Confidence in strategic reality, INC management discussion and analysis of financial position and results of operations (Form 10-Q)

Confidence in strategic reality, INC management discussion and analysis of financial position and results of operations (Form 10-Q)

The next dialogue and evaluation needs to be learn along with our accompanying consolidated monetary statements and their notes.

As used herein, the phrases "we," "our," "us," and "Firm" discuss with Strategic
Realty Belief, Inc., and, as required by context, Strategic Realty Working
Partnership, L.P., a Delaware restricted partnership, which we discuss with as our
"working partnership" or "OP", and to their respective subsidiaries.
References to "shares" and "our frequent inventory" discuss with the shares of our frequent
inventory.
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A particular observe relating to forward-looking statements

Sure statements included on this Quarterly Report on Kind 10-Q that aren't
historic information (together with any statements regarding funding goals,
different plans and goals of administration for future operations or financial
efficiency, or assumptions or forecasts associated thereto) are forward-looking
statements inside the which means of Part 21E of the Securities Alternate Act of
1934, as amended (the "Alternate Act"). These statements are solely predictions. We
warning that forward-looking statements should not ensures. Precise occasions or our
investments and outcomes of operations may differ materially from these
expressed or implied in any forward-looking statements. Ahead-looking
statements are sometimes recognized by way of phrases comparable to "could," "ought to,"
"anticipate," "may," "intend," "plan," "anticipate," "estimate," "consider,"
"proceed," "predict," "potential" or the unfavorable of such phrases and different
comparable terminology.

The forward-looking statements included herein are based mostly upon our present
expectations, plans, estimates, assumptions and beliefs, which contain quite a few
dangers and uncertainties. Assumptions regarding the foregoing contain judgments
with respect to, amongst different issues, future financial, aggressive and market
situations and future enterprise selections, all of that are tough or
inconceivable to foretell precisely and lots of of that are past our management.
Though we consider that the expectations mirrored in such forward-looking
statements are based mostly on affordable assumptions, our precise outcomes and
efficiency may differ materially from these set forth within the forward-looking
statements. The next are among the dangers and uncertainties, though not
the entire dangers and uncertainties, that would trigger our precise outcomes to
differ materially from these offered in our forward-looking statements:

•The antagonistic impact of the general public well being disaster of the novel coronavirus illness
(COVID-19) pandemic, or any future pandemic, epidemic or outbreak of infectious
illness, on the monetary situation, outcomes of operations, money flows and
efficiency of the Firm and its tenants, the actual property market, in
specific with respect to retail industrial properties and the worldwide financial system
and monetary markets.

•Our govt officers and sure different key actual property professionals are additionally
officers, administrators, managers, key professionals and/or holders of a direct or
oblique controlling curiosity in our advisor. Because of this, they face conflicts
of curiosity, together with conflicts created by our advisor's compensation
preparations with us and conflicts in allocating time amongst us and different
applications and enterprise actions.

•We're unsure of our sources for funding our future capital wants. If we
can't get hold of debt or fairness financing on acceptable phrases, our capacity to
proceed to accumulate actual properties or different actual estate-related belongings, fund or
broaden our operations and pay distributions to our stockholders can be
adversely affected.

•We rely on tenants for our income and, accordingly, our income depends
upon the success and financial viability of our tenants. Revenues from our
properties may lower attributable to a discount in tenants (attributable to elements
together with, however not restricted to, tenant defaults, tenant insolvency, early
termination of tenant leases and non-renewal of present tenant leases) and/or
decrease rental charges, making it harder for us to fulfill our monetary
obligations, together with debt service and our capacity to pay distributions to our
stockholders.

•All our belongings are concentrated in a single state and in city retail properties,
any antagonistic financial, actual property or enterprise situations on this geographic space
or within the city retail market, together with with respect to the present financial
slowdown, the rising rate of interest atmosphere and inflation may have an effect on our
working outcomes and our capacity to pay distributions to our stockholders.

•Our present and future investments in actual property and different actual estate-related
investments could also be affected by unfavorable actual property market and basic
financial situations, which may lower the worth of these belongings and scale back
the funding return to our stockholders. Revenues from our properties may
lower. Such occasions would make it harder for us to fulfill our debt
service obligations and restrict our capacity to pay distributions to our
stockholders.

•Sure of our debt obligations have variable rates of interest with curiosity and
associated funds that modify with the motion of LIBOR or different indices.
Will increase in these indices may improve the quantity of our debt funds and
restrict our capacity to pay distributions to our stockholders.

