10-K 1 mvpreit12311610k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

Or

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 333-180741

MVP REIT, INC.
(Exact name of registrant as specified in its charter)

MARYLAND
 
45-4963335
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)

8880 W. SUNSET RD SUITE 240, LAS VEGAS, NV  89148
(Address of Principal Executive Offices)  (Zip Code)

Registrant's Telephone Number: (858) 369-7959

Securities registered pursuant to Section 12(b) of the Act:

None
 
None
(Title of each class)
 
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [   ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [   ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [   ]



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ]
Accelerated filer [   ]
   
Non-accelerated filer [X]
Smaller reporting company [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [   ] No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.

Class
   
Market Value as of
June 30, 2016
Common Stock, $0.001 Par Value
 
$
99,766,791
       

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class
   
Number of Shares Outstanding
As of March 21, 2017
Common Stock, $0.001 Par Value
   
10,978,745
       

 

TABLE OF CONTENTS

     
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Special Note Regarding Forward-Looking Statements

Certain statements included in this annual report on Form 10-K (this "Annual Report") that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential" or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

·
the fact that we have a limited operating history, as the majority of our properties were purchased within the last two years;
·
the fact that we have had a net loss for each annual period since inception;
·
the performance of properties the Company has acquired or may acquire or loans that the Company may make that are secured by real property or;
·
changes in economic conditions generally and the real estate and debt markets specifically;
·
legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);
·
potential damage and costs arising from natural disasters, terrorism and other extraordinary events, including extraordinary events affecting parking facilities included in our portfolio;
·
risks inherent in the real estate business, including ability to secure leases at favorable terms, tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;
·
competitive factors that may limit our ability to make investments or attract and retain tenants;
·
our ability to generate sufficient cash flows to pay distributions to our stockholders;
·
our failure to maintain our status as a REIT;
·
the availability of capital and debt financing generally, and any failure to obtain debt financing at favorable terms or a failure to satisfy the conditions and requirements of that debt;
·
interest rates; and
·
changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed upon on any forward-looking statements included herein. All forward-looking statements are made as of the date of this Annual Report, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward – looking statements made after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Annual Report, including, without limitation, the risks described under "Risk Factors," the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.


PART I

ITEM 1. BUSINESS
 
General

MVP REIT, Inc. (the "Company" or "MVP") was incorporated on April 3, 2012 as a Maryland corporation, and has elected to be taxed, and operates in a manner that will allow the Company to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2013. Pursuant to its initial public offering (the "Offering"), which closed in September 2015, the Company issued 10,856,323 shares of its common stock for which it received net proceeds of approximately $97.3 million. Of this amount, approximately $19.5 million of shares were issued in consideration of the contribution of commercial properties to the Company. The Company has also registered up to $50 million for the issuance of common stock pursuant to a distribution reinvestment plan (the "DRIP") under which common stockholders may elect to have their distributions reinvested in additional shares of common stock.

The Company operates as a REIT. The Company is not a mutual fund or an investment company within the meaning of the Investment Company Act of 1940, nor is the Company subject to any regulation thereunder. As a REIT, the Company is required to have a December 31st fiscal year end. Among other requirements, REITs are required to satisfy certain gross income and asset tests, which may affect the composition of assets the Company acquires with the proceeds from its public offering. In addition, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).

The Company's investment strategy was originally to invest available net proceeds from its Offering in direct investments in real property and real estate secured loans that met the Company's investment objectives and strategies. In March 2014, the Company's board of directors approved a plan to increase the focus of the Company's investment strategy on parking and self-storage facilities located throughout the United States as the Company's core assets. As part of this strategy, the Company exchanged office properties with affiliated entities to exchange all of its ownership interests in certain non-core assets (consisting of four office buildings) for all of the affiliated entities' ownership interests in five parking facilities and one self-storage facility. The property exchanges were consummated on April 30, 2014.

In June 2014, the Company's board decided to further focus its efforts primarily on parking facilities. Additionally, during July and August, 2014, the Company sold its membership interest in the two remaining office buildings owned by the Company to affiliates of its advisor, Vestin Realty Mortgage I, Inc., a Maryland corporation and OTC Pink Sheets-listed company ("VRM I") and Vestin Realty Mortgage II, Inc., a Maryland corporation and Nasdaq-listed company that has provided notice of its intent to delist from Nasdaq, to be effective on or about March 30, 2017 ("VRM II"). The Company may, from time to time, invest in non-core assets, including investments in companies that manage real estate or mortgage investment companies; however, the Company has agreed that no more than 25% of the gross proceeds from the Offering will be used to invest in real properties other than parking facilities.

In June 2016, the Company and MVP REIT II, Inc. ("MVP REIT II") jointly announced the engagement of Ladenburg Thalmann & Co., Inc. to assist in evaluating various courses of action intended to enhance stockholder liquidity and value. In connection with the engagement, the Company decided to defer taking further action to list the Company's common shares on the NASDAQ Global Market until Ladenburg Thalmann completes its evaluation. The Company's board had authorized taking such action in March 2016. After reviewing the Ladenburg Thalmann's completed evaluation, the Company's board of directors will decide whether to proceed with a listing on the NASDAQ Global Market or take other action to enhance stockholder liquidity and value. The Company currently expects that no decision on this matter will be made during the second fiscal quarter of 2017. Following the Company's engagement of Ladenburg Thalmann, the Company's board of directors approved the reinstatement of the DRIP in July 2016, since no decision on liquidity is expected until during the second fiscal quarter of 2017. There can be no assurance as to if or when the Company will again pursue a listing or another liquidity transaction.

On October 3, 2012, the Company confirmed that its board of directors had approved a plan for payment of initial monthly cash distributions of $0.045 per share. On January 25, 2013, the Company issued a press release announcing that its board of directors had approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.2 percent, or $0.558 per share annually or $0.0465 monthly, assuming a purchase price of $9.00 per share. The distribution, previously 6 percent, increased beginning with the January 2013 distribution, paid to stockholders of record as of January 24, 2013, on February 10, 2013.  On June 4, 2013, the Company issued a press release announcing that its board of directors had approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.7 percent, assuming a purchase price of $9.00 per share or $0.05025 monthly.  The Company anticipates paying future distributions monthly in arrears, with a record date on the 24th of each month and distributions paid on the 10th day of the following month (or the next business day if the 10th is not a business day).

Starting April 11, 2016, the NAV of $9.14 per common share has been used for purposes of effectuating permitted redemptions of the Company's common stock and issuing shares pursuant to the Company's distribution reinvestment plan.

From inception through December 31, 2016, the Company has paid approximately $13.6 million in distributions including approximately $2.9 million in DRIP distributions to the Company's stockholders, all of which have been paid from offering proceeds and constituted a return of capital. The Company may pay distributions from sources other than cash flow from operations, including proceeds from the Offering, the sale of assets, or borrowings. The Company has no limits on the amounts it may pay from such sources. If the Company continues to pay distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted

The Company's sponsor is MVP Capital Partners, LLC ("MVPCP" or the "Sponsor"), an entity owned and managed by Michael V. Shustek, the Company's Chairman and Chief Executive Officer. The Company's advisor is MVP Realty Advisors, LLC (the "Advisor"). VRM II owns 60% of the Advisor, and the remaining 40% is owned by VRM I. Michael Shustek owns a significant majority of Vestin Mortgage, LLC, a Nevada limited liability company, which is the manager of VRM I and VRM II. The Advisor is responsible for managing the Company's affairs on a day-to-day basis and for identifying and making investments on the Company's behalf pursuant to an advisory agreement between the Company and the Advisor (the "Advisory Agreement").

The Company is the sole member of its operating limited liability company, MVP Real Estate Holdings, LLC, a Nevada limited liability company ("REH"). Substantially all of the Company's business is conducted through our wholly owned subsidiary REH. The operating agreement provides that REH is operated in a manner that enables the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability, and (3) ensure that REH is not classified as a "publicly traded partnership" for purposes of Section 7704 of the Internal Revenue Code, which classification could result in REH being taxed as a corporation

Investment Objectives

Our primary investment objective is to generate current income. The Company anticipate generating current income from rent and other income from properties acquired.

The Company may also seek to realize growth in the value of our investments by timing their sale to maximize value. However, the Company cannot assure investors that MVP will attain these objectives or that the value of our assets will not decrease. Furthermore, within our investment objectives and policies, our advisor will have substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets. Our board of directors, including our independent directors, will review our investment policies at least annually to determine whether our investment policies continue to be in the best interests of our stockholders. Each determination and the basis therefore shall be set forth in the applicable board meeting minutes.
Current Investment Focus and Expansion of Geographic Focus

Parking Facilities

Based on current market conditions and other factors, MVP has decided that a significant focus of our investment strategy will be on parking facilities, including parking lots, parking garages and other parking structures.

The Company believes parking facilities possess attractive characteristics not found in other commercial real estate investments, including the following:
 
 
generally can be leased to any number of parking operators, which gives the property owner flexibility and pricing power
 
 
if a tenant that operates a facility terminates a lease, replacement operators can generally be found quickly, minimizing any dark period;
 
 
generally, no leasing commissions;
 
 
generally, no tenant improvement requirements;
 
 
relatively low capital expenditures; and
 
 
in light of the relatively low up-front costs, an enhanced opportunity for geographic diversification.

Moreover, MVP believe the REIT industry is evolving, with more REITs moving towards specializing in particular types of properties or property location rather than building a diversified portfolio of properties. Therefore, our board has determined that diversification of our portfolio may not enhance shareholder value and would come at the expense of potentially developing specialized expertise in investments in parking facilities that could provide us with a competitive advantage and distinguish us from other REIT investments in the marketplace.

The parking industry is large and fragmented and includes companies that provide temporary parking spaces for vehicles on an hourly, daily, weekly, or monthly basis along with providing various ancillary services. A substantial number of companies in the industry offer parking services as a non-core operation in connection with property management or ownership, and the vast majority of companies in the industry are small, private and operate a single parking facility. The owner of a parking facility may operate the facility or may engage a management company for this purpose. Location is critically important to the performance of parking facilities. Parking rates and ancillary services offered at the facility (such as car wash or electric car charging stations) may also influence a driver's decision to use a particular parking facility. The performance of parking facilities may fluctuate significantly based on economic trends. For example, the National Parking Association reported that 96% of airport parking lots experienced a decline in parked vehicles from 2008 to 2009, with 58% reporting a decline of more than 10%, as a result of reduced air travel during the 2008/2009 recession.

The Company's parking facilities are typically operated through triple net or modified net leases under which MVP relies upon the lessee to manage and conduct the daily operations of the facilities. Leases generally have terms of three to ten years, and may provide for rent based on the performance of the leased parking facility.  In addition, under a net lease arrangement, the lessee is generally responsible for all of the operating expenses at our leased location.

Our Advisor will have substantial discretion with respect to the selection of specific properties. The consideration paid for a property will ordinarily be based on the fair market value of the property as determined by a majority of our board of directors. In selecting a potential property for acquisition, the Company and our Advisor will consider a number of factors, including, but not limited to, the following:

 
 
projected demand for parking facilities in the area;
 
 
a property's geographic location and type;
 
 
a property's physical location in relation to population density, traffic counts and access;
 
 
construction quality and condition;
 
 
potential for capital appreciation;
 
 
proposed purchase price, terms and conditions;
 
 
historical financial performance;
 
 
rental/parking rates and occupancy/use levels for the property and competing properties in the area;
 
 
the terms and conditions of any lease or management contract for a particular parking facility;
 
 
potential for rent increases;

 
 
demographics of the area;
 
 
operating expenses being incurred and expected to be incurred, including, but not limited to property taxes and insurance costs;
 
 
potential capital improvements and reserves required to maintain the property;
 
 
prospects for liquidity through sale, financing or refinancing of the property;
 
 
potential competitors;
 
 
the potential for the construction of new properties in the area;
 
 
treatment under applicable federal, state and local tax and other laws and regulations;
 
 
evaluation of title and obtaining of satisfactory title insurance; and
 
 
evaluation of any reasonably ascertainable risks such as environmental contamination.

There is no limitation on the number, size or type of properties that MVP may acquire or on the percentage of net offering proceeds that may be invested in any particular property type or single property. The number and mix of properties will depend upon real estate market conditions and other circumstances existing at the time of acquisition and the amount of proceeds available for investments. Moreover, depending upon real estate market conditions, economic changes and other developments, our board of directors may change our targeted investment focus or supplement that focus to include other targeted investments from time to time without stockholder consent. Notwithstanding the foregoing, MVP has agreed that no more than 25% of the gross proceeds from our initial public offering will be used to invest in real properties other than parking facilities.  See "Risk Factors – Stockholders will not have the opportunity to evaluate additional investments before we make them, which makes investment in our shares more speculative."

Concentration

The Company had nine, six and two parking tenants as of December 31, 2016, 2015 and 2014, respectively. One tenant, Standard Parking + ("SP+"), represented a concentration for the years ended December 31, 2016, 2015 and 2014, in regards to parking base rental revenue.  During the years ended December 31, 2016, 2015 and 2014, SP+ accounted for 68%, 76% and 87%, respectively, of the parking base rental revenue.  No other tenants represented more than 10% of our base rental revenue during 2016.

Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company's common stock available for issue, as well as other administrative responsibilities for the Company including accounting services and investor relations. The Company may depend upon VRM I and VRM II, the owners of the Advisor, to support and fund the Company's costs and expenses.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates, including VRM I and VRM II. In the event that these companies are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.

Competition

Outside of affiliates, the Company is unaware of any REITs in the United States that invest predominantly in parking facilities; nevertheless the Company has significant competition with respect to the acquisition of real property. Competitors include other REITs, owners and managers of parking facilities, private investment funds, hedge funds, and other investors, many of which have significantly greater resources.  The Company may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If the Company pays higher prices for investments the returns will be lower and the value of assets may not increase or may decrease significantly below the amount paid for such assets.

Any parking facilities acquired or invested in will face intense competition, which may adversely affect rental and fee income. The Company believes that competition in parking facility operations is intense. The relatively low cost of entry has led to a strongly competitive, fragmented market consisting of competitors ranging from single facility operators to large regional and national multi-facility operators, including several public companies. In addition, any parking facilities acquired may compete with building owners that provide on-site paid parking. Many of the competitors have more experience in owning and operating parking facilities. Moreover, some of the competitors will

have greater capital resources, greater cash reserves, less demanding rules governing distributions to stockholders and a greater ability to borrow funds. Competition for investments may reduce the number of suitable investment opportunities available, may increase acquisition costs and may reduce demand for parking facilities, all of which may adversely affect operating results.

Income Taxes

The Company is organized and conducts operations to qualify as a REIT under Sections 856 to 860 will be sustained upon examination of the Internal Revenue Code of 1986, as amended (the "Code") and to comply with the provisions of the Internal Revenue Code with respect thereto. A REIT is generally not subject to federal income tax on that portion of its REIT taxable income ("Taxable Income"), which is distributed to its stockholders, provided that at least 90% of Taxable Income is distributed and provided that certain other requirements are met. Our Taxable Income may substantially exceed or be less than our net income as determined based on GAAP, because, differences in GAAP and taxable net income consist primarily of allowances for loan losses or doubtful account, write-downs on real estate held for sale, amortization of deferred financing cost, capital gains and losses, and deferred income.

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position, including resolutions of any related appeals or litigation process, based on the technical merits. Based on our evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition on the financial statements. The net income tax provision for the years ended December 31, 2016 and 2015 was approximately zero.

Regulations

Our investments are subject to various federal, state, local and foreign laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. MVP intends to obtain all permits and approvals necessary under current law to operate our investments.

Environmental

As an owner of real estate, MVP is subject to various environmental laws of federal, state and local governments. In particular, under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws typically impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In connection with our ownership of parking facilities, MVP may be potentially liable for any such costs.

The Company does not believe that compliance with existing laws will have a material adverse effect on our financial condition or results of operations. However, MVP cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which MVP holds an interest, or on properties that may be acquired directly or indirectly in the future.

Employees

The Company does not currently have any employees nor does MVP currently intend to hire any employees who will be compensated directly by us. The Company relies on employees of the Advisor and its affiliates, subject to the supervision of our board of directors, to manage our day-to-day activities, implement our investment strategy and provide management, acquisition, advisory and administrative services.

Available Information

The Company is subject to the reporting and information requirements of the Securities Exchange Act of 1934, or the Exchange Act, and, as a result, file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. The SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly and current reports, proxy and information statements and other information the Company filed electronically with the SEC. Access to these filings is free of charge and can be accessed on our website, www.mvpreit.com.

ITEM 1A. RISK FACTORS

The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones MVP faces but do represent those risks and uncertainties that the Company believes are material to us. Additional risks and uncertainties not presently known to us or that the Company currently deems immaterial may also harm our business.
Risks Related to an Investment in Us
We have experienced losses in the past, and we may experience additional losses in the future.
Historically, we have experienced net losses (calculated in accordance with accounting principles generally accepted in the United States of America) and we may not be profitable or realize growth in the value of our investments. Many of our losses can be attributed to start-up costs, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments. For a further discussion of our operational history and the factors affecting our losses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Annual Report on Form 10-K and our accompanying consolidated financial statements and notes thereto.
Our cash distributions are not guaranteed and may fluctuate.
The actual amount and timing of distributions will be determined by our board of directors and typically will depend upon the amount of funds available for distribution, which will depend on items such as current and projected cash requirements and tax considerations. As a result, our distribution rate and payment frequency may vary from time to time.
We have paid, and may continue to pay, our distributions from sources other than cash flow from operations, which has reduced the funds available for the acquisition of properties and may reduce our stockholders' overall return.
As of December 31, 2016, we have paid all of our distributions from proceeds from issuance of our common stock in the offering or under our distribution reinvestment plan and constituted a return of capital.  Our organization documents permit us to pay distributions from any source, including offering proceeds, borrowings, or sales of assets. We have not placed a cap on the use of offering or other proceeds to fund distributions. Our distribution policy is to fund the payment of regular distributions to our stockholders from cash flow from our operations.  However, we may not generate sufficient cash flow from operations to fund distributions.  Therefore, we may need to continue to utilize proceeds from the sale of securities, borrow funds or request that our advisor, in its discretion, defer its receipt of fees and reimbursement of expenses in order to make cash distributions. We can give no assurance that we will be able to pay distributions solely from our funds from operations in the future. If we continue to pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and stockholder overall return may be reduced.
Because we have paid, and may continue to pay, our cash distributions from sources other than cash flow from operations, such distributions may not reflect the current performance of our real property investments or our current operating cash flows, and may constitute a return of capital or taxable gain from the sale or exchange of property.
Our long-term strategy is to fund the payment of monthly distributions to our stockholders entirely from our funds from operations. However, during the early stages of our operations, we have utilized offering proceeds to make cash distributions.  Because the amount we pay out in distributions may exceed our cash flow from operations, the amount of distributions paid at any given time may not reflect the current performance our real property investments or our current cash flow from operations. To the extent distributions exceed cash flow from operations, distributions may be treated as a return of capital (rather than a return on capital) and could reduce a stockholder's basis in our stock. A reduction in a stockholder's basis in our stock could result in the stockholder recognizing more gain upon the disposition of his or her shares, which in turn could result in greater taxable income to such stockholder.

We depend upon our advisor to find suitable investments. If it is unable to do so, we may not be able to achieve our investment objectives or pay distributions.
Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our advisor in the acquisition of our investments, including the determination of any financing arrangements. While our advisor's personnel have substantial experience in investing in real estate secured loans, they have only limited experience in making direct investments in real estate. Stockholders will have no opportunity to evaluate the economic merits or the terms of our investments and must rely entirely on the management abilities of our advisor and the oversight of our board of directors. We cannot assure stockholders that our advisor will be successful in obtaining suitable investments on financially attractive terms or that, if our advisor makes investments on our behalf, our objectives will be achieved. If we, through our advisor, are unable to find suitable investments promptly, we will hold the proceeds from our initial public offering in an interest-bearing account or invest the proceeds in short-term assets. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable, or be limited in our ability, to pay distributions and we may not be able to meet our investment objectives.
Our sponsor and its other affiliated entities, including MVP REIT II, Inc. ("MVP REIT II"), a publicly registered non-traded REIT managed by our advisor, also rely on Michael V. Shustek for investment opportunities. MVP REIT II also invests in parking assets in the United States and Canada, has completed its initial public offering of common shares, and is seeking to raise additional funds through a private placement of preferred stock to accredited investors. To the extent that our advisor's real estate, finance and securities professionals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution of our investment strategy. Delays we encounter in the selection and acquisition of income-producing assets would likely limit our ability to pay distributions to our stockholders and lower their overall returns.
Any adverse changes in our advisor's financial health or our relationship with our advisor or its affiliates could hinder our operating performance and the return on our stockholders' investment.
We have engaged our advisor to manage our operations and our portfolio of investments. Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of our advisor and its affiliates, as well as our advisor's real estate, finance and securities professionals, in the identification and acquisition of investments, the determination of any financing arrangements, the management of our assets and operation of our day-to-day activities.  We also depend upon Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc., the owners of our advisor, to continue to support and fund our costs and expenses.  Any adverse changes in our advisor's financial condition or our relationship with our advisor, its owners or its other affiliates could hinder our advisor's ability to successfully manage our operations and our portfolio of investments.
The loss of key real estate, finance and securities professionals at our sponsor could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of a stockholder's investment.
Our prospects for success depend to a significant degree upon the contributions of Michael V. Shustek who would be difficult to replace.  If he were to cease his association with us, our operating results could suffer. We do not intend to maintain key person life insurance on any person. We believe that our prospects for future success depend, in large part, upon our sponsor and its affiliates' ability to retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and our sponsor and its affiliates may be unsuccessful in attracting and retaining such skilled individuals. If our sponsor loses or is unable to obtain the services of highly skilled professionals, our ability to implement our investment strategies could be delayed or hindered, and the value of a stockholder's investment may decline.

