tenants-in-common, each of which own 57% and 43%, respectively, and we beneficially own an aggregate of 76.4%, based on our ownership percentages of each tenant-in-common. (3) 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. (4) 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, starting annualized rent of $532,736, and a commencement date estimated to be between November 1, 2023 and March 1, 2024. (5) The loss of Hallibur ton Energy Services, Inc. from our Shea Center II property in Colorado, has dropped the occupancy to approximately 66% in February 2023.   Top Ten Tenants Physical Occupancy Table   The following table sets forth certain information with respect to our top 10 tenants at our Office/Industrial and Retail Properties.   40 Table of Contents   As of December 31, 2022 Tenant   Number of Leases (1)     Annualized Base Rent     % of Total Annualized Base Rent   Halliburton Energy Services, Inc.     1       944,851       8.57 % Johns Hopkins University     1       696,321       6.32 % Finastra USA Corporation     1       507,360       4.60 % MasTec North America, Inc.     1       353,258       3.20 % L&T Care LLC     1       329,385       2.99 % Wells Fargo Bank, N.A.     1       289,751       2.63 % Nova Financial & Investment Corporation     1       263,240       2.39 % Republic Indemnity of America     1       262,825       2.39 % Meissner Jacquet Real Estate Management Group, Inc.     1       247,134       2.24 % Fredrikson & Byron P.A.     1       234,999       2.13 %             $ 4,129,124       37.46 %   (1) On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired.  Hallibur ton Energy Services, Inc. was located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base rent.  We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary.  Our management team is working to fill the 45,535 square foot space as quickly as possible, and has already leased approximately 20% of the space to a tenant during January 2023.   Lease Expirations Tables   The following table sets forth lease expirations for our properties as of December 31, 2022, assuming that none of the tenants exercise their renewal options.   Office/Industrial and Retail Properties:   Expiration Year   Number of Leases Expiring     Square Footage     Annual Rental From Lease     Percent of Total   2022 (1)     3       62,868     $ 1,084,714       9.8 % 2023     56       137,273       1,902,590       17.3 % 2024     20       58,699       1,010,993       9.2 % 2025     23       130,463       2,084,009       18.9 % 2026     20       148,168       2,447,014       22.2 % 2027     15       48,202       843,371       7.6 % Thereafter     19       97,588       1,650,373       15.0 % Totals     156       683,261     $ 11,023,064       100.0 %   (1) On December 31, 2022, three of our leases expired and were not renewed.  One of them was Halliburton Energy Services, Inc., located in our Shea Center II property in Colorado, and made up approximately 8.57% of our annual base rent.  We placed approximately $1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary.  Our management team is working to fill the 45,535 square foot space as quickly as possible, and has already leased approximately 20% of the space to a tenant during January 2023.   Model Home Properties:   Expiration Year (1)   Number of Leases Expiring     Square Footage     Annual Rental From Lease     Percent of Total   2023     61       186,028     $ 1,753,824       58.8 % 2024     31       92,852       1,229,916       41.2 %       92       278,880     $ 2,983,740       100.0 %   (1) These leases are subject to extensions by the home builder depending on sales of the total development.  All model homes are sold at the end of the lease period.   41 Table of Contents   Physical Occupancy Table for Last 5 Years   The following table presents the percentage occupancy for each of our properties, excluding our Model Home Properties, as of December 31 for each of the last five years.     