Note A - Organization and Business Operations

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note A — Organization and Business Operations

Mobile Infrastructure Corporation (formerly known as The Parking REIT, Inc.) (the “Company,” “we,” “us” or “our”), is a Maryland corporation formed on May 4, 2015. The Company focuses on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. The Company targets both parking garage and surface lot properties primarily in top 50 U.S. Metropolitan Statistical Areas (“MSAs”), with proximity to key demand drivers, such as airports, transportation hubs, educational facilities, government buildings and courthouses, sports and entertainment venues, hospital and health centers, hotels, office complexes and residences.

As of June 30, 2022, the Company owned 45 parking facilities in 23 separate markets throughout the United States, with a total of 15,818 parking spaces and approximately 5.5 million square feet.  The Company also owns approximately 0.2 million square feet of retail/commercial space adjacent to its parking facilities.

The Company is the sole general partner of Mobile Infra Operating Partnership, L.P., formerly known as MVP REIT II Operating Partnership, LP, a Maryland limited partnership (the “Operating Partnership”). The Company owns substantially all of its assets and conducts substantially all of its operations through the Operating Partnership, is the sole general partner of the Operating Partnership and owns approximately 45.8% of the common units of the Operating Partnership (the “OP Units”). Color Up, LLC, a Delaware limited liability company (“Color Up” or “Purchaser”) and HSCP Strategic III, LP, a Delaware limited partnership (“HS3”), are limited partners of the Operating Partnership and own approximately 44.2% and 10%, respectively, of the outstanding OP Units. Color Up is our largest stockholder and is controlled by the Company’s Chief Executive Officer and a director, Manuel Chavez, the Company’s President, Interim Chief Financial Officer, Treasurer, Secretary and a director, Stephanie Hogue, and a director of the Company, Jeffrey Osher. HS3 is controlled by Mr. Osher.

The Company previously elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and operated in a manner that allowed the Company to qualify as a REIT through December 31, 2019. As a consequence of lease modifications entered into during the COVID-19 pandemic, the Company earned income from a number of tenants that did not constitute qualifying REIT income for purposes of the annual REIT gross income tests, and, as a result, the Company was not in compliance with the annual REIT income tests for its taxable year ended December 31, 2020. Accordingly, the Company did not qualify for taxation as a REIT in 2020 and has been taxed as a C corporation beginning with its 2020 taxable year. As a C corporation, the Company is not required to distribute any amounts to its stockholders. 

Recapitalization

On January 8, 2021, the Company entered into an equity purchase and contribution agreement (the “Purchase Agreement”) by and among the Company, the Operating Partnership, Vestin Realty Mortgage I, Inc., (“VRMI”) Vestin Realty Mortgage II, Inc. (“VRMII”) and Michael V. Shustek (“Mr. Shustek” and together with VRMI and VRMII, the “Former Advisor”) and Color Up (the “Purchaser”). The transactions contemplated by the Purchase Agreement are referred to herein collectively as the “Transaction.”

On August 25, 2021, the closing of the Transaction occurred (the “Closing”). As a result of the Transaction, the Company acquired three multi-level parking garages consisting of approximately 765 and 1,625 parking spaces located in Cincinnati Ohio and approximately 1,154 parking spaces located in Chicago, Illinois totaling approximately 1,201,000 square feet. In addition to the parking garages contributed, proprietary technology was contributed to the Company, which will provide management real-time information on the performance of assets. Pursuant to the Closing, the Operating Partnership issued 7,495,090 newly issued common units of the Operating Partnership (the “OP Units”) at $11.75 per unit for total consideration of $84.1 million, net of transaction costs. The consideration received consisted of $35.0 million of cash, three parking assets with a fair value of approximately $98.9 million (“Contributed Interests”) and technology with a fair value of $4.0 million. The Company also assumed long-term debt with a fair value of approximately $44.5 million. In addition, the Company issued warrants to Color Up to purchase up to 1,702,128 shares of Common Stock at an exercise price of $11.75 for an aggregate cash purchase price of up to $20 million. The fair value of the warrants recorded as of the Closing was approximately $3.3 million. Transaction expenses not directly related to the acquisition of the Contributed Interests or issuance of OP Units of approximately $12.2 million and the settlement of the deferred management internalization liability of $10.0 million were recorded in transaction expenses and settlement of deferred management internalization, respectively, in the Statement of Operations.

Management assessed the potential accounting treatment for the Transaction by applying Accounting Standards Codification ("ASC") 805 and determined the Transaction did not result in a change of control. As a result, the three real estate assets and the technology platform acquired, described above, were accounted for by the Company as asset acquisitions in the financial statements, resulting in the recognition of assets and liabilities, at acquired cost and reflect the capitalization of any transaction costs directly attributable to the asset acquisitions.

The following schedule sets forth how the consideration exchanged in the Transaction was allocated among the various assets acquired and liabilities acquired or settled.

Assets acquired and liabilities assumed
Investment in real estate	$	98,919,000
Intangibles - technology		4,000,000
Cash		35,000,000
Long-term debt		(44,533,000	)
Indemnification liability		(2,000,000	)
Total assets acquired and liabilities assumed	$	91,386,000
OP Units (1)		88,067,000
Warrants		3,319,000
Total consideration	$	91,386,000

(1) Represents the value of the 7,495,090 OP Units issued at $11.75 per unit, excluding associated transaction costs of approximately $4.0 million.

Pending Merger

On May 27, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") by and between the Company and Mobile Infrastructure Trust, a Maryland real estate investment trust ("MIT"), which is 100% owned by Bombe Asset Management LLC ("Bombe"), an Ohio limited liability company owned by Mr. Chavez and Ms. Hogue. Pursuant to the terms of the Merger Agreement, the Company will merge with and into MIT, with MIT continuing as the surviving entity resulting from the merger. The merger and the transactions contemplated by the Merger Agreement are referred to herein collectively as the "Merger."

Prior to the Merger, MIT expects to undertake an initial public offering (the "MIT IPO") of its common shares of beneficial interest, $0.0001 par value per share (“MIT Common Shares”), which is expected to close at least one business day prior to the effective time of the Merger. The closing of the MIT IPO is a condition to the closing of the Merger. The size and price range for the MIT IPO have yet to be determined. The MIT IPO is subject to the completion of the review process of the U.S. Securities and Exchange Commission and to market and other conditions; therefore, the expected date of completion of the MIT IPO and the closing date of the Merger have not yet been determined.

The Merger is expected to be accounted for as a reverse recapitalization of the Company contemporaneous with the initial public offering of the MIT Common Shares. Under this method of accounting, MIT will be treated as the “acquiree” and the Company is treated as the acquirer for financial statement reporting purposes under principles generally accepted in the United States ("GAAP"). Accordingly, for accounting purposes, the Merger will be treated as the equivalent of the Company issuing stock for the net assets of MIT, accompanied by a recapitalization with a contemporaneous initial public offering of the MIT Common Shares. The net assets of the Company will be stated at historical cost, with no incremental goodwill or other intangible assets recorded.