Stockholders will not have the opportunity to evaluate additional investments before we make them, which makes investment in our shares more speculative.
Our current investment strategy is to focus predominantly on parking facilities, and we have agreed that no more than 25% of the gross proceeds from our initial public offering may be used to invest in real properties other than parking facilities. Stockholders will not have an opportunity to evaluate our future investments, and will have to rely entirely on the ability of our advisor to select suitable and successful investment opportunities. Furthermore, our board of directors and our advisor will have broad discretion in implementing our investment strategy, objectives and policies. These factors increase the risk that a stockholder's investment may not generate returns comparable to our competitorsand may hinder a stockholder's ability to achieve its own personal investment objectives related to portfolio diversification, risk-adjusted investment returns and other objectives.
There can be no assurance that we will effect a liquidity event. If we do not successfully implement a liquidity transaction, stockholders may have to hold their investment for an indefinite period.
There currently is no public market for our common stock and there may never be one. In the future, our board of directors may consider various forms of liquidity, each of which is referred to as a liquidity event, including, but not limited to: (1) the listing of shares of our common stock on a national securities exchange; (2) the sale of all or substantially all of our assets; or (3) the sale or a merger in a transaction that would provide our stockholders with cash and/or securities of a publicly traded company. In June 2016, the Company and MVP REIT II jointly announced the engagement of Ladenburg Thalmann & Co., Inc. to assist in evaluating various courses of action intended to enhance stockholder liquidity and value. After reviewing the Ladenburg Thalmann's completed evaluation, our board of directors will decide whether to proceed with a listing on the NASDAQ Global Market or take other action to enhance stockholder liquidity and value. We currently expect that no decision on this matter will be made until the second quarter of 2017. There can be no assurance that we will cause a liquidity event to occur at such time or at all. If we do not pursue a liquidity transaction our shares of common stock may continue to be illiquid and stockholders may, for an indefinite period of time, be unable to convert their investment to cash easily and could suffer losses on their investments.
A stockholder's ability to have its shares repurchased is limited under our share repurchase program, and if a stockholder is able to have its shares repurchased, it may be at a price that is less than the price such stockholder paid for the shares and the then-current market value of the shares.
Our share repurchase program contains significant restrictions and limitations. For example, stockholders must generally hold their shares for a minimum of one year before they can participate in our share repurchase program. Further, we presently intend to limit the number of shares to be repurchased during any calendar quarter to not more than 2.00% of the number of shares of our common stock outstanding on December 31st of the prior calendar year. Repurchases will be funded solely from the net proceeds from the sale of shares under the distribution reinvestment plan in the prior calendar year. Our board of directors may also limit the amounts available for repurchase at any time in its sole discretion. In addition, our board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase program at any time upon 30 days prior notice. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination of our share repurchase program.
Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations — Share Repurchase Program" for a description of the terms and limitations associated with our share repurchase program. As a result of these limitations, the repurchase price stockholders may receive upon any such repurchase may not be indicative of the price stockholders would receive if our shares were actively traded or if we were liquidated, and stockholders should not assume that they will be able to sell all or any portion of their shares back to us pursuant to our share repurchase program or to third parties at a price that reflects the then current market value of the shares or at all.

Risks Related to Our Investments
We may be unable to successfully invest in or acquire properties situated in parts of the United States where we do not have extensive experience.
We intend to explore investments in and acquisitions of properties throughout the United States. Our company's historical experience has been primarily in the Western and Southwestern regions of the United States and other areas where our affiliates and correspondents have experience. We may not possess familiarity with the dynamics and prevailing conditions of any new geographic markets we enter, which could adversely affect our ability to successfully expand into or operate within those markets. For example, new markets may have different insurance practices, reimbursement rates and local real estate, zoning and development regulations than those with which we are familiar. We may find ourselves more dependent on third parties in new markets because our distance could hinder our ability to directly and efficiently identify suitable investments or manage properties in distant markets. We may not be successful in identifying suitable properties or other assets which meet our acquisition or development criteria or in consummating acquisitions or investments on satisfactory terms or at all for a number of reasons, including, among other things, unsatisfactory results of our due diligence investigations, failure to obtain financing on acceptable terms for the acquisition or development and our misjudgment of the value of the opportunities. We may also be unable to successfully integrate the operations of acquired properties, maintain consistent standards, controls, policies and procedures, or realize the anticipated benefits of the acquisitions within the anticipated timeframe or at all. If we are unsuccessful in expanding into new markets, it could adversely affect our business, financial condition and results of operations and our ability to make distributions to our shareholders.
Our revenues will be significantly influenced by demand for parking facilities generally, and a decrease in such demand would likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.
We have decided that a predominant focus for our portfolio of investments and acquisitions will be parking facilities. There are no specific targets for such properties as a percentage of our total portfolio, nor are there any limitations in this regard. However, based on our current investment strategy to focus predominantly on parking facilities, a substantial percentage of our portfolio will consist of parking and similar properties, and we have agreed that no more than 25% of the gross proceeds from our initial public offering may be used to invest in real properties other than parking facilities.  A decrease in the demand for parking facilities, or other developments adversely affecting such sector of the property market, including a downturn in the economy, emergency safety measures, natural disasters and acts of terrorism, would likely have a more pronounced effect on our financial performance than if we owned a more diversified real estate portfolio. Adverse developments affecting such sectors of the property market could have a material, adverse effect on the value of our properties as well as our revenues and our distributions to stockholders.
Any parking facilities we acquire or invest in will face intense competition, which may adversely affect rental and fee income.
We believe that competition in parking facility operations is intense. The relatively low cost of entry has led to a strongly competitive, fragmented market consisting of competitors ranging from single facility operators to large regional and national multi-facility operators, including several public companies. In addition, any parking facilities we acquire may compete with building owners that provide on-site paid parking, as well as municipal and other governmental entities that choose not to outsource their parking operations. Many of the competitors have more experience than we do in owning and operating parking facilities. Moreover, some of our competitors will have greater capital resources, greater cash reserves, less demanding rules governing distributions to stockholders and a greater ability to borrow funds. Competition for investments may reduce the number of suitable investment opportunities available to us, may increase acquisition costs and may reduce demand for parking facilities, all of which may adversely affect our operating results. Additionally, an economic slowdown in a particular market could have a negative effect on our parking fee revenues.
If competitors build new facilities that compete with our facilities or offer space at rates below the rates we charge, our lessees may lose potential or existing customers and we may be pressured to discount their rates to retain business and to reduce rents paid to us. As a result, our ability to make distributions to stockholders may be impaired. In addition, increased competition for customers may require us to make capital improvements to facilities that we would not otherwise make, which could reduce cash available for distribution to our stockholders.

Our leases expose us to certain risks.
We operate our parking facilities through net leases. We rely upon the lessee to manage and conduct the daily operations of the facilities. In addition, under a net lease arrangement, the lessee is generally responsible for all of the operating expenses, taxes and fees at our leased location. The loss or renewal on less favorable terms of a lease, or a breach or other failure to perform by a lessee under a lease, could have a material adverse effect on our business, financial condition and results of operations. A material reduction in the rental and other income associated with the leases (or an increase in anticipated expenses to the extent we are responsible for such expenses) also could have a material adverse effect on our business, financial condition and results of operations.
Deterioration in economic conditions in general and other factors could reduce the demand for parking and, as a result, reduce our revenues and adversely affect our financial condition.
Adverse changes in global, national and local economic conditions could have a negative impact on our business. If adverse economic conditions reduce discretionary spending, business travel or other economic activity that fuels demand for parking services, our revenues could be reduced. Adverse changes in local and national economic conditions could also reduce parking spaces or depress prices for parking services. In addition, our parking facilities tend to be concentrated in urban areas. Users of our parking facilities include workers who commute by car to their places of employment in these urban centers. The return on our investments could be materially adversely affected to the extent that weak economic conditions or demographic factors have resulted in the elimination of jobs and high unemployment in these urban areas. In addition, increased unemployment levels, the movement of white-collar jobs from urban centers to suburbs or out of North America entirely, increased office vacancies in urban areas, movement toward home office alternatives or lower consumer spending could reduce consumer demand for parking, which could adversely impact our revenues and financial condition. Weather conditions, including fluctuations in temperatures, hurricanes, snow or severe weather storms, earthquakes, drought, heavy flooding, natural disasters or acts of terrorism also may result in reduced levels of travel and use of our parking facilities and require increase in certain expenditure costs, all of which could adversely impact our revenues and our ability to make distributions to our stockholders. Moreover, changing lifestyles and technology innovations also may decrease the need for parking spaces, thereby decreasing the demand for parking facilities. The need for parking spaces, for example, may decrease as the public increases its use of livery service companies and ride sharing companies or elects to take public transit for their transportation needs.  Future technology innovations, such as driverless vehicles, also may decrease the need for parking spaces.  These and other developments affecting the demand for parking could have a material, adverse effect on the value of our properties as well as our revenues and our distributions to shareholders.
Our business strategy contemplates that certain of our investments may be in real estate markets that have suffered significant declines in value in recent years. As a result, such investments may entail greater risk of loss resulting in a decline in the value of our shares and reduced distributions to stockholders.
Our sponsor's historic experience is primarily in states in the Western and Southwestern United States such as Nevada, Arizona, California, Texas and Utah. The real estate markets in a number of these states have suffered significant declines in value over the last several years. One of our business strategies contemplates investing in under-valued properties, including in the Western and Southwestern United States, and seeking to profit from future appreciation in such properties, as well as lending to borrowers who are developing properties with significant growth potential in such geographic markets.
As the real estate markets in which we operate have begun to improve, it may become more difficult for us to identify undervalued property or suitable borrowers to execute this business strategy.  Even if we are able to identify such potential investments, we continue to bear the risks that we may acquire properties that fail to appreciate in value and we may make loans to borrowers who are unable to complete their projects and repay their loans as a result of persistent weakness in local real estate markets or other factors. In such event, the value of our investments may decline and we may experience a high level of defaults on our loans, resulting in a likely decline in the value of  our shares of common stock and reduced distributions to our stockholders.

Changes in national, regional or local economic, demographic or real estate market conditions may adversely affect our results of operations and returns to our investors.
We will be subject to risks incident to the ownership of real estate related assets including:
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changes in national, regional or local economic, demographic or real estate market conditions;
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changes in supply of, or demand for, similar properties in an area;
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increased competition for real estate-related assets targeted by our investment strategy;
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bankruptcies, financial difficulties or lease defaults by property owners and tenants;
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changes in interest rates and availability of financing; and
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changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws.
Additionally, we are unable to predict future changes in national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease real properties or dispose of them. In addition, rising interest rates could also make alternative interest-bearing and other investments more attractive and therefore potentially lower the relative value of the real estate-related assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations funds from operations, cash flow and returns to our investors.
A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could harm our operations.
Many of our investments may be susceptible to economic slowdowns or recessions, which could lead to financial losses in our investments and a decrease in revenues, net income and assets. While certain real estate markets have improved from the most recent economic downturn, a recession or continuing market volatility may interfere with the successful implementation of our business strategy, decrease revenues and the return on our investments and make it more difficult for us to collect rents or fee revenue.  An economic slowdown or recession, in addition to other non-economic factors such as an excess supply of properties or decrease demand for parking, could also have a material negative impact on the values of our investments.
Our investments in real estate will be subject to the risks typically associated with real estate.
We are subject to the risk that our investments may not generate sufficient rental and other revenues to meet our operating expenses and other obligations. Such a deficiency could result in an adverse impact our economic performance and the value of our investments. Events and conditions applicable to owners and operators of real estate that are beyond our control and could impact our economic performance and the value of our investments may include:
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property damage and other losses from natural disasters such as hurricanes, earthquakes, adverse weather conditions and floods;
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acts of war or terrorism, including the consequences of terrorist attacks;
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adverse changes in national and local economic and real estate conditions;
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an oversupply of (or a reduction in demand for) space in the areas where particular properties are located and the attractiveness of particular properties to prospective tenants;
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inability to locate or finance property acquisitions on favorable terms or at all;
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vacancies or inability to rent space or engage a manager on favorable terms or at all;
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inability to collect rent from lessees;
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increased operating costs, including insurance premiums, maintenance and repair costs, and taxes, to the extent not otherwise passed through to tenants;
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changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;
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costs of remediation and liabilities associated with environmental conditions affecting properties;
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the potential for uninsured or underinsured property losses. and
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the relative illiquidity of real estate investments.
We have no established investment criteria limiting the geographic concentration of our investments. If our investments are concentrated in an area that experiences adverse economic conditions, increased regulations or natural disasters, our investments may lose value and we may experience losses.
Our real estate investments may be concentrated in one or few geographic locations.  These investments may carry the risks associated with significant geographical concentration. We have not established and do not plan to establish any investment criteria to limit our exposure to these risks for future investments. As a result, properties underlying our investments may be overly concentrated in certain geographic areas, and we may experience losses as a result. A worsening of economic conditions, increased regulations or a natural disaster in the geographic area in which our investments may be concentrated could have an adverse effect on our business, including increasing our operating costs, reducing our revenues and otherwise adversely impacting our financial conditions and ability to make distributions to our stockholders.
Competition with third parties in acquiring and operating our investments may reduce our profitability and the return on stockholder's investment.
We have significant competition with respect to our acquisition of assets with many other companies, including other REITs, owners and managers of parking facilities, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than us. We may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we pay higher prices for investments our returns will be lower and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets.  We may also face intense competition to attract tenants to some of the properties we may acquire. There is no assurance that we will be able to attract tenants on favorable terms, if at all. Each of these factors could adversely affect our results of operations, financial condition, value of our investments and ability to pay distributions.
Changes in supply of or demand for similar real properties in a particular area may increase the price of real properties we seek to purchase and decrease the price of real properties when we seek to sell them.
The real estate industry is subject to market forces. We are unable to predict certain market changes including changes in supply of, or demand for, parking facilities and other real properties that we may acquire as investments in a particular area. Any potential purchase of an overpriced asset could decrease our rate of return on these investments and result in lower operating results and overall returns to our stockholders.
Our operating expenses may increase in the future and, to the extent such increases cannot be passed on to tenants, our cash flow and our operating results would decrease.
Operating expenses, such as expenses for insurance, utilities, taxes, and labor, are not fixed and may increase in the future. Moreover, many expenditures associated with properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the properties. There is no guarantee that we will be able to pass such operating expenses on to the lessee or manager of a parking facility or other real property we own. To the extent increased operating expenses cannot be passed on to the lessee or manager, any such increase would cause our cash flow and our operating results to decrease.

Real property that incurs a vacancy could be difficult to re-lease or sell.
Real property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of a lease. Additionally, an economic slowdown may lead to increased defaults by tenants. Certain of the real properties we may acquire may have some level of vacancy at the time of closing or the transaction itself may trigger the need to replace the tenant or parking facility operator. Regardless of the nature of any vacancies, we may have difficulty obtaining a new tenant or manager for any vacant space we have in our real properties or otherwise be able to replace any departing tenant or manager on terms as favorable as the terminated lease or management agreement. Additionally, if market rental rates are reduced, property-level cash flows would likely be negatively affected as existing leases renew at lower rates. If the vacancy continues for a long period of time or if we are unable to negotiate comparable terms when replacing a tenant or manager, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the real property could be diminished because the market value may depend principally upon the value of the leases of such real property.
The bankruptcy, insolvency or other loss of a significant lessee may adversely impact our operations and our ability to pay distributions to our stockholders.
A single lessee accounted for more than a majority of our parking base rental revenue as of December 31, 2016 and 2015.  See "Item 1. Business – Current Investment Focus and Expansion of Geographic Focus – Concentration" for more information. The inability of any of our significant lessee to pay rent or fees or a decision by a significant lessee to terminate a lease agreement prior to, or at the conclusion of, their term could have a significant negative impact on our results of operations or financial condition if a suitable replacement lessee is not secured in a timely manner. The bankruptcy, insolvency or other loss of a significant lessee may have an adverse impact on our income and our ability to pay distributions to our stockholders. Generally, under bankruptcy law, a debtor tenant has 120 days to exercise the option of assuming or rejecting the obligations under any unexpired lease for nonresidential real property, which period may be extended once by the bankruptcy court. If the tenant assumes its lease, the tenant must cure all defaults under the lease and may be required to provide adequate assurance of its future performance under the lease. If the tenant rejects the lease, we will have a claim against the tenant's bankruptcy estate. Although rent owing for the period between filing for bankruptcy and rejection of the lease may be afforded administrative expense priority and paid in full, pre-bankruptcy arrears and amounts owing under the remaining term of the lease will be afforded general unsecured claim status (absent collateral securing the claim). Moreover, amounts owing under the remaining term of the lease will be capped. Other than equity and subordinated claims, general unsecured claims are the last claims paid in a bankruptcy and therefore funds may not be available to pay such claims in full.
Real property will be subject to property taxes that may increase in the future, which could adversely affect our cash flow.
Real property is subject to real and personal property taxes that may increase as tax rates change and as real property is assessed or reassessed by taxing authorities. We anticipate that certain of our leases will generally provide that the property taxes, or increases in property taxes, are charged to the lessees as an expense related to the real property that they occupy, while other leases will generally provide that we are responsible for such taxes. In any case, we are ultimately responsible for payment of the taxes to the applicable government authorities. If real property taxes increase, tenants may be unable to make the required tax payments, ultimately requiring us to pay the taxes even if otherwise stated under the terms of the lease. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space.
Our parking facilities also may be subject to sales and parking taxes and, to the extent we are unable to require compliance by our lessee or manager of such regulations, or to the extent a lessee or manager fails to comply with such regulations, we may be obligated to withhold and remit such taxes or a direct assessment may be imposed upon us for failure to remit sales/parking taxes or failure to file the appropriate tax return.

Uninsured losses or premiums for insurance coverage relating to real property may adversely affect stockholder returns.
Our real properties may incur casualty losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Risks associated with potential terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders sometimes require property owners to purchase specific coverage against terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance real property we may hold. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our real property incurs a casualty loss which is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure stockholders that funding will be available to us for repair or reconstruction of damaged real property in the future.
Actions of joint venture partners could negatively impact our performance.
We may enter into joint ventures with third parties, including MVP REIT II and other entities that are affiliated with our advisor. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with a direct investment in real estate, including, for example:
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the possibility that our venture partner or co-tenant in an investment might become bankrupt;
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that the venture partner or co-tenant may at any time have economic or business interests or goals which are, or which become, inconsistent with our business interests or goals;
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that such venture partner or co-tenant may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives;
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the possibility that we may incur liabilities as a result of an action taken by such venture partner;
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that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business;
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the possibility that if we have a right of first refusal or buy/sell right to buy out a co-venturer, co-owner or partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so; or
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the possibility that we may not be able to sell our interest in the joint venture if we desire to exit the joint venture.
Under certain joint venture arrangements, neither party has the power to control the joint venture, potentially resulting in an impasse, which might have a negative influence on the joint venture and decrease potential returns to stockholders. In addition, to the extent that our venture partner or co-tenant is an affiliate of our advisor, certain conflicts of interest will exist.

Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.
From time to time, we may seek to acquire multiple properties in a single transaction. Portfolio acquisitions are more complex and expensive than single property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions may also result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. To acquire multiple properties in a single transaction we may be required to accumulate a large
amount of cash. We would expect the returns that we earn on such cash to be less than the ultimate returns on real property, therefore accumulating such cash could reduce our funds available for distributions. Any of the foregoing events may have an adverse effect on our operations.
Delays in the acquisition, development and construction of real property may have adverse effects on our results of operations and returns to our stockholders.
Delays we encounter in the selection, acquisition and development of real property could adversely affect stockholder returns. Where properties are acquired prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, stockholders could suffer delays in receiving cash distributions attributable to those particular real properties. Delays in completion of construction could give tenants the right to terminate preconstruction leases for space at a newly developed project. We may incur additional risks when we make periodic progress payments or other advances to builders prior to completion of construction.
Each of those factors could result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. Furthermore, the price we agree to pay for a real property will be based on our projections of rental income and expenses and estimates of the fair market value of real property upon completion of construction. If our projections are inaccurate, we may pay too much for a property.
Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.
All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.
Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, operations of our parking facilities and other tenant operations, the existing condition of land when we buy it, operations in the vicinity of our real property, such as the presence of underground storage tanks, oil leaks and other vehicle discharge, or activities of unrelated third parties may affect our real property. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of real property, we may be exposed to such costs in connection with such regulations. The cost of defending against environmental claims, of any damages or fines we must pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property could materially and adversely affect our business, lower the value of our assets or results of operations and, consequently, lower the amounts available for distribution to stockholders.

Real property investments may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or cost for remediation.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our real property investments could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others if property damage or personal injury occurs.
The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders.
Investment in real property may be subject to the Americans with Disabilities Act of 1990, as amended, or ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The ADA has separate compliance requirements for "public accommodations" and "commercial facilities" that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA's requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.
Real property is an illiquid investment, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.
Real property is an illiquid investment. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property. Additionally, we may acquire real properties that are subject to contractual "lock-out" provisions that could restrict our ability to dispose of the real property for a period of time.
We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure stockholders that we will have funds available to correct such defects or to make such improvements.
In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. Our real properties may also be subject to resale restrictions. All these provisions would restrict our ability to sell a property, which could reduce the amount of cash available for distribution to our stockholders.
Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.
We may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type of portfolio investments held, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:
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interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
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available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
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the duration of the hedge may not match the duration of the related liability or asset;
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our hedging opportunities may be limited by the treatment of income from hedging transactions under the rules determining REIT qualification;
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the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;
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the party owing money in the hedging transaction may default on its obligation to pay; and
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we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.
Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.
Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs.
The cost of using hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates. We may increase our hedging activity and thus increase our hedging costs during periods when interest rates are volatile or rising and hedging costs have increased. In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then current market price. We may not be able to terminate our hedging positions or dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot assure stockholders that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.
The Dodd-Frank Act regulates derivative transactions, which include certain hedging instruments we may use in our risk management activities. The Dodd-Frank Act contemplates that most swaps will be required to be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility. There are some exceptions to these requirements for entities that use swaps to hedge or mitigate commercial risk. The scope of these exceptions is currently uncertain, pending further definition through rulemaking proceedings. Although the Dodd-Frank Act includes significant new provisions regarding the regulation of derivatives, the impact of those requirements will not be known definitively until regulations have been adopted by the SEC and the Commodities Futures Trading Commission. The new legislation and any new regulations could increase the operational and transactional cost of derivatives contracts and affect the number and/or creditworthiness of available hedge counterparties to us.
Complying with REIT requirements may limit our ability to hedge effectively.
The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (1) interest rate risk on liabilities incurred to carry or acquire real estate-related assets or (2) risk of currency

fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests (or any property which generates such income or gain), and such instrument is properly identified under applicable Treasury Regulations.
To the extent we enter into transactions to mitigate the risk of hedging transactions where the hedged asset has been extinguished or disposed of, income from such transactions may also be excluded from gross income for purposes of the REIT 75% and 95% gross income tests. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.
Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.
Some of our assets will be classified for accounting purposes as "available-for-sale." These investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to stockholders' equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security falls below its amortized value and is not temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.
A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.
Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.
Market values of our investments may decline for a number of reasons, such as changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.
We disclose funds from operations, or FFO, a non-GAAP financial measure, in communications with investors, including documents filed with the SEC; however, FFO is not equivalent to our net income or loss as determined under GAAP, and our computation of FFO may not be comparable to other REITs.
One of our objectives is to provide cash distributions to our stockholders from cash generated by our operations determined under U.S. GAAP. Cash generated from operations is not equivalent to our net income from continuing operations as determined under U.S. GAAP. One non-U.S. GAAP supplemental performance measure that we consider due to the certain unique operating characteristics of real estate companies is known as funds from operations, or "FFO." The National Association of Real Estate Investment Trusts, or "NAREIT," an industry trade group, promulgated this measure which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with U.S. GAAP, excluding gains or losses from sales of property, plus depreciation and amortization on real property and after adjustments for unconsolidated partnerships and joint ventures in which we hold an interest. In addition, NAREIT has recently clarified its computation of FFO, which includes adding back real estate impairment charges for all periods presented, however, under U.S. GAAP, impairment charges reduce net income. While impairment charges are added back in the calculation of FFO, we caution that due to the fact that impairments to the value of any property are typically based on estimated future undiscounted cash flows compared to current carrying value, declines in the undiscounted cash flows which led to the impairment charges reflect declines in property operating performance which may be permanent.
The calculation of FFO may vary from entity to entity since capitalization and expense policies tend to vary from entity to entity. Items that are capitalized do not impact FFO whereas items that are expensed reduce FFO. Consequently, our presentation of FFO may not be comparable to other similarly titled measures presented by other REITs. FFO does not represent cash flows from operations as defined by U.S. GAAP, it is not indicative of cash

available to fund all cash flow needs nor is it indicative of liquidity, including our ability to pay distributions, and should not be considered as an alternative to net income, as determined in accordance with U.S. GAAP, for purposes of evaluating our operating performance. Management uses the calculation of FFO for several reasons. We use FFO to compare our operating performance to that of other REITs. Additionally, we compute FFO as part of our acquisition process to determine whether a proposed investment will satisfy our investment objectives.
The historical cost accounting rules used for real estate assets require, among other things, straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical cost accounting for depreciation may be less informative than FFO. We believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our operating performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs.
However, FFO should not be construed to be equivalent to or a substitute for the current U.S. GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the performance of real estate under U.S. GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-U.S. GAAP FFO measures and the adjustments to U.S. GAAP in calculating FFO. Furthermore, FFO is not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations calculated in accordance with U.S. GAAP, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO should be reviewed in conjunction with other U.S. GAAP measurements as an indication of our performance. The exclusion of impairments limits the usefulness of FFO as a historical operating performance measure since an impairment indicates that the property's operating performance may have been permanently affected. FFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO.
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and investor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.  In addition, the Company has purchased a Cybersecurity insurance policy to mitigate our risks.

Risks Related to Our Financing Strategy
The real estate finance industry has been and may continue to be adversely affected by conditions in the global financial markets and economic conditions in the United States generally.
Beginning in mid-2007, the global financial markets experienced significant declines in the values of nearly all asset classes and an unprecedented lack of liquidity. This market disruption was initially triggered by the subprime residential lending and single family housing markets experiencing significant default rates, declining real estate values and increasing backlog of housing supply. Other lending markets also experienced higher volatility and decreased liquidity resulting from the poor credit performance in the residential lending markets. The residential sector capital markets issues quickly spread more broadly to commercial real estate and other credit markets. Financial conditions affecting some real estate markets have improved amid low Treasury rates and increased lending from banks, insurance companies and other financial institutions. However, any deterioration of financial conditions could have the potential to materially adversely affect the value of our properties and other investments; the availability or the terms of financing that we may anticipate utilizing; our ability to make principal and interest payments on, or refinance, certain property acquisitions or refinance any debt at maturity; and/or, for our leased properties, the ability of our tenants to enter into new leasing transactions or satisfy rental payments under existing leases.
We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.
We may finance our assets with outside capital. Notwithstanding the improvements in the credit markets since the economic downturn beginning in mid-2007, many real estate lenders and investors continue to find it difficult to obtain cost-effective debt capital to finance new investment activity or to refinance maturing debt. We do not know whether any sources of capital will be available to us in the future on terms that are acceptable to us, if at all. If we cannot obtain sufficient capital on acceptable terms, our businesses and our ability to operate could be severely impacted.
Increases in interest rates could increase the amount of our debt payments and negatively impact our operating results.
Interest we pay on our debt obligations will reduce cash available for distributions.  As interest rates are expected to rise in the coming years, we anticipate incurring increased borrowing costs. Moreover, if we incur variable rate debt, increases in interest rates would increase our interest costs. Higher borrowing costs would reduce our cash flows and our ability to make distributions to stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.
Instability in the debt markets may make it more difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make to our stockholders.
If mortgage debt is unavailable on reasonable terms as a result of increased interest rates or other factors, we may not be able to finance the initial purchase of properties. In addition, we run the risk of being unable to refinance any mortgage debt on our properties when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace our advisor. In addition, loan documents may limit our ability to replace a property's property manager or terminate certain operating or lease agreements related to a property. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

We have broad authority to incur debt and high debt levels could hinder our ability to make distributions and decrease the value of a stockholder's investment.
Our charter does not limit us from incurring debt until our borrowings would exceed 300% of our net assets. Further, we can increase our borrowings in excess of 300% of our net assets, if a majority of our independent directors approve such increase and the justification for such excess borrowing is disclosed to our stockholders in our next quarterly report. High debt levels would cause us to incur higher interest charges and higher debt service payments and could also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of a stockholder's investment.
We expect to use credit facilities to finance our investments, which may require us to provide additional collateral and significantly impact our liquidity position.
On October 5, 2016, we and MVP REIT, as borrowers, through our respective operating partnerships, entered into an unsecured credit agreement with KeyBank, National Association as the administrative agent and KeyBanc Capital Markets as the lead arranger.  Pursuant to the unsecured credit agreement, the borrowers were provided with a $30 million unsecured credit facility, which may be increased up to $100 million, in minimum increments of $10 million, for a maximum of $70 million increase. The unsecured credit facility has an initial term of two years, maturing on October 5, 2018, and may be extended for a one-year period if certain conditions are met and upon payment of an extension fee.
We expect to use credit facilities to finance some of our investments. To the extent these credit facilities contain mark-to-market provisions, if the market value of the real estate secured loans pledged by us declines in value due to credit quality deterioration, we may be required by the lending institution to provide additional collateral or pay down a portion of the funds advanced. In a weakening economic environment, we would generally expect credit quality and the value of the real estate secured loans that serve as collateral for our credit facilities to decline, resulting in a higher likelihood that the lenders would require partial repayment from us, which could be substantial. Posting additional collateral to support our credit facilities could significantly reduce our liquidity and limit our ability to leverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lending institutions can accelerate our indebtedness, which could have a material adverse effect on our business and operations.
Risks Related to Conflicts of Interest
The fees we pay to affiliates, including in connection with our initial public offering and the acquisition and management of our investments, were not determined on an arm's length basis; therefore, we do not have the benefit of arm's length negotiations of the type normally conducted between unrelated parties.
The fees being paid to our advisor, MVP American Securities (our affiliated selling agent) and other affiliates for services they provide for us were not determined on an arm's length basis. As a result, the fees have been determined without the benefit of arm's length negotiations of the type normally conducted between unrelated parties and may be in excess of amounts that we would otherwise pay to third parties for such services.
Our executive officers and our advisor's key real estate, finance and securities professionals will face conflicts of interest caused by our compensation arrangements with our advisor and its affiliates, which could result in actions that are not in the long-term best interests of our company.
Our executive officers and our advisor's key real estate, finance and securities professionals are also officers, directors, managers and/or key professionals of our sponsor, our affiliated selling agent and other affiliated entities. Our advisor, our affiliated selling agent and other affiliated entities will receive substantial fees from us. These fees could influence the advice given to us by the key personnel of our advisor and its affiliates. Among other matters, these compensation arrangements could affect their judgment with respect to:
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the continuation, renewal or enforcement of our agreements with our advisor, our affiliated selling agent and other affiliated entities, including the advisory agreement and our selling agreement with our affiliated selling agent;
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any follow-on public offerings of equity by us, which would enable our affiliated selling agent to earn additional selling commissions and our advisor to earn additional acquisition and asset management fees;
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acquisitions of investments and loans originated for us by affiliates, which entitle our advisor to asset management fees and, in the case of acquisitions of real property from other affiliated entities, might entitle affiliates of our advisor to disposition fees in connection with services for the seller;
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real property sales, since the asset management fees payable to our advisor will decrease;
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sales of real property, which entitle our advisor to disposition fees; and
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borrowings to acquire investments and loans originated for us by affiliates, which borrowings will increase the debt financing fees, and asset management fees payable to our advisor.
The fees our advisor receives in connection with transactions involving the acquisition of an asset are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. Additionally, the payment of certain fees may influence our advisor to recommend transactions with respect to the sale of a property or properties that may not be in our best interest at the time. Investments with higher net operating income growth potential are generally riskier or more speculative. In evaluating investments and other management strategies, the opportunity to earn fees may lead our advisor to place undue emphasis on criteria relating to its compensation at the expense of other criteria, such as the preservation of capital, to achieve higher short-term compensation. Considerations relating to our affiliates' compensation from us and other affiliates could result in decisions that are not in the best interests of our stockholders, which could hurt our ability to pay distributions to stockholders or result in a decline in the value of their investments.
Our sponsor will face conflicts of interest relating to performing services on our behalf and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could limit our ability to make distributions and reduce a stockholder's overall investment return.
Our advisor relies upon the key real estate, finance and securities professionals of our sponsor to identify suitable investment opportunities for us. Our sponsor and other affiliated entities, including MVP REIT II, a publicly registered non-traded REIT that is also seeking to invest primarily in parking assets, also rely on many of the same real estate, finance and securities professionals. Our investment strategy is similar to that of MVP REIT II. When these real estate, finance and securities professionals direct an investment opportunity to any affiliated entity, they, in their sole discretion, will offer the opportunity to the entity for which the investment opportunity is most suitable based on the investment objectives, available cash and existing portfolio of each entity. There are no specific guidelines to govern the allocation of investment opportunities among MVP REIT II and our affiliated entities.  The allocation of investment opportunities could result in our investing in assets that provide less attractive returns, reducing the level of distributions we may be able to pay to stockholders.
Further, our directors and officers, our sponsor, our advisor, Michael V. Shustek and any of their respective affiliates, employees and agents are not prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition or sale of real estate investments or that otherwise compete with us.
Our advisor's real estate, finance and securities professionals acting on behalf of our advisor will face competing demands relating to their time and this may cause our operations and a stockholder's investment to suffer.
Our advisor relies on the real estate, finance and securities professionals of our sponsor performing services for us on behalf of our advisor, including Michael V. Shustek, for the day-to-day operation of our business, who is also an executive officer of other affiliated entities. As a result of his interests in other affiliated entities and the fact that he engages in and will continue to engage in other business activities on behalf of himself and others, Michael V. Shustek will face conflicts of interest in allocating his time among us, our sponsor and other affiliated entities, including MVP REIT II which is currently conducting a public offering, and other business activities in which he is involved. These conflicts of interest could result in declines in the returns on our investments and the value of a stockholder's investment.

Our advisor may have conflicting fiduciary obligations if we enter into joint ventures or engage in other transactions with its affiliates. As a result, in any such transaction we may not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties.
We have co- invested in property together with one or more of our affiliates, including with the owners of our advisor, Vestin Realty Mortgage I, Inc. and Vestin Realty Mortgage II, Inc., and MVP REIT II.  We may make additional co-investments in real estate of real estate-secured loans with our affiliates or through a joint venture with its affiliates. In these circumstances, our advisor will have a conflict of interest when fulfilling its fiduciary obligation to us. In any such transaction, we would not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties.
Our executive officers and our advisor's key real estate, finance and securities professionals face conflicts of interest related to their positions and interests in our affiliates, which could hinder our ability to implement our business strategy and to generate returns to stockholders.
Our executive officers and our advisor's key real estate, finance and securities professionals are also executive officers, directors, managers and key professionals of our sponsor, our advisor, MVP REIT II, MVP American Securities, LLC ("MVP AS") and other affiliated entities. As a result, they owe duties to each of these entities, their members and limited partners and these investors, which duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders.
The loyalties of these individuals to other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to stockholders and to maintain or increase the value of our assets.
We may purchase real property and other real estate-related assets from third parties who have existing or previous business relationships with affiliates of our advisor, and, as a result, in any such transaction, we may not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties.
We may purchase real property and other real estate-related assets from third parties that have existing or previous business relationships with affiliates of our advisor. The officers, directors or employees of our advisor and its affiliates may have a conflict in representing our interests in these transactions on the one hand and the interests of such affiliates in preserving or furthering their respective relationships on the other hand. In any such transaction, we will not have the benefit of arm's-length negotiations of the type normally conducted between unrelated parties, and the purchase price or fees paid by us may be in excess of amounts that we would otherwise pay to third parties.
A stockholder's interest in us could be diluted and we could incur other significant costs associated with being self-managed if we internalize our management functions.
Our board of directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire our advisor's assets and the personnel that our advisor utilizes to perform services on its behalf for us. The payment of such consideration could result in dilution of a stockholder's interests as a stockholder and could reduce the income per share attributable to a stockholder's investment. Additionally, although we would no longer bear the costs of the various fees and expenses we expect to pay to our advisor under the advisory agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance. We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other employees and consultants that will be paid by our advisor or its affiliates. We may issue equity awards to officers, employees and consultants, which awards would decrease our net income and funds from operations and may further dilute a stockholder's investment. We cannot reasonably estimate the amount of advisory fees we would save or the costs we would incur if we become self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our income per share would be lower as a result of the internalization than it otherwise would have been, potentially decreasing the amount of cash available to distribute to our stockholders and the value of our shares.

Internalization transactions involving the acquisition of advisors affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims which would reduce the amount of cash available for us to originate or acquire assets, and to pay distributions. If we internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity. Currently, our advisor and its affiliates perform asset management and general and administrative functions, including accounting and financial reporting, for multiple entities. These personnel have substantial know-how and experience which provides us with economies of scale. We may fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. Certain key employees may not become employees of the advisor but may instead remain employees of the sponsor or its affiliates. An inability to manage an internalization transaction effectively could thus result in our incurring excess costs and suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs, and our management's attention could be diverted from most effectively managing our investments.
Risks Related to Our Shares and Our Corporate Structure
There is no public market for our shares and we are not required to effectuate a liquidity event by a certain date; therefore, it will be difficult for stockholders to sell their shares and, if stockholders are able to sell their shares, they will likely sell their shares at a substantial discount.

There is no public market for our shares of common stock, and we are not required to pursue a liquidity event by a certain date. Additionally, our charter contains restrictions on the ownership and transfer of our shares, and these restrictions may limit stockholders' ability to sell their shares. If stockholders are able to sell their shares, they may only be able to sell their shares at a substantial discount from the price they paid. This may be the result, in part, of the fact that the amount of funds available for investment are reduced by funds used to pay certain up-front fees and expenses, including organization and offering costs, such as issuer costs, selling commissions, and acquisition expenses in connection with our public offerings. Unless our aggregate investments increase in value to compensate for these up-front fees and expenses, which may not occur, it is unlikely that stockholders will be able to sell their shares, without incurring a substantial loss. Stockholders may also experience substantial losses if we dispose of our assets in connection with a liquidation event, though we are not required to consummate a transaction to provide liquidity to stockholders on any date certain or at all. We cannot assure stockholders that their shares will ever appreciate in value to equal the price they paid for their shares. We have adopted a share repurchase program but it is limited in terms of the amount of shares that may be repurchased each quarter. Thus, prospective stockholders should consider their shares as illiquid and a long-term investment, and they must be prepared to hold their shares for an indefinite length of time.
 
Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary or appropriate to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Code, among other purposes, our charter generally prohibits a person from beneficially or constructively owning more than 9.8% in value of the aggregate of our outstanding shares of capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of the aggregate of our outstanding common stock, unless exempted by our board of directors. This limit can generally be waived and adjusted by our board of directors. The ownership limit may have the effect of precluding a change in control of us by a third party, even if such change in control would be in the interest of the our stockholders (and even if such change in control would not reasonably jeopardize our REIT status). This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock. In addition, these provisions may also decrease stockholders' ability to sell their shares of our common stock.

