Company Focuses on Reducing Preferred Stock and Optimizing Capital Allocation

In its latest financial report, the Company has outlined several strategies to improve its financial stability and capital structure. The key highlights include:

Series D Preferred Stock Redemptions During the first quarter of 2025, the Company redeemed nearly 194,000 shares of its Series D Preferred Stock, issuing over 305,000 shares of common stock in settlement. The Company also received requests to redeem an additional 39,000 shares of Series D Preferred Stock, which will be redeemed in the second quarter.

Convertible Notes As of March 31, 2025, the conversion price for the Company’s Convertible Notes was approximately $4.56 per share of common stock. This means each $25 of principal on the Convertible Notes can be converted into about 5.48 shares of common stock.

Noncontrolling Interests in Subsidiary The Company’s subsidiary, Cedar, had two tender offers expire during the quarter, allowing Cedar to repurchase and retire over 1.9 million shares of its preferred stock. This will reduce Cedar’s future annual dividend payments by $4.5 million.

Related Party Transactions The Company provides property management and leasing services to its subsidiary Cedar, for which Cedar paid the Company $0.5 million in the first quarter. The Company also has a $12.5 million investment in Stilwell Activist Investments, L.P.

Preferred Dividends As of March 31, 2025, the Company had accumulated $29.6 million in undeclared dividends to holders of its Series D Preferred Stock, including $1.9 million from the first quarter.

Leasing Activity The Company saw strong leasing activity in the first quarter, with 273,579 square feet of renewals at a 12.5% weighted average increase in rental rates. It also signed 68,502 square feet of new leases at a 38.1% higher weighted average rate compared to prior rents.

Financial Performance Revenues were down 5.9% year-over-year, primarily due to the sale of properties in 2024 and 2025. Property operating expenses also decreased, leading to a 2.2% decline in same-property net operating income.

The Company reported net income of $5.4 million in the first quarter, compared to a $6.0 million loss a year earlier. This was driven by a $5.7 million gain on property disposals and a $3.8 million gain on preferred stock retirements, partially offset by a $2.3 million loss on the fair value of derivative liabilities.

Funds from Operations (FFO), a key metric for REITs, increased to $5.9 million, up from $0.6 million in the prior year period. Adjusted FFO (AFFO) also improved to $0.4 million, compared to $0.2 million a year ago.

Liquidity and Capital Resources The Company ended the quarter with $47.0 million in consolidated cash, cash equivalents and restricted cash, up from $38.5 million a year earlier. Cash flow from operations was $4.4 million, while investing activities generated $16.2 million, primarily from property sales. Financing activities used $34.4 million, mainly for debt repayments and preferred stock redemptions.

The Company’s total debt balance was $489.0 million at March 31, 2025, down from $499.5 million at the end of 2024. The weighted average interest rate on the fixed-rate debt was 5.54% with a 7.3 year average term.

Looking ahead, the Company has $10.5 million in debt maturing over the next 12 months and $5.0 million in outstanding construction commitments. To meet these needs, the Company plans to use its cash reserves and cash flow from operations.

The Company also intends to continue repurchasing its Cedar subsidiary’s preferred stock, which it believes will help offset the loss of net operating income from recent property sales. By reducing the number of preferred shares outstanding, the Company can lower its future dividend obligations.

Macroeconomic Considerations The Company noted that its leases contain provisions to help mitigate the impact of inflation, such as pass-through clauses for certain operating expenses. However, prolonged high inflation could still have a material adverse effect. Conversely, deflation could lead to downward pressure on rents.

Interest rate increases could result in higher borrowing costs for the Company and its tenants. But the Company’s relatively low exposure to floating-rate debt and focus on fixed-rate financing has helped mitigate the direct impact. Changes in tariffs could also affect construction costs, tenant rents, and the tenant mix.

Outlook The Company remains focused on enhancing its financial stability and optimizing its capital allocation through measures like preferred stock redemptions and repurchases. It also plans to grow operations by leasing vacant space, replacing defaulting tenants, and selectively disposing of non-core assets.

However, the Company’s success in executing this strategy will depend on its ability to generate sufficient liquidity through operations, asset sales, and financing activities. If the Company is unable to do so, its growth may be limited without additional capital.

Overall, the Company is taking proactive steps to streamline its capital structure, reduce leverage, and position itself for long-term sustainability in a challenging macroeconomic environment.