All forward-looking statements needs to be learn in mild of the dangers recognized
in Half I, Merchandise 1A of our Annual Report on Kind 10-Okay for the 12 months ended December
31, 2021 (the "2021 Annual Report on Kind 10-Okay"). Any of the assumptions
underlying the forward-looking statements included herein could possibly be inaccurate,
and undue reliance shouldn't be positioned upon on any forward-looking statements
included herein. All forward-looking statements are made as of the date of this
Quarterly Report on Kind 10-Q, and the danger that precise outcomes will differ
materially from the expectations expressed herein will improve with the passage
of time. Besides as in any other case required by the federal securities legal guidelines, we
undertake no obligation to publicly replace or revise any forward-looking
statements made after the date of this Quarterly Report on Kind 10-Q, whether or not as
a consequence
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of recent data, future occasions, modified circumstances or another purpose. In
mild of the numerous uncertainties inherent within the forward-looking
statements included on this Quarterly Report on Kind 10-Q, and the dangers
described in Half I, Merchandise 1A of the 2021 Annual Report on Kind 10-Okay, the
inclusion of such forward-looking statements shouldn't be considered a
illustration by us or another person who the goals and plans set forth
on this Quarterly Report on Kind 10-Q can be achieved.

Abstract

We're a Maryland company that was fashioned on September 18, 2008, to take a position
in and handle a portfolio of income-producing retail properties, situated in the
United States, actual estate-owning entities and actual estate-related belongings,
together with the funding in or origination of mortgage, mezzanine, bridge and
different loans associated to industrial actual property. Throughout the first quarter of 2016,
we additionally invested, by joint ventures, in two vital retail initiatives
beneath growth, certainly one of which was considerably accomplished through the 12 months
ended December 31, 2020. Now we have elected to be taxed as an actual property funding
belief ("REIT") for federal earnings tax functions, commencing with the taxable 12 months
ended December 31, 2009, and we've got operated and intend to proceed to function
in such a fashion. We personal considerably all of our belongings and conduct our
operations by our working partnership, of which we're the only real basic
accomplice. We additionally personal a majority of the excellent restricted accomplice pursuits in
the working partnership.

Since our inception, our enterprise has been managed by an exterior advisor. We do
not have direct staff and all administration and administrative personnel
chargeable for conducting our enterprise are employed by our advisor. Presently
we're externally managed and suggested by SRT Advisor, LLC, a Delaware restricted
legal responsibility firm (the "Advisor") pursuant to an advisory settlement with the
Advisor (the "Advisory Settlement") initially executed on August 10, 2013, and
subsequently renewed yearly by 2022. The present time period of the Advisory
Settlement terminates on August 9, 2023. The Advisor is an affiliate of PUR
Administration LLC, which is an affiliate of L3 Capital, LLC. L3 Capital, LLC is a
actual property funding agency centered on institutional high quality, value-add, prime
city retail and mixed-use funding inside first tier U.S. metropolitan
markets.

Impression of COVID-19 and Market Forecast

Given the continuing workforce shortages, world provide chain bottlenecks and
shortages, latest macroeconomic traits, together with inflation and rising curiosity
charges, we proceed to observe and tackle dangers associated to the COVID-19 pandemic
and the overall state of the financial system on our portfolio and retail tenants. As of
September 30, 2022, all of our tenants have resumed paying hire and whereas we
consider that the COVID-19 pandemic has and will proceed to negatively impression
our monetary situation and outcomes of operations, together with however not restricted to,
declines in actual property rental revenues, the shortcoming to promote sure
properties at a good worth, and a lower in building and leasing
exercise, we consider that the preliminary impacts from the pandemic to our portfolio
and tenants have began to subside.

Throughout the 9 months ended September 30, 2022, inflation in the USA
has accelerated and is presently anticipated to proceed at an elevated degree in
the near-term. Rising inflation may have an antagonistic impression on our variable
price debt or the refinancing of our fastened price debt, in addition to basic and
administrative bills, as these prices may improve at a price increased than our
rental and different income. As well as, our retail tenants could expertise
decreased income because of rising inflation and decreased shopper spending.
The Federal Reserve has not too long ago began elevating rates of interest to fight
inflation and restore worth stability and it's anticipated that charges will
proceed to rise all through the rest of 2022. Because of this, to the extent
our publicity to will increase in rates of interest just isn't eradicated by curiosity
price swaps or different safety agreements, such will increase could end in increased
debt service prices, which is able to adversely have an effect on our money flows.

We consider that the actions we've got taken to enhance our monetary place and
maximize our liquidity, as described additional within the "Administration's Dialogue and
Evaluation of Monetary Situation and Outcomes of Operations" in our 2021 Annual
Report on Kind 10-Okay, will proceed to mitigate the impression to our money movement
attributable to the present macroeconomic traits.

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property portfolio

As of September 30, 2022, our wholly-owned property portfolio included six
retail properties, excluding a land parcel, which we discuss with as "our
properties" or "our portfolio," comprising an mixture of roughly 27,000
sq. toes of multi-tenant, industrial retail area situated in a single state. We
bought our properties for an mixture buy worth of roughly $35.3
million. As of September 30, 2022 roughly 88% of our wholly-owned actual
property investments had been leased (based mostly on rentable sq. footage), with a
weighted-average remaining lease time period of roughly 6.0 years. As of December
31, 2021, roughly 86% of our wholly-owned actual property investments had been
leased (based mostly on rentable sq. footage as of December 31, 2021), with a
weighted-average remaining lease time period of roughly 6.3 years.