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our board of directors may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of repurchase of any such classes or series of stock. Thus, our board of directors could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.
Our rights and the rights of our stockholders to recover claims against directors, including our independent directors, and our officers are limited, which could reduce our stockholders and our recovery against them if they negligently cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter generally provides that no director or officer will be liable to us or our stockholders for monetary damages and that we must generally indemnify directors and officers for losses unless, in the case of independent directors, they are grossly negligent or engage in willful misconduct or, in the case of non-independent directors or officers, they are negligent or engage in misconduct. As a result, our stockholders and we may have more limited rights against our directors and officers than might otherwise exist under common law, which could reduce stockholders and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our directors (as well as by our officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distribution to stockholders.
We are not and do not plan to be registered as an investment company under the Investment Company Act, and therefore we will not be subject to the requirements imposed and stockholder protections provided by the Investment Company Act; maintaining an exemption from registration may limit or otherwise affect our investment choices.
Neither we nor any of our subsidiaries are registered or intend to register as an investment company under the Investment Company Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:
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limitations on capital structure;
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restrictions on specified investments;
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prohibitions on transactions with affiliates; and
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compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.
We expect that the Company and its subsidiaries will rely on the exception from the definition of an investment company under Section 3(c)(5)(C) of the Investment Company Act, which is available for entities "primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate." In providing guidance on this exclusion, the SEC staff, among other things, generally has focused on whether at least 55% of a subsidiary's portfolio will comprise of qualifying real estate-related assets and at least 80% of its portfolio will comprise of qualifying real estate-related assets and real estate-related assets (and no more than 20% will comprise of other, non-qualifying assets). For purposes of the exclusions provided by Sections 3(c)(5)(C), we will classify our investments based in large measure on no-action letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC Guidance, on our view of what constitutes a qualifying real estate asset and a real estate related asset. These no-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than 20 years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain

mortgage loans, participations in mortgage loans, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate investments or real estate related investments and therefore our investments in these types of assets may be limited. No assurance can be given that the SEC will concur with our classification of our assets. The SEC is reviewing interpretive issues relating to the status of mortgage-related pools under the Investment Company Act and whether mortgage-related pools potentially are making judgments about their status under the Investment Company Act without sufficient regulatory guidance. It is not certain whether or to what extent the SEC or its staff in the future may modify interpretive guidance to narrow the ability of issuers to rely on the exemption from registration provided by Section 3(c)(5)(C). Future revisions to the Investment Company Act or further guidance from the SEC staff may cause us to lose our exemption from registration or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.
To ensure that neither we nor any of our subsidiaries are required to register as an investment company, an entity may be unable to sell assets that it would otherwise want to sell and may need to sell assets that it would otherwise wish to retain. In addition, we or our subsidiaries may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire securities or interests in companies that we would otherwise want to acquire. We will monitor our holdings and those of our subsidiaries to ensure continuing and ongoing compliance with these tests, and we will be responsible for making the determinations and calculations required to confirm our compliance with these tests. If the SEC does not agree with our determinations, we may be required to adjust our activities or those of our subsidiaries.
If we or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.
Further, if we or our subsidiaries are required to register as investment companies under the Investment Company Act, our investment options may be limited by various limitations, such as those mentioned above, and we or our subsidiaries would be subjected to a complex regulatory scheme, the costs of compliance with which can be high.
We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements.
In April 2012, President Obama signed into law the Jumpstart Our Business Startups Act, or the JOBS Act. We are an "emerging growth company," as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies."
We could remain an "emerging growth company" for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues equals or exceeds $1 billion, (2) December 31 of the fiscal year that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor's attestation report on management's assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise, (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold shareholder advisory votes on executive compensation. Certain of these exemptions are inapplicable to us because of our structure as an externally managed REIT.  If we do take advantage of any of these exemptions, we do not know if some investors will find our common stock less attractive as a result.
In addition, the JOBS Act provides that an "emerging growth company" can take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of such extended

transition period including 404(b) reporting subject to further management evaluation. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to instead comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
Stockholders will have limited control over changes in our policies and operations, which increases the uncertainty and risks they face as stockholders.
Our board of directors determines our major policies, including our policies regarding growth, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under the Maryland General Corporation Law, or MGCL, and our charter, our stockholders have a right to vote only on limited matters. Our board's broad discretion in setting policies and our stockholders' inability to exert control over those policies increase the uncertainty and risks stockholders face as stockholders.
Our stockholders' interest in us will be diluted if we issue additional shares.
Existing stockholders do not have preemptive rights to any shares issued by us in the future. Our charter currently has authorized 100,000,000 shares of capital stock, of which 98,999,000 shares are classified as common stock, par value $0.001 per share, 1,000,000 shares are classified as preferred stock, par value $0.001 per share, and 1,000 shares are classified as non-participating, non-voting convertible stock, par value $0.001 per share. Subject to any limitations set forth under Maryland law, our board of directors may increase the number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock designated, or classify or reclassify any unissued shares without the necessity of obtaining stockholder approval. All of such shares may be issued in the discretion of our board of directors. Existing stockholders may suffer dilution of their equity investment in us, in the event that we (1) sell additional shares of our common stock or preferred stock in the future, including those issued pursuant to our distribution reinvestment plan or in any follow-on equity offerings, (2) sell securities that are convertible into shares of our common stock or redeemable by us where the redemption price is paid in the form of shares of our common stock, (3) issue shares of our common stock or preferred stock in a private offering of securities to institutional investors, (4) issue shares of our common stock to our advisor, its successors or assigns, in payment of an outstanding fee obligation as set forth under our advisory agreement or (5) issue shares of our common stock to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership. Because of these and other reasons described in this "Risk Factors" section, stockholders should not expect to be able to own a significant percentage of our shares.
Our stockholders' investment will be diluted upon conversion of the convertible stock.
We have issued 1,000 shares of our convertible stock to our advisor, for which our advisor contributed $1,000. Our convertible stock will convert to shares of our common stock if and when: (A)  we have made total distributions on the then outstanding shares of our common stock equal to the invested capital attributable to those shares plus a 6.00% cumulative, non-compounded, annual pre-tax return on such invested capital; or (B)  (i) we list our common stock for trading on a national securities exchange and (ii) the sum of the aggregate market value of the issued and outstanding shares of our common stock plus our distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6% cumulative, pre-tax non-compounded annual return to investors; or (C)  our advisory agreement is terminated or not renewed, but only if at the time of such termination or non-renewal, the requirements for conversion set forth in either of the immediately preceding clause (A) or (B) also shall have been satisfied.  For purposes of such calculation, the market value of our outstanding common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed for trading on a national securities exchange. In the event of a termination or non-renewal of our advisory agreement for cause, the convertible stock will be redeemed by us for $1.00 per share. In general, upon the occurrence of any of the conditions set forth above, our issued shares of convertible stock will convert into a number of shares of common stock representing three and one-half percent (3.50%) of the outstanding shares of our common stock immediately preceding the conversion.  Upon the issuance of shares of our common stock in connection with the conversion of our convertible stock, our stockholders' interests in us will be diluted.

The conversion of the convertible stock held by our advisor may discourage a takeover attempt or prevent us from effecting a merger that otherwise would have been in the best interests of our stockholders.
The affirmative vote of two-thirds of the outstanding shares of convertible stock, voting as a single class, will be required (1) for any amendment, alteration or repeal of any provision of our charter that materially and adversely changes the rights of the convertible stock and (2) to effect a merger of our company into another entity, or a merger of another entity into our company, unless in each case each share of convertible stock (A) will remain outstanding without a material and adverse change to its terms and rights or (B) will be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having rights identical to that of our convertible stock. In the event that we propose to merge with or into another entity, including another REIT, our advisor could, by exercising these voting rights, determine whether or not we are able to complete the proposed transaction. By voting against a proposed merger, our advisor could prevent us from effecting the merger, even if the merger otherwise would have been in the best interests of our stockholders.
Payment of fees to our advisor and its affiliates will reduce cash available for investment and distribution and increases the risk that stockholders will not be able to recover the amount of their investment in our shares.
Our advisor and its affiliates will perform services for us in connection with the selection, acquisition, and administration of our investments. We will pay them substantial fees for these services, which will result in immediate dilution to the value of our stockholders' investment and will reduce the amount of cash available for investment or distribution to stockholders. We may increase the compensation we pay to our advisor subject to approval by our board of directors and other limitations in our charter, which would further dilute stockholders' investment and the amount of cash available for investment or distribution to stockholders. We estimate that we will use 96.25% to 96.59% of our gross offering proceeds for investments, to pay fees to our advisor for its services in connection with the selection and acquisition of investments and for the repurchase of shares of our common stock under our share repurchase program. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or our company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of our company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets. Moreover, these fees increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than the purchase price of the shares in our initial public offering. These substantial fees and other payments also increase the risk that stockholders will not be able to resell their shares of our common stock at a profit, even if our shares are listed on a national securities exchange.
Although we will not currently be afforded the protection of certain provisions of the MGCL relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.
Under Maryland law, "business combinations" between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder and thereafter may only be consummated if approved by two supermajority votes of our stockholders. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. These provisions may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the MGCL could provide similar anti-takeover protection.

Our charter includes a provision that may discourage a person from launching a mini-tender offer for our shares.
Our charter provides that any tender offer made by a person, including any "mini-tender" offer, must comply with most provisions of Regulation 14D of the Securities Exchange Act of 1934, as amended, or the Exchange Act. A "mini-tender offer" is a public, open offer to all stockholders to buy their stock during a specified period of time that will result in the bidder owning less than 5% of the class of securities upon completion of the mini-tender offer process. Absent such a provision in our charter, mini-tender offers for shares of our common stock would not be subject to Regulation 14D of the Exchange Act. Tender offers, by contrast, result in the bidder owning more than 5% of the class of securities and are automatically subject to Regulation 14D of the Exchange Act. Pursuant to our charter, the offeror must provide our company notice of such tender offer at least 10 business days before initiating the tender offer. If the offeror does not comply with these requirements, no stockholder may transfer shares of our common stock to such offeror unless such stockholder shall have first offered such shares to us for purchase at the tender offer price. In addition, the non-complying offeror shall be responsible for all of our expenses in connection with that offeror's noncompliance. This provision of our charter may discourage a person from initiating a mini-tender offer for our shares and prevent stockholders from receiving a premium price for their shares in such a transaction.
Federal Income Tax Risks
Failure to maintain our status as a REIT could adversely affect our operations and our ability to make distributions.
We believe we operate in such a manner as to qualify, and we have elected to be treated, as a REIT for U.S. federal income tax purposes, commencing with our taxable year ended December 31, 2013. If we were to fail to continue to qualify as a REIT for any taxable year, or if our board determined to revoke our REIT election, we would be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer be deductible in computing our taxable income and we would no longer be required to make distributions. To the extent that distributions had been made in anticipation of our qualifying as a REIT, we might be required to borrow funds or liquidate some investments in order to pay the applicable corporate income tax.
Lastly, it is possible that future economic, market, legal, tax or other considerations may cause our board of directors to determine that it is no longer in our best interest to continue to be qualified as a REIT and recommend that we revoke our REIT election.
Our leases must be respected as such for U.S. federal income tax purposes in order for us to qualify as a REIT.

In order for us to qualify as a REIT, at least 75% of our gross income each year must consist of real estate-related income, including rents from real property. Income from operation of our parking facilities will not be treated as rents from real property. Accordingly, we lease our parking facilities to lessees that will operate the facilities. If such leases were recharacterized as management contracts for U.S. federal income tax purposes or otherwise as an arrangement other than a lease, we could fail to qualify as a REIT.

To continue to qualify as a REIT, we must meet annual distribution requirements, which may result in us distributing amounts that may otherwise be used for our operations or having to borrow funds.
To obtain the favorable tax treatment accorded to REITs, we normally will be required each year to distribute to our stockholders at least 90% of our real estate investment trust taxable income, determined without regard to the deduction for distributions paid and by excluding net capital gains. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on acquisitions of properties and it is possible that we might be required to borrow funds or sell assets to fund these distributions. We may not always be able to make distributions sufficient to meet the annual distribution requirements and to avoid corporate income taxation on the earnings that we distribute.

From time to time, we may generate taxable income greater than our income for financial reporting purposes, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur, e.g., from (i) the effect of non-deductible capital expenditures, (ii) the creation of reserves, (iii) the recognition of original issue discount or (iv) required debt amortization payments. If we do not have other funds available in these situations, it might be necessary to arrange for short-term, or possibly long-term, borrowings, or to pay dividends in the form of our shares or other taxable in-kind distributions of property. We may need to borrow funds at times when the market conditions are unfavorable. Such borrowings could increase our costs and reduce the value of a stockholder's investment. In the event in-kind distributions are made, stockholder tax liabilities associated with an investment in our common stock for a given year may exceed the amount of cash we distribute to stockholders during such year.
Stockholders may have current tax liability on distributions if they elect to reinvest in shares of our common stock.
Our stockholders who elect to participate in the distribution reinvestment plan, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair market value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions used to purchase those shares of common stock in cash. As a result, if stockholders are not a tax-exempt entity, they may have to use funds from other sources to pay stockholder tax liability on the value of the common stock received.
Distributions payable by REITs generally do not qualify for the reduced tax rates that apply to other corporate distributions.
Qualified dividend income payable by corporations to domestic stockholders that are individuals, trusts or estates is subject to the reduced maximum tax rate applicable to capital gains. Distributions payable by REITs, however, generally are not eligible for the preferential rate. The more favorable rates applicable to regular corporate distributions could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including our common stock.
In certain circumstances, we may be subject to federal, state and local taxes as a REIT, which would reduce our cash available for distribution to our stockholders.
Even if we qualify and maintain our status as a REIT, we may be subject to U.S. federal income taxes or state taxes. For example, net income from a "prohibited transaction" will be subject to a 100% tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain income we earn from the sale or other disposition of our property and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. We may also be subject to state and local taxes on our income or property, either directly or at the level of the companies through which we indirectly own our assets. Any U.S. federal or state taxes we pay will reduce our cash available for distribution to our stockholders.
Distributions to tax-exempt investors may be classified as unrelated business taxable income.
Neither ordinary nor capital gain distributions with respect to our common stock nor gain from the sale of common stock should generally constitute unrelated business taxable income to a tax-exempt investor. However, there are certain exceptions to this rule.  In particular: *
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Part of the income and gain recognized by certain qualified employee pension trusts with respect to our common stock may be treated as unrelated business taxable income if shares of our common stock are predominately held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT share ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income;
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Part of the income and gain recognized by a tax-exempt investor with respect to our common stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the common stock;

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Part or all of the income or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from federal income taxation under Sections 501(c)(7), (9), (17), or (20) of the Code may be treated as unrelated business taxable income.
Investments in other REITs and real estate partnerships could subject us to the tax risks associated with the tax status of such entities.
We may invest in the securities of other REITs and real estate partnerships. Such investments are subject to the risk that any such REIT or partnership may fail to satisfy the requirements to qualify as a REIT or a partnership, as the case may be, in any given taxable year. In the case of a REIT, such failure would subject such entity to taxation as a corporation, may require such REIT to incur indebtedness to pay its tax liabilities, may reduce its ability to make distributions to us, and may render it ineligible to elect REIT status prior to the fifth taxable year following the year in which it fails to so qualify. In the case of a partnership, such failure could subject such partnership to an entity level tax and reduce the entity's ability to make distributions to us. In addition, such failures could, depending on the circumstances, jeopardize our ability to qualify as a REIT.
Complying with the REIT requirements may impact our ability to maximize profits.
To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of shares of our common stock. We may be required to forego attractive investments or liquidate otherwise attractive investments to comply with such tests. We also may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
Complying with the REIT requirements may force us to liquidate otherwise attractive investments.
To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate-related assets. The remainder of our investments (other than governmental securities and qualified real estate-related assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate-related assets) can consist of the securities of any one issuer, and no more than 25% (20% for taxable years beginning after December 31, 2017) of the value of our total securities can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments to maintain REIT status. Such action may subject the REIT to the tax on prohibited transactions, discussed below.
Liquidation of assets may jeopardize our REIT status.
To continue to qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to satisfy our obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our status as a REIT, or we may be subject to a 100% tax on any resulting gain if we sell assets that are treated as dealer property or inventory.
Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on our stockholders' investment.
Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. Under applicable provisions of the Code regarding prohibited transactions by REITs, we will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, but excluding our taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the

100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (3) structuring certain dispositions of our properties to comply with certain safe harbors available under the Code for properties held for at least two years. However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, but excluding our taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
Recharacterization of sale-leaseback transactions may cause us to lose our REIT status.
We may purchase real property and lease it back to the sellers of such property. We cannot assure stockholders that the Internal Revenue Service (the "IRS") will not challenge any characterization of such a lease as a "true lease," which would allow us to be treated as the owner of the property for federal income tax purposes. In the event that any such sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification "asset tests" or the "income tests" and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated, which might also cause us to fail to meet the distribution requirement for a taxable year.
The stock ownership limit imposed by the Code for REITs and our charter may restrict our business combination opportunities.
To qualify as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year after our first year in which we qualify as a REIT. Our charter, with certain exceptions, authorizes our board of directors to take the actions that are necessary or appropriate to preserve our qualification as a REIT. Unless an exemption is granted by our board of directors, no person (as defined to include entities) may own more than 9.8% in value of the aggregate of our outstanding shares of capital stock or more than 9.8%, in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding common stock following the completion of our initial public offering. Generally, this limit can be waived and adjusted by the board of directors. In addition, our charter will generally prohibit beneficial or constructive ownership of shares of our capital stock by any person that owns, actually or constructively, an interest in any of our tenants that would cause us to own, actually or constructively, 10% or more of any of our tenants. Our board of directors may grant an exemption from the 9.8% ownership limit prospectively or retroactively in its sole discretion, subject to such conditions, representations and undertakings as required by our charter or as it may determine. These ownership limitations in our charter are common in REIT charters and are intended, among other purposes, to assist us in complying with the tax law requirements and to minimize administrative burdens. However, these ownership limits might also delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.
The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
The IRS has issued Revenue Procedure 2003-65, which provides a safe harbor pursuant to which a mezzanine loan that is secured by interests in a pass-through entity will be treated by the IRS as a real estate asset for purposes of the REIT tests, and interest derived from such loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We may make investments in loans secured by interests in pass-through entities in a manner that complies with the various requirements applicable to our qualification as a REIT. To the extent, however, that any such loans do not satisfy all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure, there can be no assurance that the IRS will not challenge the tax treatment of such loans, which could jeopardize our ability to qualify as a REIT.

Legislative or regulatory action could adversely affect us or our investors.
In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments in REITs and similar entities. Additional changes to tax laws are likely to continue to occur in the future and may take effect retroactively, and there can be no assurance that any such changes will not adversely affect how we are taxed or the taxation of a stockholder. Any such changes could have an adverse effect on an investment in shares of our common stock. We urge stockholders to consult with their own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.
Foreign investors may be subject to FIRPTA on the sale of common stock if we are unable to qualify as a domestically controlled REIT.
A foreign person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax under the Foreign Investment in Real Property Tax Act, or "FIRPTA", on the gain recognized on the disposition. FIRPTA does not apply, however, to the disposition of stock in a REIT if the REIT is a "domestically controlled REIT." A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by non-U.S. holders. There can be no assurance that we will qualify as a domestically controlled REIT. If we were to fail to so qualify, gain realized by a foreign investor on a sale of our common stock would be subject to FIRPTA unless our common stock was traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than ten percent of the value of our outstanding common stock. We are not currently traded on an established securities market nor do we anticipate being traded on an established securities market in the foreseeable future.
We may enter into certain hedging transactions which may have a potential impact on our REIT status.
From time to time, we may enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may include entering into interest rate and/or foreign currency swaps, caps, and floors, options to purchase these items, and futures and forward contracts. Income and gain from hedging transactions that we enter into to hedge indebtedness incurred or to be incurred to acquire or carry real estate-related assets and that are clearly and timely identified as such will be excluded from both the numerator and the denominator for purposes of the 75% and 95% gross income tests. To the extent that we do not properly identify such transactions as hedges or we hedge with other types of financial instruments, or hedge other types of indebtedness, the income from those transactions is not likely to be treated as qualifying income for purposes of the gross income tests, which could jeopardize our status as a REIT. Furthermore, compliance with the statutory REIT requirements may limit our ability to implement hedging strategies that may otherwise reduce risk, thereby increasing our risk profile.
Qualifying as a REIT involves highly technical and complex provisions of the Code.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Prior to March 2017, our corporate headquarters were located at 12730 High Bluff Drive, Suite 110, San Diego, CA  92130.  During March 2017, the Company moved our headquarters to our Southern Nevada office, located at 8880 West Sunset Road, Suite 240, Las Vegas, Nevada 89148.  The office in San Diego will be closed on March 31, 2017.

As of December 31, 2016, the Company held, along with affiliated entities, 30 properties with an aggregate purchase price totaling $142.4 million, of which our portion was $122.4 million, plus closing costs.  These acquisitions were funded by the initial public offering, through the issuance of the Company's common stock, financing, assuming liabilities and debt financing.

The following map and table sets forth the property name, percentage owned, location and other information with respect to the parking lots/facilities that the Company had acquired as of December 31, 2016:

 
The location marks are based on dollar amounts MVP REIT paid for each property at the time of purchase in relation to total purchases owned at December 31, 2016.
 
