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SQFT: Balance Sheet Strengthening Measures Support Initiatives To Enhance Portfolio

04/30/2021

By M. Marin

NASDAQ:SQFT

READ THE FULL SQFT RESEARCH REPORT

Measures Streamline and Strengthen Balance Sheet, Enhancing Financial Flexibility

Presidio Property Trust (NASDAQ:SQFT), an internally-managed REIT that has a diversified portfolio of commercial and industrial properties and model homes, remains committed to deleveraging and continues to strengthen its balance sheet. 1Q21, SQFT paid roughly $7.7 million remaining on promissory notes prior to their quarter-end maturity. The company used cash and proceeds of property sales to pare the debt. With the repayment in full of the notes, earlier elimination of preferred shares and $11.5 million in cash at year-end 2020, SQFT believes it is poised for growth in 2021 and beyond.

Debt reduction has been a key target for SQFT. The company generally finances its investment in its property portfolio through secured asset-backed mortgage loans, but has initiated deleveraging measures regarding corporate debt. Moreover, in order to enhance its financial flexibility and potentially add liquidity if needed, the company also amended its shelf registration earlier this month. Under the shelf filing, the company can raise up to $200 million.

The company ended 2020 with $11.5 million in cash, cash equivalents and restricted cash, as noted. Moreover, 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; SQFT generated just under $15 million in proceeds from asset sales in 2021 through March 30.

Same-store rental revenue steady in 2020…

Separately, SQFT recorded 2020 revenue of $24.4 million, down 15% from $28.6 million in 2019, primarily reflecting the sale of several properties in 2019 and 1Q20. On a same-store basis, however, rental revenue of $19.6 million was down only 1.7% year-over-year and occupancy of 83.2% at the end of 2020 was higher than 80.8% on the same basis in 2019.

… Supporting SQFT’s Strategy to Target Smaller, Growing Markets

The company believes that smaller markets it targets have been more stable during the COVID-19 pandemic than larger metropolitan markets, in part because of lower reliance on public transportation. Moreover, the company’s strategy targets smaller regional markets that are characterized by population and economic growth.

Characteristics of Presidio’s target markets include higher growth in demand for housing, industrial and office space than national average growth rates. These are important factors behind the company’s high occupancy rates, which have remained above 83%, throughout the pandemic.

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