({dollars} in hundreds)                                                                                          Efficient                                        Authentic
                                                            Rentable Sq.              P.c                Lease (3)                       Date              Buy
Property Title (1)                   Location                      Toes                 Leased (2)            (per Sq. Foot)                  Acquired              Value     Debt (4)

Wholly owned actual property investments

400 Grove Road             San Francisco, CA                   2,000                         100  %       $        48.00                      6/14/2016       $  2,890          $  1,450
8 Octavia Road             San Francisco, CA                   3,640                          47  %                65.31                      6/14/2016          2,740             1,500
Fulton Retailers                 San Francisco, CA                   3,758                          66  %                58.43                      7/27/2016          4,595             2,200
450 Hayes                    San Francisco, CA                   3,724                         100  %                98.78                     12/22/2016          7,567             3,650
388 Fulton                   San Francisco, CA                   3,110                         100  %                61.96                       1/4/2017          4,195             2,300
Silver Lake                  Los Angeles, CA                    10,497                         100  %                84.25                      1/11/2017         13,300             6,900
                                                                26,729                                                                                            35,287            18,000

Actual property investments owned by joint ventures held on the market 3032 Wilshire Joint Enterprise Property

             Santa Monica, CA                   12,208                          42  %                96.39                       3/8/2016         13,500            12,711
                                                                38,937                                                                                          $ 48,787          $ 30,711

(1) The checklist of actual property doesn’t embrace the parcel remaining in Topaz Market From September 30, 2022.

(2) The proportion is predicated on the rented sq. foot of every property as of
September 30, 2022.

(3)Efficient hire per sq. foot is calculated by dividing the annualized
September 30, 2022 contractual base hire by the whole sq. toes occupied at
the property. The contractual base hire doesn't embrace different objects comparable to
tenant concessions (e.g., free hire), proportion hire, and expense recoveries.

(4) Debt represents the stability excellent as of September 30, 2022excludes reclassification of roughly 0.1 million {dollars} Deferred finance prices, web, as a corresponding legal responsibility. For extra details about our financing, please discuss with Observe 7. “Cost notes, web” in our condensed consolidated monetary statements included on this quarterly report.

Properties beneath growth

As of September 30, 2022, we had one property beneath growth in Hollywood,
California. This growth undertaking remains to be within the planning section and
building has not commenced. Throughout the third quarter of 2022 we expensed
roughly $280 thousand in prices included within the condensed consolidated
assertion of operations.
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Operations outcomes

Comparability between the three and 9 months ended September 30, 2022versus the three and 9 months ended September 30, 2021.

The next desk offers abstract details about our outcomes of operations
for the three and 9 months ended September 30, 2022 and 2021 (quantities in
hundreds):

                                                 Three Months Ended
                                                   September 30,
                                                 2022           2021        $ Change      % Change

Rental earnings and refunds $734 $517 $217 42.0%

    Working and upkeep bills              273           469      

(196) (41.8)%

    Normal and administrative bills             290           373      

(83) (22.3)%

    Depreciation and amortization bills          254           351      

(97) (27.6)%

    Curiosity expense                                852           319      

533 167.1%

    Loss on early lease termination                   -           624      

(624) (100.0)%

    Loss on impairment of actual property               152         5,628      
 (5,476)       (97.3) %
    Working loss                               (1,087)       (7,247)        6,160        (85.0) %

    Web loss                                 $   (1,087)     $ (6,976)     $  6,160        (88.3) %

                                                 9 Months Ended
                                                   September 30,
                                                 2022           2021        $ Change      % Change

Rental earnings and refunds $2,189 $1,870 $319 17.1%

    Working and upkeep bills            1,323         1,747      

(424) (24.3)%

    Normal and administrative bills           1,238         1,184      

54 4.6%

Depreciation and amortization expense 846 1,068

(222) (20.8%)

    Curiosity expense                              1,484           947      

537 56.7%

    Loss on early lease termination                 190           624      

(434) (69.6%) %

    Loss on impairment of actual property             6,035         5,628      
    407          7.2  %
    Working loss                               (8,927)       (9,328)          401         (4.3) %
    Different earnings, web                                 -           422          (422)      (100.0) %

    Web loss                                 $   (8,927)     $ (8,906)     $    (21)         0.2  %

Our outcomes of operations for the three and 9 months September 30, 2022should not essentially indicative of these anticipated in future intervals.

he received

The rise in income through the three and 9 months ended September 30,
2022, in comparison with the identical intervals in 2021, was primarily because of the receipt of
key cash from a brand new tenant as a part of new lease settlement on the 388 Fulton
property and new tenants paying hire on the Silverlake and Wilshire Joint
Enterprise properties.