Property Name
Location
Purchase
Date
Property
Type
# Spaces
Property Size (Acres)
Retail
Sq Ft
 Aggregate Initial Purchase Price
%
Owned
MVP PF Ft. Lauderdale 2013, LLC
Ft. Lauderdale, FL
7/31/2013
Lot
66
0.61
4,017
$3,400,000
100.0%
MVP PF Kansas City 2013, LLC
Kansas City, MO
8/28/2013
Lot
164
1.18
N/A
$1,550,000
100.0%
MVP PF Memphis Poplar 2013, LLC
Memphis, TN
8/28/2013
Lot
125
0.86
N/A
$2,685,000
100.0%
MVP PF Memphis Court 2013, LLC
Memphis, TN
8/28/2013
Lot
37
0.41
N/A
$190,000
100.0%
MVP PF St. Louis 2013, LLC
St Louis, MO
9/4/2013
Lot
179
1.22
N/A
$4,125,000
100.0%
MVP Denver Sherman, LLC
Denver, CO
1/26/2015
Lot
28
0.14
N/A
$585,000
100.0%
MVP Milwaukee Old World, LLC
Milwaukee, WI
3/31/2015
Lot
54
0.26
N/A
$1,000,000
100.0%
MVP St. Louis Convention Plaza, LLC
St. Louis, MO
5/13/2015
Lot
221
1.26
N/A
$2,575,000
100.0%
MVP St. Louis Lucas, LLC
St. Louis, MO
6/29/2015
Lot
217
1.16
N/A
$3,463,000
100.0%
MVP Milwaukee Wells, LLC
Milwaukee, WI
6/30/2015
Lot
100
0.95
N/A
$3,900,000
100.0%
MVP Wildwood NJ Lot, LLC (1)
Wildwood, NJ
7/10/2015
Lot
29
0.26
N/A
$970,000
100.0%
MVP KC Cherry Lot, LLC
Kansas City, MO
10/9/2015
Lot
84
0.60
N/A
$515,000
100.0%
MVP Indianapolis WA Street Lot, LLC
Indianapolis, IN
10/29/2015
Lot
150
1.07
N/A
$4,995,000
100.0%
MVP Wildwood NJ Lot, LLC #2  (1)
Wildwood, NJ
12/16/2015
Lot
45
0.31
N/A
$615,000
100.0%
Minneapolis City Parking, LLC
Minneapolis, MN
1/6/2016
Lot
270
4.36
N/A
$9,395,000
87.0%
MVP Indianapolis Meridian Lot, LLC
Indianapolis, IN
1/15/2016
Lot
39
0.24
N/A
$1,550,000
100.0%
 
 
MVP Milwaukee Clybourn, LLC
Milwaukee, WI
1/20/2016
Lot
15
0.06
N/A
$205,000
100.0%
MVP Milwaukee Arena Lot, LLC
Milwaukee, WI
2/1/2016
Lot
75
1.11
N/A
$3,900,000
100.0%
MVP Clarksburg Lot, LLC
Clarksburg, WV
2/9/2016
Lot
94
0.81
N/A
$620,000
100.0%
MVP Denver Sherman 1935, LLC
Denver, CO
2/12/2016
Lot
72
0.43
N/A
$2,437,500
76.0%
MVP Cleveland West 9th, LLC (2)
Cleveland, OH
5/11/2016
Lot
254
2.16
N/A
$5,675,000
49.0%
33740 Crown Colony, LLC  (2)
Cleveland, OH
5/17/2016
Lot
82
0.54
N/A
$3,030,000
49.0%
MVP Houston Preston Lot, LLC
Houston, TX
11/22/2016
Lot
46
0.23
N/A
$2,800,000
80.0%
Mabley Place Garage, LLC
Cincinnati, OH
12/9/2014
Garage
775
0.90
8,400
$14,580,000
83.0%
MVP Fort Worth Taylor, LLC
Fort Worth, TX
3/16/2015
Garage
1,013
1.18
11,828
$23,336,000
100.0%
MVP Houston Saks Garage, LLC
Houston, TX
5/28/2015
Garage
265
0.36
5,000
$8,375,000
100.0%
MVP Indianapolis City Park, LLC
Indianapolis, IN
10/5/2015
Garage
370
0.47
N/A
$10,500,000
100.0%
MVP Bridgeport Fairfield Garage, LLC
Bridgeport, CT
3/30/2016
Garage
878
1.01
4,349
$7,800,000
90.0%
White Front Garage Partners, LLC
Nashville, TN
9/30/2016
Garage
155
0.26
N/A
$11,496,000
20.0%
MVP Minneapolis Venture, LLC
Minneapolis, MN
1/6/2016
For Sale Lot
185
4.36
N/A
$6,100,000
87.0%

All our parking facility were fully leased to a parking operator as of December 31, 2016.

(1)
These lots have been combined into one property for purposes of the operating lease with SP+.
(2)
 In November 2016, these properties were merged into one holding company called MVP Cleveland West 9th II, LLC, for the purposes of debt financing.

ITEM 3. LEGAL PROCEEDINGS

From time to time in the ordinary course of business, the Company or its subsidiaries may become subject to legal proceedings, claims or disputes.  As of March 24, 2017, neither the Company nor any of its subsidiaries was a party to any material pending legal proceedings.  See "Note C – Commitments and Contingencies" to the financial statements included herein for more information.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our shares of common stock are not currently listed on a national securities exchange or any over-the-counter market.

In June 2016, the Company and MVP REIT II, jointly announced the engagement of Ladenburg Thalmann & Co., Inc. to assist in evaluating various courses of action intended to enhance stockholder liquidity and value. In connection with the engagement, the Company decided to defer taking further action to list the Company's common shares on the NASDAQ Global Market until Ladenburg Thalmann completes its evaluation. The Company's board had authorized taking such action in March 2016. After reviewing the Ladenburg Thalmann's completed evaluation, the Company's board of directors will decide whether to proceed with a listing on the NASDAQ Global Market or take other action to enhance stockholder liquidity and value.  The Company currently expects that no decision on this matter will be made until the second fiscal quarter of 2017. Following the Company's engagement of Ladenburg Thalmann, the Company's board of directors approved the reinstatement of the DRIP in July 2016, since no decision on liquidity is expected until the second fiscal quarter of 2017. There can be no assurance as to if or when the Company will again pursue a listing or another liquidity transaction.

In order for members of the Financial Industry Regulatory Authority, Inc., or FINRA, and their associated persons to have participated in the offering and sale of our common shares or to participate in any future offering of our common shares, MVP is required pursuant to FINRA Rule 5110 to disclose in each Annual Report distributed to our stockholders a per share estimated value of our common shares, the method by which it was developed and the date of the data used to develop the estimated value. In addition, our advisor must prepare annual statements of estimated share values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports relating to an investment in our common shares. The basis for this valuation is the fact that the Company recently completed a public offering of our common shares at the price of $9.00 per share (not taking into consideration purchase price discounts for certain categories of purchasers).  Starting April 11, 2016, the NAV of $9.14 per common share has been used for purposes of effectuating permitted redemptions of the Company's common stock and issuing shares pursuant to the Company's distribution reinvestment plan.

Stockholder Information

As of March 21, 2017, there were 2,143 holders of record of the Company's common shares. The number of stockholders is based on the records of the Company's transfer agent.

Distribution Policy

The Company intends to continue making regular cash distributions to its stockholders, typically on a monthly basis. The actual amount and timing of distributions will be determined by our board of directors in its discretion and typically will depend on the amount of funds available for distribution, which is impacted by current and projected cash requirements, tax considerations and other factors. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, the Company must make distributions equal to at least 90% of its "REIT taxable income" each year.

On October 3, 2012, the Company confirmed that its board of directors had approved a plan for payment of initial monthly cash distributions of $0.045 per share. On January 25, 2013, the Company issued a press release announcing that its board of directors had approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.2 percent, or $0.558 per share annually or $0.0465 monthly, assuming a purchase price of $9.00 per share. The distribution, previously 6 percent, increased beginning with the January 2013 distribution, paid to stockholders of record as of January 24, 2013 on February 10, 2013.  On June 4, 2013, the Company issued a press release announcing that its board of directors has approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.7 percent, assuming a purchase price of $9.00 per share or $0.05025 monthly.  The Company anticipates paying future distributions monthly in arrears, with a record date on the 24th of each month and distributions paid on the 10th day of the following month (or the next business day if the 10th is not a business day).  Starting April 11, 2016, the NAV of $9.14 per common share has been used for purposes of effectuating permitted redemptions of the Company's common stock and issuing shares pursuant to the Company's distribution reinvestment plan.

From inception through December 31, 2016, the Company has paid approximately $13.6 million in distributions including approximately $2.9 million in DRIP distributions to the Company's stockholders, all of which have been paid from offering proceeds and constituted a return of capital.  The Company may pay distributions from sources other than cash flow from operations, including proceeds from the Offering, the sale of assets, or borrowings.  The Company has no limits on the amounts it may pay from such sources. If the Company continues to pay distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted.

Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations – Distributions" for more information on distributions.

Distribution Reinvestment Plan

The Company currently has a distribution reinvestment plan pursuant to which the Shareholder may have the distributions received automatically reinvested in additional shares of the Company's common stock. The Shareholder may purchase common stock under the Company's distribution reinvestment plan for $9.14 per share. However, the Company may amend the plan to offer shares at such prices as the Company determines necessary or appropriate to ensure the Company's dividends are not "preferential" for incomes tax purposes. No sales commissions will be paid in connection with shares purchased pursuant to the Company's distribution reinvestment plan.

Investors participating in the Company's distribution reinvestment plan may purchase fractional shares. If sufficient shares of the Company's common stock are not available for issuance under the Company's distribution reinvestment plan, the Company will remit excess distributions in cash to the participants. If the Shareholder elects to participate in the distribution reinvestment plan, the Shareholder must agree that, if at any time the Shareholder fails to meet the applicable investor suitability standards or cannot make the other investor representations or warranties set forth in the then current prospectus, the subscription agreement or the Company's articles relating to such investment, the Shareholder will promptly notify us in writing of that fact.

Stockholders purchasing common stock pursuant to the distribution reinvestment plan will have the same rights and will be treated in the same manner as if such common stock were purchased pursuant to this offering.

At least quarterly, the Company will provide each participant a confirmation showing the amount of the distributions reinvested in the Company's shares during the covered period, the number of shares of the Company's common stock owned at the beginning of the covered period, and the total number of shares of common stock owned at the end of the covered period. The Company have the discretion not to provide a distribution reinvestment plan, and a majority of the Company's board of directors may amend, suspend or terminate the Company's distribution reinvestment plan for any reason (except that the Company may not amend the distribution reinvestment plan to eliminate a participant's ability to withdraw from the plan) at any time upon 10 days' prior notice to the participants. The Shareholder's participation in the plan will also be terminated to the extent that a reinvestment of the Shareholder's distributions in the Company's common stock would cause the percentage ownership limitation contained in the Company's charter to be exceeded. Otherwise, unless the Shareholder terminates the Shareholder's participation in the Company's distribution reinvestment plan in writing, the Shareholder's participation will continue even if the shares to be issued under the plan are registered in a future registration. The Shareholder may terminate the Shareholder's participation in the distribution reinvestment plan at any time by providing the Company with 10 days' written notice. A withdrawal from participation in the distribution reinvestment plan will be effective only with respect to distributions paid more than 30 days after receipt of written notice. Generally, a transfer of common stock will terminate the stockholder's participation in the distribution reinvestment plan as of the first day of the month in which the transfer is effective.

If the Shareholder participates in the Company's distribution reinvestment plan and is subject to federal income taxation, the Shareholder will incur a tax liability for distributions allocated to the Shareholder even though the Shareholder has elected not to receive the distributions in cash, but rather to have the distributions withheld and reinvested in the Company's common stock. Specifically, the Shareholder will be treated as if the Shareholder has received the distribution from the Company in cash and then applied such distribution to the purchase of additional shares of the Company's common stock. The Shareholder will be taxed on the amount of such distribution as ordinary income to the extent such distribution is from current or accumulated earnings and profits, unless the Company have designated all or a portion of the distribution as a capital gain distribution. In addition, the difference between the public offering price of the Company's shares and the amount paid for shares purchased pursuant to the Company's distribution reinvestment plan may be deemed to be taxable as income to participants in the plan. Please see "Risk Factors — Federal Income Tax Risks — The Shareholder may have current tax liability on distributions if the Shareholder elects to reinvest in shares of the Company's common stock."

Notwithstanding any of the foregoing, an investor's participation in the Company's distribution reinvestment plan will terminate automatically if the Company dishonors, or partially dishonors, any requests by such investor to redeem the Company's shares of common stock in accordance with the Company's share repurchase program. The Company will notify investors of any such automatic termination from the Company's distribution reinvestment plan.

Share Repurchase Program

The Company has a share repurchase program that may provide stockholders who generally have held their shares for at least one year an opportunity to sell their shares to the Company, subject to certain restrictions and limitations.  Prior to the date that the Company establishes an estimated value per share of common stock, the purchase price will be 97.5% of the purchase price paid for the shares, if redeemed at any time between the first and third anniversaries of the purchase date, and 100% of the purchase price paid if redeemed after the third anniversary.  After the Company establishes an estimated value per share of common stock, the Company will repurchase shares at 100% of the estimated value per share, as determined by its board of directors and disclosed in the annual report publicly filed with the SEC.  The number of shares to be repurchased during a calendar quarter is limited to the lesser of: (i) 2.0% of the number of shares of common stock outstanding on December 31 of the prior calendar year, and (ii) those repurchases that can be funded from the net proceeds of the sale of shares under the Company's distribution reinvestment plan in the prior calendar year.  The board of directors may also limit the amounts available for repurchase at any time at its sole discretion. The share repurchase program will terminate if the shares of common stock are listed on a national securities exchange.

As of the date of this filing, 191,184 shares have been redeemed and the Company has received additional requests for repurchase of 46,686 shares in the amount of approximately $426,707, which exceeds the amount allowable for 2016 repurchase and it is currently anticipated will be paid in the second quarter of 2017 which will be the next date shares will be available for repurchase.  The SRP will be terminated if and when the Company's common shares are listed on a national securities exchange.

Use of Offering Proceeds

On September 25, 2012, the Company's Registration Statement on Form S-11 registering a public offering (No. 333- 180741) of up to $550,000,000 in shares of the Company's common stock was declared effective under the Securities Act of 1933, as amended, or the Securities Act, and the Company commenced the initial public offering. The Company offered up to 55,555,555 shares of the Company's common stock to the public in the primary offering at $9.00 per share and up to 5,555,555 shares of the Company's our common stock pursuant to the distribution reinvestment plan at $8.73 per share. The Company entered into selling agreements with MVP AS and other non-affiliated selling agents to distribute shares of our common stock to its clients. The Company's initial public offering terminated in September 2015.  Starting April 11, 2016, the NAV of $9.14 per common share has been used for purposes of effectuating permitted redemptions of the Company's common stock and issuing shares pursuant to the Company's distribution reinvestment plan.

As of December 31, 2016, the Company had 10,952,325 shares of common stock issued and outstanding for a total of approximately $90.2 million, less offering costs.

The following is a table of summary of offering proceeds from inception through December 31, 2016:

Type
 
Number of Shares - Convertible
   
Number of Shares - Common
   
Value
 
Issuance of common stock – purchase
   
--
     
8,631,754
   
$
75,348,000
 
Issuance of common stock – acquisition
   
--
     
2,217,537
     
19,484,000
 
Issuance of convertible stock
   
1,000
     
--
     
1,000
 
Stock based compensation
   
--
     
7,032
     
63,000
 
DRIP shares
   
--
     
326,991
     
2,867,000
 
Distributions
   
--
     
--
     
(13,633,000
)
Redeemed shares
   
--
     
(230,989
)
   
(2,077,000
)
Contribution from Advisor
   
--
     
--
     
8,114,000
 
                         
    Total
   
1,000
     
10,952,325
   
$
90,167,000
 


From inception through December 31, 2016, the Company incurred the following actual costs in connection with the issuance and distribution of the registered securities.

Type of Cost
 
Amount
 
Selling commissions – related party
 
$
224,000
 
Selling commissions – unrelated party
   
1,996,000
 
Organization and offering expenses
   
2,555,000
 
Total expenses
 
$
4,775,000
 

From the commencement of our offering through December 31, 2016, the net cash proceeds to us from our offering, after deducting the total expenses incurred described above, were $70.6 million.  From the commencement of the offering through December 31, 2016, net proceeds from our offering have been allocated to paying distributions, selling commissions and acquiring properties.  If the Company continues to pay distributions from offering proceeds and other sources other than our cash flow from operations, the funds available to us for investments would be reduced, the share value may be diluted, the expenses and other amounts, as percentage of the total offering proceeds, may be higher.  For the period of inception through December 31, 2016, the ratio of the costs of raising capital to the capital raised is approximately 6.3%.

Recent Sales of Unregistered Securities

On April 4, 2012, the Company issued 22,222.22 shares of common stock at $9.00 per share to MVP Capital Partners, LLC ("MVPCP"), our sponsor, in exchange for $200,000 in cash. On April 4, 2012, the Company also issued 1,000 shares of our convertible stock at $1.00 per share to MVP Realty Advisors, LLC ("the Advisor"), our advisor. In each case, MVP relied on Section 4(2) of the Securities Act for the exemption from the registration requirements of the Securities Act of 1933, as amended. Our sponsor and our advisor, by virtue of their affiliation with us, had access to information concerning our proposed operations and the terms and conditions of this investment.

No additional consideration is due upon the conversion of the convertible stock. There will be no distributions paid on shares of convertible stock. The conversion of the convertible stock into shares of common stock will decrease the percentage of our shares of common stock owned by persons purchasing shares in this offering. However, at no time will the conversion of the convertible stock into shares of common stock result in our advisor holding a majority of the outstanding shares of our common stock.

Except in limited circumstances, shares of convertible stock will not be entitled to vote on any matter, or to receive notice of, or to participate in, any meeting of our stockholders at which they are not entitled to vote. However, the affirmative vote of the holders of more than two-thirds of the outstanding shares of convertible stock, voting together as a single class, will be required (1) for any amendment, alteration or repeal of any provision of our charter that materially and adversely changes the rights of the convertible stock and (2) to effect a merger of our company into another entity, or a merger of another entity into our company, unless in each case each share of convertible stock (A) will remain outstanding without a material and adverse change to its terms and rights or (B) will be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having rights identical to that of our convertible stock.

Our convertible stock will convert into shares of our common stock if:

 
 
The Company has made total distributions on the then outstanding shares of our common stock equal to the invested capital attributable to those shares plus a 6.00% cumulative, non-compounded, annual pre-tax return on such invested capital; or
 
 
 
(i) the Company list its common stock for trading on a national securities exchange and (ii) the sum of the aggregate market value of the issued and outstanding shares of our common stock plus our distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6% cumulative, pre-tax non-compounded annual return to investors; or
 
 
 
our advisory agreement is terminated or not renewed, but only if at the time of such termination or non-renewal, the requirements for conversion set forth in either of the immediately preceding clause (A) or (B) also shall have been satisfied.

For purposes of such calculation, the market value of our outstanding common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed for trading on a national securities exchange.

In the event of a termination or non-renewal of our advisory agreement for cause, the convertible stock will be redeemed by us for $1.00 per share. In general, upon the occurrence of any of the conditions set forth above, our issued shares of convertible stock will convert into a number of shares of common stock representing three and one-half percent (3.50%) of the outstanding shares of our common stock immediately preceding the conversion.

Our board of directors will oversee the conversion of the convertible stock. Further, if in the good faith judgment of our board of directors full conversion of the convertible stock would cause a holder of our stock to violate the limitations on the ownership and transfer of shares of common stock which prohibit, among other things, (1) any person or entity from owning or acquiring, directly or indirectly, more than 9.8% of the value of our then outstanding capital stock or more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock or (2) any transfer of shares or other event or transaction that would result in the beneficial ownership of our outstanding shares of capital stock by fewer than 100 persons or would otherwise cause us to fail to qualify as a REIT, then our board of directors can either elect to increase or waive the ownership limit, if it would not cause us to fail to qualify as a REIT or our board of directors could determine to allow the conversion of only such number of shares of convertible stock (or fraction of a share thereof) into shares of our common stock such that no holder of our stock would violate such limitations, and the conversion of the remaining shares of convertible stock will be deferred until the earliest date after our board of directors determines that such conversion will not violate such limitations. Any such deferral will not otherwise alter the terms of the convertible stock.

Equity Incentive Plan

The Company has adopted an equity incentive plan. The equity incentive plan offers certain individuals an opportunity to participate in the Company's growth through awards in the form of, or based on, the Company's common stock. The Company has no current intention to issue any awards under the equity incentive plan but may do so in the future in order to attract and retain qualified directors, officers, employees, and consultants.

The equity incentive plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, performance awards, dividend equivalents, other stock-based awards and cash-based awards to directors, employees and consultants of the Company selected by the board of directors for participation in the equity incentive plan. Stock options granted under the equity incentive plan will not exceed an amount equal to 10% of the outstanding shares of the Company's common stock on the date of grant of any such stock options. Any stock options and stock appreciation rights granted under the equity incentive plan will have an exercise price or base price that is not less than the fair market value of the Company's common stock on the date of grant.