Date   Percentage Occupancy as of the Year Ended December 31,     Acquired   2018     2019     2020     2021     2022   Office/ Industrial Properties:                                           Garden Gateway Plaza (1) 03/07     68.1 %     76.4 %     76.4 %     N/A       N/A   Executive Office Park (1) 07/08     99.9 %     100.0 %     97.7 %     N/A       N/A   Genesis Plaza 08/10     58.3 %     78.5 %     74.7 %     85.6 %     96.2 % Dakota Center 05/11     98.2 %     86.0 %     86.0 %     73.5 %     71.8 % Grand Pacific Center 03/14     72.6 %     71.8 %     74.2 %     56.6 %     56.4 % Arapahoe Center 12/14     100.0 %     100.0 %     100.0 %     100.0 %     100.0 % West Fargo Industrial 08/15     75.9 %     77.1 %     82.0 %     90.8 %     94.3 % 300 N.P. 08/15     82.3 %     73.0 %     72.8 %     64.8 %     75.5 % Highland Court (1)(2) 08/15     78.5 %     70.1 %     64.5 %     N/A       N/A   One Park Centre 08/15     72.7 %     79.1 %     84.8 %     80.5 %     84.9 % Shea Center II (4) 12/15     88.2 %     90.9 %     91.2 %     91.6 %     95.4 % Baltimore 12/21     N/A       N/A       N/A       100.0 %     100.0 % Retail Properties:                                           World Plaza (3) 09/07     22.6 %     100.0 %     100.0 %     100.0 %     N/A   Waterman Plaza (1) 08/08     100.0 %     90.7 %     85.9 %     N/A       N/A   Union Town Center 12/14     100.0 %     100.0 %     100.0 %     87.4 %     72.9 % Research Parkway 08/15     100.0 %     100.0 %     100.0 %     100.0 %     88.8 % Mandolin (2) 08/21     N/A       N/A       N/A       100.0 %     100.0 %   (1) Property was sold during the year ended December 31, 2021. (2) 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. (3) Property was sold during the year ended December 31, 2022. (4) The loss of Hallibur ton Energy Services, Inc. from our Shea Center II property in Colorado, has dropped the occupancy to approximately 66% in February 2023.   42 Table of Contents   Annualized Base Rent Per Square Foot for Last 5 Years   The following table presents the average effective annual rent per square foot for each of our properties, excluding our Model Home Properties, as of December 31, 2022.       Annualized Base Rent per Square Foot (1) For the Years Ended December 31,                       2018     2019     2020     2021     2022     Annualized Base Rent (2)     Net Rentable Square Feet   Office/ Industrial Properties:                                                         Garden Gateway Plaza (3)   $ 10.60     $ 12.62     $ 13.45       N/A       N/A       N/A       115,052   Executive Office Park (3)   $ 12.34     $ 13.29     $ 13.65       N/A       N/A       N/A       49,864   Genesis Plaza   $ 20.62     $ 28.15     $ 22.97     $ 25.71     $ 26.26     $ 1,217,583       57,807   Dakota Center   $ 14.21     $ 12.87     $ 13.24     $ 13.22     $ 14.09     $ 1,206,666       119,434   Grand Pacific Center   $ 14.29     $ 13.97     $ 13.71     $ 13.79     $ 13.90     $ 730,296       93,153   Arapahoe Center   $ 14.22     $ 14.69     $ 15.18     $ 11.87     $ 13.75     $ 1,086,730       79,023   West Fargo Industrial   $ 6.78     $ 6.65     $ 6.77     $ 6.81     $ 6.80     $ 962,867       150,099   300 N.P.   $ 16.51     $ 13.67     $ 14.86     $ 14.89     $ 16.72     $ 403,444       34,517   Highland Court (3)(5)   $ 24.59     $ 19.33     $ 22.33       N/A       N/A       N/A       93,536   One Park Centre   $ 20.27     $ 19.51     $ 21.85     $ 23.42     $ 20.35     $ 1,195,415       69,174   Shea Center II (6)   $ 18.53     $ 18.47     $ 19.24     $ 20.37     $ 19.40     $ 2,161,231       121,306   Baltimore     N/A       N/A       N/A     $ 21.50     $ 21.93     $ 696,321       31,752   Retail Properties:                                                         World Plaza (4)   $ 4.64     $ 13.63     $ 9.93     $ 14.28       N/A       N/A       55,810   Waterman Plaza (3)   $ 18.88     $ 16.30     $ 12.42       N/A       N/A       N/A       21,170   Union Town Center   $ 24.91     $ 25.63     $ 23.73     $ 23.86     $ 25.22     $ 809,626       44,042   Research Parkway   $ 22.07     $ 22.58     $ 29.09     $ 22.69     $ 23.53     $ 223,500       10,700   Mandolin (5)     N/A       N/A       N/A     $ 30.75     $ 31.37     $ 329,385       10,500     (1) Annualized Base Rent (defined as cash rent including abatements) divided by the percentage occupied divided by rentable square feet. (2) Annualized Base Rent is based upon actual rents due as of December 31, 2022. (3) Property was sold during the year ended December 31, 2021. (4) Property was sold during the year ended December 31, 2022. (5) 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. (6) The Annualized Base Rent for Shea Center II, includes Hallibur ton Energy Services, Inc. which totals $944,851 for the year ended December 31, 2022.       43 Table of Contents