Operation and upkeep bills

Working and upkeep bills decreased through the three and 9 months
ended September 30, 2022, in comparison with the identical intervals in 2021, primarily attributable to
decrease unhealthy debt reserves, write-off of uncollectible rents and decrease consulting
charges associated to Wilshire Joint Enterprise Property growth. Improve partially
offset by increased safety prices and tenant authorized prices.

Normal and administrative bills

Normal and administrative bills decreased through the three months ended
September 30, 2022In comparison with the identical interval in 2021, primarily attributable to decrease audit and different skilled charges and decrease asset administration charges.

Normal and administrative bills elevated through the 9 months ended
September 30, 2022In comparison with the identical interval in 2021, primarily attributable to increased authorized charges with the rise partially offset by decrease asset administration charges.

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Depreciation and amortization bills

Depreciation and amortization bills decreased through the three and 9
months ended September 30, 2022, in comparison with the identical intervals in 2021, primarily
because of the impairment cost incurred through the 12 months ended December 31, 2021 at
the Wilshire Joint Enterprise Property and the suspension of depreciation on the
Wilshire Joint Enterprise Property because of the classification of the property as
held on the market within the consolidated stability sheets as of June 30, 2022.

curiosity expense

Curiosity expense remained elevated through the three and 9 months ended
September 30, 2022, in comparison with the identical interval in 2021, primarily due to attract
downs on the Unsecured mortgage from PUR Holdings Lender, LLC, an affiliate of the
Advisor. Further improve attributable to improve within the Secured In a single day Financing
Charge leading to a better rate of interest on the SRT Mortgage.

Loss upon early termination of the lease

Loss on early lease termination through the three and 9 months ended September
30, 2022 associated to the disposal of belongings because of the termination of a tenant
lease on the 388 Fulton property.

The loss on early lease termination through the three and 9 months ending September 2021 pertains to disposal of belongings attributable to termination of leases at 400 Grove, 450 Hayes and Wilshire.

Actual property impairment loss

Loss on impairment of actual property through the three months ended September 30,
2022, associated to the Wilshire Joint Enterprise of roughly $0.2 million. Loss
on impairment of actual property through the 9 months ended September 30, 2022,
associated to the Wilshire Joint Enterprise and Sundown & Gardner Joint Enterprise of
roughly $2.6 million and $3.5 million, respectively.

The loss ensuing from the impairment of the property worth through the three and 9 months ending
September 30, 2021associated to the Wilshire Joint Enterprise.

Different earnings, web

Different earnings, web for the three and 9 months ended September 30, 2021consisting of revenue from the sale of outlets in Turkey Creek close to to $0.4 million.

Liquidity and capital sources

Since our inception, our principal demand for funds has been for the acquisition
of actual property, the cost of working bills and curiosity on our
excellent indebtedness, the cost of distributions to our stockholders and
investments in unconsolidated joint ventures and growth properties. Prior
to the termination of our preliminary public providing in February 2013 we used
providing proceeds to fund our acquisition actions and our different money wants.
Presently we've got used and anticipate to proceed to make use of debt financing, web gross sales
proceeds and money movement from operations to fund our money wants.

As of September 30, 2022, our money and money equivalents had been roughly $0.5
million and we had $0.6 million of restricted money (funds held by the lenders
for property taxes, insurance coverage, tenant enhancements, leasing commissions, capital
expenditures, rollover reserves and different financing wants).

Our mixture borrowings, secured and unsecured, are reviewed by our board of
administrators no less than quarterly. Below our Articles of Modification and Restatement,
as amended, which we discuss with as our "constitution," we're prohibited from borrowing
in extra of 300% of the worth of our web belongings. Web belongings for functions of
this calculation is outlined to be our complete belongings (aside from intangibles),
valued at value previous to deducting depreciation, reserves for unhealthy money owed and different
non-cash reserves, much less complete liabilities. Nonetheless, we could quickly borrow in
extra of those quantities if such extra is authorized by a majority of the
impartial administrators and disclosed to stockholders in our subsequent quarterly
report, together with an evidence for such extra. As of September 30, 2022 and
December 31, 2021, our borrowings had been roughly 173.8% and 120.2%,
respectively, of the worth of our web belongings.
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The next desk summarizes, for the intervals indicated, the objects chosen in our condensed consolidated statements of money flows (quantities in hundreds):

                                                             9 Months Ended
                                                               September 30,
                                                          2022                2021             $ Change
Web money supplied by (utilized in):
Working actions                                  $   (1,784)         $  (1,775)         $       (9)
Investing actions                                      (1,517)             1,838              (3,355)
Financing actions                                       1,970                (38)              2,008

Web (lower) improve in money and money equivalents and restricted money

                                       $   (1,331)         $ 

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money flows from working actions

The change in money flows from working actions was primarily attributable to decrease
provisions for losses on tenant receivables, decrease depreciation and amortization
expense and decrease losses on early lease terminations attributable to fewer tenants
terminating leases through the 9 months ended September 30, 2022 as in contrast
to the identical interval in 2021.

money movement from investing actions

Money flows utilized by investing actions through the 9 months ended September
30, 2022, primarily consisted of $0.9 million of extra funding within the
Sundown and Gardner Joint Enterprise and $0.4 million extra funding in
tenant and constructing enhancements on the Wilshire and Silverlake properties.