The board of directors, or the compensation committee of the board of directors, will administer the equity incentive plan, with sole authority to determine all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted if the grant or vesting of the awards would jeopardize the Company's status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under the Company's charter. Unless otherwise determined by the board of directors, no award granted under the equity incentive plan will be transferable except through the laws of descent and distribution.

The Company has authorized and reserved an aggregate maximum of 300,000 shares for issuance under the equity incentive plan. In the event of a transaction between the Company and its stockholders that causes the per-share value of common stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering or large nonrecurring cash dividend), the share authorization limits under the equity incentive plan will be adjusted proportionately, and the board of directors must make such adjustments to the equity incentive plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. In the event of a stock split, a stock dividend or a combination or consolidation of the outstanding shares of common stock into a lesser number of shares, the authorization limits under the equity incentive plan will automatically be adjusted proportionately and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase price.

Unless otherwise provided in an award certificate or any special plan document governing an award, in the event of a corporate transaction (as defined in the Company's equity incentive plan), if any award issued under the Company's equity incentive plan is not assumed or replaced as part of the corporate transaction, then such portion of the award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value) immediately prior to the effective date of such corporation transaction, so long as the grantee's continuous service has not terminated prior to such date. Unless otherwise provided in an award certificate or any special plan document governing an award, in the event of a change in control, each outstanding award issued automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value), immediately prior to the effective date of such change in control, provided that the grantee's continuous service has not terminated prior to such date. Under the equity incentive plan, a "corporate transaction" is defined to include (i) a merger or consolidation in which the Company is not the surviving entity; (ii) the sale of all or substantially all of the Company's assets. (iii) the Company's complete liquidation or dissolution; and (iv) acquisitions by any person of beneficial ownership of securities possessing more than 50% of the total combined voting power of the Company's outstanding securities (but excluding any transactions determined by our administrator not to constitute a "corporate transaction"). Under the equity incentive plan, a "change in control" is defined generally as a change in ownership or control of the Company effected either through (i) acquisitions of securities by any person (or related group of persons) of securities possessing more than 50% of the total combined voting power of the Company's outstanding securities pursuant to a tender offer or exchange offer that the Company's directors do not recommend the Company's stockholders accept; or (ii) a change in the composition of the board over a period of 12 months or less such that a majority of the Company's board members will no longer serve as directors, by reason of one or more contested elections for board membership.

The equity incentive plan will automatically expire on the tenth anniversary of the date on which it is approved by the board of directors and stockholders, unless extended or earlier terminated by the board of directors. The board of directors may terminate the equity incentive plan at any time. The expiration or other termination of the equity incentive plan will have no adverse impact on any award previously granted under the equity incentive plan. The board of directors may amend the equity incentive plan at any time, but no amendment will adversely affect any award previously granted, and no amendment to the equity incentive plan will be effective without the approval of the Company's stockholders if such approval is required by any law, regulation or rule applicable to the equity incentive plan.

In addition, no option, warrant or any other equity award will be issued under our equity incentive plan or otherwise to our advisor, our sponsor or any of their affiliates, if the issuance of any such award would result in a violation of any applicable NASAA REIT Guidelines, including the limitations imposed under the NASAA REIT Guidelines on our total operating expenses (after giving effect to the expense associated with such equity award). Please see "Note E — Related Party Transactions and Arrangements – Fees and Expenses Paid in Connection with the Operations of the Company" for more information regarding the NASAA REIT Guidelines' limitations on operating expenses

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data as of and for the years ended December 31, 2016, 2015 and 2014 should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected financial data has been derived from our audited consolidated financial statements.
 
STATEMENT OF OPERATIONS DATA:
 
The year ended December 31, 2016
   
The year ended December 31, 2015
   
The year ended December 31, 2014
   
The year ended December 31, 2013
   
For the Period from April 3, 2012 through December 31, 2012
 
Total revenues
 
$
8,592,000
   
$
4,650,000
   
$
658,000
   
$
39,000
   
$
-
 
Total expenses
 
$
(9,315,000
)
 
$
(6,023,000
)
 
$
(3,374,000
)
 
$
(7,168,000
)
 
$
(935,000
)
Income (loss) from continuing operations
 
$
(2,989,000
)
 
$
(2,686,000
)
 
$
(2,752,000
)
 
$
(7,209,000
)
 
$
(937,000
)
Income (loss) from continuing operations per common share
 
$
(0.27
)
 
$
(0.36
)
 
$
(0.76
)
 
$
(6.92
)
 
$
(13.43
)
Net loss
 
$
(3,266,000
)
 
$
(1,360,000
)
 
$
(1,837,000
)
 
$
(8,587,000
)
 
$
(1,141,000
)
                                         
Weighted average shares outstanding
   
10,999,713
     
7,502,606
     
3,639,056
     
1,041,559
     
69,750
 
                                         
STATEMENT OF CASH FLOWS DATA:
 
The year ended December 31, 2016
   
The year ended December 31, 2015
   
The year ended December 31, 2014
   
The year ended December 31, 2013
   
For the Period from April 3, 2012 through December 31, 2012
 
Net cash (used in) provided by operating activities
 
$
(3,322,000
)
 
$
(2,458,000
)
 
$
(2,779,000
)
 
$
473,000
   
$
(190,000
)
Net cash (used in) investing activities
 
$
(27,233,000
)
 
$
(54,778,000
)
 
$
(2,631,000
)
 
$
(2,940,000
)
 
$
(3,279,000
)
Net cash provided by financing activities
 
$
24,156,000
   
$
53,935,000
   
$
17,677,000
   
$
3,481,000
   
$
4,000,000
 


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the "Selected Financial Data" above and our accompanying consolidated financial statements and the notes thereto. Also see "Forward Looking Statements" preceding Part I.

Overview

MVP REIT, Inc. (the "Company," "we," "us," or "our") was incorporated on April 3, 2012 as a Maryland corporation, and has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2013. Pursuant to its initial public offering, which closed in September 2015, the Company received net consideration of approximately $97.3 million for the issuance of its common stock. Of this amount, approximately $19.5 million of common shares were issued in consideration of the contribution of commercial properties to the Company. The Company has also registered up to $50 million for the issuance of common stock pursuant to a distribution reinvestment plan (the "DRIP") under which common stockholders may elect to have their distributions reinvested in additional shares of common stock.

The Company's investment strategy was to invest available net proceeds from its offering in direct investments in real property and real estate secured loans that meet the Company's investment objectives and strategies. In March 2014, the Company's board of directors approved a plan to increase the focus of the Company's investment strategy on parking and self- storage facilities located throughout the United States as the Company's core assets. In June 2014, the Company's board decided to further focus the Company's investments primarily on parking facilities.

During the year ended December 31, 2016, MVP REIT acquired an ownership interest in the following properties:
 
Property Name
MVP REIT
%
MVP REIT II %
 Total Purchase Price
Purchase Date
Property Type
Consolidated Properties listed as investments in real estate
MVP Indianapolis Meridian
100.0%
0.0%
$1,550,000
1/15/2016
Lot
MVP Milwaukee Clybourn
100.0%
0.0%
$205,000
1/20/2016
Lot
MVP Milwaukee Arena
100.0%
0.0%
$3,900,000
2/1/2016
Lot
MVP Clarksburg
100.0%
0.0%
$620,000
2/9/2016
Lot
MVP Bridgeport Fairfield Garage
90.0%
10.0%
$7,800,000
3/30/2016
Garage
Minneapolis City Parking
87.0%
13.0%
$9,395,000
1/6/2016
Lot
MVP Houston Preston Lot
80.0%
20.0%
$2,800,000
11/22/2016
Lot
MVP Denver Sherman 1935
76.0%
24.0%
$2,437,500
2/12/2016
Lot
           
Investment in equity method investee
MVP Cleveland West 9th (1)
49.0%
51.0%
$5,675,000
5/11/2016
Lot
33740 Crown Colony (1)
49.0%
51.0%
$3,030,000
5/17/2016
Lot
White Front Garage Partners
20.0%
80.0%
$11,496,000
9/30/2016
Garage
           
Assets held for sale
MVP Minneapolis Venture
87.0%
13.0%
$6,100,000
1/6/2016
Lot


Property information continued:

Property Name
# Spaces
Property Size (Acres)
Parking Lease is with
 Tenant Portion of Property Tax
Term in Years
 Annual Base Rent
 Revenue Sharing Starting Point $
Consolidated Properties listed as investments in real estate
MVP Indianapolis Meridian
39
0.24
Denison
N/A
10
$95,000
60%>$155,000
MVP Milwaukee Clybourn
15
0.06
Secure
N/A
5
$20,000
75%>$45,000
MVP Milwaukee Arena
75
1.11
SP +
N/A
5
$200,000
70%>$320,000
MVP Clarksburg
94
0.81
ABM
N/A
5
$55,400
50%>$112,500
MVP Bridgeport Fairfield Garage
878
1.01
SP +
$100,000
5
$17,940
65%> $775,000
Minneapolis City Parking
270
4.36
SP +
N/A
5
$800,000
70%>$1,032,000
MVP Houston Preston Lot
46
0.23
iPark Services
N/A
10
$228,000
65%>$300,000
MVP Denver Sherman 1935
72
0.43
SP +
N/A
10
$120,000
70%>$160,000
               
Investment in equity method investee
MVP Cleveland West 9th(1)
254
2.16
SP +
$120,000
5
$330,000
70%>650,000
33740 Crown Colony  (1)
82
0.54
SP +
$40,000
5
$185,000
70%>$325,000
White Front Garage Partners
155
0.26
Premier Parking
ALL
10
$700,000
70%>$850,000
               
Assets held for sale
MVP Minneapolis Venture
185
4.36
 N/A
N/A
N/A
N/A
N/A
 
(1)
In November 2016, these properties were merged into one holding company called MVP Cleveland West 9th II, LLC, for the purposes of debt financing.

During January 2017, the Company and MVP REIT II, through MVP Detroit Center Garage, LLC ("MVP Detroit Center"), an entity owned by the Company and MVP REIT II, acquired a multi-level parking garage consisting of approximately 1,275 parking spaces, located in Detroit, Michigan, for a purchase price of $55.0 million, plus acquisition and financing-related transaction costs.  The Company owns a 20% equity interest in the MVP Detroit Center and MVP REIT II owns an 80% equity interest.  The parking garage will be operated by SP Plus Corporation ("SP+") under a long-term lease, where SP+ will be responsible for the first $572,000 in property taxes, pay annual base rent of $3.4 million, and 80% of all gross revenue above $5.0 million.  As part of the acquisition MVP Detroit Center entered into a $31.5 million loan agreement with Bank of America, N.A., with a term of 10 years, amortized over 25 years, with monthly principal and interest payments totaling approximately $194,000, bearing an annual interest rate of 5.52%, secured by the parking garage, and maturing in February 2027.

Since a majority of our property leases call for additional percentage rent, MVP monitors the gross revenue generated by each property on a monthly basis.  The higher the property's gross revenue the higher our potential percentage rent.  Below is graph showing the comparison of our monthly rental income to the gross revenue generated by the properties.


As of December 31, 2016, the Company held a 51% or more interest in 27 properties (out of 30 total investments), with initial purchase prices totaling approximately $122 million, of which our portion was $115.8 million. Of those 27 properties; 21 were owned 100% by us, three properties had common ownership with MVP REIT II and one had common ownership with an unrelated third party.  One of the properties owned by us and MVP REIT II is currently listed for sale at $6.1 million.  In addition, MVP held a less than 50% ownership in three properties, where MVP REIT II owned the majority share, of which our share of the purchase price was approximately $6.6 million.  These properties were acquired with funds from the initial public offering, third party financing and the assumption of existing liabilities

The Company may, from time to time, invest in non-core assets, including investments in companies that manage real estate or mortgage investment companies; however, the Company anticipates that its core investments going forward will be predominantly in parking facilities. In addition, the Company has agreed that no more than 25% of the gross proceeds from its initial public offering will be used to invest in real properties other than parking facilities.

As previously reported, on March 7, 2016, the Company's board of directors approved taking the necessary action to list its common shares on the NASDAQ Global Market with view to providing a liquidity opportunity for its stockholders. In connection with the action to list the shares, on May 5, 2016, the Company's board of directors suspended the Company's distribution reinvestment plan ("DRIP"). In June 2016, the Company and MVP REIT II, jointly announced the engagement of Ladenburg Thalmann & Co., Inc. to assist in evaluating various courses of action intended to enhance stockholder liquidity and value. In connection with the engagement, the Company decided to defer taking further action to list the Company's common shares on the NASDAQ Global Market until Ladenburg Thalmann completes its evaluation. After reviewing the Ladenburg Thalmann's completed evaluation, the Company's board of directors will decide whether to proceed with a listing on the NASDAQ Global Market or take other action to enhance stockholder liquidity and value. The Company currently expects that no decision on this matter will be made until the second fiscal quarter of 2017. Following the Company's engagement of Ladenburg Thalmann, the Company's board of directors approved the reinstatement DRIP in July 2016, since no decision on liquidity is expected until the second fiscal quarter of 2017. There can be no assurance as to if or when the Company will again pursue a listing or another liquidity transaction.

The Company operates as a REIT. The Company is not a mutual fund or an investment company within the meaning of the Investment Company Act of 1940, nor is the Company subject to any regulation thereunder. As a REIT, the Company is required to have a December 31 fiscal year end. As a REIT, the Company will not be subject to federal income tax on income that is distributed to stockholders.  Among other requirements, REITs are required to satisfy certain gross income and asset tests, which may affect the composition of assets the Company acquires with the proceeds of the offering. In addition, REITs are required to distribute to stockholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).

The Company's board of directors will at all times have ultimate oversight and policy-making authority over the Company, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to our advisory agreement, however, our board has delegated to MVP Realty Advisors, LLC, our advisor, authority to manage our day-to-day business, in accordance with our investment objectives, strategy, guidelines, policies and limitations. Vestin Realty Mortgage II, Inc., ("VRM II") owns 60% of the Advisor, and the remaining 40% is owned by Vestin Realty Mortgage I, Inc. ("VRM I"); both are managed by Vestin Mortgage, LLC. The Company's sponsor is MVP Capital Partners, LLC ("MVPCP" or the "Sponsor"), an entity owned and managed by Michael V. Shustek, the Company's Chairman and Chief Executive Officer. Michael Shustek owns a significant majority of Vestin Mortgage, LLC, a Nevada limited liability company, which is the manager of VRM I, and VRM II.

VRM I, an OTC Pink Sheet-listed company, and VRM II, a Nasdaq-listed company that has provided notice of its intent to delist from Nasdaq on or about March 30, 2017, are engaged primarily in the business of investing in commercial real estate and loans secured by commercial real estate. As the owners of the Advisor, VRM I and VRM II may benefit from any fees and other compensation that the Company pays to the Advisor under the Advisor Agreement. In this regard, the Company notes that the Advisor has agreed to waive certain fees and expenses it otherwise would be entitled under the Advisory Agreement.  Please refer to Note E – Related Party Transactions and Arrangements – Fees and Expenses Paid in Connection With the Operations of the Company in Part II, Item 8 Condensed Consolidated Financial Statements of this Annual Report on Form 10-K. As of December 31, 2016, the aggregate amount of fees and expense reimbursements waived by the Advisor was approximately $6.9 million.  If the owners of the Advisor determine that such waivers are no longer in the best interests of their stockholders or otherwise refuse to grant future waivers of fees or expenses if requested by the Company, then the Company's operating expenses could increase significantly, which could adversely affect the Company's results of operations and the amount of distributions to stockholders.

In addition, the Company may compete against MVP REIT II, VRM I and VRM II, all of whom are managed by affiliates of our sponsor, for the acquisition of investments. The Company believes this potential conflict with respect to VRM I and VRM II, is mitigated, in part, by the Company's focus on parking facilities as its core investments, while the investment strategy of VRM I and VRM II focuses on acquiring office buildings and other commercial real estate and loans secured by commercial real estate. MVP REIT II has substantially the same investment strategy as the Company, in that MVP REIT II is also focused primarily on investments in parking facilities. For additional discussion regarding potential conflicts of interests, please see "Risk Factors—Risks Related to Conflicts of Interest" and "Item 13 – Certain Relationships and Related Transactions, and Director Independence" in our Annual Report on Form 10-K for the year ended December 31, 2016.

Results of Operations

MVP has purchased the majority of the properties since January 1, 2015, and the results of operations below reflect start-up costs as well as acquisition expenses incurred in connection with purchasing properties as the Company deployed our offering proceeds. We expect that income and expenses related to our portfolio will increase in future years as a result of owning the properties acquired for a full year and as a result of anticipated future acquisitions of real estate and real estate-related assets.  The results of operations described below may not be indicative of future results of operations.

Comparison of operating results for the years ended December 31, 2016, 2015 and 2014:

Rental revenues (by property)
 
2016
 
2015
 
2014
Ft. Lauderdale
$
169,000
$
169,000
$
113,000
Memphis Court
 
16,000
 
16,000
 
11,000
Memphis Poplar
 
273,000
 
273,000
 
182,000
Kansas City
 
118,000
 
118,000
 
78,000
St. Louis
(a)
318,000
(b)
313,000
 
192,000
Mabley Place
(a)
1,598,000
(b)
1,433,000
 
82,000
Denver Sherman
 
35,000
 
33,000
 
--
Fort Worth
 
1,502,000
 
1,189,000
 
--
Milwaukee Old World
 
160,000
 
120,000
 
--
St. Louis Convention
(a)
230,000
 
117,000
 
--
Houston Saks Garage
(a)
617,000
 
355,000
 
--
St. Louis Lucas
(a)
251,000
 
110,000
 
--
Milwaukee Wells
 
280,000
 
141,000
 
--
Wildwood NJ
 
42,000
 
8,000
 
--
Indy Garage
(a)
797,000
 
178,000
 
--
KC Cherry Lot
(a)
69,000
 
15,000
 
--
Indy WA Street
(a)
522,000
 
62,000
 
--
Indianapolis Meridian
 
91,000
 
--
 
--
Milwaukee Clybourn
 
19,000
 
--
 
--
Milwaukee Arena
 
199,000
 
--
 
--
MVP Clarksburg Lot
 
50,000
 
--
 
--
Denver 1935 Sherman
 
106,000
 
--
 
--
Bridgeport Fairfield
 
336,000
 
--
 
--
Minneapolis City Parking
 
779,000
 
--
 
--
MVP Houston Preston Lot
 
15,000
 
--
 
--
             
Total revenues
$
8,592,000
$
4,650,000
$
658,000
 
 
a)
Includes percentage rent from properties where gross revenue was above the set threshold in 2016 as follows:
Mabley Place - $182,000
Indy WA Street - $143,000
St. Louis - $68,000
Indy Garage - $48,000
St. Louis Convention - $40,000
St. Louis Lucas - $31,000
Houston Saks Garage - $11,000
KC Cherry Lot - $3,000

b)
Includes percentage rent from properties where gross revenue was above the set threshold in 2015 as follows:
Mabley Place - $42,000
St. Louis - $64,000

Total rental revenue earned, for the year ended December 31, 2016, from our 27 consolidated properties which have continued operations, totaled $8.6 million, as compared to $4.7 million for the year ended 2015, and $0.7 million for the year ended 2014. The increase in total rental revenues is mainly due to the additional properties acquired by the Company during the year ended December 31, 2016 compared to the years ended December 31, 2015 and 2014.  As the common stock offering has been closed since 2015 and the majority of the Company's capital has been deployed, we do not expect to see the similar growth in revenue that MVP experienced from 2014 to 2016, to continue in the foreseeable future.  The Company does expect to see continued grow from percentage rent on many of our properties over the next few years, as the properties purchased during 2016 will see the end of their 1st lease contract year in 2017.  This is when they will be eligible to received percentage rent.

Assets purchased in 2012 and 2013 were sold as of December 31, 2015, and income from those investments is reported as income (loss) from assets held for sale in the discontinued operations, net of income taxes section of our consolidated statements of operations.

See Note I – Acquisitions of the Notes to the Consolidated Financial Statements included in Part 2, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K.

