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spk00: Good afternoon, ladies and gentlemen, and welcome to the Presidio Property Trust fourth quarter 2020 earnings call. At this time, all participants are in place in a listen-only mode. It is now my pleasure to turn the floor over to your host, Laurel Hartcorn. Sir, the floor is yours.
spk04: Thank you, operator. Good afternoon and welcome to Presidio Property Trust fourth quarter and year-end 2020 earnings call. My name is Lowell Hartkorn, investor relations here at Presidio. Joining me on the call today are Jack Heilbrun, our president and chief executive officer, Adam Sragovitz, chief financial officer, Gary Katz, senior vice president of asset management, and Larry DuBose, the head of our model home division. Jack, Adam, Gary, and Larry will make prepared remarks today. then we'll be happy to take your questions via chat. At any time, you can click on the ask question button in the media player window to submit questions to our team. While we ask for your patience today as consistent with social distancing recommendations, each of us from the company will be speaking from separate offices. Unless otherwise noted, Comparisons made on this conference call will be between 2020 year and the 2019 year. If we are referring to a quarter, it will be the fourth quarter of 2020 compared to the fourth quarter of 2019. In addition, today's discussion will include forward-looking statements, which are subject to risk and uncertainties. Actual results could differ materially from these forward-looking statements. Please refer to our SEC filings for detailed discussion of potential risks and uncertainties. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are including in our earnings press release, which was issued and filed with our Form 8-K today. As a reminder, this conference call will be made available for replay on the investor section of our website, www.PresidioPT.com, where we will also post our prepared remarks following the conclusion of this call. With that, let me turn the call over to Jack Heilbrunn, our president and CEO. Jack?
spk05: Thank you, Lowell. We spend time at Presidio thinking about the road ahead and how we might prepare for changes in the economy and our business. Nothing could have prepared us for the strange and crazy year that was 2020. With the world turned upside down with COVID, we are fortunate that our diversified portfolio performs so well under these conditions. To us, diversified does not mean just buying anything that comes our way. It means buying certain type of properties in particular locations where we expect to see long-term strength. We were recently able to completely retire our short-term mezzanine debt, mostly from sales of properties that we had owned for many years and then repositioned for sale. It was a long-term undertaking. The sales process started in 2020 and even late 2019 in one case. But we were able to have great outcomes for our company and our shareholders. There are so many paradoxes in the economy today that it serves us well to be both flexible about what we look at and discerning about the final decision. For example, there is great demand for single family homes in some geographies, as Lily will talk about later. But unfortunately, not so much demand for hotel space and others. Another example is some of our buildings that may not have seen they would sell quickly. And a lack of inventory, however, has worked in our favor on a number of occasions as a seller. With 2020 behind us, we see certain signs of optimism in terms of tenant demand and the ability to grow capital and to be able to grow shareholder value. We thank you for joining us. I will now turn the call over to Adam, our CFO.
spk02: Thank you, Jack. I'd like to extend a special welcome to all our new shareholders and a reminder that you can stay up to date on our company by visiting the investor section of our website at www.presidiopt.com. We post press releases there as well as our SEC filings. Our press releases should also be visible at your favorite financial website or brokerage firm online account if you look under our stock ticker SQFT. At a high level, due primarily to the sale of properties and not the impact of COVID, our revenues of $24.4 million for 2020 were down 15% versus $28.6 million for 2019. You may remember that at our peak, we carried $40 million of mezzanine debt, which, as Jack mentioned, has now been paid off in full. We expect 2021 to be a year of growth now that the short-term debt is behind us and expect that the capital markets will see us as a stronger company. We have also cycled out of several properties that we believe to have a limited price appreciation potential without extensive capital expenditures. Jack mentioned the importance of being a diversified REIT, the benefits of which are reflected in our overall revenue collection this quarter during a time of turmoil suffered by many. For the 2020 year, we collected 98% of the rent that we budgeted on a consolidated level, which includes the effects of rent abatements and deferrals related to COVID. The strongest areas of the business, the model homes and office properties saw 100% of the budget revenue collected. The industrial properties were also strong with 97% of the budgeted rents collected. Retail was a challenging area with 87% collected of build rents. However, model homes and office properties accounted for 83% of total rents. So the portfolio on balance performed well during the year due to the strength of the core business. COVID's impact on our business in 2020 primarily rent abatements extended to businesses operated by retail tenants affected by COVID, totaled $263,000, or only 1% of collections. We've had several shareholders ask about our perspective on the current financing and refinancing markets, and we believe that lenders continue to have a strong appetite for making loans, especially for assets resilient in the face of COVID. We also currently see a number of opportunities to access the capital markets for growth capital. I'll pass the call now to Gary Katz to address leasing and property activity.