Money flows from investing actions through the 9 months ended
September 30, 2021consisting primarily of roughly $3.8 million in sale proceeds Turkey Creek It’s partially offset 1.3 million {dollars} Further funding within the Sundown and Gardner Joint Enterprise undertaking.

money flows from financing actions

Money flows supplied by financing actions through the 9 months ended
September 30, 2022, primarily consisted of proceeds of $2.0 million from a draw
down on the Unsecured Mortgage from PUR Holdings Lender, LLC, an affiliate of the
Advisor. Extra money was supplied by building mortgage proceeds of
roughly $0.2 million. The rise was partially offset by cost of
financing prices associated to the extensions of the Sundown & Gardner and Wilshire
Joint Enterprise loans.

Money flows utilized in financing actions through the 9 months ended September
30, 2021, primarily consisted of cost of financing prices associated to the
extension of the Sundown & Gardner mortgage, partially offset by building mortgage
proceeds

Quick-term liquidity and capital sources

Our principal short-term demand for funds is for the cost of working
bills and the cost on our excellent indebtedness. Thus far, our money
wants for operations have been funded by money supplied by property operations,
the gross sales of properties, debt refinancing, and the sale of shares of our frequent
inventory. We could fund our short-term working money wants from operations, from the
gross sales of properties and from debt.

On December 30, 2021, so as to fund our short-term liquidity wants we
obtained a $4.0 million Unsecured Mortgage from PUR Holdings Lender, LLC, an
affiliate of the Advisor. The Unsecured Mortgage has a time period of 12 months with an
rate of interest of seven.0% each year, compounding month-to-month with the power to pay-off
through the time period of the mortgage. The Unsecured Mortgage requires draw downs in
increments of a minimum of roughly $0.3 million. The Unsecured Mortgage will
be due and payable upon the sooner of 12 months or the termination of the
Advisory Settlement by us. On March 15, 2022, we and PUR Holdings Lender, LLC,
amended the mortgage settlement to permit for an extension of the maturity date of the
Unsecured Mortgage by six months, from December 30, 2022 to June 30, 2023, if we
present PUR Holdings Lender, LLC, with discover, pay an extension charge, and no
occasion of default has occurred. On August 2, 2022, PUR Holdings Lender, LLC
agreed to a further six month extension on the possibility of the Firm to
prolong the maturity date till December 31, 2023. The Unsecured Mortgage is
assured by us.

On August 10, 2022, the due diligence interval expired beneath a Buy and Sale
Settlement we entered with an unrelated third-party for the sale of the Wilshire
Joint Enterprise Property situated in Santa Monica, California for a sale worth of
$16.5 million. On October 11, 2022, we consummated the disposition of the
Wilshire Joint Enterprise Property for $16.5 million in money, earlier than customary
closing and transaction prices, leading to web money proceeds of roughly
$2.2 million. In reference to the disposition of the Wilshire Joint Enterprise
Property, we repaid the Wilshire Building Mortgage within the quantity of
$12.7 million, which was secured by a primary Deed of Belief on the Wilshire Joint
Enterprise Property. The Buy and Sale
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The settlement has been entered into 30 June 2022Because of this, the Wilshire co-ownership was labeled as held on the market within the consolidated stability sheet as of September 30, 2022.

Lengthy-term liquidity and capital sources

On a long-term foundation, our principal demand for funds can be for actual property and
actual estate-related investments, extra funding in our growth
initiatives and the cost of acquisition-related bills, working bills,
distributions to stockholders, future redemptions of shares and curiosity and
principal funds on present and future indebtedness. Typically, we intend to
meet money wants for objects aside from acquisitions and acquisition-related
bills from our money movement from operations, debt and gross sales of properties. On a
long-term foundation, we anticipate that considerably all money generated from operations
can be used to pay distributions to our stockholders after satisfying our
working bills together with curiosity and principal funds. We could take into account
future public choices or personal placements of fairness. Discuss with Observe 7. "Notes
Payable, Web" to our condensed consolidated monetary statements included in
this Quarterly Report on Kind 10-Q for added data on the maturity
dates and phrases of our excellent indebtedness.

Our capacity to entry capital on favorable phrases in addition to to make use of money from
operations to proceed to fulfill our liquidity wants could possibly be affected by the
continued results of the COVID-19 pandemic, the present financial slowdown, the
rising rate of interest atmosphere and inflation (or the general public notion that
any of those occasions could proceed). The complete impression of those occasions on our rental
income and, consequently, future money from operations can't be decided at
current.