Operating expenses
 
2016
   
2015
   
2014
 
General and administrative
 
$
1,791,000
   
$
910,000
   
$
775,000
 
Impairment of investment in real estate
   
100,000
     
--
     
--
 
Acquisition expenses
   
1,081,000
     
678,000
     
235,000
 
Acquisition expenses – related party
   
1,458,000
     
2,649,000
     
1,898,000
 
Operation and maintenance
   
1,980,000
     
421,000
     
43,000
 
Operation and maintenance – related party
   
1,055,000
     
566,000
     
379,000
 
Loan payoff fee
   
587,000
     
--
     
--
 
Depreciation
   
1,263,000
     
799,000
     
44,000
 
Total operating expenses
 
$
9,315,000
   
$
6,023,000
   
$
3,374,000
 

Increase in operating expenses is mainly due to the additional properties owned by the Company during the years ended December 31, 2016 and 2015 compared to the year ended December 31, 2014.  During the year ended December 31, 2016 the Company recorded a loss on impairment of $100,000 on Indy Meridian in accordance with an appraisal received during the 3rd quarter.  In addition, the Company refinanced a loan on our Fort Worth property that was assumed when we purchased the property.  The loan we assumed had an annual interest rate of 5.59% and matured in August 2021 with a balloon payment of approximated $10.2 million due at maturity.  The new loan with American National Insurance Company ("ANICO") has an annual interest rate of 4.50%, will mature in November of 2026 and will have a balloon payment of approximately $9.5 million.  As part of the refinancing of this loan the company was able to obtain an additional $0.5 million in loan proceeds for general repairs and maintenance to the Fort Worth property.  The early extinguishment of the existing debt called for a prepayment penalty of approximately $587,000.  Management believes that the extra money for repairs and maintenance, along with the lower interest rate for an additional five years, out weight the cost of the prepayment penalty and puts the property in a better position for the long term.

See Note I – Acquisitions of the Notes to the Consolidated Financial Statements included in Part 2, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K.

Other income and (expense)
 
2016
   
2015
   
2014
 
Interest expense
 
$
(2,381,000
)
 
$
(1,313,000
)
   
(169,000
)
Income from investment in equity method investee
   
116,000
     
--
     
6,000
 
Loss on acquisition of investment real estate
   
(2,000
)
   
--
     
--
 
Interest Income
   
1,000
     
--
     
--
 
Other income
           
--
     
127,000
 
Total other expense
 
$
(2,266,000
)
 
$
(1,313,000
)
   
(36,000
)

Interest expense has increase from 2014 to 2016 due to the assumption of debt through acquisitions and adding new debt to acquisitions that were completed with cash previously.  To maximize the use of our cash, the Company will continue to looks for opportunities to put financing in place on existing properties and future acquisitions.  The interest expense will vary based on the amount of our borrowings and current interest rates at the time of financing.  The Company will seek to secure appropriate leverage with the lowest interest rate available to us.  The terms of the loans will greatly depend on the quality of the property, the credit worthiness of the tenant and the amount of income the property is able to generate through parking revenue.  There is no assurance, however, that the Company will be able to secure additional financing on favorable terms or at all.  Interest expense recorded for the years ended December 31, 2016, 2015 and 2014, includes loan amortization costs.  Total loan amortization cost over this period totaled approximately $195,000, $85,000 and $22,000, respectively.

See Note K – Notes Payable and Note M – Line of Credit of the Notes to the Consolidated Financial Statements included in Part II, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K.

Discontinued operations, net of income taxes
 
2016
   
2015
   
2014
 
Income (loss) from assets held for sale, net of income taxes
 
$
(244,000
)
 
$
214,000
     
876,000
 
Gain on sale of investment in real estate held for sale
   
--
     
1,260,000
     
44,000
 
Total income (loss) from discontinued operations
 
$
(244,000
)
 
$
1,474,000
     
920,000
 

As of December 31, 2016, we had an 87.09% ownership interest in one property that was listed as held for sale, with a carrying value of approximately $6.1 million.  This property was acquired on January 6, 2016, along with MVP REIT II, with the purchase of two parking lots located in Minneapolis, Minnesota.  This property is accounted for at the fair value based on an appraisal.

During June 2016, Minneapolis Venture entered into a purchase and sales agreement (the "PSA") to sell the 10th Street lot "as is" to a third party for approximately $6.1 million, which was cancelled in October 2016.  During February 2017, the Company entered into a letter of intent to sell a portion of the property (approximately 2.2 acres) to an unrelated third party for $3.0 million.  The remaining portion of the property will be retained by the Company and will be leased to a parking operator.

See Note L – Assets Held for Sale of the Notes to the Consolidated Financial Statements included in Part II, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K.

During the first and second quarters of 2014, the Company's Board approved a sale of its interest in six office buildings to VRM I and VRM II in exchange for VRM I and VRM II's interest in five parking facilities and a storage facility.  Additionally, during June 2014, the Company's Board approved a sale of its interest in two additional office buildings to VRM I and VRM II.  The net income from the office buildings is reported as discontinued operations.  Subsequently, during January 2015, management entered into a plan to sell the storage unit assets resulting in the financial reporting of these assets, liabilities and results of operations related to the assets held for sale, as discontinued operations.  The sale of the storage assets resulted in a gain on sale of investment in real estate held for sale of approximately $1.3 million.

Funds from Operations and Modified Funds from Operations

The Advisor believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient. Additionally, publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, the Company believes that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases.

In order to provide a more complete understanding of the operating performance of a REIT, the National Association of Real Estate Investment Trusts ("NAREIT") promulgated a measure known as funds from operations ("FFO"). FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, adding back asset impairment write-downs, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures. Because FFO calculations exclude such items as depreciation and amortization of real estate assets and gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, the Company believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT

definition or may interpret the current NAREIT definition differently than the Company does, making comparisons less meaningful.

The Investment Program Association ("IPA") issued Practice Guideline 2010-01 (the "IPA MFFO Guideline") on November 2, 2010, which extended financial measures to include modified funds from operations ("MFFO"). In computing MFFO, FFO is adjusted for certain non-operating cash items such as acquisition fees and expenses and certain non-cash items such as straight-line rent, amortization of in-place lease valuations, amortization of discounts and premiums on debt investments, nonrecurring impairments of real estate-related investments, mark-to-market adjustments included in net income (loss), and nonrecurring gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Management is responsible for managing interest rate, hedge and foreign exchange risk. To achieve our objectives, the Company may borrow at fixed rates or variable rates. In order to mitigate our interest rate risk on certain financial instruments, if any, the Company may enter into interest rate cap agreements and in order to mitigate our risk to foreign currency exposure, if any, the Company may enter into foreign currency hedges. The Company views fair value adjustments of derivatives, impairment charges and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Additionally, the Company believes it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations, assessments regarding general market conditions, and the specific performance of properties owned, which can change over time. No less frequently than annually, the Company evaluates events and changes in circumstances that could indicate that the carrying amounts of real estate and related intangible assets may not be recoverable. When indicators of potential impairment are present, the Company assesses whether the carrying value of the assets will be recovered through the future undiscounted operating cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) expected from the use of the assets and the eventual disposition. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of MFFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges through operational net revenues or cash flows prior to any liquidity event.

The Company adopted the IPA MFFO Guideline as management believes that MFFO is a helpful indicator of our on-going portfolio performance and ability to sustain our current distribution level. More specifically, MFFO isolates the financial results of the REIT's operations. MFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, MFFO for the period presented may not be indicative of future results or our future ability to pay our dividends. By providing FFO and MFFO, the Company presents information that assists investors in aligning their analysis with management's analysis of long-term operating activities. MFFO also allows for a comparison of the performance of our portfolio with other REITs that are not currently engaging in acquisitions, as well as a comparison of our performance with that of other non-traded REITs, as MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and the Company believe often used by analysts and investors for comparison purposes. As explained below, management's evaluation of our operating performance excludes items considered in the calculation of MFFO based on the following economic considerations:

·
Straight-line rent. Most of our leases provide for periodic minimum rent payment increases throughout the term of the lease. In accordance with GAAP, these periodic minimum rent payment increases during the term of a lease are recorded to rental revenue on a straight-line basis in order to reconcile the difference between accrual and cash basis accounting. As straight-line rent is a GAAP non-cash adjustment and is included in historical earnings, it is added back to FFO to arrive at MFFO as a means of determining operating results of our portfolio.
·
Amortization of in-place lease valuation. As this item is a cash flow adjustment made to net income in calculating the cash flows provided by (used in) operating activities, it is added back to FFO to arrive at MFFO as a means of determining operating results of our portfolio.

·
Acquisition-related costs. The Company was organized primarily with the purpose of acquiring or investing in income-producing real property and loans secured by real estate in order to generate operational income and cash flow that will allow us to provide regular cash distributions to our stockholders. In the process, the Company incurs non-reimbursable affiliated and non-affiliated acquisition-related costs, which in accordance with GAAP, are expensed as incurred and are included in the determination of income (loss) from operations and net income (loss). These costs have been and will continue to be funded with cash proceeds from the offering or included as a component of the amount borrowed to acquire such real estate. If the Company acquires a property after all offering proceeds from the offering have been invested, there will not be any offering proceeds to pay the corresponding acquisition-related costs. Accordingly, unless our Advisor determines to waive the payment of any then-outstanding acquisition-related costs otherwise payable to our Advisor, such costs will be paid from additional debt, operational earnings or cash flow, net proceeds from the sale of properties, or ancillary cash flows. In evaluating the performance of our portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments' revenues and expenses. Acquisition-related costs may negatively affect our operating results, cash flows from operating activities and cash available to fund distributions during periods in which properties are acquired, as the proceeds to fund these costs would otherwise be invested in other real estate related assets. By excluding acquisition-related costs, MFFO may not provide an accurate indicator of our operating performance during periods in which acquisitions are made. However, it can provide an indication of our on-going ability to generate cash flow from operations and continue as a going concern after the Company ceases to acquire properties on a frequent and regular basis, which can be compared to the MFFO of other non-listed REITs that have completed their acquisition activity and have similar operating characteristics to ours. Management believes that excluding these costs from MFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management.

For all of these reasons, the Company believes the non-GAAP measures of FFO and MFFO, in addition to income (loss) from operations, net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful to investors in evaluating the performance of our real estate portfolio. However, a material limitation associated with FFO and MFFO is that they are not indicative of our cash available to fund distributions since other uses of cash, such as capital expenditures at our properties and principal payments of debt, are not deducted when calculating FFO and MFFO. Additionally, MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value. The use of MFFO as a measure of long-term operating performance on value is also limited if the Company does not continue to operate under our current business plan as noted above. MFFO is useful in assisting management and investors in assessing our on-going ability to generate cash flow from operations and continue as a going concern in future operating periods, and in particular, after the offering and acquisition stages are complete and NAV is disclosed. However, MFFO is not a useful measure in evaluating NAV because impairments are taken into account in determining NAV but not in determining MFFO. Therefore, FFO and MFFO should not be viewed as more prominent a measure of performance than income (loss) from operations, net income (loss) or to cash flows from operating activities and each should be reviewed in connection with GAAP measurements.

Neither the SEC, NAREIT, nor any other organization body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate MFFO and its use as a non-GAAP performance measure. In the future, the SEC or NAREIT may decide to standardize the allowable exclusions across the REIT industry, and the Company may have to adjust the calculation and characterization of this non-GAAP measure.

Our calculation of FFO and MFFO, attributable to common shareholders is presented in the following table for the years ended December 31, 2016, 2015 and 2014.

   
For the years ended December 31,
 
   
2016
   
2015
   
2014
 
Net Loss attributable to MVP REIT, Inc. common shareholders
 
$
(3,266,000
)
 
$
(1,360,000
)
 
$
(1,837,000
)
Subtract:
                       
Change in deferred rental assets
   
66,000
     
(132,000
)
   
(332,000
)
Gain on Sale of REO
   
--
     
(1,260,000
)
   
(44,000
)
Add:
                       
Depreciation and amortization of real estate assets
   
1,263,000
     
799,000
     
44,000
 
Discontinued operations loss (income)
   
244,000
     
(214,000
)
   
(876,000
)
Loan payoff fee
   
587,000
     
--
     
--
 
Asset impairment write-downs
   
100,000
     
--
     
--
 
FFO
 
$
(1,006,000
)
 
$
(2,167,000
)
 
$
(3,045,000
)
Add:
                       
Acquisition fees and expenses to non-affiliates
   
1,081,000
     
678,000
     
235,000
 
Acquisition fees and expenses to affiliates
   
1,458,000
     
2,649,000
     
1,898,000
 
                         
MFFO attributable to MVP REIT, Inc common shareholders
 
$
1,533,000
   
$
1,160,000
   
$
(912,000
)

Capital and Liquidity Resources

The Company commenced operations on December 11, 2012 and acquired our first property on December 14, 2012.

Our principal demand for funds will be/and is for the acquisition of real estate assets, funding of loans secured by real estate, the payment of operating expenses, capital expenditures,  interest on our outstanding indebtedness and the payment of distributions to our stockholders. Over time, the Company intends to generally fund its operating expenses from its cash flow from operations. The cash required for acquisitions and investments in real estate will be funded primarily from the sale of shares through our distribution reinvestment plan, dispositions of properties in our portfolio and through third party financing and the assumption of debt on acquired properties.

Net cash used in operating activities for the year ended December 31, 2016 was $3.3 million.  Operating cash flows were used for the payment of normal operating expenses such as management fees, accounting fees and legal bills.  Net cash used in investing activities totaled approximately $27.2 million and consisted mainly of cash used in investment of real estate of approximately $28.7 million of which approximately $16.0 million was applied to purchase from deposits in prior periods, investment in equity method investee of approximately $6.6 million, $6.1 million used in investment in real estate held for sale and approximately $1.5 million is on deposit for future acquisitions.

Net cash provided by financing activities totaled $24.2 million and consisted of proceeds from notes payable of approximately $34.7 million, proceeds from line of credit of approximately $4.8 million, payments on redeemed shares of approximately $1.6 million, payments on notes payable of approximately $12.9 million, capital contributions from non-controlling interest-related party of approximately $4 million, purchase of non- controlling interest of approximately $0.8 million and distributions to stockholders and non-controlling interest of approximately $5.5 million and $1.2 million, respectively.

Net cash used in operating activities for the year ended December 31, 2015 was $2.4 million.  Operating cash flows were used for the payment of normal operating expenses such as management fees, accounting fees, legal bills and expenses related to real estate owned held for sale.  Operating cash flows were provided by the receipt of proceeds from our assets held for sale.  Net cash used in investing activities consisted mainly of cash used in investment of real estate of approximately $48.6 million, deposits on future acquisitions of approximately $15.7 million and provided by proceeds from the sale of Red Mountain and Cedar Park of approximately $9.7 million.  Net cash provided by financing activities consisted of proceeds from issuance of common stock, net of commissions of approximately $58.5 million and proceeds from a promissory note of approximately $3.8 million.  Net cash used in financing activities consisted of payments on redeemed shares of approximately $0.4 million, payments on notes payable of approximately $0.7 million, payments on notes payable – held for sale of approximately $4.3 million and distributions to stockholders of approximately $2.9 million.

Net cash used in operating activities for the year ended December 31, 2014 was $2.8.  Net cash used in investing activities for the year ended December 31, 2014 was $2.6.  The cash provided by financing activities for the year ended December 31, 2014 was $17.7.

As of December 31, 2016, the Company has eight promissory notes in the aggregate amount of approximately $49.4 million, net of loan issuance costs, secured by our real estate. Our charter precludes us from borrowing more than the NASAA REIT Guidelines limit of 300% of our net assets, unless a majority of our independent directors approve any borrowing in excess of 300% of our net assets and the justification for such excess borrowing is disclosed to our stockholders in our next quarterly report. The Company expects that it may use leverage for any senior debt or equity investments that the Company makes. The Company expects that our debt financing, if any, on such investments will not exceed 50% of the greater of the cost or fair market value of our overall investments.

On October 5, 2016, the Company, through its Operating LLC, and MVP REIT II, through a wholly owned subsidiary (the "Borrowers") entered into a credit agreement (the "Unsecured Credit Agreement") with KeyBank, National Association ('KeyBank") as the administrative agent and KeyBanc Capital Markets ("KeyBanc Capital Markets") as the lead arranger. Pursuant to the Unsecured Credit Agreement, the Borrowers were provided with a $30 million unsecured credit facility (the "Unsecured Credit Facility"), which may be increased up to $100 million, in minimum increments of $10 million. The Unsecured Credit Facility has an initial term of two years, maturing on October 5, 2018, and may be extended for a one-year period if certain conditions are met and upon payment of an extension fee. The Unsecured Credit Facility has an annual interest rate calculated based on LIBOR Rate plus 2.25% or Base Rate plus 1.25%, both as provided in the Unsecured Credit Agreement. The Base Rate is calculated as the greater of (i) the KeyBank Prime rate or (ii) the Federal Funds rate plus ½ of 1%. Payments under the Unsecured Credit Facility are interest only and are due on the first day of each quarter.  The obligations of the Borrowers of the Unsecured Credit Agreement are joint and several. The Borrowers have entered into cross-indemnification provisions with respect to their joint and several obligations under the Unsecured Credit Agreement.

The Company will experience a relative decrease in liquidity as offering proceeds are used to acquire and operate our assets and may experience a temporary, relative increase in liquidity if and when investments are sold, to the extent such sales generate proceeds that are available for additional investments. Our advisor may, but is not required to, establish working capital reserves from offering proceeds out of cash flow generated by our investments or out of proceeds from the sale of our investments. The Company also may, but is not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds in non-liquidating sale transactions. Working capital reserves are typically utilized to fund tenant improvements, leasing commissions and major capital expenditures. Our lenders also may require working capital reserves.

To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short- term borrowing. In addition, subject to the limitations previously described in our prospectus, the Company may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

In addition to making investments in accordance with our investment objectives, the Company expects to use its capital resources to make certain payments to our advisor and the selling agent(s). During the organization and offering stage, these payments included payments to the selling agent(s) for selling commissions and payments to our advisor for reimbursement of certain organization and offering expenses. During the acquisition and development stage, the Company expects to make payments to our advisor in connection with the selection or purchase of investments, the management of our assets and costs incurred by our advisor in providing services to us. For a discussion of the compensation to be paid to our advisor, see " Fees and Expenses Paid in Connection With the Operations of the Company", included in Note E — Related Party Transactions and Arrangements in Part II, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K for more information. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and our board of directors.

Management Compensation Summary

The following table summarizes all compensation and fees incurred by us and paid or payable to our Advisor and its affiliates in connection with our organization, our initial public offering and our operations for the years ended December 31, 2016, 2015 and 2014.

   
For the years ended December 31,
 
   
2016
   
2015
   
2014
 
                   
Selling Commissions – related party
 
$
--
   
$
--
   
$
2,000
 
Acquisition Fees – related party
   
1,458,000
     
2,649,000
     
1,898,000
 
Asset Management Fees
   
941,000
     
500,000
     
350,000
 
Debt Financing Fees
   
114,000
     
66,000
     
29,000
 
Total
 
$
2,513,000
   
$
3,215,000
   
$
2,279,000
 

Distributions

The Company intends to continue making regular cash distributions to its stockholders, typically on a monthly basis. The actual amount and timing of distributions will be determined by our board of directors in its discretion and typically will depend on the amount of funds available for distribution, which is impacted by current and projected cash requirements, tax considerations and other factors. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, the Company must make distributions equal to at least 90% of its "REIT taxable income" each year.

On October 3, 2012, the Company confirmed that its board of directors had approved a plan for payment of initial monthly cash distributions of $0.045 per share. On January 25, 2013, the Company issued a press release announcing that its board of directors had approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.2 percent, or $0.558 per share annually and $0.0465 per share monthly, assuming a purchase price of $9.00 per share. The distribution rate, which had previously been 6 percent, increased beginning with the January 2013 distribution. On June 4, 2013, the Company issued a press release announcing that its board of directors has approved an increase in its monthly distribution rate on its common shares to an annualized distribution rate of 6.7%, or $0.60 per share annually and $0.05025 monthly assuming a purchase price of $9.00 per share.  The Company anticipates paying future distributions monthly in arrears, with a record date on the 24th of each month and distributions paid on the 10th day of the following month (or the next business day if the 10th is not a business day).  Starting April 11, 2016, the NAV of $9.14 per common share has been used for purposes of effectuating permitted redemptions of the Company's common stock and issuing shares pursuant to the Company's distribution reinvestment plan.

From inception through December 31, 2016, the Company has paid approximately $13.6 million in distributions including approximately $2.9 million in DRIP distributions to the Company's stockholders, all of which have constituted a return of capital. Our total distributions paid for the period presented, the sources of such distributions, the cash flows used in operations and the number of shares of common stock issued pursuant to our distribution reinvestment plan, or DRIP, are detailed below.

To date, the all of distributions have been paid from offering proceeds and represent a return of capital.