spk01: Thank you, Adam. We are happy to report that in spite of COVID-19 challenges, it was still a great year for leasing. In 2020, we executed 62 leases for a total of 283,000 square feet. Around 25% of these transactions represent new tenants, while the remainder consists of lease renewals or extensions. 2021 has gotten off to a good start as well with 16 lease transactions totaling 55,000 square feet year to date, of which notably around 70% represent new tenants. Given the current environment, tenant retention has been strong as most tenants are choosing to stay put and extend their leases rather than relocate. We currently have 19 additional lease transactions in the pipeline and are optimistic about current leasing demand. It is important to note that our successful leasing and tenant retention efforts are largely a byproduct of our strategic property types and locations. Most of the pandemic related real estate stress has occurred in primary and or gateway markets in downtown locations. However, our office portfolio consists primarily of suburban office properties in regions that are either high growth, such as Denver, or stable, such as Fargo. Our tenants do not rely on mass transit and most are small businesses, which don't necessarily have the capability to work from home. On the property sales front, during 2020, we sold three Colorado office properties representing nearly $29 million of transaction volume. So far in 2021, we sold another Colorado office property and a California retail center representing nearly $15 million. We currently have two Colorado office properties in escrow, which we expect to close during the second quarter, and a California retail center on the market for sale. Given the lack of inventory on the market, we have been pleased with the level of prospective buyer interest in our properties. We will continue to market properties for sale that we believe will enhance stockholder value. As Adam mentioned, because of our diversified portfolio of properties and tenants, The pandemic has not had a significant impact on our rent collections. Of the 220 plus tenants in our portfolio, we have entered into rent abatement or deferral agreements with only 12 tenants. And of those 12, all have either satisfied their obligations or are currently abiding by the terms as planned. Looking forward, we currently see a lot of positive tenant activity in the market with a solid number of inquiries for space and tour requests. I'll pass the call now over to Larry Dubose, who will cover activity in the model home division.
spk05: Thank you, Gary.
spk03: Our model home markets continue to perform very well. We have always looked at model homes as the home builder's most mission-critical asset, and that view proved out in 2020 as we collected 100% of build rents. COVID's impact on the model home business has been to shorten the time that homes are on the market. We are fortunate to have single-family homes in an asset class in great demand, as people seek more living space, located primarily in Texas and Florida, two states that have seen strong population growth. Texas has added over 1,000 people per day, and Florida has recently overtaken New York as the country's third-largest state. In 2020, we sold 46 model homes for approximately $18.1 million and recognized a gain of approximately $1.6 million. During 2020, we acquired 28 model home properties, leased them back to home builders under triple net leases. The purchase price for the properties was $10.2 million, all purchased under their appraised values. We expect a strong residential market the next few years. Inventories and interest rates are at historically low levels, and demand is solid. We have not acquired any new model homes to date in 2021, but do expect to see some volume in the second quarter. I'll pass this call now to Adam to answer any questions from our listeners.
spk02: Thank you, Larry. We will now take some questions from our listeners. If you have not already done so, please click on the Ask Question button in your media player window if you would like to submit a question. The first question that we will go to here is for Gary Katz, the question of, if we see any interesting properties to buy currently. Everything seems so expensive right now.
spk01: We do. However, they're a little bit different than what we've looked at in the past. In the past, we were comfortable buying multi-tenant properties that had in-place income with some sort of a value-add component usually due to or usually resulting from leasing vacant space and so forth. These days, though, we're much more reluctant to take on leasing risk and much more focused on buying in-place yield with long-term leases, maybe a property with one, two, or three tenants with very low capital expenditure exposure down the road with the focus being solely on yield, on cash flow and yield.
spk02: Great. Thanks for that. The next question will pass to Jack Heilbronn, our CEO, which is how would another lockdown affect our business?
spk05: Assuming there would be another lockdown and it looks like or would look like the current lockdowns or the lockdowns that we had in 2020, I think there would be a de minimis impact on our properties. For instance, North Dakota stayed open during the lockdowns that other states had. And while Colorado did have some lockdowns, as Gary mentioned earlier, our smaller tenants did not have the ability to work from home, at least in mass and for long periods of time. So I don't think we would see a greater effect than what occurred in the past year and it might actually be less as we've sold some of the retail and office properties.
spk02: That's great. Thanks very much. I think the next question is also for you, Jack. It's a question about if we foresee Tencent dividends for the next four quarters or how we think about our dividend.
spk05: We can't comment on that. The dividend decision is always up to the board of directors. That being said, as a REIT, we recognize the importance of paying a dividend and as far as we can, we intend to pay a dividend.
spk02: That's great. I think that is it for the questions from the audience, so I'll pass the call now to Lowell Hartcorn to conclude.
spk04: Thanks, Adam. This concludes Presidio's fourth quarter and year-end 2020 earnings call. Please be sure to visit our website at www.presidiopt.com, then click on the Investor section to stay up to date on our press releases and SEC filings. We have also posted supplemental financial information there in addition to what we filed with the SEC I'd like to thank everyone for taking the time to join us today, as well as to those listening to the recording. We look forward to visiting with you again when we discuss the results of our first quarter of 2021 in May. Thank you.
spk00: Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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