We consider that our money available, together with different potential aforementioned
sources of liquidity that we could possibly get hold of, can be enough to fund
our working capital wants and debt obligations for no less than the following twelve
months and past. Nonetheless, this forward-looking assertion is topic to a
variety of uncertainties, together with with respect to the length of the COVID-19
pandemic, and the present financial atmosphere and there will be no assure
that we are going to achieve success with our plan. Furthermore, over the long run, if our
money movement from operations doesn't improve from present ranges, we could must
tackle a liquidity deficiency. We're actively exploring choices ought to money
movement from operations not sufficiently enhance, together with a sale of a number of
belongings that aren't producing optimistic money movement.

Current Financing Transactions

Multi-Property Secured Financing

on me December 24, 2019Now we have entered right into a mortgage settlement (“SRT Mortgage Settlement”) with PFP Holding Firm, LLC (“SRT Lender”) for a non-recourse secured mortgage (“SRT Mortgage”).

The SRT Mortgage is secured by first deeds of belief on our 5 San Francisco belongings
(Fulton Retailers, 8 Octavia, 400 Grove, 450 Hayes and 388 Fulton Road) in addition to
our Silverlake Assortment situated in Los Angeles. The SRT Mortgage matures on
January 9, 2023. Now we have an possibility to increase the time period of the mortgage for 2
extra twelve-month intervals, topic to the satisfaction of sure
covenants and situations contained within the SRT Mortgage Settlement. Now we have the precise
to prepay the SRT Mortgage in entire at any time or partially now and again,
topic to the cost of sure bills, prices or liabilities doubtlessly
incurred by the SRT Lender because of the prepayment and topic to sure
different situations contained within the mortgage paperwork. Particular person properties could also be
launched from the SRT Mortgage collateral in reference to bona fide third-party
gross sales, topic to compliance with sure covenants and situations contained in
the SRT Mortgage Settlement.

As of September 30, 2022, the SRT Mortgage had a principal stability of roughly
$18.0 million. The SRT Mortgage is a floating Secured In a single day Financing Charge
("SOFR") price mortgage which bears curiosity at 30-day SOFR (with a flooring of 1.50%)
plus 2.80%. The default price is the same as 5% above the speed that in any other case would
be in impact. Month-to-month funds are interest-only with the whole principal
stability and all excellent curiosity due at maturity.

Pursuant to the SRT Mortgage, we should adjust to sure issues contained within the
mortgage paperwork together with however not restricted to, (i) necessities to ship audited
and unaudited monetary statements, SEC filings, tax returns, professional forma budgets,
and quarterly compliance certificates, and (ii) minimal limits on our liquidity
and tangible web price. The SRT Mortgage comprises customary covenants, together with,
with out limitation, covenants with respect to upkeep of properties and
insurance coverage, compliance with legal guidelines and environmental issues, covenants limiting or
prohibiting the creation of liens, and transactions with associates.

In relation to the SRT mortgage, we’ve got carried out non-recourse customary deduction and environmental ensures, together with restricted extra ensures in respect of condominium buildings within the San Francisco origins.

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Actual property secured loans

On Could 7, 2019, we refinanced and repaid our financing with Lone Oak Fund, LLC
with a brand new building mortgage from ReadyCap Business, LLC (the "Lender") (the
"Wilshire Building Mortgage"). As of September 30, 2022, the Wilshire
Building Mortgage had a principal stability of roughly $12.7 million, with
future funding out there as much as a complete of roughly $13.9 million, and bears
an rate of interest of 1-month LIBOR (with a flooring of two.467%) plus an curiosity
margin of 4.25% each year, payable month-to-month. On October 11, 2022, we consummated
the disposition of the Wilshire Joint Enterprise Property for $16.5 million in
money, earlier than customary closing and transaction prices. In reference to the
disposition of the Wilshire Joint Enterprise Property, we repaid the Wilshire
Building Mortgage within the quantity of $12.7 million, which was secured by a primary
Deed of Belief on the Wilshire Joint Enterprise Property. We executed a warranty
that guaranties that the mortgage curiosity reserve quantities are saved in compliance
with the phrases of the mortgage settlement. The Lender additionally required {that a} principal
within the upstream proprietor of our three way partnership accomplice within the Wilshire Joint Enterprise
(the "Guarantor"), ensures efficiency of borrower's obligations beneath the
mortgage settlement with respect to the completion of capital enhancements to the
property. We executed an Indemnity Settlement in favor of the Guarantor in opposition to
legal responsibility beneath that completion warranty besides to the extent attributable to gross
negligence or willful misconduct, in addition to for liabilities incurred beneath the
Environmental Indemnity Settlement executed by the Guarantor in favor of the
Lender. We used working capital funds of roughly $3.1 million to repay the
distinction between the Wilshire Building Mortgage preliminary advance and the prior
mortgage, to pay transaction prices, in addition to to fund sure required curiosity and
building reserves.