   
Distributions paid in Cash
   
Distributions paid through DRIP
   
Total
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2016
 
$
1,041,000
   
$
621,000
   
$
1,662,000
   
$
(1,179,000
)
2nd Quarter, 2016
   
1,461,000
     
205,000
     
1,666,000
     
20,000
 
3rd Quarter, 2016
   
1,616,000
     
42,000
     
1,658,000
     
370,000
 
4th Quarter 2016
   
1,397,000
     
254,000
     
1,651,000
     
(2,533,000
)
Total 2016
 
$
5,515,000
   
$
1,122,000
   
$
6,637,000
   
$
(3,322,000
)

   
Distributions paid in Cash
   
Distributions paid through DRIP
   
Total
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2015
 
$
535,000
   
$
148,000
   
$
683,000
   
$
(911,000
)
2nd Quarter, 2015
   
623,000
     
265,000
     
888,000
     
(436,000
)
3rd Quarter, 2015
   
751,000
     
388,000
     
1,139,000
     
(394,000
)
4th Quarter, 2015
   
1,015,000
     
590,000
     
1,605,000
     
(717,000
)
Total 2015
 
$
2,924,000
   
$
1,391,000
   
$
4,315,000
   
$
(2,458,000
)

   
Distributions paid in Cash
   
Distributions paid through DRIP
   
Total
Distributions Paid
   
Cash Flows Used in Operations (GAAP basis)
 
1st Quarter, 2014
 
$
400,000
   
$
47,000
   
$
447,000
   
$
(978,000
)
2nd Quarter, 2014
   
422,000
     
60,000
     
482,000
     
498,000
 
3rd Quarter, 2014
   
443,000
     
78,000
     
521,000
     
(1,245,000
)
4th Quarter, 2014
   
473,000
     
94,000
     
567,000
     
(1,054,000
)
Total 2014
 
$
1,738,000
   
$
279,000
   
$
2,017,000
   
$
(2,779,000
)

The Company may not generate sufficient cash flow from operations to fully fund distributions.  We may continue to pay all or a portion of the distributions from other sources, such as cash flows from offering proceeds, financing activities, borrowings, cash advances from our Advisor, or by way of waiver or deferral of fees. The Company has not established any limit on the extent to which distributions could be funded from these other sources. Accordingly, the amount of distributions paid may not reflect current cash flow from operations and distributions may include a return of capital, rather than a return on capital.  If the Company continues to pay distributions from sources other than cash flow from operations, the funds available to the Company for investments would be reduced and the share value may be diluted.  The level of distributions will be determined by the board of directors and depend on a number of factors including current and projected liquidity requirements, anticipated operating cash flows and tax considerations, and other relevant items deemed applicable by the board of directors.

Related-Party Transactions and Arrangements

On November 5, 2016, MVP REIT II, Inc. purchased 338,409 shares of MVP REIT, Inc's common stock from an unrelated third party for $3.0 million or $8.865 per share.  During the year ended, the Company paid MVP REIT II, approximately $34,000 in distributions, related to their ownership of the Company's common stock.
For more information, see Note E — Related Party Transactions and Arrangements in Part II, Item 8 Condensed Consolidated Financial Statements of this Annual Report on Form 10-K for a discussion of the various related party transactions, agreements and fees

Inflation

The Company expects to include provisions in its tenant leases designed to protect the Company from the impact of inflation. These provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. Due to the generally long-term nature of these leases, annual rent increases may not be sufficient to cover inflation and rent may be below market.

Income Taxes

The Company is organized and conducts operations to qualify as a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the "Code") and to comply with the provisions of the Internal Revenue Code with respect thereto.  A REIT is generally not subject to federal income tax on that portion of its REIT taxable income ("Taxable Income"), which is distributed to its stockholders, provided that at least 90% of Taxable Income is distributed and provided that certain other requirements are met.  Our Taxable Income may substantially exceed or be less than our net income as determined based on GAAP, because, differences in GAAP and taxable net income consist primarily of allowances for loan losses or doubtful account, write-downs on real estate held for sale, amortization of deferred financing cost, capital gains and losses, and deferred income.

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation process, based on the technical merits.  Based on our evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition on the financial statements.  The net income tax provision for the year ended December 31, 2016 and 2015 was approximately zero.

The Company has entered into agreements with affiliates of its Sponsor, whereby the Company will pay certain fees or reimbursements to the Advisor or its affiliates in connection with, among other things, acquisition and financing activities, asset and property management services and reimbursement of operating and offering related costs. See Note E — Related Party Transactions and Arrangements in Part II, Item 8 Consolidated Financial Statements of this Annual Report on Form 10-K for a discussion of the various related party transactions, agreements and fees.

REIT Compliance

The Company filed as a REIT for federal income tax purposes effective for the year ended December 31, 2013: therefore, the Company generally will not be subject to federal income tax on income that is distributed to the stockholders. If the Company fails to qualify as a REIT in any taxable year, including and after the taxable year in which the Company initially elects to be taxed as a REIT, the Company will be subject to federal income taxes on the taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect the Company's net income.

To qualify as a REIT for tax purposes, the Company will be required to distribute at least 90% of the REIT taxable income to the stockholders. The Company must also meet certain asset and income tests, as well as other requirements. The Company will monitor the business and transactions that may potentially impact the REIT status. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income taxes (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.  The Company believes it has met all the required criteria to qualify as a REIT for tax purposes as of December 31, 2016.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of December 31, 2016.

Real Estate Investments & Industry Outlook

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, five years for fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

We are required to present the operations related to properties that have been sold or properties that are intended to be sold, as discontinued operations in the statement of operations for all periods presented. Properties that are intended to be sold are to be designated as "held for sale" on the balance sheet.

We believe that favorable U.S. Treasury yields and competitive lender spreads have created a generally favorable borrowing environment for real estate purchases in 2015 and 2016.  Given the uncertainty around the world's financial markets, we believe investors have been willing to accept lower yields on U.S. government backed securities, providing Freddie Mac and Fannie Mae with access to investor capital.  During the fourth quarter of 2016, U.S. Treasury rates increased, and we expect that US Treasury rates will continue to increase over the next year, which we anticipate will make it harder to finance our current unencumbered properties or to finance new acquisitions at favorable rates.  Management will continue to look for favorable financing opportunities that will maximize our use of cash, but there can be no assurance that we will be able to find favorable rates.

Parking Industry Outlook

In December 2016, the National Parking Association, ("NPA"), release their annual Parking Demand Report, which highlighted long-term demand and potential trends in the parking industry.  According to the NPA's website http://weareparking.org some of the key finds include:

·
Parking revenue is projected to grow from just under $25 billion in 2015 to nearly $29 billion by 2018.
·
The #1 reason for parking growth is population expansion projected to increase from 320M in 2015, to 400M by 2050.
·
15 year trend continues, 86 percent of U.S. commuters' say driving and parking their vehicle is their dominant mode of transportation.
·
Approximately 119.9M Americans drive to work (2013 U.S. Census).
·
New York, Los Angeles, Chicago, Houston and Phoenix highlight urbanization and density and have the most parking growth potential.
·
The top two states in terms of parking revenue are California ($1.4 billion), and New York ($1.2 billion).
·
By region, population density leads to parking growth in the New York/Northeast corridor. The West Coast, anchored by California, continues to be a parking powerhouse. And Florida as 3rd most populous state, presents future revenue growth opportunities.

According to NPA, parking demand is a function of a number of factors, all working in tandem to affect demand and usage. When looking at macroeconomic, demographic, employment, and industry statistics, NPA sees a picture of patterns that influence parking demand in North America:

·
Population: Fundamental population growth of 9.6% from the 2000 U.S. Census to the 2010 U.S. Census is expected to continue into the future.
·
Employment: In the U.S., 92% employment provides sustained parking demand, 6.2% unemployment as of August 2014.
·
Baby Boomers. The Baby Boomer population will be 65 or older in 2029 and stand at 61.3 million, representing 20% of the U.S. population.
·
Colleges/Universities: College/university enrollment increased 30% from 2000-2009, from 15.3 million to 20.4 million.
·
Municipalities: Public sector parking is beset by financial pressures; this pressure will accelerate automation and rate increases that will drive revenue.
·
Pricing: Demand will be affected by demand pricing, mobile rate promotions, pre-paid parking and price increases, both public/private, as well as price rates for peak parking periods.

Critical Accounting Policies

The Company's accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management's judgment or interpretation of the facts and circumstances relating to various transactions is different, it is possible that different accounting policies will be applied or different amounts of assets, liabilities, revenues and expenses will be recorded, resulting in a different presentation of the financial statements or different amounts reported in the financial statements.

Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. Below is a discussion of the accounting policies that management considers to be most critical once we commence significant operations. These policies require complex judgment in their application or estimates about matters that are inherently uncertain.


Purchase Price Allocation

We allocate the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. We utilize various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on our analysis of comparable properties in our portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships, as applicable.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered by us in our analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, we will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.

Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, we initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

The aggregate value of intangible assets related to customer relationship, as applicable, is measured based on our evaluation of the specific characteristics of each tenant's lease and our overall relationship with the tenant. Characteristics considered by us in determining these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, among other factors.

The value of in-place leases is amortized to expense over the initial term of the respective leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

In making estimates of fair values for purposes of allocating purchase price, we will utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We will also consider information obtained about each property as a result of our pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.


Contractual Obligations

As of December 31, 2016, our contractual obligations consisted of the mortgage notes secured by our acquired properties and the Revolving Credit Facility:

   
Total
   
Less than 1 year
   
1-3 years
   
3-5 years
   
More than 5 years
 
Long-term debt obligations
 
$
50,523,000
   
$
1,286,000
   
$
6,143,000
   
$
2,424,000
   
$
40,670,000
 
Capital and Operating Lease Obligations
   
--
     
--
     
--
     
--
     
--
 
Line of Credit:
                                       
    Interest
   
--
     
--
     
--
     
--
     
--
 
    Principle
   
4,810,000
     
4,810,000
     
--
     
--
     
--
 
Purchase Obligations
   
--
     
--
     
--
     
--
     
--
 
Total
 
$
55,333,000
   
$
6,096,000
   
$
6,143,000
   
$
2,424,000
   
$
40,670,000
 

Contractual obligation table amount does not reflect the unamortized loan issuance cost of $1.1 million for notes payable and $164,000 for the line of credit as of December 31, 2016.

Subsequent Events

During January 2017, the Company and MVP REIT II, through MVP Detroit Center Garage, LLC ("MVP Detroit Center"), an entity owned by the Company and MVP REIT II, acquired a multi-level parking garage consisting of approximately 1,275 parking spaces, located in Detroit, Michigan, for a purchase price of $55.0 million, plus acquisition and financing-related transaction costs.  The Company owns a 20% equity interest in the MVP Detroit Center and MVP REIT II owns an 80% equity interest.  The parking garage will be operated by SP Plus Corporation ("SP+") under a long-term lease, where SP will be responsible for the first $572,000 in property taxes, pay annual base rent of $3.4 million, and 80% of all gross revenue above $5.0 million.  As part of the acquisition MVP Detroit Center entered into a $31.5 million loan agreement with Bank of America, N.A., with a term of 10 years, amortized over 25 years, with monthly principal and interest payments totaling approximately $194,000, bearing an annual interest rate of 5.52%, secured by the parking garage, and maturing in February 2027.

Status of Offering

The Company commenced its initial public offering of its common stock on September 25, 2012 and terminated the offering in September 2015.  As of March 21, 2017, the Company had accepted investors' subscriptions for, and issued, 10,978,745 shares of common stock, including shares issued pursuant to the distribution reinvestment plan.  The Company received net cash proceeds of approximately $75,348,000, additionally the Company issued shares valued at $19,484,000 for contributed properties.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the effects of interest rate changes primarily as a result of debt used to maintain liquidity and fund expansion of the Company's real estate investment portfolio and operations. One of the Company's interest rate risk management objectives is to limit the impact of interest rate changes on cash flows. To achieve this objective, the Company may borrow at fixed rates or fix the variable rates of interest on variable interest rate borrowings through the use of interest rate swaps. The Company may enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate the Company's interest rate risk on a related financial instrument. The Company will not enter into derivative or interest rate transactions for speculative purposes. The Company is exposed to credit risk of the counterparty to these interest rate swap agreements in the event of non-performance under the terms of the derivative contracts. In the event of non-performance by the counterparty, if the Company is not able to replace these swaps, the Company would be subject to the variability of interest rates on the total amount of debt outstanding under the mortgage.


Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing the Company's business plan, the Company expects that the primary market risk to which the Company will be exposed is interest rate risk.

As of December 31, 2016, the Company's debt consisted of approximately $49.4 million, in fixed rate debt and $4.6 million variable rate debt, net of loan issuance costs.  Our variable interest rate debt in related to the KeyBank line of credit, where that rate is the 30 day LIBOR plus 2.25%. Changes in interest rates have different impacts on the fixed rate and variable rate debt. A change in interest rates on fixed rate debt impacts its fair value but has no impact on interest incurred or cash flows. A change in interest rates on variable rate debt could impact the interest incurred and cash flows and its fair value.

Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on the Company's financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur. Further, in the event of a change of that magnitude, the Company may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in the Company's financial structure.

The following tables summarizes gross annual debt maturities, average interest rates and estimated fair values on the Company's outstanding debt as of December 31, 2016:

   
For the Years Ending December 31
                   
   
2017
   
2018
   
2019
   
2020
   
2021
   
Thereafter
   
Total
   
Fair Value
 
Fixed rate debt
 
$
1,286,000
   
$
1,194,000
   
$
4,949,000
   
$
1,185,000
   
$
1,239,000
   
$
40,670,000
   
$
50,523,000
   
$
76,108,000
 
                                                                 
Average interest rate
   
4.63
%
   
4.74
%
   
4.89
%
   
4.72
%
   
4.72
%
   
4.72
%
               


ITEM 8. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
 
 
   
CONSOLIDATED FINANCIAL STATEMENTS
 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MVP REIT, Inc.
 
We have audited the accompanying consolidated balance sheets of MVP REIT, Inc. and subsidiaries (the "Company") as of December 31, 2016 and 2015, and the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended December 31, 2016.  Our audits also included the consolidated financial statement schedule.  These consolidated financial statements and financial statement schedule are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MVP REIT, Inc. and subsidiaries as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

 
/s/ RBSM LLP

New York, New York
March 24, 2017


 

MVP REIT, Inc.
CONSOLIDATED BALANCE SHEETS

   
December 31, 2016
   
December 31, 2015
 
             
ASSETS
 
Cash
 
$
4,112,000
   
$
10,511,000
 
Cash – restricted
   
1,712,000
     
1,133,000
 
Accounts receivable
   
117,000
     
42,000
 
Prepaid expenses
   
444,000
     
316,000
 
Deferred rental assets
   
93,000
     
159,000
 
Investments in real estate and fixed assets:
               
Land and improvements
   
66,484,000
     
44,507,000
 
Building and improvements
   
49,973,000
     
43,010,000
 
Fixed assets
   
88,000
     
88,000
 
Gross investments in real estate and fixed assets:
   
116,545,000
     
87,605,000
 
Accumulated depreciation
   
(2,128,000
)
   
(865,000
)
Total investments in real estate and fixed assets, net
   
114,417,000
     
86,740,000
 
                 
Due from related party
   
462,000
     
--
 
Deposits
   
1,519,000
     
16,010,000
 
Other assets
   
121,000
     
140,000
 
Investment in equity method investee
   
4,123,000
     
--
 
Assets held for sale
   
6,100,000
     
--
 
Total assets
 
$
133,220,000
   
$
115,051,000
 
LIABILITIES AND EQUITY
 
Liabilities
               
Accounts payable and accrued liabilities
 
$
959,000
   
$
462,000
 
Deferred revenue
   
55,000
     
25,000
 
Due to related parties
   
--
     
7,000
 
Security deposits
   
248,000
     
211,000
 
Line of credit, net of unamortized loan issuance costs of $164,000 as of December 31, 2016
   
4,646,000
     
--
 
Notes payable, net of unamortized loan issuance cost of $1,106,000 and $534,000 at December 31, 2016 and 2015, respectively
   
49,417,000
     
28,177,000
 
Total liabilities
   
55,325,000
     
28,882,000
 
Commitments and contingencies
   
--
     
--
 
Equity
MVP REIT, Inc. Shareholders' Equity
               
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding
   
--
     
--
 
Non-voting, non-participating convertible stock, $0.001 par value, 1,000 shares authorized, issued and outstanding as of December 31, 2016 and 2015
   
--
     
--
 
Common stock, $0.001 par value, 98,999,000 shares authorized, 10,952,325 and 11,002,902 shares issued and outstanding as of December 31, 2016 and 2015, respectively
   
11,000
     
11,000
 
Additional paid-in capital
   
90,156,000
     
97,277,000
 
Accumulated deficit
   
(16,191,000
)
   
(12,925,000
)
Total MVP REIT, Inc. Shareholders' Equity
   
73,976,000
     
84,363,000
 
Non-controlling interest
   
3,919,000
     
1,806,000
 
Total equity
   
77,895,000
     
86,169,000
 
Total liabilities and equity
 
$
133,220,000
   
$
115,051,000
 
The accompanying notes are an integral part of these consolidated financial statements.
MVP REIT, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

   
For the Years Ended December 31,
 
   
2016
   
2015
   
2014
 
Revenues
                 
Rental revenue
 
$
8,592,000
   
$
4,650,000
   
$
658,000
 
Total revenues
   
8,592,000
     
4,650,000
     
658,000
 
                         
Operating expenses
                       
General and administrative
   
1,791,000
     
910,000
     
775,000
 
Acquisition expenses
   
1,081,000
     
678,000
     
235,000
 
Acquisition expenses – related party
   
1,458,000
     
2,649,000
     
1,898,000
 
Operation and maintenance
   
1,980,000
     
421,000
     
43,000
 
Operation and maintenance – related party
   
1,055,000
     
566,000
     
379,000
 
Impairment of investment in real estate
   
100,000
     
--
     
--
 
Loan payoff fee
   
587,000
     
--
     
--
 
Depreciation and amortization expenses
   
1,263,000
     
799,000
     
44,000
 
Total operating expenses
   
9,315,000
     
6,023,000
     
3,374,000
 
                         
Loss from operations
   
(723,000
)
   
(1,373,000
)
   
(2,716,000
)
                         
Other income (expense)
                       
Interest expense
   
(2,381,000
)
   
(1,313,000
)
   
(169,000
)
Income from investment in equity method investee
   
116,000
     
--
     
6,000
 
Loss on acquisition in real estate
   
(2,000
)
   
--
     
--
 
Interest income
   
1,000
     
--
     
127,000
 
Total other expense
   
(2,266,000
)
   
(1,313,000
)
   
(36,000
)
                         
Loss from continuing operations
   
(2,989,000
)
   
(2,686,000
)
   
(2,752,000
)
                         
Discontinued operations, net of income taxes
                       
Income (loss) from assets held for sale, net of income taxes
   
(244,000
)
   
214,000
     
876,000
 
Gain on sale of investment in real estate held for sale
    --       
1,260,000
     
44,000
 
Total income (loss) from discontinued operations
   
(244,000
)
   
1,474,000
     
920,000
 
                         
Provision for income taxes
   
--
     
--
     
--
 
                         
Net loss
   
(3,233,000
)
   
(1,212,000
)
   
(1,832,000
)
Net income attributable to non-controlling interest – related party
   
33,000
     
148,000
     
5,000
 
Net loss attributable to common stockholders
 
$
(3,266,000
)
 
$
(1,360,000
)
   $
(1,837,000
)
Basic and diluted loss per weighted average common share
                       
Loss from continuing operations attributable to MVP REIT common stockholders – basic and diluted
   
(0.27
)
   
(0.36
)
   
(0.76
)
Income (loss) from discontinued operations – basic and diluted
   
(0.03
)
   
0.18
     
0.25
 
Net loss attributable to MVP REIT common stockholders - basic and diluted
   
(0.30
)
   
(0.18
)
   
(0.51
)
Distributions declared per common share
 
$
0.60
   
$
0.58
   
$
0.56
 
Weighted average common shares outstanding, basic and diluted
   
10,999,713
     
7,502,606
     
3,639,056
 

The accompanying notes are an integral part of these consolidated financial statements.
MVP REIT, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 and 2014
   
Convertible stock
   
Common stock
                         
   
Number of Shares
   
Par Value
   
Number of Shares
   
Par Value
   
Additional Paid-in Capital
   
Accumulated
Deficit
   
Non-controlling Interest -Related Party
   
Total
 
Balance, December 31, 2013
   
1,000
   
$
--
     
2,909,819
   
$
3,000
   
$
32,386,000
   
$
(9,728,000
)
 
$
1,187,000
   
$
23,848,000
 
Issuance of common stock - purchases
   
--
     
--
     
1,246,458
     
1,000
     
10,866,000
     
--
     
--
     
10,867,000
 
Issuance of common stock - acquisitions
                   
11,396
             
100,000
                     
100,000
 
Redeemed shares
   
--
     
--
     
(10,610
)
   
--
     
(95,000
)
   
--
     
--
     
(95,000
)
Distribution – DRIP
   
--
     
--
     
31,893
     
--
     
278,000
     
--
     
--
     
278,000
 
Distributions – cash
   
--
     
--
     
--
     
--
     
(2,016,000
)
   
--
     
--
     
(2,016,000
)
Contribution from Advisor related to reduction of due to related parties
   
--
     
--
     
---
     
--
     
595,000