secured loans Properties beneath growth

On October 29, 2018, we entered right into a mortgage settlement with Lone Oak Fund, LLC
(the "Sundown & Gardner Mortgage"). The Sundown & Gardner Mortgage has a principal stability
of roughly $8.7 million, and had an rate of interest of 6.9% each year. At
every maturity date in October 2019, 2020 and 2021, in reference to an
extension of the mortgage for a further twelve-month interval, the rate of interest
of the mortgage was modified to six.5%, 7.3% and seven.0%, respectively. On September 7,
2022, the Firm prolonged the Sundown & Gardner Mortgage for a further
twelve-month interval beneath the identical phrases, besides a rise within the curiosity
price to eight.6% each year. The brand new maturity date is October 31, 2023. The Sundown &
Gardner Mortgage is secured by a primary Deed of Belief on the Sundown & Gardner
Property.

mortgage with ally

On December 30, 2021, we obtained a $4.0 million unsecured mortgage (the "Unsecured
Mortgage") from PUR Holdings Lender, LLC, an affiliate of the Advisor. The Unsecured
Mortgage has a time period of 12 months with an rate of interest of seven.0% each year,
compounding month-to-month with the power to pay-off through the time period of the mortgage. The
Unsecured Mortgage requires draw downs in increments of a minimum of roughly
$0.3 million. The Unsecured Mortgage can be due and payable upon the sooner of 12
months or the termination of the Advisory Settlement by us. The Unsecured Mortgage is
assured by us. On March 15, 2022, we and PUR Holdings Lender, LLC, amended
the mortgage settlement to permit for an extension of the maturity date of the
Unsecured Mortgage by six months, from December 30, 2022 to June 30, 2023, if we
present PUR Holdings Lender, LLC, with discover, pay an extension charge, and no
occasion of default has occurred. On August 2, 2022, PUR Holdings Lender, LLC
agreed to a further six month extension on the possibility of the Firm to
prolong the maturity date till December 31, 2023. As of September 30, 2022 the
Unsecured Mortgage had an impressive stability of roughly $3.0 million.

Pointers for Complete Working Bills

We reimburse our Advisor for some bills paid or incurred by our Advisor in
reference to the companies supplied to us, besides that we are going to not reimburse
our Advisor for any quantity by which our complete working bills on the finish of
the 4 previous fiscal quarters exceed the higher of (1) 2% of our common
invested belongings, as outlined in our constitution; and (2) 25% of our web earnings, as
outlined in our constitution, or the "2%/25% Pointers" except a majority of our
impartial administrators determines that such extra bills are justified based mostly
on uncommon and non-recurring elements. For the three and 9 months ended
September 30, 2022 and 2021, our complete working bills didn't exceed the
2%/25% Pointers.

Our Advisory Settlement offers that the Advisor shall not be required to
reimburse to us any working bills incurred throughout a given interval that
exceed the relevant restrict on "Complete Working Bills" (as outlined within the
Advisory Settlement) to the extent that such extra working bills are
incurred because of sure uncommon and non-recurring elements authorized by
our board of administrators.
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inflation

Nearly all of our leases at our properties comprise inflation safety
provisions relevant to reimbursement billings for frequent space upkeep
fees, actual property tax and insurance coverage reimbursements on a per sq. foot
foundation, or in some circumstances, annual reimbursement of working bills above a
sure per sq. foot allowance. We anticipate to incorporate comparable provisions in
our future tenant leases designed to guard us from the impression of inflation.
Because of the usually long-term nature of those leases, annual hire will increase, as
effectively as rents obtained from acquired leases, is probably not enough to cowl
inflation and hire could also be beneath market charges.

REIT . compliance

To qualify as a REIT for tax functions, we're required to yearly distribute at
least 90% of our REIT taxable earnings, topic to sure changes, to our
stockholders. We should additionally meet sure asset and earnings checks, in addition to different
necessities. If we fail to qualify as a REIT in any taxable 12 months, we can be
topic to federal earnings tax (together with any relevant various minimal tax)
on our taxable earnings at common company charges and usually won't be
permitted to qualify for remedy as a REIT for federal earnings tax functions for
the 4 taxable years following the 12 months throughout which our REIT qualification is
misplaced except the IRS grants us aid beneath sure statutory provisions. Such an
occasion may materially adversely have an effect on our web earnings and web money out there
for distribution to our stockholders.

Quarterly distributions

As set forth above, so as to qualify as a REIT, we're required to distribute
no less than 90% of our annual REIT taxable earnings, topic to sure changes,
to our stockholders. Our board of administrators will proceed to judge the quantity
of future quarterly distributions based mostly on our operational money wants.

Some or all of our distributions have been paid, and should proceed to be repaid sooner or later from sources aside from money movement from operations.

In mild of the COVID-19 pandemic, its impression on the financial system and the associated
future uncertainty, on March 27, 2020, our board of administrators decided to
droop the cost of any dividend for the quarters ending March 31, 2020, and
to rethink future dividend funds on 1 / 4 by quarter foundation. Dividend
funds weren't reinstated as of September 30, 2022.

Funds from operations

Funds from operations ("FFO") is a supplemental non-GAAP monetary measure of a
actual property firm's working efficiency. The Nationwide Affiliation of Actual
Property Funding Trusts, or "NAREIT", an business commerce group, has promulgated
this supplemental efficiency measure and defines FFO as web earnings, computed in
accordance with GAAP, plus actual property associated depreciation and amortization and
excluding extraordinary objects and beneficial properties and losses on the sale of actual property,
and after changes for unconsolidated joint ventures (changes for
unconsolidated partnerships and joint ventures are calculated to replicate FFO.)
You will need to observe that not solely is FFO not equal to our web earnings or
loss as decided beneath GAAP, it additionally doesn't characterize money flows from
working actions in accordance with GAAP. FFO shouldn't be thought-about an
various to web earnings as a sign of our efficiency, neither is FFO
essentially indicative of money movement as a measure of liquidity or our capacity to
fund money wants, together with the cost of distributions.

We take into account FFO to be a significant, extra measure of working efficiency
and one that's an applicable supplemental disclosure for an fairness REIT attributable to
its widespread acceptance and use inside the REIT and analyst communities.
Comparability of our presentation of FFO to equally titled measures for different
REITs could not essentially be significant attributable to potential variations within the
software of the NAREIT definition utilized by such REITs.
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Our calculation of FFO attributable to frequent shares and Widespread Models and the
reconciliation of web earnings (loss) to FFO is as follows (quantities in hundreds,
besides shares and per share quantities):

                                                             Three Months Ended                           9 Months Ended
                                                               September 30,                                September 30,
FFO                                                      2022                  2021                   2022                  2021
Web loss                                           $      (1,087)         $     (6,976)         $      (8,927)         $     (8,906)
Changes:

Achieve on disposal of belongings                                     -                     -                      -                  (422)

Depreciation of actual property                                  205                   309                    710                   932
Amortization of in-place leases and leasing
prices                                                         49                    42                    136                   136
Loss on impairment of actual property                            152                 5,628                  6,035                 5,628
FFO attributable to frequent shares and Widespread
Models (1)                                          $        (681)         $ 

(997) $ (2,046) $ (2,632)

FFO per share and Widespread Unit (1)                  $       (0.06)         $ 

(0.09) $ (0.19) ($0.24)

Weighted common frequent shares and models
excellent (1)                                       10,957,289            10,957,204             10,957,289            10,957,204


(1)Our frequent models have the precise to transform a unit into frequent inventory for a
one-to-one conversion. Due to this fact, we're together with the associated non-controlling
curiosity earnings/loss attributable to frequent models within the computation of FFO and
together with the frequent models along with weighted common shares excellent for
the computation of FFO per share and customary unit.

Transactions and agreements with associated events

We're presently social gathering to the Advisory Settlement, pursuant to which the Advisor
manages our enterprise in alternate for specified charges paid for companies associated to
the funding of funds in actual property and actual estate-related investments,
administration of our investments and for different companies. Discuss with Observe 11. "Associated
Social gathering Transactions" to our condensed consolidated monetary statements included
on this Quarterly Report on Kind 10-Q for a dialogue of the Advisory Settlement
and different associated social gathering transactions, agreements and costs.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Our interim unaudited condensed consolidated monetary statements have been
ready in accordance with GAAP and along with the principles and
laws of the SEC. The preparation of our monetary statements requires
vital administration judgments, assumptions and estimates about issues that
are inherently unsure. These judgments have an effect on the reported quantities of belongings
and liabilities and our disclosure of contingent belongings and liabilities on the
dates of the monetary statements and the reported quantities of income and
bills through the reporting intervals. With totally different estimates or assumptions,
materially totally different quantities could possibly be reported in our monetary statements.
Moreover, different corporations could make the most of totally different estimates which will impression
the comparability of our outcomes of operations to these of corporations in comparable
companies. A dialogue of extra accounting insurance policies that administration
considers crucial in that they contain vital administration judgments,
assumptions and estimates is included in our 2021 Annual Report on Kind 10-Okay.

Later occasions

on me October 11 2022Now we have accomplished the disposal of the Wilshire frequent property of $16.5 million In money, earlier than the same old closing and transaction prices $1.6 millionleading to a web money return of approx $2.2 million…in reference to the disposition of the Wilshire frequent property, we’ve got repaid the development mortgage from ReadyCap Business, LLC. ReadyCap Business, LLC within the quantity of $12.7 millionThe mortgage is secured by a deed of the primary of Belief in Wilshire Widespread Possession.

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#Confidence #strategic #actuality #administration #dialogue #evaluation #monetary #place #outcomes #operations #Kind #10Q

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